Philips share price rises sharply after a $1.1 billion settlement over apnea devices

What is striking about this settlement is that Philips is now also compensating patients for physical damage and for the fact that there was ‘inadequate monitoring’. So far, Philips has denied after its own research that loose foam particles in the devices can cause health damage. A settlement concluded last year amounting to 448 million euros with American patients only concerned economic damage, which was allegedly suffered because the devices did not work properly.

In a press statement, the company still admits no fault for any injuries caused by the devices. CEO Roy Jakobs calls the settlement ‘an important milestone’ that ‘creates more clarity about the way forward’.

Reputational damage

It therefore appears that Philips mainly wants to put an end to the reputational damage caused by the devices with the settlement. The persistent stories about malfunctioning sleep apnea machines have given Philips a lot of negative publicity, which also led to losses in turnover and jobs. After the settlement was announced, Phillips shares rose by 33 percent on the Amsterdam stock exchange on Monday. The affair caused Phillips a share price loss of about 50 percent before Monday.

The settlement was reached with a group of patients who had filed a joint case. Payments will start next year, Philips said. However, 980 million euros have already been paid for the settlement in the first quarterly account of this year. The company does not indicate how large the group of patients who are now being compensated.

To lose

The problems mainly occur in the American market. In January, Philips reached an agreement with the American regulator FDA, as a result of which sales of the devices have been stopped for the time being. The US Department of Justice is still investigating Philips’ actions, which could lead to a hefty fine. Dealing with the problems, including the latest settlement, already cost more than 5 billion euros, not to mention losses incurred and the stock market decline.

In the first quarter of 2024, Philips achieved a turnover of 4.1 billion euros. According to the company, this is a growth of 2.4 percent, despite disappointing sales in the growth market China. Partly because of the settlement, Philips’ loss this quarter amounts to 800 million euros.