Philips on recall: ‘We are progressing very well’

AMSTERDAM, the Netherlands – Philips’ plan to remediate an additional 300,000 devices will push the completion date of its recall into 2023, but the company recorded additional provisions in the first quarter to speed up the process as much as it can. 

Philips now expects to complete more than 90% of production and shipments to customers by the end of 2022, said Frans van Houten, CEO, during an April 25 conference call to discuss the company’s financial results for the first quarter of 2022. 

“Look, there are no hard signs about an exact week or date, but we are pretty confident that we are progressing very well,” he said. “And yes, please allow us some weeks back and forth because it's a huge volume. But we are proud of the fact how we have ramped up and we see further ramping up during the year.” 

Philips recorded a EUR 65 million increase in the quarter to account for the higher expected volume of devices eligible for remediation and the higher communication costs. It also recorded a further EUR 100 million for the potential higher cost of execution and to ensure the speed of the program in a volatile environment.  

These recent provisions sit on top of EUR 250 million already recorded in each January of this year and April of last year. 

“Now, we have taken an additional EUR 100 million as a sort of contingency to deal with unforeseens, such as suppliers wanting expediting charges or whatever other measures we need to take to keep the speed up,” van Houten said. “And we didn't want to come back time and again with surprises there. And therefore, with this decision to reserve EUR 100 million, we feel that we are well provided for.” 

Philips also disclosed during the call that Respironics and certain subsidiaries in the U.S. received a subpoena on April 8, 2022, from the U.S. Department of Justice to provide information related to the events leading to the recall. The company says it is cooperating with the agency. 

“That means they are preparing an investigation and we just have to accept that,” van Houten said. “That is not uncommon for a situation of this magnitude. We are in close collaboration and contact with (regulatory agencies). Like us, they feel the pressure from patients and they are very focused on working with us to achieve the remediation as fast as possible. That's priority No. 1 in all our conversations.” 

Looking ahead, Philips is still on track to have additional particulate testing and analysis on its devices completed in the second quarter. The company recently referenced a Canadian study that does not show any correlation between the occurrence of cancer and the use of Respironics devices based on an epidemiological study among almost 7,000 users. 

“Ultimately, this science will be very important,” van Houten said.