Philips shares surged to a more than two-year high on Monday after the Dutch medical devices giant agreed to a $1.1 billion settlement in the U.S. for personal injury cases linked to the recall of some of its sleep apnea devices.
Millions of devices were recalled in 2021 due to concerns that components carried potential cancer risks. Philips shares closed more than 29% higher, recovering from earlier gains.
The company stated it had set aside 982 million euros, or $1.1 billion, for the payout of personal injury and medical monitoring claims, noting that the settlement would resolve the uncertainty over the litigation.
Philips emphasized it did not admit any fault or liability, or that its Respironics devices caused any injuries.
“Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall,” said Philips CEO Roy Jakobs.
The provision was lower than the expected 2 billion euros to 4 billion euros, according to Barclays analyst Hassan Al-Wakeel, who noted that a worst-case scenario of 10 billion euros was feared.
The settlement is a “capped amount and ends uncertainty on litigation,” Al-Wakeel added.
In September, Philips settled economic loss claims in the U.S. related to the recall, for which it set aside 575 million euros, or $615.7 million.
Philips still faces some cases in Europe over the recall. However, Jakobs said with the latest settlement, the company is able to put the “vast majority” of cases behind them, allowing Philips to focus on its future.
Philips reported a loss of 998 million euros, or $1.07 billion, for the period. Adjusted earnings, however, beat analysts’ forecasts, coming in at 388 million euros for the quarter.
Sales slightly declined year on year, at 4.14 billion euros in the first quarter from 4.17 billion euros in 2023.
Analysts at Jefferies noted that while the results were better than expected, the company’s group order intake had declined for a seventh consecutive quarter.
