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Koninklijke Philips NV ADR PHG

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FDA Continues Philips Investigation; Maintaining FVE Until More Clarity Is Provided

Javier Correonero Equity Analyst

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.

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Company Profile

Business Description

Philips is a diversified global healthcare company operating in three segments: diagnosis and treatment, connected care, and personal health. About 44% of the company's revenue comes from the diagnosis and treatment segment, which features imaging systems, ultrasound equipment, image-guided therapy solutions and healthcare informatics. The connected care segment (24% of revenue) encompasses monitoring and analytics systems for hospitals and sleep and respiratory care devices, whereas the personal health business (remainder of revenue) includes electric toothbrushes and men's grooming and personal-care products. In 2020, Philips generated EUR 19.5 billion of sales and had 80,000 employees in over 100 countries.

Philips Center, Amstelplein 2
Amsterdam, 1096 BC, Netherlands
T +31 205977777
Sector Healthcare
Industry Medical Devices
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 77,746