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    PHIA   NL0000009538

PHILIPS NV

(PHIA)
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Real-time Euronext Amsterdam  -  11:38 2022-09-29 am EDT
15.64 EUR   -0.66%
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FDA says faulty Philips device reports accelerating as CEO departs

08/17/2022 | 11:19am EDT
FILE PHOTO: Dutch technology company Philips logo is seen at company headquarters in Amsterdam

AMSTERDAM (Reuters) - The U.S. Food and Drug Administration (FDA) said reports of faulty Philips ventilators and sleep apnea machines had risen in the past quarter, underlining problems facing the Dutch company, which has just announced plans to replace its CEO.

Philips says it is approximately halfway through a recall of 5.5 million such devices in the United States due to the threat posed by a foam part they contain -- a problem that has alarmed customers, damaged the company's reputation and helped wipe $30 billion off its market capitalisation.

The FDA said on Tuesday it had received 48,000 reports associated with breakdown or suspected breakdown in the foam used in Philips respirators over the three months ending July 31, 2022, more than twice the number of such reports it received between April 2021 and April 2022.

"A wide range of injuries have been reported in these (reports) including cancer, pneumonia, asthma, other respiratory problems, infection, headache, cough, difficulty breathing, dizziness, nodules, and chest pain," the FDA said. The reports are not proof that Philips devices were responsible.

A spokesperson for Philips on Wednesday said the timing of the Aug. 16 FDA update -- the same day that Philips announced longtime CEO Frans van Houten would depart the company -- was coincidental.

Van Houten will be replaced by Roy Jakobs, the Philips executive who is heading the company's recall operation, on Oct. 15.

Spokesman Steve Klink said the increase in reports was due to increased public awareness of the problem after its recall began in June 2021.

"Over the past three months we were still going through what you would call a backlog of the complaints," he said.

"Now we need to work through them and see which are justified and which not."

The FDA ordered Philips in March to notify patients of the recall, saying its communication until then was "inadequate."

Philips has estimated costs of its replacements at around 900 million euros, but that does not include costs from a possible settlement with the U.S. Department of Justice or from consumer injury lawsuits.

Analyst Jos Versteeg of InsingerGilissen said Philips should avoid downplaying FDA concerns and later having to backtrack.

"There's a big chance that it will end up fined, that there will not be big claims. But the point is, you don't want to take the risk," he said.

Analyst Javier Correonero of Morningstar said Philips has a "real credibility issue", citing both the deepening recall problems and the company's July 25 profit warning.

"At this point I think the market has low confidence in management's ability to set financial targets", he said in an email.

Philips' Sleep & Respiratory care made up roughly 10% of company sales of 17.1 billion euros in 2021, according to the company's annual report. It is unable to sell machines to new buyers in affected product lines until the recall is complete.

U.S.-based Resmed Inc, which has 60% of the market for sleep apnea devices, has benefited from the Philips recall, with Citi analysts estimating they will gain 10% market share permanently as a result.

Philips shares were down 1.1% at 19.55 euros on Wednesday, having lost 60% of their value since April 2021.

Philips also makes medical imaging, monitoring and diagnostic equipment, competing with General Electric and Siemens Healthineers.

($1 = 0.9833 euros)

(Reporting by Toby Sterling and Bart Meijer. Additional reporting by Manas Mishra, Michele Gershberg, Juliette Portala; editing by David Evans)

By Toby Sterling and Bart H. Meijer


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
GENERAL ELECTRIC COMPANY -2.68% 62.73 Delayed Quote.-31.76%
MORNINGSTAR, INC. -0.83% 213.5 Delayed Quote.-37.05%
PHILIPS NV -0.66% 15.642 Real-time Quote.-51.94%
RESMED, INC. -0.13% 218.46 Delayed Quote.-16.02%
SIEMENS AG -1.21% 98.26 Delayed Quote.-34.86%
SIEMENS HEALTHINEERS AG 0.31% 42.01 Delayed Quote.-36.37%
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Financials
Sales 2022 18 191 M 17 769 M 17 769 M
Net income 2022 520 M 508 M 508 M
Net Debt 2022 4 454 M 4 351 M 4 351 M
P/E ratio 2022 29,5x
Yield 2022 4,57%
Capitalization 13 755 M 13 436 M 13 436 M
EV / Sales 2022 1,00x
EV / Sales 2023 0,92x
Nbr of Employees 78 831
Free-Float 99,4%
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Number of Analysts 15
Last Close Price 15,64 €
Average target price 24,25 €
Spread / Average Target 55,0%
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Managers and Directors
Frans van Houten Chief Executive Officer
Abhijit Bhattacharya Chief Financial Officer & Executive Vice President
Feike Sijbesma Chairman-Supervisory Board
Jan Kimpen Chief Medical Officer
Shez Partovi Chief Medical, Innovation & Strategy Officer
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