(Reuters) -Philips announced the main terms of an agreement it reached in January with the U.S. government on its new sleep apnea machines, which has already cost the company over 360 million euros in the fourth quarter of 2023, sending its shares up almost 3% on Wednesday.
Philips (LON:0LNG) said it had reached what is known as a consent decree that spells out the improvements it needs to make at its Respironics plants in the United States.
In January, Philips said the costs of the consent decree led to a provision of 363 million euros in the fourth quarter of 2023, and were expected to be about 1% of total revenue in 2024.
The agreement followed the recall of millions of breathing devices and ventilators used to treat sleep apnea in 2021, because of concerns that foam used to reduce noise from the devices could degrade and become toxic, carrying potential cancer risks.
The company also stopped selling new devices at that point.
Earlier this year, the FDA said 561 deaths had been reported since 2021 related to the use of recalled ventilators and machines.
"It provides clarity and a roadmap to demonstrate compliance with regulatory requirements and to restore the Philips Respironics business," the company said in a statement detailing the main terms of the decree.
CEO Roy Jakobs in January noted on average it takes five to seven years to comply with consent decrees in the medical equipment industry.
Under the terms of the agreement, Philips Respironics will continue the recall.
The company said that more than 99% of the sleep therapy devices have been repaired globally, while the repair of the ventilators is ongoing.
Philips Respironics will be allowed to continue servicing its already operating devices, including selling accessories and replacement parts.
The consent decree also allows for exports of the machines.
Philips said its devices with the new silicone sound abatement foam have been subject to extensive testing and the company has not identified any safety issues.
Philips confirmed the consent decree would not change its 2023–2025 financial outlook.