Dutch medical device maker Philips said on Monday it has struck a $1.1 billion deal to settle lawsuits in the United States faulty sleep machines In a case that has put the company in trouble.
The company’s shares rose on news of the deal, which was less onerous than some shareholders had feared.
Since 2021, Philips has been battling a series of crises on its DreamStation machines for sleep apnea, a disorder in which breathing stops and starts during sleep.
Earlier this year the company had said that it would do so Stop new sales of machines in the United States Following a series of recalls of devices made by subsidiary Philips Respironics.
Philips said in a statement on Monday that it had reached a settlement with the plaintiffs “to resolve the personal injury litigation and medical surveillance class action to eliminate the uncertainty associated with litigation in the US,” adding that He “has not admitted any fault or liability, or that any injuries were caused by Respironics’ devices.”
It said the agreement addresses claims and other potential matters filed in US courts.
Analysts at investment firm Jefferies said in a note that the settlement was “much lighter than feared and will mark an end to the litigation uncertainty”.
Philips shares rose more than 33 percent on the Amsterdam Stock Exchange following the announcement.
“Patient safety and quality are our top priority, and we have taken important steps to resolve the consequences of the Respironics recall,” Philips Chief Executive Roy Jacobs said in a company statement.
He said, “The treatment of sleep therapy devices for patients is almost complete, and the test results so far show that the use of these devices is not expected to cause any major harm to health.”
“We regret the concern experienced by patients,” it said, adding that the settlements are “important milestones and provide further clarity on the path forward for Philips.”
Philips, which has had to cut thousands of jobs, reported a loss of 463 million euros ($501 million) for the full year through 2023.
It on Monday reported a loss of 824 million euros on total sales of 4.1 billion euros in the first quarter of this year.
Phillips said the settlement payment is expected to take place in 2025 and will be funded through cash flow generation.
The company said it had made a provision of 982 million euros ($1.05 billion) in the first quarter to cover the settlement.
Philips said it also reached a settlement with insurers to pay Philips 540 million euros to cover Respironics recall-related claims.
“The three biggest lawsuits we had are now behind us,” Jacobs said in a conference call.
“We can move forward and that’s very important,” he said, cautioning that “it doesn’t mean everything is solved.”
Franco-German bank Oddo BHF said that “With the long tail of remaining legal risks being very manageable, we believe today’s agreement materially de-risks the investment case.”
