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Fisher & Paykel Healthcare (ASX:FPH) share price drops on product recall

The Fisher & Paykel Healthcare Ltd (ASX: FPH) share price has fallen after announcing a product recall.

Fisher & Paykel describes itself as a leading designer, manufacturer and marketer of products and systems for use in acute and chronic respiratory care, surgery and the treatment of obstructive sleep apnea. Its products are sold in over 120 countries.

Fisher & Paykel Healthcare product recall

The company has initiated a “voluntary limited recall” of batches of Airvo 2 and myAirvo 2 devices manufactured before 14 August 2017.

This recall relates to a speaker configuration issue that may result in “distorted, intermittent or inaudible alarm sound levels”. Fisher & Paykel Healthcare said this does not affect the therapy delivered by the devices and they will otherwise perform as intended.

The company said that since 14 August 2017, a new speaker configuration from a different supplier was implemented into the manufacturing of Airvo 2 and myAirvo devices.

For readers that don’t know, those devices are used to deliver “high flow therapy” to patients, though they are not intended for life support. Appropriate patient monitoring is required at all times. If there is an interruption to therapy a patient may experience oxygen desaturation.

How does this affect the Fisher & Paykel Healthcare share price?

Investors clearly think it’s a negative, with the share price down around 1%.

Fisher & Paykel Healthcare said it’s consulting with various international regulatory authorities to initiate appropriate action in each country. It will also contact distributors, dealers and hospitals that may have products subject to this recall and replace any affected devices.

The ASX healthcare share has estimated there are approximately 9,000 of the affected devices remaining in use. Customers can contact their local Fisher & Paykel Healthcare representative, regional sales office or distributor.

The company has estimated the company has estimated the costs will be approximately $12 million, which will be provisioned in the result for the 12 months to 31 March 2024.

Depreciation change

The company also advised that a taxation bill passed its third reading in New Zealand Parliament today, which removes depreciation deductions for commercial and industrial buildings that were reinstated by the previous government “and will likely impact the company’s tax expense” for FY24.

The ASX share said it’s currently unable to quantify the financial impact of these changes.

Final thoughts on the Fisher & Paykel Healthcare share price

A $12 million hit is painful for shareholders, but hopefully it’s just a one-off occurence.

The company is doing the right thing, and hopefully this builds further trust with long-term customers. It also mentioned it has been using a different system for a number of years.

The Fisher & Paykel Healthcare share price has rallied in the last few months, so I wouldn’t call it a cheap buy. I don’t know the business or sector, but I’m cautious around this sort of business because of the unknown (to me) potential of a competitor introducing a better/cheaper product. There are other ASX growth shares I’d rather buy.

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