Philips: ‘We are very intent on getting back in play’

AMSTERDAM, the Netherlands – Philips expects to be better able to provide guidance on when it will start recovering its market share in the sleep and respiratory market this summer, says CEO Frans van Houten. 

The company is still very much in the throes of a recall of respiratory devices that it doesn’t expect to conclude until the fourth quarter of this year. 

“I find it’s too early; nevertheless, I don’t want to leave you hanging there,” he said during a Jan. 24 conference call to discuss the company’s latest financial results. “I think the recovery of our strong market share is likely to take a few years. However, there’s a strong, pent-up demand in the market for sleep devices and so we should get a kind of out-of-the-gate boost to the revenue once we are back in the market. But at the same time, it’s not realistic that our 50% market share will just fall into our laps in the first months. So, it will take a bit of time and I hope to give a lot more color on that when we kind of speak over the summer.” 

Most recently, Philips announced it widened the scope of the recall to include a total of about 5.2 million devices, forcing the company to increase its provision another EUR 225 million. 

In addition to the recall, the recovery will take time due to supply chain challenges that have eaten into the company’s inventory and that are expected to continue until at least mid-year, van Houten says.  

“We are very intent on getting the sleep business back in play and we are expecting to be able to allocate some production capacity to that in the fourth quarter,” he said. “Of course, then we have to rebuild our pipeline inventory, but we have a team working on the recovery of the business as we speak.” 

That team comprises more than 1,000 people working under the leadership of Roy Jakobs, a member of the executive committee, van Houten says. 

“We’ve also made organizational changes throughout 2021, which include onboarding new top management in the Sleep and Respiratory Care business and further strengthening our quality and regulatory affairs leadership,” he said. 

Other updates from the call: 

Follow up with FDA 

Philips has submitted a comprehensive response and action plan to the U.S. Food and Drug Administration in connection with the Form-483 from November. “Philips Respironics continues to engage with the FDA, and we will work closely with the agency to clarify and follow up on the inspectional findings and its requests,” van Houten said. 

Replace-repair mix 

Philips has targeted shifting the mix of replacements and repairs from 70-30 to 50-50. “Initially we were unsure about how many products we would get back from patients and whether they are repairable in the first place,” van Houten said. “In the meantime, we now have a sizable quantity back and evaluated by our factory, and we know that we can repair a significant volume that comes back.” 

Litany of lawsuits  

Philips has been named in about 100 class action lawsuits and about 120 personal injury lawsuits related to the recall. “We are very determined to provide the data to start scoping what is now the real risk,” van Houten said. “Therefore, there’s no point in getting ahead of ourselves before we have kind of put all that evidence in place. It’s my estimation that the earliest that we are able to scope litigation is going to be somewhere in 2023.” 

Data mining 

That data includes the results of the VOC testing Philips announced in December and the results of particulates testing it plans to announce in the second quarter. The company is also testing the impact of ozone on its devices. “A battery of tests is ongoing,” van Houten said.