The Philips office building in Warsaw, Poland, on July 29, 2021.
Nurfoto | Nurfoto | Getty Images
Phillips Shares rose to a more than two-year high on Monday after the Dutch US medical device giant agreed to a $1.1 billion settlement for personal injury cases related to the recall of some of its are sleep apnea devices.
Millions of devices were recalled in 2021 over concerns that components posed potential cancer risks. Philips shares were up 46% at 11:15 a.m. London time.
The company said it had made a provision of 982 million euros (or $1.1 billion) for the payment of claims for personal injury and medical monitoring, adding that the settlement would end uncertainty over the lawsuit for the company. The company said it has not admitted any fault or liability, or that any injury has been caused by its Respironics devices.
“Patient safety and quality are our top priorities and we have taken important steps to further resolve the impact of the Respironics recall,” Philips CEO Roy Jakobs said in a statement.
“The recovery of the sleep therapy devices for patients is almost complete, and test results to date show that use of these devices is not expected to result in noticeable harm to health. We regret any concerns that patients may have experienced.”
According to Barclays analyst Hassan Al-Wakeel, the provision was below the 2 to 4 billion euros that had been expected. He added that in the worst case scenario, losses of up to 10 billion euros were feared.
The settlement is a “capped amount and ends the uncertainty surrounding litigation,” Al-Wakeel said in a note on Monday.
In September Philips economic loss claims settled in the US in connection with the recall, for which it has made a provision of 575 million euros or $615.7 million.
Monday's recovery took Philips shares to their highest level since March 1, 2022.
Philips is still facing some cases in Europe due to the recall. However, Jakobs told CNBC's “Squawk Box Europe” on Monday that the latest settlement will allow the company to put the “vast majority” of cases behind it.
“[It] let us focus on getting Philips back to where it belongs,” he said, noting that the company on Monday reiterated its full-year expectations of comparable sales growth of 3% to 5% and raised its cash flow guidance to 0.9 to 1.1 billion. euros.
The company reported a loss of 998 million euros, or $1.07 billion, for the period. Adjusted profit exceeded analyst expectations and amounted to 388 million euros for the quarter.
Sales were slightly lower year-on-year, to 4.14 billion euros in the first quarter, compared to 4.17 billion euros in 2023.
Analysts at Jefferies said results were better than expected, but pointed out that the group's order intake had fallen for the seventh quarter in a row.
