Pomerantz Appointed Lead Counsel in Koninklijke Philips Securities Litigation

On November 3, 2021, U.S. District Judge Margo K. Brodie of the Eastern District of New York appointed Pomerantz LLP as Lead Counsel on behalf of Richard Sun, Lead Plaintiff in Patel v. Koninklijke Philips N.V., 21-cv-4606 (E.D.N.Y.), a securities action brought on behalf of a class of defrauded investors concerning allegations that Koninklijke Philips N.V. (“Philips” or the “Company”) had deficient manufacturing controls and procedures that subjected it to product recalls, diminished revenue and potential legal action.

Philips operates as a health technology company in North America, Greater China, and internationally. The Company’s products include, among others, Bi-Level Positive Airway Pressure (“Bi-Level PAP”) and Continuous Positive Airway Pressure (“CPAP”) devices, as well as mechanical ventilators. Bi-Level PAP machines pump air under pressure into the airway of the lungs. Bi-Level PAP machines have a higher pressure when users breathe in and lower pressure when users breathe out. CPAP machines keep users’ airway open by providing a continuous stream of air through a mask. CPAP machines are devices prescribed to people with obstructive sleep apnea to keep their airways open during sleep. Bi-Level PAP and CPAP machines use Polyester-based polyurethane (PE-PUR), a sound abatement foam, to reduce sound and vibration.

Allegations against Philips include that: (i) the Company had deficient product manufacturing controls or procedures; (ii) as a result, Philips’ Bi-Level PAP and CPAP devices and mechanical ventilators were manufactured using hazardous materials; (iii) accordingly, the Company’s sales revenues from the foregoing products were unsustainable; and (iv) the foregoing also subjected Philips to a substantial risk of a product recall, in addition to potential legal and/or regulatory action.

On February 25, 2020, Philips announced its 2019 financial results in which it touted that its manufacturing processes and supply chain management allowed it to produce “high-quality products” in a “responsible way.” The Company also touted “respect to the Company’s product design and manufacturing,” stating that it “actively maintains Quality Systems globally that establish standards for its product design, manufacturing and distribution processes; these standards are in compliance with Food and Drug Administration (FDA)/International Organization for Standardization (ISO) requirements.”

On February 23, 2021, Philips announced its 2020 financial results in which it again touted its “quality, operational excellence and productivity.”

On June 14, 2021, Philips issued a voluntary recall of certain of its Bi-Level PAP and CPAP devices, as well as mechanical ventilators, after finding that the sound abatement foam used in the devices could degrade and become toxic, potentially causing cancer. The Company stated that it had “produced millions of Bi-Level PAP, CPAP and mechanical ventilator devices using the PE-PUR sound abatement foam” and it had “determined based on testing that there are possible risks to users related to this type of foam. The risks include that the PE-PUR foam may degrade into particles which may enter the device’s air pathway and be ingested or inhaled by the user, and the foam may off-gas certain chemicals.”

On this news, Philips’ share price fell $2.25 per share, or 3.9%, to close at $54.25 per share on June 14, 2021.