FDA says reports of faulty Philips ventilators rise in past quarter

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FDA says reports of faulty Philips ventilators rise in past quarter

AMSTERDAM Reuters - The U.S. Food and Drug Administration said reports of faulty Philips ventilators and sleep apnea machines had risen in the past quarter, underlining problems facing the Dutch company that has just announced plans to replace its CEO.

Philips is about halfway through a recall of 5.5 million such devices in the United States due to the threat posed by a foam part that has damaged the company's reputation and helped wipe $30 billion off its market capitalisation.

More than twice the number of reports it received between April 2021 and April 2022, the FDA said on Tuesday it had received 48,000 reports related to breakdown or suspected breakdown in foam used in Philips respirators over the three months ending July 31, 2022, more than double the number of such reports it received between April 2021 and April 2022.

The FDA said that a wide variety of injuries have been reported in these reports, including cancer, pneumonia, asthma, other respiratory problems, infection, headache, cough, difficulty breathing, dizziness, nodules, and chest pain. The reports aren't proof that Philips devices were responsible.

A spokesman for Philips said on Wednesday that the timing of the Aug. 16 FDA update was the same day that Philips announced longtime CEO Frans van Houten would leave the company.

On October 15th, Van Houten will be replaced by Roy Jakobs, the Philips executive who is responsible for the company's recall operation.

Steve Klink, spokesman, said the increase in reports was due to increased public awareness of the problem after its recall began in June 2021.

Over the past three months, we were still going through a backlog of complaints, he said.

We need to look through them and see which are justified and which not. The FDA ordered Philips to notify patients of the recall in March, saying its communication until then was inadequate. Philips' replacements' costs are estimated to be around 900 million euros, but that doesn't include costs from a possible settlement with the U.S. Department of Justice or consumer injury lawsuits.

InsingerGilissen analyst Jos Versteeg said Philips should avoid downplaying FDA concerns and later having to backtrack.

There's a chance that it will end up fined, that there won't be big claims. He said that you don't want to take the risk.

Analyst Javier Correonero of Morningstar said Philips has a credibility issue, citing both the deepening recall problems and the company's July 25 profit warning.

He said in an email that the market has low confidence in management's ability to set financial targets.

Philips Sleep Respiratory Care accounted for about 10% of company sales of 17.1 billion euros in the year 2021, according to the company's annual report. It is unable to sell machines to new customers in affected product lines until the recall is complete.

Citi analysts believe that the company will gain 10% market share permanently as a result of the Philips recall, which has 60% of the market for sleep apnea devices.

Philips' shares were down 1.1% at 19.55 euro on Wednesday, having lost 60% of their value since April 2021.

Philips also makes medical imaging, monitoring and diagnostic equipment, competing with General Electric and Siemens Healthineers.