Philips CEO Frans van Houten will step down on Oct. 15, after more than 11 years in the role, amid ongoing turmoil for the company’s recall of millions of sleep apnea and ventilator machines.
Roy Jakobs, who leads Philips’ connected care business, was named as his successor. Van Houten will remain with the company in an advisory role and assist with the transition until April 30, 2023, Philips said Tuesday in a statement.
The company will hold a shareholder meeting on Sept. 30 to appoint Jakobs as president and CEO.
Van Houten is leaving at a tumultuous time for the company. Philips announced in July that it was in negotiations with the U.S. Department of Justice for a consent decree about its recall of sleep apnea and ventilator machines. The announcement followed facility inspections and an order from the Food and Drug Administration about the recall.
Philips is also experiencing challenges across its businesses due to macroeconomic factors like supply chain constraints and increased costs. The company’s second-quarter revenue declined 7% from a year earlier to 4.2 billion euros ($4.27 billion). Sales at its connected care business, which Jakobs will be leaving, dropped 13% in the three-month period.
Last month, the company cut its revenue growth forecast to 1% to 3% in 2022, compared with a previous range of 3% to 5%.
In June 2021, Philips announced a recall for sleep apnea and ventilator machines, citing health risks for users. The foam used to quiet machines could break down into particles and be ingested or inhaled by patients, possibly exposing them to toxic chemicals.
Over the last 15 months, the sleep apnea and ventilator recall has grown to over 5.5 million machines, led to a facility inspection by the FDA, a subpoena from the DOJ and, most recently, negotiations with the regulator on a consent decree.
The FDA also ordered the company in March to notify all customers, including users, healthcare providers and suppliers, about the recall after finding that the company’s previous communication efforts were inadequate as some were not aware that there was a recall.
The ongoing issues have kept Philips off the market, opening a unique opportunity for rival ResMed. On Aug. 11, ResMed reported that it brought in about $60 million to $70 million of revenue in its fourth quarter from the recall, bringing the total in its fiscal year 2022 to a range of $230 million to $250 million.
There are still questions for Philips going forward. Wall Street analysts wrote in July that the consent decree talks with the DOJ create additional uncertainty as to when Philips can return to the market and may lead to manufacturing being shut down.
The company is also facing multiple lawsuits, which could add to the financial cost of the recall.
Philips’ stock rose 1.3% to $20.35 in early morning trading.
