Scottsdale-based Matrixx, Inc., the maker of the popular Zicam cold suppressant products, received a notice from the FDA that the company is in violation of a number federal drug laws, regarding the sale of three of its intranasal zinc-based products: Zicam Cold Remedy Nasal Gel, Zicam Cold Remedy Nasal Swabs and Zicam Cold Remedy Swabs (kids size). In addition, the FDA issued a warning to consumers to stop using the products because the products could cause a loss of the sense of smell (anosmia), either long-lasting or permanent.

In a strongly worded letter to the company, the FDA said that Matrixx's drugs do not fall under the exemption of most homeopathic products which makes the company in violation of numerous drug laws. According to the letter, the FDA noted that their investigation turned up 800 complaints about the products that the FDA did not know about. The company was given 15 days to respond to the notice.

The three products in question accounted for 40% of Matrixx's $100 million annual sales. On the news of the FDA action, the stock dropped on June 16 nearly 70 percent from $19.25 to $5.78. Over 34 million shares traded on the 16 and 17. Normally, the average daily volume was under 100,000 shares per day.

The company has been involved with a number of lawsuits, having settled one in 2006 for $12 million. Judging from the internet, a number of law firms are gearing up to file more lawsuits based on the FDA action.

The company has voluntarily pulled the products from the market and has placed large ads in a number of major newspapers, explaining the recall. The company plans to work with the FDA to show that its products are safe.

John Laub is the Chairman of the Phoenix CEO-CFO Group.

1. "Scottsdale-Based Zicam Faces Customer Lawsuit." Ken Alltucker The Arizona Republic. June 23, 2009.

2. "FDA Warning Stuns Scottsdale Company Matrixx. Report said Zicam Swabs, Gels Can Cause Loss of Smell." Ken Alltucker. The Arizona Republic. June 19, 2009.

3. "FDA: Zicam Nasal Sprays Harm Smell and Taste." Ken Alltucker and Ginger Rough. The Arizona Republic. June 17, 2009.

4. "Phoenix-based Makers of Zicam Settle Lawsuit Over Lost Sense of Smell." John Laub. CEO-CFO Group.com. April 20, 2006.

5. "FDA Advises Consumers Not To Use Certain Zicam Cold Remedies. Intranasal Zinc Product Linked to Loss of Sense of Smell." FDA News Release. June 16, 2009.

6. "Matrixx Initiatives, Inc. AKA Zicam LLC 6/16/09." Warning Letter.
Department of Health and Human Services Public Health Service. Food and Drug Administration. June 16, 2009.