Dutch medical device maker Philips said on Monday it had reached a $1.1 billion deal in the United States to settle lawsuits defective sleep machines in a case that haunted the company.
The company’s shares soared on news of the settlement, which was less burdensome than some shareholders feared.
Since 2021, Philips has been facing a series of crises over its DreamStation machines for sleep apnea, a condition in which breathing stops and starts during sleep.
Earlier this year, the company announced that this would be the case stop new sales of the machines in the United States following a series of recalls of devices from subsidiary Philips Respironics.
Philips said in a statement Monday that it had reached an agreement with the plaintiffs “to resolve the personal injury lawsuits and the medical monitoring class action to end the uncertainty associated with litigation in the U.S.” , adding that it “did not admit any blame.” or liability, or that any injuries were caused by Respironics devices.”
The agreement covers claims filed in US courts and other potential cases, the report said.
Analysts at investment firm Jefferies said in a note that the settlement was “much milder than feared and will mark the end of uncertainty surrounding the litigation.”
Philips shares rose by more than 33 percent on the Amsterdam stock exchange after the announcement.
“Patient safety and quality are our top priorities and we have taken important steps to further resolve the impact of the Respironics recall,” Philips CEO Roy Jakobs said in the company statement.
“The recovery of the sleep therapy devices for patients is almost complete and the test results to date show that the use of these devices is not expected to result in noticeable damage to health,” he said.
“We regret any concerns patients may have experienced,” he said, adding that the settlements were “important milestones and provide further clarity on the path forward for Philips.”
Philips, which has had to cut thousands of jobs, posted a full-year loss of 463 million euros ($501 million) in 2023.
It reported on Monday a loss of 824 million euros in the first quarter of this year on a total turnover of 4.1 billion euros.
Philips said the settlement payments are expected to be made in 2025 and will be financed by cash flow generation.
The company said it had booked a provision of 982 million euros ($1.05 billion) in the first quarter to cover the settlement.
Philips said it has also entered into an agreement with insurers to pay Philips 540 million euros to cover recalls related to Respironics.
“The three biggest lawsuits we had are now behind us,” Jakobs said in a conference call.
“We can move forward and that is very important,” he said, cautioning that this “does not mean everything has been resolved.”
French-German bank Oddo BHF said that “as the long tail of remaining legal risks is very manageable, we believe that today’s settlement significantly jeopardizes the investment case.”
