Dutch medical device maker Philips said Monday it had reached a $1.1 billion deal in the United States to settle lawsuits over faulty sleep machines in a case that have dogged the company.
The company’s stock soared on news of the settlement, which was less onerous than feared by some shareholders.
Since 2021, Philips has been battling a series of crises over its DreamStation machines for sleep apnea, a disorder in which breathing stops and starts during sleep.
Earlier this year, the company said it would halt new sales of the machines in the United States following a series of recalls of the devices made by subsidiary Philips Respironics.
Philips said in a statement Monday that it had reached an agreement with the plaintiffs “to resolve the personal injury litigation and the medical monitoring class action to end the uncertainty associated with litigation in the U.S.,” adding that it didn’t “admit any fault or liability, or that any injuries were caused by Respironics’ devices.”
The agreement addresses claims filed in U.S. courts and other potential cases, it said.
Analysts at the Jefferies investment firm said in a note that the settlement was “much milder than feared and shall mark the end of litigation uncertainty”.
Shares in Philips surged by more than 33 percent on the Amsterdam stock exchange following the announcement.
“Patient safety and quality is our highest priority, and we have taken important steps in further resolving the consequences of the Respironics recall,” Philips chief executive Roy Jakobs said in the company statement.
“The remediation of the sleep therapy devices for patients is almost complete, and the test results to date show the use of these devices is not expected to result in appreciable harm to health,” he said.
“We do regret the concern that patients may have experienced,” he said, adding that the settlements were “significant milestones and provide further clarity on the way forward for Philips.”
Philips, which has had to cut thousands of jobs, posted losses of 463 million euros ($501 million) over the full year in 2023.
It reported a loss on Monday of 824 million euros in the first quarter of this year on sales totaling 4.1 billion euros.
Philips said the settlement payments are expected to take place in 2025 and will be funded through 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 also concluded an agreement with insurers to pay Philips 540 million euros to cover Respironics recall-related claims.
“The three biggest litigation cases that we had are now put behind us,” Jakobs said in a conference call.
“We can move on and that’s very important,” he said, while cautioning that it “doesn’t mean that everything is resolved.”
Franco-German bank Oddo BHF said that “with the long tail of remaining legal risks being very manageable, we believe the settlement today materially derisks the investment case.”