Zicam recall zaps Matrixx sales
Phoenix Business Journal - by Angela Gonzales
Tuesday, August 3, 2010, 2:00pm MST
Floundering from a product recall last summer, Matrixx Initiatives Inc.’s sales were cut in half during its first fiscal quarter ended June 30.
Net sales fell to $3.2 million, from $6.9 million during the same period in 2009. Last year’s first-quarter results included $2 million in sales of the Zicam nasal cold remedy products, which were withdrawn from the market in June 2009.
Bill Hemelt, president and CEO of Matrixx, said sales in the first quarter are historically the lowest in the fiscal year. Still, it’s a critical period for finalizing retail plans for the upcoming cold season, while shipments are prepared.
However, the bottom line improved.
The Scottsdale firm reported a $2.4 million net loss during the three months ended June 30, compared with a $22.8 million loss during the same time in 2009.
Matrixx (Nasdaq:MTXX) pulled some of its Zicam products off the shelves last summer after the U.S. Food and Drug Administration warned the company that it had received numerous complaints about customers losing their sense of smell after using the nasal gel products.
Hundreds of lawsuits followed.
Hemelt said the litigation process is moving quickly. The product lawsuits fall into two categories: claims alleging the nasal gel products caused loss of smell and claims seeking compensation based on allegations that the company misrepresented the safety and/or efficacy of the products.
“The majority of these cases fall into a multi-district litigation process for which the judge has set a strict timetable for moving the cases forward,” he said.
Hemelt said he also is in mediation with plaintiffs to settle the cases.
“However, if we are unable to resolve these matters in a manner that is in the company’s best interest, we will proceed with the litigation,” he said.
Last month, Matrixx entered into settlement agreements with 46 potential claimants who several years ago had threatened to file lawsuits claiming the Zicam nasal gel had caused a loss of smell.
“The company denies the allegations but concluded for business reasons that it was in the company’s best interest to settle the claims,” Hemelt said. “The settlement amounts were $5,000 or less per claimant and were paid from our litigation reserve.”
For fiscal 2011, Hemelt is expecting to see revenue increase 3 percent to 5 percent above the $67.3 million achieved in fiscal 2010. Plus, he expects Matrixx to get out of the red, with between $2 million and $3 million in net income.
The company’s stock closed at $4.89 a share Tuesday. Its 52-week range is between $3.61 and $6.79.
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