The company anticipates the settlement will resolve all personal injury and medical monitoring claims related to its June 2021 recall.
RT’s Three Key Takeaways:
- Philips Respironics has agreed to a $1.1 billion settlement to resolve the personal injury litigation and the medical monitoring class action in the United States.
- The related payments are expected in 2025 and will be funded from Philips’ cash flow generation.
- Philips also reached a EUR 540 million agreement with insurers to cover Respironics recall-related product liability claims.
Philips and plaintiffs’ leadership have reached an agreement to resolve the personal injury litigation and the medical monitoring class action “to end the uncertainty associated with litigation in the US,” according to a release from the company.
The settlement addresses the claims filed in the US courts and potential claims submitted to the census registry. Under the settlement, Philips Respironics has agreed to pay a total of $1.1 billion. The related payments are expected in 2025 and will be funded from Philips’ cash flow generation.
Philips and Philips Respironics do not admit any fault or liability, or that any injuries were caused by Respironics’ devices.
Earlier this month, Philips Respironics signed a consent decree, which was court-approved, and obtained the final court approval for the previously announced economic loss settlement in the US, for which a provision was recognized in Q1 2023.
Philips also concluded an agreement with insurers to pay Philips EUR 540 million to cover Respironics recall-related product liability claims. This income is expected to be recognized in Q2 2024 and payment is expected during 2024.
“Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall. The remediation of the sleep therapy devices for patients is almost complete, and the test results to date show the use of these devices is not expected to result in appreciable harm to health. We do regret the concern that patients may have experienced,” says Roy Jakobs, CEO of Royal Philips, in a release. “The approved consent decree and economic loss settlement, and now the resolution of the personal injury and medical monitoring litigation in the US, are significant milestones and provide further clarity on the way forward for Philips.”
Outlook
For the full year 2024, Philips continues to expect 3-5% comparable sales growth and an Adjusted EBITA margin of 11-11.5%.
The expected free cash flow is now increased to EUR 0.9-1.1 billion in 2024, including the receipt from insurers for the Respironics product liability claims and the remaining payment related to the economic loss settlement. The personal injury and medical monitoring litigation settlement payment is expected in 2025.
The outlook excludes the potential impact of other previously disclosed Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.
