Royal Philips (NYSE:PHG) announced today that the U.S. Dept. of Health and Human Servies partially terminated its ventilator manufacturing contract.
Amsterdam-based Philips received the termination notice from HHS after agreeing to a contract in April to deliver 43,000 bundled EV300 ventilator configurations to HHS through December 2020 amid the COVID-19 pandemic.
News of the contract termination follows a congressional report from July accusing the Trump administration of bungling plans to obtain ventilators early in the coronavirus pandemic, claiming that federal officials squandered more than $500 million in a contract with Philips.
The company will complete its deliveries for August, which will result in 12,300 total bundled ventilator configurations supplied to the Strategic National Stockpile, falling in line with the stipulations of the contract. The remaining 30,700 ventilators the company was contracted to manufacture will not be supplied to the stockpile.
Philips CEO Frans van Houten said in a news release that the companies order book remains solid, despite the reduction in ventilator production after the contract termination. The reduction will impact Philips’ financial performance, he added, but the company expects to return to growth and improved profitability, with modest sales growth over the full year.
“To date, we have delivered on our commitments to HHS,” van Houten said. “I am proud that with great urgency and under intense pressure, we achieved a fourfold ventilator production expansion with substantial investments: we hired hundreds of new colleagues for our factories in the U.S. and called upon our supply chain partners to massively step up, all in response to the COVID-19 pandemic.
“While we are disappointed in light of these vast efforts, we will adjust our plans and work with HHS to effectuate the partial termination of this contract.”
