What happened
Shares of medical technology company Koninklijke Philips (PHG 1.69%) were down more than 9% as of 10:45 on Friday. The company announced on Thursday that the Food and Drug Administration (FDA) is recommending further tests on certain recalled sleep apnea and respirator devices before allowing them back on the market.
The stock is up more than 26% so far this year.
So what
On Thursday, Philips said that after discussing the matter with the FDA, it has agreed to perform further testing on the recalled devices. The FDA had said it wasn't satisfied with Philips' handling of the recall, so additional risk testing was required. It added that the testing and analysis Philips had shared were not enough to determine the risks to users.
The recall has been ongoing since 2021. The polyester-based polyurethane foam in the recalled devices degraded when certain cleaning materials were used, the FDA said, causing cancer or injuries. The FDA said there have been 100,000 complaints over the machines and 385 deaths.
Now what
Philips' shares will likely continue to be dragged down until the recall is resolved. The company was hoping to put the matter behind it, saying it had settled some legal claims last month for 575 million euros (around $606 million). Philips is also facing personal injury claims over the devices as well as an investigation by the Department of Justice.
The company's shares had risen recently after a second-quarter report that showed revenue of 4.5 billion euros (about $4.75 million), up 7% year over year, and net income of 74 million euros (about $78 million), compared to a loss of 20 million euros (about $21 million) in the same period last year. The company also raised yearly revenue guidance to show that it expected a mid-single-digit-percentage gain this year.
