Matrixx Sales Clobbered by Zicam RecallAug 4, 2010 | Parker Waichman LLP
Matrixx Inc. is still reeling from last summer’s recall of Zicam Cold Remedy nasal products. According to the company, sales for its fiscal first quarter, which ended June 30, dropped to $3.2 million, down from $6.9 million one year ago. Last year’s first quarter sales included $2 million in recalled Zicam Cold Remedy nasal products, the company said.
Last June, the U.S. Food & Drug Administration (FDA) said it had received 130 reports of anosmia—loss of sense of smell—in people who had used the product. Following the FDA alert, Matrixx Initiatives recalled two of the products: Zicam Cold Remedy Nasal Gel and Zicam Cold Remedy Swabs. The company had already withdrawn Zicam Cold Remedy Swabs, Kids Size, the third product named by the FDA.
At the same time, the FDA issued a Warning Letter to Matrixx stating it had failed to inform the agency of an additional 800 anosmia reports linked to the recalled cold remedies. Matrixx admitted that it did not pass along those reports to the FDA, but maintained that its legal counsel advised it was not required to forward those reports to the agency. In the Warning Letter, the FDA warned the firm that the products cannot be marketed without agency approval and also stated that the three Zicam nasal remedies did not include adequate warnings about the risk of loss of sense of smell.
Since then, Matrixx has been named in lawsuits filed on behalf of hundreds of consumers and investors stemming from the Zicam recall. In a press release announcing first quarter results, Bill Hemelt, President and Chief Executive Officer, said the company is engaged in mediation with the plaintiffs in an effort to settle the cases in order to avoid the costs and risks of litigation. However, if the cases are not resolved in a way that is in the company’s best interests, Hemelt said Matrixx would proceed to litigation.
Hemelt also said Matrixx has entered into settlement agreements with 46 potential claimants who, several years ago, had threatened to file lawsuits against the company claiming that Zicam Cold Remedy nasal gel had caused a loss of smell. Matrixx denies the allegations but concluded for business reasons that it was in the company’s best interest to settle the claims, Hemelt said.