Philips Hit with Securities Class Action Over Stock Drop Linked to Bi-Level PAP, CPAP Device Recall

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A proposed class action alleges Koninklijke Philips N.V. and its CEO and CFO have harmed investors financially by failing to disclose that certain of the company’s Bi-Level PAP, CPAP and mechanical ventilator devices would be subject to a recall over concerns that hazardous materials were used in their manufacture.

The 26-page lawsuit alleges the defendants artificially inflated the price of Philips stock by withholding that the company had deficient manufacturing controls and procedures in place and that, as a result, its Bi-Level Positive Airway Pressure (Bi-Level PAP) and Continuous Positive Airway Pressure (CPAP) devices and mechanical ventilators were made using hazardous materials and would need to be recalled, which subjected the company to potential legal and regulatory action.

The case claims Philips investors, as a result of the company’s allegedly misleading statements leading up to the recall, were harmed financially when Philips’ stock price fell 3.98 percent on June 14, 2021 following the announcement of the recall.

“As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages,” the complaint alleges.

Philips, a Netherlands-based health technology company, manufactures sleep and respiratory care devices that use a polyester-based polyurethane (PE-PUR) sound abatement foam to reduce sound and vibration from the machines, the lawsuit begins. Per the suit, Philips announced on June 14 a recall of certain of its Bi-Level PAP and CPAP devices and mechanical ventilators due to concerns that the sound abatement foam could “degrade and become toxic, potentially causing cancer.” The recall notice stated that the foam may degrade into particles that could be ingested or inhaled by the user or off-gas certain harmful chemicals, both of which could result in adverse health effects such as headache, irritation, respiratory issues and “possible toxic and carcinogenic effects.”

Upon news of the recall, Philips’ stock price fell $2.25 per share, or about 3.98 percent, financially injuring investors, the lawsuit says.

The case looks to represent anyone who purchased or otherwise acquired Philips securities between February 25, 2020 and June 11, 2021 and were damaged “upon the revelation of the alleged corrective disclosures.”

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