Philips Reaches Agreement With FDA on Ventilator Recall — Update

By Elena Vardon

Royal Philips said it reached an agreement with the U.S. Food and Drug Administration on the terms of a settlement linked to recall of its Respironics ventilators.

The Dutch health-technology group on Monday said it booked a 363 million euros ($394 million) provision in the fourth quarter for remediation activities, inventory write-downs and onerous contract provisions related to the consent decree.

In 2021, Philips issued a recall of the breathing-aid machines, following reports that an internal sound-dampening foam could degrade, spurring concerns that it could release harmful gases or particles into the lungs of users. The consent decree it agreed upon with the FDA will be submitted to the relevant U.S. court for approval once finalized, Philips said.

"The decree will provide Philips Respironics with a roadmap of defined actions, milestones, and deliverables to demonstrate compliance with regulatory requirements and to restore the business," it said. The company won't sell new CPAP or BiPAP sleep therapy devices or other respiratory care devices in the country until the requirements are met but will continue to service existing sleep and respiratory care devices as well as supply accessories, consumables, and replacement parts, it said.

Philips provided the awaited update on the consent decree alongside its results for the fourth quarter. It said it expects 2024 comparable sales growth of between 3% and 5%, with an adjusted earnings before interest, taxes and appreciation margin in the 11% to 11.5% range. Estimates taken from a company-compiled consensus pencil in 4.0% growth and a margin of 11.1% for the year.

For the fourth quarter, the Amsterdam-listed group reported EUR5.06 billion in sales, representing 3% in comparable growth excluding provisions charged to sales or a 1% decline including them. Consensus estimates had seen EUR5.33 billion in sales with 2.6% comparable sales growth. Adjusted Ebita margin was 12.5% for the quarter, excluding provisions, and 12.9% including, against views of a 12.6% margin.

Net profit attributable to shareholders for the three months ended Dec. 31 was EUR38 million, missing consensus expectations of EUR331 million.

Write to Elena Vardon at elena.vardon@wsj.com

(END) Dow Jones Newswires

January 29, 2024 02:34 ET (07:34 GMT)

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