Philips halts sleep apnoea device sales in US after FDA deal

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Philips has halted sales of its sleep apnoea machines in the US after reaching an agreement with authorities there, following the recall of millions of devices in the past three years.

The Dutch manufacturer said on Monday it was setting aside €363mn in the fourth quarter to fix long-running problems with its breathing machines following a deal with the US Department of Justice, acting 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 machines in 2021 owing to potential health risks caused by the disintegration of noise-dampening foam inside them.

The issue affected 15mn devices globally. The FDA said people using the devices could breathe in or swallow the foam if it broke down, or inhale invisible chemicals. Philips said it expected to recall up to 5.6mn machines as some devices were no longer in use.

Until the conditions in the multiyear agreement are met, Philips’ Respironics unit will not sell any new sleep apnoea machines in the US, but will be allowed to sell parts and service existing machines.

Jefferies analysts said restarting US sales was “likely to take years”.

The deal comes after Philips said last year it was anticipating more than $600mn of legal costs in the US arising from the millions of potentially faulty medical devices, and had set aside €575mn to resolve a class-action lawsuit issued after the 2021 recall. That was in addition to €204mn in costs related to job cuts and problems with the machines.

Philips shares opened 5 per cent lower on Monday, and are about 60 per cent off their 2021 highs.

“Resolving the consequences of the Respironics recall for our patients and customers is a key focus area and I acknowledge and apologise for the distress and concern caused,” chief executive Roy Jakobs said on 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 US deal would “provide Philips Respironics with a road map of defined actions, milestones, and deliverables to demonstrate compliance with regulatory requirements and to restore the business”.

Philips disclosed its agreement with US authorities as it released earnings for the fourth quarter, with sales decreasing 7 per cent year on year including the impact from its Respironics operations. It recorded €653mn in adjusted earnings before interest, tax and amortisation, in line with the previous year but short of analyst expectations.

Philips said it remained confident in delivering its 2023-2025 plan, though uncertainties remained. For 2024, it expects to deliver comparable sales growth, excluding Respironics operations, of between 3 and 5 per cent.

The consent degree was subject to approval from the relevant US court, Philips said.