Philips Settles US Ventilator Recall for $1.1 Billion

Philips Agrees to $1.1 Billion Settlement in US Ventilator Recall Case

Dutch medical devices maker Philips has reached a $1.1 billion settlement in personal injury cases in the United States related to the global recall of ventilators used to treat sleep apnea. The company announced the agreement on Monday, putting an end to uncertainty over the US litigation.

The devices were recalled in April 2021 due to concerns that the foam used in them could degrade and become toxic, posing potential cancer risks. Philips has been dealing with the fallout of the recall for three years, with fears of large litigation bills causing a significant drop in its market value.

CEO Roy Jakobs stated that the settlement and the recent agreement with US authorities mark significant milestones for Philips, providing clarity on the way forward. The company has also reached an agreement with insurers for compensation of 540 million euros ($580 million) for product liability costs, to be received in the second quarter of 2024.

In its first-quarter earnings report, Philips reported an 8% increase in core profit, beating analyst expectations. Despite a 2.4% growth in comparable sales, order intake continued to decline, mainly due to slower sales in China.

“We started the year in line with our plan,” Jakobs said, highlighting positive order intake growth outside China and strong margin improvement. The company expects to fund the settlement payments from cash flow next year.

Overall, the settlement and positive earnings report provide a sense of relief for Philips as it navigates the aftermath of the ventilator recall.