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Philips shares rocket 29% as firm settles U.S. respiratory device case

In Business
April 29, 2024

The Philips office building in Warsaw, Poland, on July 29, 2021.

Nurphoto | Nurphoto | Getty Images

Philips shares soared to a more than two-year high Monday after the Dutch medical devices giant agreed to a $1.1 billion settlement in the U.S. for personal injury cases linked to the recall of some of its sleep apnea devices.

Millions of devices were recalled in 2021 over concerns that components carried potential cancer risks.

Philips shares provisionally closed more than 29% higher, paring gains from earlier in the session.

The company said it had made a 982 million euro, or $1.1 billion, provision for the payout of personal injury and medical monitoring claims, adding that the settlement would end the uncertainty over the litigation for the company. It said it did not admit any fault or liability, or that any injuries were caused by its Respironics devices.

“Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall,” Philips CEO Roy Jakobs said in a statement.

“The remediation of the sleep therapy devices for patients is almost complete, and the test results to date show the use of these devices is not expected to result in appreciable harm to health. We do regret the concern that patients may have experienced.”

The provision was below the 2 billion euros to 4 billion euros that was expected, according to Barclays analyst Hassan Al-Wakeel. He added that 10 billion euros was feared in a worst-case scenario.

The settlement is a “capped amount and ends uncertainty on litigation,” Al-Wakeel said in a Monday note.

'Vast majority' of legal cases linked to sleep apnea devices recall now settled, Philips CEO says

In September, Philips settled economic loss claims in the U.S. related to the recall, for which it made a 575 million euro, or $615.7 million, provision.

Monday’s rebound took Philips shares to their highest level since March 1, 2022.

Philips still faces some cases in Europe over the recall. However, Jakobs told CNBC’s “Squawk Box Europe” on Monday that with the latest settlement, the company is able to put the “vast majority” of cases behind them.

“[It] leaves us to focus on bringing Philips back to where it belongs,” he said, noting that the company reiterated on Monday its full-year guidance of 3% to 5% comparable sales growth, and raised its cash flow guidance to 0.9 to 1.1 billion euros.

The firm reported a loss of 998 million euros, or $1.07 billion, for the period. Adjusted earnings, meanwhile, beat analysts’ forecasts, coming in at 388 million euros for the quarter.

Sales were slightly lower year on year, at 4.14 billion euros in the first quarter from 4.17 billion euros in 2023.

Analysts at Jefferies said the results were better than expected but pointed out that the company’s group order intake had declined for a seventh quarter in a row.

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