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Philips, the Dutch health technology firm, has announced it will cease the sale of new sleep apnea treatment devices in the United States for the foreseeable future, as it endeavors to comply with an agreement reached with the FDA.
This resolution comes after the recall of millions of breathing apparatuses and ventilators utilized for sleep apnea treatment in 2021. The recall was prompted by concerns regarding the degradation of foam components within the devices, which could potentially become toxic and pose cancer risks.
In response to the agreement, termed a consent decree, Philips has outlined the necessary enhancements required at its Respironics facilities situated in the U.S. Until these stipulated conditions are fulfilled, the company has confirmed that it will refrain from introducing new Respironics devices into the U.S. market.
Following the announcement of the agreement, Philips observed an 8.3% decline in its shares at 1405 GMT in Amsterdam, with ING analyst Marc Hesselink characterizing the terms as “very punitive” and expressing skepticism about Philips’ ability to reclaim its market position in the U.S.
Analyst Mathieu Chevrier from Citi remarked that while he had initially anticipated Philips’ re-entry into the U.S. market by July, potentially benefiting rival ResMed, whose shares rose nearly 2% in early U.S. trading.
The finalization of the decree is pending, awaiting submission to the relevant U.S. court for approval, although the duration of this process remains uncertain. CEO Roy Jakobs refrained from divulging specific details regarding the conditions Philips must fulfill. Still, they indicated that compliance with consent decrees typically spans five to seven years within the medical equipment sector.
Philips disclosed that the costs associated with the agreement necessitated a provision of 363 million euros ($393.5 million) in the fourth quarter of the previous year, with anticipated expenses amounting to approximately 1% of total revenues for 2024. Despite the consent decree, Philips continues to contend with multiple lawsuits filed by patients citing health issues stemming from the use of its devices, alongside an investigation by the U.S. Department of Justice concerning the handling of the recall.
However, the company affirmed that the agreement does not alter its financial objectives for 2025, as outlined in the preceding year. Consequently, Philips’ core profit in the fourth quarter remained relatively stable at 653 million euros, while comparable sales experienced a 1% decline. Analysts, surveyed by the company, had forecasted an adjusted EBITA of 672 million euros, up from 651 million euros the previous year, with anticipated comparable sales growth of 2.6%.