Royal Philips NV will book provisions of €575 million ($630 million) as part of a planned settlement in the US to compensate patients during a recall of millions of medical devices that treat sleep apnea.
(Bloomberg) — Royal Philips NV will book provisions of €575 million ($630 million) as part of a planned settlement in the US to compensate patients during a recall of millions of medical devices that treat sleep apnea.
The company is a defendant in several class-action lawsuits and individual personal injury claims in the US, including an economic loss class action. The funds set aside will cover the expected settlement for the economic loss suit, “an important step in addressing the litigation related to the recall,” Philips said Monday.
The company has already set aside around €1 billion for the recall of around 5.5 million devices globally, of which more than half are in the U.S. Philips started the first such step in June 2021.
The company also reported first-quarter adjusted earnings before interest, taxes and amortization of €359 million, beating the average estimate of €212 million in a Bloomberg survey of analysts. Its operational performance improved amid an easing in its supply chain woes and a restructuring process put in train under the new Chief Executive Officer Roy Jakobs.
“We are confident in our plan for the year 2023,” Jakobs said, acknowledging that uncertainties remain.
Philips previously said it expects to deliver low single-digit comparable sales growth and a high single-digit adjusted operating profit margin this year.
Jakobs, who was overseeing the issues around the recall of medical devices to treat sleep apnea, took over in October and started his tenure by cutting 10,000 jobs. More than half of the reducions have been achieved, he said.
Philips has warned it might need to increase the money it sets aside as lawsuits progress. Users have alleged that inhaling the foam after it disintegrates poses a cancer risk. In addition to economic compensation for clients, Philips also faces medical monitoring class action in the US.
Read More: Philips Slow in Replacing Recalled Sleep Devices, Regulator Says
It’s also being investigated by the US Department of Justice and remains in ongoing discussions with the FDA regarding a proposed consent decree. The company has not yet made any provisions for these matters.
(Updates with details from the statement)
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