Philips In Talks With U.S. Authorities Over Defibrillators -- 3rd Update
January 24 2017 - 8:46AM
Dow Jones News
By Maarten van Tartwijk
AMSTERDAM--Royal NV is again caught in the crosshairs of U.S.
authorities.
The Dutch health-technology company said Tuesday it is in talks
with the U.S. Department of Justice following inspections of its
defibrillator business by the Food and Drug Administration before
and during 2015. The outcome of the talks could result in a fine
and have a "meaningful impact on the operations of this business,"
it said.
Defibrillators are used to restore patients' heartbeats after
cardiac arrest and are used by consumers and first responders
working at fire departments. The FDA in 2013 warned that thousands
of the devices made by Philips may not have delivered the required
shock during emergencies because of an electrical component
failure.
Chief Executive Frans van Houten said the current discussions
with the Justice Department are unrelated to the FDA warning in
2013 and primarily focus on quality-management systems and
compliance matters. "It is not about product quality or patient
safety," he said.
Philips shares nevertheless fell by around 3% in Amsterdam even
as it reported better-than-expected fourth-quarter earnings.
It is the second time the Dutch conglomerate has been caught in
a brawl with the FDA. In 2014 the agency detected shortcomings in
manufacturing controls at a medical-imaging plant in Cleveland.
Production was halted for a prolonged period, causing Philips to
issue multiple profit warnings.
Mr. van Houten said Philips has worked hard to improve
compliance and sought to reassure analysts that the latest
investigation will likely be less harmful than the Cleveland
problems.
The defibrillator business is relatively small, accounting for
roughly EUR290 million ($312 million) in annual sales. The U.S.
represents only part of that figure, suggesting the impact of a
potential fine could be relatively limited.
The issue, however, adds to wider concerns of Philips'
operations in the U.S., its most important market by sales.
President Donald Trump's promise to undo the Affordable Care Act is
generating uncertainties in the health-care industry. General
Electric Co., one of Philips' major rivals, last week warned that
uncertainties could slow sales of medical equipment such as MRI and
X-ray machines.
Mr. van Houten said the U.S. business continues to perform well
but that the industry remains in the dark about the impact of
policy under the new president. "I have spoken with several
hospital CEOs...Everybody is trying to understand what 'repeal and
replace' could mean. Nobody knows what could happen," he said.
Philips, which makes a range of products from X-ray machines to
electric toothbrushes, said Tuesday it returned to net profit in
the fourth quarter as it reported a pickup in sales and benefited
from cost-savings.
Net profit was EUR640 million in the last three months of 2016,
up from a EUR39 million net loss in the same period a year earlier,
beating market expectations.
Adjusted earnings before interest, taxes and amortization were
EUR1 billion, up from EUR842 million in the previous year. Sales
were EUR7.24 billion, up 3% on a comparable basis.
The Dutch company, which is in the process of exiting its
lighting business, reiterated its financial targets for the next
three to four years.
Write to Maarten van Tartwijk at maarten.vantartwijk@wsj.com
(END) Dow Jones Newswires
January 24, 2017 08:31 ET (13:31 GMT)
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