Philips
(NYSE: PHG)
shares got a huge boost today despite first-quarter results that fell shy of the consensus forecast on Wall Street.
Investors appeared to react positively to recent updates on the company’s long-running Respironics recall. Shares of PHG rose more than 35% to $28.50 apiece in early-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — ticked up 0.5%.
The company’s recent progress with its ongoing Respironics recall included agreeing to a consent decree in the U.S. and receiving a judge’s approval to settle lawsuits related to the economic losses involving millions of recalled CPAP machines. (The economic losses settlement — not to be confused with personal injury claims — was for at least $613 million. Here’s a full timeline of the recall going back to mid-2021.)
Philips said today that it settled all personal injury claims filed in the U.S. for $1.1 billion, a total well below expectations of at least $2 billion and as much as $10 billion, according to Reuters.
In a statement shared with MassDevice, the plaintiffs’ co-lead counsel in the case said they were pleased to have reached the $1.1 billion resolution of personal injury and medical monitoring claims.
Sandra L. Duggan of Levin Sedran & Berman, Kelly K. Iverson of Lynch Carpenter, Christopher A. Seeger of Seeger Weiss, and Steven A. Schwartz of Chimicles Schwartz Kriner & Donaldson-Smith said:
“The agreements with Philips will provide compensation to those users of the now-recalled CPAP and other respiratory devices who suffer from significant physical injuries and important research for the treatment of those injuries. This is in addition to the uncapped settlement that will provide more than $600 million in economic compensation to affected device owners. Ultimately, these combined agreements accomplish what we sought to achieve when this litigation began — holding Philips accountable by obtaining care for those with physical injuries and compensation for those needing new respiratory devices.”
More on Philips’ Q1 misses
For the quarter, the Amsterdam-based medtech giant company reported losses of $1.07 billion (€998 million). That equals losses of 77¢ (€0.72) per share on sales of $4.4 billion (€4.1 billion) for the quarter ended March 31, 2024.
Philips recorded a more than $300 million bottom-line slide on a slight sales decrease of 0.7%.
Adjusted to exclude one-time items, earnings per share came in at 22¢ (€0.21). That landed 6¢ behind expectations on Wall Street. Sales fell shy of the forecast as well, as experts projected $4.66 billion.
Outlook for the rest of the year at Philips
Philips reiterated its confidence in delivering on its plan for 2025 while acknowledging that uncertainties remain. It expects 2024 to have 3%-5% comparable sales growth with an adjusted EBITA margin of 11%-11.5%.
The company expects free cash flow between $962.5 million and $1.18 billion (€900 million and €1.1 billion). That includes the reciept from insurers for the Respironics product liability claims and remaining settlement payment. It expects to make the personal injury and medical monitoring litigation settlement payment in 2025.
Philips’ outlook excludes the potential impact of other legal proceedings related to the Respironics recall. That includes a U.S. Dept. of Justice (DOJ) investigation.
“We started the year in line with our plan, with order intake growth outside China turning positive and strong margin improvement. Supported by key innovation launches and strong focus on our execution priorities, we remain confident in our performance improvement plan for 2024,” said CEO Roy Jakobs. “Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall. The remediation of the sleep therapy devices for patients is almost complete, and the test results to date show the use of these devices is not expected to result in appreciable harm to health. We do regret the concern that patients may have experienced.
“The approved consent decree and economic loss settlement, and now the resolution of the personal injury and medical monitoring litigation in the U.S., are significant milestones and provide further clarity on the way forward for Philips.”
