"This is the end..."
Not so fast. This statement grossly underestimates the ability of management, the popularity of the brand name, and perhaps more importantly a Matrixx victory in the lawsuits against them. Matrixx doesn't have a bunch of amateurs at the helm. The growth in sales of Zicam since Mr. Carl Johnson took over as President/CEO and the new Board was put in place prove this without question. Mr. Johnson is not new to adversity either. He has decades of experience under his belt working with OTC drugs at Perrigo and Johnson & Johnson. In fact, he worked at J&J during the Tylenol debacle several years ago. Matrixx will get through this, but it will take time.
Meanwhile this issue has created a complete disconnect between the company's fundamentals and the stock price. There's no way that a company growing earnings more than 100% per year isn't severely undervalued at 28 times trailing earnings. Oh, but I don't have any doubt that the stock could get even cheaper in the short term. The 4 plus million shares of volume last Friday, with the stock taking out what should have been strong support at 10 nearly assures that it will at least test a lower level before it can sustain a meaningful rally. There's no doubt in my mind that with that much volume, many long term shareholders gave up on the stock, and were replaced by a bunch of short term traders who are looking to make a few quick bucks on a relief rally. If I'm right about this, the stock price will have little stability in the short term because those short term traders will dump as fast as they bought either when they have a small profit, or when they have a small loss.
The only possible savior to the stock price in the short term would be if enough institutions step up over the next week or two and collectively buy about a million shares. I don't rule that out entirely because the company is presenting at the Roth Capital Conference next week, and any fund manager that looks at this company's growth and stock price will conclude that it is cheap beyond reason. The only question in their minds will be whether they have confidence that the anosmia and legal issues will blow over in time, or if the stock price is sufficiently cheap to warrant their risk that the situation will worsen. I can't answer that question, nor can anyone else here, but this isn't a slam-dunk short from 10 by any means.
There's no doubt in my mind that Zicam Cold Remedy is safe and has not caused anyone's loss of smell. The only thing that the proponents of this theory have are a few anecdotal cases and a 1930s study in which 1) a different zinc compound (zinc sulfate) was used rather than zinc gluconate, which is in Zicam, and 2) a higher concentration of zinc than what is in Zicam. First, as I posted nearly a year ago, zinc sulfate is an acid whereas zinc gluconate is a base. Second, the pH of zinc sulfate is much lower than the pH of the nasal cavity, which Zicam approximates very closely. Obviously if you stick an acid up your nose you are much more likely to do damage than if you stick a base up your nose whose pH almost exactly matches the pH of the nasal cavity. This is just plain common sense. To those who try to confuse the issue by saying the issue isn't acid vs. base, rather it is the zinc that causes the problem, you need to explain why Material Safety Data Sheets (MSDS) for zinc gluconate, which are used in industry by workers of chemicals, and required by OSHA, say that zinc gluconate has absolutely NO harmful health effect. Compare the MSDS of zinc gluconate to that of zinc sulfate, which lists irritation to the nose and throat, gastrointestinal disturbance, corneal burn, and toxicity to aquatic organisms as health effects.
Raw zinc gluconate is a powder, and the MSDS lists NO health hazard. This is the purest, most concentrated form of zinc gluconate and it lists NO health hazard. Maybe those who falsely accuse Zicam Cold Remedy for people's smell loss can explain how a weaker concentration of zinc gluconate (1/100) in a gel form could have such a serious health effect (loss of smell) when the MSDS for a stronger concentration, and in powder form to boot, lists NO health effect. Isn't a powder much more likely to spread than a gel? Why don't those who falsely link Zicam to smell loss survey people that work with zinc gluconate on a daily basis and ask them if their smell or taste is impaired much less gone entirely.
There's no doubt in my mind that something unscrupulous is going down here, and it doesn't have anything to do with whether Zicam Cold Remedy caused even one case of anosmia. There are too many coincidences to ignore. I have my own theory about what is going on , but I have no reason to post it. If those with the ability to investigate desire to do so, it will all come out in due time. Meanwhile, the stock will remain very volatile, and most likely undervalued, until this issue is resolved. I posted many months ago when I first learned of the anosmia complaints that the biggest risk to the stock price was any negative publicity that might result from it. Well, it took a long time, but the negative publicity is here. People are using the media to find Zicam Cold Remedy responsible for anosmia with absolutely nothing concrete to support their accusations. Simply saying that someone had a cold, used Zicam, and lost their sense of smell doesn't even come close to proving a cause and effect, especially when the common cold itself is one of the chief causes of anosmia. I do not completely discount the possiblility that Zicam can in some rare cases cause loss of smell; however I think that it is highly unlikely, and the people making these allegations appear to have another, more tainted agenda. |
