Philips has finally managed to settle with users of its apnea devices. And that for 982 million euros, much less than expected. The share price rose by 40 percent on Monday, April 29. That is a bit of an exaggeration, say stock analysts.
In 2021, Philips announced that its ventilators against sleep apnea could contain harmful substances. Crushed foam particles could be inhaled and may be carcinogenic. The message led to panic among apnea patients.
Out of 15 million devices that Philips had sold worldwide, it recalled 5.5 million. It was the largest recall of medical equipment ever. Mainly Americans not amusedlawsuits and billion-dollar claims threatened.
Philips even seemed to be at risk of being destroyed by the affair, which according to The Financial Times already cost at least 5.2 billion euros. But now there is a settlement.
Philips’ price rises
The Eindhoven company, which has mainly focused on health technology since 2010, pays the equivalent of 982 million euros to American apnea patients. Estimates of the size of possible claims ranged from 2 to 4 billion euros. “Some analysts even thought of 10 billion euros,” says financial markets specialist Maarten Mosselman. ‘Now a line has been drawn under it and the threat has disappeared.’
Philips announced the settlement on Monday morning, April 29, at the presentation of the figures for the first quarter of 2024. The share price rose sharply from the opening. It was 28.70 euros around noon, about 40 percent higher than the closing price of Friday, April 26 (19.75 euros).
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“This relief is very extreme,” says Mosselman. ‘I can’t actually remember a 40 percent increase in the price of such a large and well-known share, without it being a tech company from Silicon Valley or without an acquisition being involved.’
Are people going crazy around Philips?
Niels Koerts, stock analyst of the podcast Het Beurscafé, also looked at the price increase with surprise. ‘I had some reliefrally calculated. But I would have thought anyone on the news who had predicted this plus of 40 percent was crazy.’
Koerts does not think Philips’ results are particularly strong. The company is experiencing a decline in orders. Based on future cash flows, Koerts would not rate the Philips share higher than 19 or 20 euros – considerably lower than the current price. ‘The share is now trading at twenty times expected earnings. In the current interest rate climate, that is really a lot for a company with issues.’
Line under apnea problem?
Philips CEO Roy Jakob writes in the quarterly report that not all the legal damage has been suffered yet. The American public prosecutor’s office still has a criminal investigation underway against Philips.
There are also investors who are demanding compensation for the price loss they have incurred due to lax action by Philips in the apnea case. On the eve of the affair, the value of a share was just over 50 euros.
A Philips spokesperson said that with this settlement in the United States, the vast majority of the claims have been resolved. ‘Especially in the United States, there are specific risks, uncertainties and costs associated with lengthy legal procedures. We made this settlement to prevent that from happening.”
Philips denies damage to apnea devices
With this settlement, Philips does not admit any guilt or liability. Nor that the devices would have caused injury. ‘Extensive testing by certified, independent laboratories has shown that use of the sleep apnea devices will not lead to health damage.’
Philips expects that the problems with the devices in the Netherlands will soon be over. ‘In the Netherlands, a solution has been provided for almost all sleep apnea devices, and we expect to complete the repair of the ventilators at the end of June.’
