Philips, the Dutch multinational health technology company, has announced a significant halt in the sales of its new sleep apnea treatment devices in the United States. This decision comes as part of an agreement with the Food and Drug Administration (FDA), following a major recall incident in 2021.
The company had previously recalled millions of its breathing devices and ventilators, used for treating sleep apnea, due to fears that the sound-reducing foam in these devices could break down, potentially releasing toxic substances and posing cancer risks.
As part of the settlement, known as a consent decree, Philips is required to implement specific improvements at its Respironics manufacturing facilities in the U.S. The sale of new Respironics devices in the U.S. market is suspended until these stipulations are met.
Following the announcement of this agreement, Philips’ shares saw a downturn, falling by 5.2% in Amsterdam trading. Analyst Marc Hesselink from ING described the agreement as “very punitive” and expressed skepticism about Philips’ ability to regain its market position in the U.S. for Respironics products.
The finalization and approval of the decree by the appropriate U.S. court are pending, and the timeline for these processes remains uncertain. Philips CEO Roy Jakobs refrained from providing detailed conditions of the agreement. However, he indicated that, on average, it takes between five to seven years for companies in the medical equipment industry to comply with consent decrees.
The financial impact of this agreement prompted Philips to set aside a provision of 363 million euros ($393.5 million) in the last quarter of the previous year. The company anticipates an approximate 1% impact on total revenues in 2024 due to this agreement.
Despite the consent decree, Philips continues to face numerous lawsuits from patients claiming adverse health effects from using these devices, in addition to an ongoing investigation by the U.S. Department of Justice regarding the recall’s management.
Philips affirmed that this agreement does not alter its financial goals for 2025, which were established last year. In the fourth quarter, the company’s core profit remained steady at 653 million euros, despite a slight 1% drop in comparable sales. This performance was marginally below the expectations of analysts, who had predicted a modest increase in adjusted EBITA and a 2.6% growth in comparable sales.
