Philips working with US FDA after mass ventilator recall

Royal Philips said it is working closely with the U.S. Food and Drug Administration after the agency asked for more tests on a silicone foam the medical equipment company plans to use to repair ventilators that were recalled earlier this year. The US FDA issued a number of initial findings on Friday following an inspection of a US manufacturing facility. 

The Dutch company’s subsidiary, Philips Respironics, issued a voluntary recall of certain sleep and breathing devices, and ventilators in June because a polyester-based polyurethane foam which, if it degrades, could potentially become toxic. 

“We will work closely with the FDA to clarify and follow up on the inspectional findings and its recent request related to comprehensive testing,” Chief Executive Officer Frans van Houten said in an emailed statement.

Following the recall, Philips Respironics planned to replace the foam in the recalled devices, which are relied on by millions of patients, with a different silicone-based foam. The FDA initially approved this plan, in part because of testing results the company provided to the agency on the new foam. 

But when investigators visited the manufacturing site, the FDA found that the new foam had failed one test on a device marketed for sale outside the U.S. The test was for the release of certain chemicals of concern, called volatile organic compounds. The FDA has asked for an independent laboratory to perform additional examinations.  

Royal Philips said tests it had carried out on the new silicone foam replacement had demonstrated acceptable results. It said it already works with third-party test labs. 

An FDA investigator’s list of inspection observations does not constitute a final determination by the agency of whether any rules and regulations have been violated, the company said.

Chips and ships: Philips cuts outlook as supply chain problems grow

(Reuters) - Last month, Philips had cut its outlook for sales and profit growth this year and said the global supply chain problems that added to its growing list of worries in the third quarter would likely intensify.

Amsterdam-based Philips said comparable sales dropped 7.6% in the July-September period to 4.2 billion euros ($4.9 billion) as a shortage of electronic components such as memory chips and a lack of shipping containers hampered production and delivery.

"It's chips and ships", Chief Executive Frans van Houten told Reuters in a telephone interview.

Memory chip producers were not able to keep up with Philips' increased demand, Van Houten said, with orders for its products ranging from electric toothbrushes to patient monitoring systems rising 17% last quarter.

Ships transporting Philips' products were also backed up in ports worldwide as international trade rapidly recovered from the COVID-19 induced slump.

"We expect the port congestion to be temporary, while it could take until the second half of next year to get the shortage of chips under control", Van Houten said.

The impact of the supply chain problems will likely increase to 200 million euros in missed sales in the final quarter of 2021, the CEO said, up from 150 million euros in the third quarter.

Although the issues will probably still hit sales into 2022, Van Houten said he expected growth to return in the course of next year.

RECALL BITES

Philips shares fell almost 1% in early trading in Amsterdam, having already lost around a fifth of their value since the company recalled millions of respiratory devices in June.

It has set aside 500 million euros to repair or replace the popular machines used mainly for the treatment of sleep apnea.

The amount does not, however, cover the possible costs of litigation, with Philips facing more than a hundred class action suits from worried patients, some of whom have said degrading foam in the devices could cause cancer or other health issues.

Van Houten said it was still too early to estimate the costs of litigation, as Philips was working with experts to determine the actual health risks from the degrading foam, something that wasn't expected to be known until some point next year.

The recall and supply chain problems pushed adjusted earnings before interest, taxes and amortisation (EBITA) down 25% in the third quarter to 512 million euros, slightly above analysts' expectations.