Philips stock tumbles after FDA says its unsatisfied with recall

Shares of Royal Philips (PHG) tumbled in early trading on Friday after the U.S. Food and Drug Administration said it was not satisfied with how the company handled a recall of its breathing device that is used to help treat sleep apnea. In a statement, the Director of the FDA's Center for Devices and Radiological Health Dr. Jeff Shuren says "we do not believe that the testing and analysis Philips has shared to date are adequate to fully evaluate the risks posed to users from the recalled devices." Yahoo Finance Live breaks down the stock's reaction.

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Video transcript

- Philip shares are on the move. The FDA saying that it is not satisfied with the way that the company handled a sleep apnea and respiratory device recall, saying that they need to conduct additional tests before they can start selling the products again. Now, this comes after the recall of millions of devices since 2021.

Senator Richard Blumenthal of Connecticut calling for the Department of Justice to investigate the company after ProPublica and the Pittsburgh Post-Gazette reported that it kept more than 3,700 complaints about the faulty devices a secret before the recall. You're looking at shares off just over 9% here in the premarket.

Certainly a massive issue. Analysts are weighing in on this here, Brad. ING saying that additional testing will result in further delays in the process in order to address some of these issues. The company has already taken a pretty massive financial hit when it comes to this issue. They're facing extra costs, a major write down on the value of the business. They've also settled a US class action lawsuit. So the costs are piling up, and the issue not yet behind them.

- Yeah, Bernstein weighing in on this one as well, here, as we've seen this really catch the attention, as you mentioned, of some analysts out there on the Street. Particularly what they had said was-- well, obviously, it goes without saying, this is negative news is what Bernstein said in a note, and then also pointing out how the FDA is clearly still not happy with the way that the recall is being handled.

Shares of Philips, you're seeing them over the past five days, down by about 1.3%. And then here, we'll see exactly where they open up on the day's session here. But continued overhang here with how this recall is being handled, and that could potentially prompt-- there you're seeing the extended hours move. They are down by about 9%, especially as that could prompt more attention from analysts, who would then be forced to issue, perhaps, some type of note or even perhaps change their valuation here, as well.