Matrixx Says Zicam Litigation Could Cost $4M To $5M Yearly
By Carol S. Remond
OF DOW JONES NEWSWIRES
26 August 2009
15:22
Dow Jones News Service
Matrixx Initiatives Inc. (MTXX) told shareholders Wednesday that it may soon cost the company $4 million to $5 million annually to defend itself against claims related to its Zicam Cold Remedy nasal products.
William Hemelt, acting president and chief operating officer at Matrixx, told shareholders at the company's annual meeting that Matrixx faced a bright future before an unexpected warning by the Food and Drug Administration on June 16 that two of its cold remedies may cause anosmia, or loss of smell.
Hemelt said Matrixx has taken steps to limit its legal expenses and that the company has the financial resources to meet the cost of litigation. He said it could take a couple of quarters for litigation costs to reach those levels.
In a June 16 warning letter published on its Web site, the FDA said that Zicam nasal cold remedies "may pose a serious risk to consumers." Matrixx voluntarily pulled those products off the shelves in response to the letter. Other Zicam products weren't affected by the FDA action.
In January 2004, Dow Jones Newswires reported that the FDA was investigating complaints that Zicam Cold Remedy, a spray designed to deliver a zinc gel into the nose, may cause a loss of smell in some users. Matrixx has all along said that reports linking Zicam to a loss of smell are misleading and unfounded.
Zicam Cold Remedy intranasal products are an over-the-counter common-cold medicine marketed as homeopathic drug products.
The FDA warning letter gave Matrixx 15 days to formally respond to its allegations, but the company requested, and was granted, an extension. A spokeswoman for the FDA said Matrixx's response is due next Wednesday.
Hemelt told shareholders that the FDA action "came out of nowhere" and that the company was "quite surprised by the resurrection of old and false news." Hemelt said the company has had preliminary discussions with the FDA and that its goal is to reverse the agency's action. He didn't address a related probe by the Securities and Exchange Commission.
(Matrixx said on June 23 that the SEC requested certain documents and information relating to the FDA warning letter. The Scottsdale, Ariz., company said it would cooperate with the SEC.)
Hemelt wasn't immediately available to comment on the SEC inquiry.
During the company's shareholder meeting, Hemelt blamed media coverage for a spike in complaints in 2004. He said that complaints had decreased over the years and that for the last quarter, legal costs dropped to about $200,000.
In 2006, Matrixx settled more than 300 lawsuits brought by consumers who alleged that the nasal gel damaged their sense of smell.
The FDA said in June that a May inspection found that Matrixx hadn't reported several hundred cases of serious side effects, mostly involving anosmia. It also said the products have "not been shown to be effective in the reduction of the duration and severity of cold symptoms."
Matrixx shares fell 9.7% Wednesday to $5.59. The stock lost almost 75% of its value on June 16, the day that the FDA warning became public.
-By Carol S. Remond, Dow Jones Newswires; 303-997-5783; carol.remond@dowjones.com [ 08-26-09 1622ET ] |
