AMSTERDAM, The Netherlands – Philips estimates that its recall of certain CPAP devices and ventilators created a headwind of around € 150 million for the company’s sales in the third quarter of 2021.
Philips reported third-quarter revenue of € 4.2 billion, a comparable decline of 7.6% due not only to the recall but also to global supply chain challenges.
“Excluding the Sleep and Breathing Care business, year-to-date comparable sales growth was 10% and adjusted EBITDA margin improved by nearly 500 basis points” CEO Frans van Houten said on an Oct. 18 conference call to discuss the latest financial results.
Philips announced the recall in June, primarily affecting its first-generation DreamStation CPAP devices. The company announced in September that it had received approval from the U.S. Food and Drug Administration to begin replacing noise-canceling foam in affected devices with a new material.
To date, Philips claims to have produced a total of approximately 750,000 repair kits and replacement devices, of which more than 250,000 have reached customers.
“We significantly increased our overall production volume in the third quarter to 55,000 units per week and are on track to reach 80,000 units per week in the fourth quarter,” said van Houten. “We expect to complete the repair and replacement programs within 12 months. We have put in place strong program management to complete corrective actions as quickly as possible. ”
When asked about an outage, van Houten said more devices are currently being replaced than repaired.
“For a repair process, you need the return of the affected units and that return flow takes time to organize,” he said. “Once we have fully implemented the circular model there, we will be in a better position to tell you the quality of the units that are returned and whether they are worth repairing. Also, because we don’t want patients to wait and are able to produce DreamStation 2 units, we basically ship DreamStation 2 units to the field to start this whole cycle. And, therefore, you have to assume that in the first months of the repair-replace program, you will see an overload of new (devices); whereas, later, when this return path is well engaged, you will see a more advantageous repair ratio.
Currently, Philips says a total of 3.3 million recalled devices have been registered as part of the recall.
“This does not mean that all registered devices are qualified repair and replacement devices,” van Houten said. “.