June 18, 2009 / 3:54 PM / 10 years ago

Matrixx: Zicam recall could cost $10 million, shrink company

WASHINGTON (Reuters) - The recall of nasal versions of Matrixx Initiatives’ widely used Zicam cold remedy products could cost the company as much as $10 million and ultimately shrink the company, the head of the consumer product maker said on Thursday.

William Hemelt, Matrixx’s acting president, chief financial and chief operating officer, said the over-the-counter healthcare company was also abandoning its current sales and earning expectations for 2009.

“The withdrawal will have significant repercussions on our business,” Hemelt said on a conference call. “Obviously, we’re reevaluating our entire plan for the year.”

On Tuesday, the U.S. Food and Drug Administration warned the company to stop selling nasal versions of its Zicam cold remedy and urged consumers not to use them after more than 130 people reportedly lost their sense of smell.

Shares of the company have tumbled since the warning, falling as much as 70 percent. On Thursday its shares continued to fall, trading down .3 percent at $6.11 in early afternoon on the Nasdaq.

Matrixx must seek FDA-approval if it wants to continue selling Zicam zinc products administered via the nose. Hemelt said the company was not likely to do so, saying the process would take years and be “highly expensive.”

While the company would try to convert users of Zicam’s nasal products to oral versions, it would likely see an estimated $5 million in lost sales, Hemelt said. The other $5 million in losses was likely to come from new advertising efforts to reach out to consumers, he added.

FDA’s warning applies to Zicam Cold Remedy Nasal Gel, Zicam Cold Remedy Nasal Swabs and Zicam Cold Remedy Swabs Kids Size, but does not affect Zicam oral zinc tablets or lozenges.

“The biggest unknown is the degree to which the sales of our products (are) maintained,” Hemelt said.

Matrixx is seeking a meeting with FDA officials with the hope of reversing the agency’s decision, Hemelt said, adding that several studies showed no loss of smell with nasal Zicam products and arguing that FDA’s conclusions were “erroneous.”

While Hemelt said Tuesday’s warning came as a “complete surprise,” he said the company had been visited in May by FDA inspectors who drew attention to about 800 reported complaints that had not been given to the agency.

A law passed in 2007 required wider mandatory reporting of certain products, but Hemelt said the company did not send along the reports based on the opinion of its lawyer.

If the company’s efforts fail to persuade the FDA, Matrixx will have to downsize, Hemelt said. “Obviously, we have to learn how to shrink this company if we’re unable to get these products back on the shelf.”

Matrixx’s other brands include its Xcid antacid products and its Nasal Comfort moisturizing spray.

There is no cure for the common cold, though many consumers seek over-the-counter products to help relieve symptoms or try to prevent the virus. Experts say the best way to prevent a cold is to wash one’s hands and limit the spread of germs.

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