Philips shares reached a two-year high after the company agreed on a $1.1 billion settlement in the U.S. for personal injury cases linked to the recall of some of its sleep apnea devices in 2021. Concerns were raised about potential cancer risks associated with the components of the devices, leading to the recall of millions of units. The settlement will provide compensation for personal injury and medical monitoring claims and will relieve uncertainty for the company. Philips emphasized that it did not admit any fault or liability, and there was no evidence that injuries were caused by its Respironics devices.
CEO Roy Jakobs expressed that patient safety and quality are top priorities for Philips and that steps have been taken to address the consequences of the recall. The remediation of the sleep therapy devices is nearly complete, and test results suggest that the devices are not expected to cause significant harm to health. While the provision for the settlement was lower than expected, it helped end uncertainty regarding potential litigation. Barclays analyst Hassan Al-Wakeel noted that a worst-case scenario could have amounted to 10 billion euros, making the settled amount significantly lower and providing some relief for the company.
The settlement follows a previous settlement for economic loss claims related to the recall, for which Philips had made a provision of 575 million euros. The rebound in Philips shares on Monday brought them to their highest level since April 2022. On the financial side, the company reported a loss of 998 million euros in the first quarter, but adjusted earnings exceeded analyst expectations at 388 million euros. Sales for the quarter were slightly lower compared to the previous year, totaling 4.14 billion euros.
Overall, Philips has taken significant steps to address the issues surrounding the recall of its sleep apnea devices and the related personal injury claims. The settlement provides a resolution to the litigation, giving investors more clarity and confidence in the company’s future. With shares reaching a two-year high and financial performance meeting or exceeding expectations, Philips appears to be on a path toward recovery and stability after a challenging period. Moving forward, the company will likely continue to focus on patient safety and quality while also addressing any remaining concerns related to its medical devices.
