Dutch health technology company Philips said on Monday it had reached an agreement on the terms of a settlement with the U.S. Food and Drug Administration (FDA) over a large-scale recall of ventilators.
The company’s shares were down over 5% in Europe on Monday morning.
Philips said the costs of the so-called consent decree with the FDA led to a provision of 363 million euros ($393.5 million) in the fourth quarter of last year, and were expected to be about 1% of total revenues in 2024.
The agreement sets out the improvements that Philips needs to make at its Respironics plants in order to be able to sell new respiratory devices in the U.S. again.
Until the conditions are met, no new Respironics devices will be sold there, the company said.
“We are fully committed to complying with the consent decree, which is an important step and provides a clear path forward,” Chief Executive Roy Jakobs said in a statement.
Philips office building in Warsaw, Poland on July 29, 2021. (Photo by Beata Zawrzel/NurPhoto via Getty Images)
Nurphoto | Nurphoto | Getty Images
The decree is being finalized and will be submitted to the relevant U.S. court for approval.
Philips recalled millions of breathing devices and ventilators used to treat sleep apnea in 2021 because foam used to dampen noise from the devices can degrade and become toxic, carrying potential cancer risks.
The operation knocked about 70% off Philips’ market value, as investors feared large litigation bills.
Philips said the agreement did not change its expectations of reaching mid-single-digit comparable sales growth and a low-teens profit margin, in adjusted EBITA, in 2025, with a free cash flow of 1.4 billion to 1.6 billion euros.
Due to the provision, Philips core profit in the fourth quarter remained roughly stable at 653 million euros, while comparable sales fell 1%.
Analysts in a company-compiled poll on average had predicted adjusted EBITA would rise to 672 million euros, from 651 million euros a year before, with comparable sales growth of 2.6%.
Philips said it expected to deliver 3-5% comparable sales growth in 2024, with an adjusted EBITA margin of 11-11.5%.
— CNBC reporters contributed to this report.