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DOJ subpoenas Philips as it invests more in repairs for Respironics devices

by John R. Fischer, Senior Reporter | April 29, 2022
Business Affairs

Despite the financial setbacks of the provisions, Philips beat its forecast, with comparable sales falling 4% instead of experiencing a high single digit drop as expected. Comparable sales fell 21% for Philips connected care unit, which performed worse than anticipated, due to recalls and supply chain challenges. The personal health business unit saw 8% growth and image-guided therapy had double-digit growth. This offset the decrease of the supply-constrained diagnosis and treatment division to 2%.

The company also kept its margin guidance intact, but analysts doubt it will reach the top end of pre-COVID levels due to the sleep care recalls, F-483, escalating inflation, supply-chain headwinds and execution issues.

The FDA warned the company in March 2022 that its notification efforts on the recall of its ventilators was inadequate to date, and that it will have to do a better job of notifying all device users. The subpoena says that the quality issues could potentially continue to impact healthcare practices long after Philips has made all necessary repairs.

Philips is currently facing 185 personal injury lawsuits and more than 100 class actions in relation to recalls, but expects the class actions to be consolidated into two cases over the summer. It also is being sued in a security class action case brought forth by SoClean and is dealing with cases outside the U.S. as well.

In addition to the recalls, Philips also warns that supply chain challenges could impact conversion of the backlog. “It is important that we recognize the increasing risk related to the COVID-19 situation, to the Russia-Ukraine war, supply chain challenges and inflationary pressures, which may potentially impact our ability to convert our strong order book to sales and achieve our margin targets if conditions deteriorate further,” said van Houten.

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