Zicam Warning Attracts SEC AttentionJun 24, 2009 | Parker Waichman LLP
Zicam maker Matrixx Initiatives Inc. said that it has received an informal inquiry from the Securities Exchange Commission (SEC) over last week's Food & Drug Administration (FDA) warning on several Zicam nasal cold remedies. Matrixx shares plummeted a whopping 70% the day of the FDA warning.
Last week, the FDA said it had received 130 reports of anosmia - loss of sense of smell - in people who had used three Zicam nasal remedies. 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 The company had already withdrawn Zicam Cold Remedy Swabs, Kids Size, the third product named by the FDA.
In a letter to Matrixx, the FDA had warned the firm that the products cannot be marketed without agency approval. The warning letter also stated that the three Zicam nasal remedies did not include adequate warnings about the risk of loss of sense of smell.
During a conference call to announce the Zicam alert, the FDA also said Matrixx Initiatives had received an additional 800 anosmia reports it hadn’t made available to the agency. Those reports were discovered by the FDA during a routine inspection in May, and the agency said that under a 2007 regulation, Matrixx should have forwarded them to the FDA.
Zicam is Matrixx's most popular product line, and accounts for about 40% of its sales. In addition to the nasal remedies named in the FDA warning, the company also markets melting tablet and liquid forms of Zicam which were not included in the warning.
The recall could cost Matrixx as much as $10 million. The day of the FDA warning, Matrixx shares closed at $5.78, compared with $19.24 at its close the day before, The Wall Street Journal said.
According to The Wall Street Journal, the SEC has asked Matrixx to provide documents and information relating to the FDA warning. On Tuesday, the company said it didn't know what the SEC was looking into but would cooperate fully, the Journal said.
According to a Reuters report, Matrixx began formally notifying retailers, wholesalers and distributors of the Zicam recall today. However, Matrixx continues to say that it "vigorously disagrees" with the FDA over charges that the Zicam products were illegally marketed. The company also claims it was not required to report the additional 800 Zicam side effect complaints to the agency.
Despite its insistence that Zicam nasal remedies are safe, this is not the first time the products have caused problems for Matrixx. As we reported previously, in 2006 the company reached a settlement with 300 Zicam users who claimed the remedies had caused them to lose the sense of smell.