Analyst Note| Javier Correonero |
Philips shares are taking a 10% hit at the time of the writing as the Food and Drug Administration issued a new report on Nov. 13 regarding the investigation of Philips' foam issues in its sleep devices and ventilator installed base. The FDA investigation has been ongoing since June, and new data has come out after it conducted an inspection of one of Philips' manufacturing facilities, which has raised new concerns. Although we are adjusting our forecasts, we are maintaining our EUR 42 fair value estimate until more clarity is provided (FDA findings are preliminary and, for now, it has not changed its initial patient guidance nor expanded the affected installed base). Our previous forecasts were conservative and already implied permanent loss of market share (mainly against Resmed) coming from reputational damage, something we believe is warranted after the FDA alleged Philips' has taken inadequate action.