THE HANGUE: The Hague-based medical device manufacturer, Philips, announced on Monday that it would halt new sales of sleep machines in the United States due to a series of recalls that have continued to impact its financial results.
Despite trimming losses for 2023 compared to the previous year, the company is grappling with challenges stemming from what it described as a “very difficult” 2022.
Philips reported losses of 463 million euros ($501 million) for the full year, a significant improvement from the 1.6 billion euros in 2022. CEO Roy Jakobs acknowledged “strong results” but said that more work needs to be done to ensure sustained performance in a volatile world.
However, traders seemed pessimistic about the company’s prospects, as Philips became the biggest loser at the opening of the Amsterdam stock exchange, with a decline of around four percent.
Since 2021, Philips has faced crises related to its DreamStation machines for sleep apnea, a disorder characterized by breathing interruptions during sleep. In response to the recalls, the company has reached a “consent decree” deal with US authorities, outlining a roadmap of targets to meet regulatory requirements.
As part of this agreement, Philips Respironics will refrain from selling new sleep therapy devices or other respiratory care devices in the US until it complies with the consent decree. The company has set aside a provision of 363 million euros in the fourth quarter to settle the deal, pending finalization and court approval.
CEO Roy Jakobs acknowledged and apologized for the distress and concern caused by the recalls, emphasizing the company’s commitment to complying with the consent decree.
In November, Philips faced further challenges when the US Food and Drug Administration warned about the potential overheating of its new “DreamStation 2” machine for sleep assistance.
The FDA received reports of issues such as fire, smoke, burns, and other signs of overheating. Philips disclosed 270 reports of possible malfunctions covering a three-year period.
The overheating issue was unrelated to the 2021 recall, where foam in the machine posed potential health risks. The recall, along with provisions for legal settlements, led to significant losses and job cuts in 2022.
Philips has taken steps to address these challenges, completing the majority of recalls and emphasizing that independent tests showed the respirators were unlikely to harm patients. Financially, the company rebounded in the third quarter of 2023, posting a net profit of 90 million euros, prompting an upward revision of its full-year outlook.
In the fourth quarter, Philips recorded a profit of 38 million euros, compared to a loss of 105 million euros in the same period last year. The firm reported total sales of 18.1 billion euros for 2023, a six-percent gain from the previous year.
Once known for products such as lightbulbs and televisions, Philips has shifted its focus to medical care technology in recent years, selling off subsidiaries. The company continued to reduce its workforce to 69,656 people by the end of 2023, compared to 77,233 at the end of 2022.
