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Philips stops selling sleep apnea devices in US after deal with FDA – Financial Times

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Philips has stopped selling its sleep apnea devices in the US after reaching a settlement with authorities there following recalls of millions of devices over the past three years.

The Dutch manufacturer said Monday it would allocate 363 million euros in the fourth quarter to fix long-standing problems with its ventilators after reaching an agreement with the U.S. Justice Department on behalf of the Food and Drug Administration.

The agreement, a so-called consent decree, caps a years-long saga after Philips began recalling certain devices in 2021 due to potential health risks from the breakdown of the sound-dampening foam inside them.

The issue affected 15 million devices worldwide. The FDA said people using the devices could inhale or swallow the foam as it breaks down, or inhale invisible chemicals. Philips said it expects to recall up to 5.6 million devices because some devices are no longer being used.

Until the terms of the multiyear agreement are met, Philips' Respironics unit will not sell new sleep apnea devices in the U.S., but will be allowed to sell parts and service existing devices.

Analysts at Jefferies said resuming U.S. sales would “likely take years.”

The deal comes after Philips said last year that it expected to incur legal costs of more than $600 million in the U.S. due to millions of potentially defective medical devices and 575 million euros to settle a post-recall lawsuit this year class action lawsuit initiated in 2021. In addition, there were 204 million euros in costs related to job cuts and problems with the machines.

Philips shares opened 5 percent lower on Monday and are about 60 percent below their 2021 highs.

“Addressing the impact of the Respironics recall on our patients and customers is a key focus, and I recognize and apologize for the distress and concern this has caused,” Chief Executive Officer Roy Jakobs said Monday. “We are fully committed to complying with the consent decree, which is an important step and provides a clear path forward,” he added.

The company said the U.S. deal would “provide Philips Respironics with a roadmap with defined actions, milestones and outcomes to demonstrate regulatory compliance and restore business.”

Philips announced its agreement with US authorities as the company reported its fourth-quarter results. Revenue fell 7 percent year over year, including the impact of its Respironics operations. Adjusted earnings before interest, taxes, depreciation and amortization amounted to 653 million euros, at the same level as the previous year but below analysts' expectations.

Philips said it remains confident of implementing its 2023-2025 plan, although uncertainties remain. For 2024, the company expects comparable sales growth, excluding the Respironics business, of between 3 and 5 percent.

The level of consent requires approval by the relevant US court, said Philips.