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US FDA still not satisfied with Philips recall; stock falls over 9%
Global Banking & Finance Review®
Company
By Toby Sterling and Piotr Lipinski
AMSTERDAM (Reuters) -The U.S. Food and Drug Administration (FDA) said it is still not satisfied with how Dutch healthcare technology company Philips has handled a major product recall and the company should conduct additional risk testing.
Its shares fell 9.6% to 16.81 euros at 0726 GMT on Friday.
It was the latest blow to Philips over the recall of millions of sleep apnea and respiratory devices, which has been ongoing since 2021.
“We do not believe that the testing and analysis Philips has shared to date are adequate to fully evaluate the risks posed to users from the recalled devices,” the FDA said in an update published overnight.
In response, Philips said it had 5 independent laboratories test the recalled devices but it has agreed with the FDA’s call for more and was in discussions with the agency on details.
“Philips’ first priority is the health and well-being of patients, both in terms of providing replacement devices and testing to seek more clarity on the safety of the sleep and respiratory care devices under the recall,” it said.
CEO Roy Jakobs has made the recall his top priority since being appointed in October 2022 after his predecessor stepped down.
The recalled devices used a type of foam that could degrade when exposed to cleaning chemicals, causing injuries to airways or leading to cancer, the FDA has said. It has tallied 100,000 complaint reports over the machines, and 385 deaths.
Philips lost more than two-thirds of its market valuation in 2021-2022 due to the recall, but has staged a modest recovery in 2023.
“This is negative news,” said analysts from Bernstein, who have a 20 euro price target and ‘market perform’ rating on the stock. “The FDA is clearly still not happy with the way the recall is being handled.”
In its update, the FDA underlined it remains “unsatisfied with the status of this recall” and it added a new resource section to its website, incorporating feedback from patients and a comprehensive timeline.
It noted that in March 2022 it had directed Philips to better communicate with the public, including issuing monthly updates, and in May 2022 it proposed issuing Philips a repair/replace/refund order, “an authority that has not been used … in 10 years.”
Last month, Philips settled one major category of legal claims over the recall, for which it had earlier taken a 575 million euro ($606 million) provision.
However the company still faces personal injury claims, as well as an investigation by the U.S. Department of Justice. It is in talks with the FDA over a “consent decree” or settlement.
($1 = 0.9485 euros)
(Reporting by Toby Sterling and Piotr Lipinski; Editing by Jan Harvey and Elaine Hardcastle)
A product recall is a request to return a product after the discovery of safety issues or defects that could harm consumers.
Risk testing involves evaluating a product or service to identify potential risks and ensure safety and compliance with regulations.
A financial provision is an amount set aside in a company's accounts to cover future liabilities or losses.
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