Philips now has ‘clarity’ to rebuild 

AMSTERDAM – With a consent decree nearly finalized and a more streamlined product portfolio, Philips believes its sleep and respiratory care business “bottomed out” at EUR 1 billion in revenues for 2023 and will "build back from there,” says CEO Roy Jakobs. 

The company announced on Jan. 29 that it has agreed on the terms of a consent decree with the U.S. Food and Drug Administration related to Philips Respironics and its recall of certain sleep and respiratory care devices.  

“We see that sleep and respiratory care bottomed, in terms of the  EUR 1 billion of revenues, and with the clarity that we have now with the consent decree and the road map to get to compliance and to restore the business, actually we are able to build from there,” said Jakobs during a conference call to discuss the company’s fourth quarter and full-year financial results. “And that is also why we were happy to announce that actually we could now confirm that we remain on our plan, including any consent decree implication for 2023 to 2025.” 

As a result of the consent decree, Philips recorded a provision of EUR 363 million in the fourth quarter of 2023 that relates to remediation activities, inventory write-downs and onerous contract provisions.  

Until the relevant requirements of the multi-year consent decree are met, Respironics can’t sell new CPAP or BiPAP sleep therapy devices or other respiratory care devices in the U.S., but Jakobs pointed out that Philips has largely stopped selling CPAP devices in the U.S. already, as it has been focused on remediating devices affected by the recall, a process that is 99% complete. The company has, however, resumed selling devices outside of the U.S. 

“We already stopped selling a lot in the U.S., right?” he said. “We continue with patient interfaces, which were the biggest part that was already in the forecast, including consumables and accessories. Furthermore, we are building back outside of the U.S. So, that’s something that comes actually on top of what we’re doing.” 

Consumables and accessories, including masks, will continue to be a focus for Philips, following the company’s decision, announced four days prior to the announcement of the consent decree, that it would stop selling 19 sleep and respiratory products as soon as this month. While the DreamStation Go portable CPAP device was included on the list of discontinued products, other DreamStation devices were not.  

“We are committed to resuming the sale of sleep therapy devices in the U.S., once the relevant requirements of the consent decree are met,” a spokesperson confirmed in an email to HME News. 

Previously, Philips had established a three-year “recovery trajectory” for its sleep and respiratory care business that projected sales of EUR 600 million by 2025, but that was subject to the consent decree and other factors. 

"We actually overdelivered (on) the first-year plan,” Jakobs said.  “We said low single-digit growth where we did 7% growth. We said high single-digit EBITDA (and) we did 10.5% EBITDA, and we committed to EUR 700 million to EUR 900 million of cash (and) we did EUR 1.6 billion cash. That actually was excluding the consent decree. Now, we continue including the consent decree and we remain fully committed to the plan as we have. We remain very committed to the 3% to 5% growth for 2024 and that includes any impact of any pruning that we did in 2023.”