Royal Philips NV slumped after the Food and Drug Administration warned about a new safety issue involving the company’s DreamStation 2 machines used to treat obstructive sleep apnea.
The US regulator has received reports including problems such as fire, smoke, burns and other signs of overheating while using the device, it said late Tuesday. The faults deepen the company’s existing issues with sleep devices that have led to costly recalls.
The FDA found a “sharp increase” of more than 270 reports linked to thermal issues with the device since August. Prior to that, it had received fewer than 30 such reports since the device was cleared for marketing in July 2020. The regulator said it doesn’t believe the issue is related to the foam used in the product.
Philips declined as much as 7.7% in Amsterdam. The shares are still up more than a third this year.
Read more: Philips Slides as Order Drop Raises Doubts Over Sales Growth
The company said it’s in talks with the FDA regarding the new reports its Respironics division filed over the last three months, which cover a three-year period following a retrospective review since the launch. It said the devices can continue to be used if safety instructions are followed.
Even if the latest problems are limited to a specific batch or faulty components, they again put Philips in the spotlight over quality or safety, Jefferies analyst James Vane-Tempest said in a note to clients.
The Dutch manufacturer has long struggled with its sleep therapy products. In June 2021, it began a recall of certain devices after health concerns related to disintegrating noise-dampening foam inside the machines. The FDA has labeled the foam problems a Class 1 issue, the most serious type.
Philips has set aside about €1 billion ($1.1 billion) for the recall of some 5.5 million devices, and in September agreed to pay at least $479 million to resolve some of the litigation. But Philips is still facing class-action and potentially thousands of individual lawsuits in the matter. Chief Executive Officer Roy Jakobs, who took over in October of last year, has warned that the consequences from the recall may last for years.
Read more: Philips May Deal With Recall Fallout for 7 More Years, CEO Says
The FDA said the DreamStation 2 machines are manufactured with a silicone-based foam and not polyester-based polyurethane foam used in the recalled devices. Some of these products were, however, distributed as replacements for users whose machines were affected by the recall.
The regulator says reports it has analyzed indicate the thermal issues may be related to an electrical or a mechanical malfunction of the product.
(Updates with analyst comment in seventh paragraph.)
