Shares of Royal Philips have experienced a sharp decline following an announcement from the U.S. Food and Drug Administration (FDA) expressing dissatisfaction with the status of the company’s recall of sleep apnea treatment devices. The FDA has requested additional testing to be conducted.
As of 0841 GMT on Friday, shares in the Dutch health-technology group were trading 9.3% lower at EUR16.84.
Jeff Shuren, the director of the FDA’s Center for Devices and Radiological Health, stated that the testing and analysis provided by Philips thus far are not sufficient for a comprehensive evaluation of the risks faced by users of the recalled devices.
In response to the FDA’s concerns, a spokesperson for Philips confirmed that the company has agreed to undertake additional testing on specific sleep and respiratory care devices to supplement the existing test data. The spokesperson further acknowledged ongoing discussions with the FDA regarding the details of these further tests.
This update from the FDA represents another setback for Philips as it continues its efforts to overcome the significant challenges posed by a substantial recall of breathing-aid machines. The recall was initiated in June 2021 due to reports of potential health risks associated with the degradation of internal sound-dampening foam. The recall has resulted in additional costs for Philips, a substantial write-down on the business’s value, and the settlement of a class-action lawsuit in the United States. The impact on the company’s share price has been significant, with the stock losing more than half its value since the discovery of the issue.
Philips Faces Delays as Additional Testing Required, says ING Analyst
In a note to clients, ING analyst Marc Hesselink expressed concerns that additional testing on Philips’ sleep-therapy devices will lead to further delays in the process. However, the tech company concluded, after extensive testing conducted alongside five independent laboratories, that the use of these devices is not expected to cause significant harm to patients’ health, according to a company spokesman.
On the contrary, the FDA (Food and Drug Administration) believes that more testing is necessary. In an online update dated Thursday, the FDA stated that it maintains its recommendations regarding potential health risks associated with the polyester-based polyurethane foam breakdown in the recalled devices, based on the information currently available.
Notably, the FDA has not expressed any concerns about the validity of the initial tests conducted. Philips, for its part, has been working closely with the FDA over the past two years and shares the same goal as the agency and other regulators in ensuring the highest safety standards.
While Philips recently announced that the remediation of sleep-therapy devices is almost complete, Hesselink noted that there are still outstanding issues. He mentioned that device replacement has mostly been accomplished, and Philips has agreed to an economic loss settlement in the U.S. However, Hesselink highlighted the need for a consent decree with the FDA as well as a settlement concerning potential harm to patients.
