Noah McCrory
Dutch medical device maker Philips said on Monday it had reached a $1.1 billion settlement in the United States to resolve lawsuits over faulty sleeping machines in a case that has dogged the company.
The company’s shares soared on news of the deal, which was less onerous than some shareholders feared.
Since 2021, Philips has been battling a series of flare-ups in its DreamStation machines for sleep apnea, a disorder in which breathing stops and starts during sleep.
Earlier this year, the company said it would stop new sales of the machines in the United States following a series of recalls of devices manufactured by subsidiary Philips Respironics.
Philips said in a statement Monday that it reached an agreement with the plaintiffs “to resolve the personal injury litigation and medical monitoring class action to end the uncertainty associated with the U.S. litigation,” adding that it did not “admit any fault or liability, or that any injuries were caused by Respironics devices.”
The settlement addresses claims filed in U.S. courts and other potential cases, it said.
Analysts at investment firm Jefferies said in a note that the settlement was “much softer than feared and will mark an end to the uncertainty of the litigation.”
Philips shares rose more than 33% on the Amsterdam stock exchange following the announcement.
“Patient safety and quality are our highest priority and we have taken important steps to further address the consequences of the Respironics recall,” Philips Chief Executive Roy Jakobs said in the company’s statement.
“The repair of sleep therapy devices for patients is nearly complete and test results to date show that the use of these devices is not expected to result in appreciable harm to health,” he said.
“We regret the concern that patients may have felt,” he said, adding that the agreements were “significant milestones and provide further clarity on the path forward for Philips.”
Philips, which had to cut thousands of jobs, recorded losses of 463 million euros (501 million dollars) for the entire year 2023.
The company reported on Monday a loss of 824 million euros in the first quarter of this year, on sales that totaled 4.1 billion euros.
Philips said settlement payments are expected to occur in 2025 and will be financed through cash flow generation.
The company said it recorded a provision of 982 million euros ($1.05 billion) in the first quarter to cover the deal.
Philips said it also reached an agreement with insurers to pay Philips 540 million euros to cover claims related to the Respironics recall.
“The three biggest litigation cases we had are now behind us,” Jakobs said on a conference call.
“We can move forward and that’s very important,” he said, warning that this “doesn’t mean everything is resolved.”
Franco-German bank Oddo BHF said that “with the long tail of remaining legal risks being very manageable, we believe the agreement today significantly de-risks the investment case.”
