Zicam Warning Leads to SEC Inquiry

The Security Exchange Commission (SEC) has issued an informal inquiry to Matrixx Initiative, Inc. in the wake of a Zicam warning issued last week by FDA about users losing their sense of smell. The company’s stock has plummeted since they were forced to recall their most popular products and disclosed that at least 800 reports of Zicam problems were received from consumers that they never turned over to the FDA.

The Wall Street Journal reports that the SEC sent Matrixx Initiatives an inquiry on June 19, requesting documents and information related to the FDA’s Zicam warning. The SEC has not commented on the investigation, but Matrixx Initiatives officials say they are cooperating fully with the investigation.

The recalled Zicam Cold Remedy Nasal Gel and Zicam Cold Remedy Gel Swabs made up approximately 40% of Matrixx Initiatives sales. The company’s stocks fell about 70% the day after the FDA warning on Zicam, from around $19 to just under $6. The company estimates the recall will cost them about $10 million.

On June 16, the FDA urged all consumers to immediately stop using the over-the-counter cold remedies after linking it to at least 130 reports from consumers who used the nasal gel, gel swabs and discontinued Zicam Cold Remedy Swabs, Kids Size, to loss of smell known as anosmia, which can be long lasting and permanent.

Although they agreed to pull the products from the market, Matrixx Initiatives continues to insist that anosmia can not be caused as a side effect of Zicam, and says that the loss of sense of smell has most likely been connected with the common cold itself, which Zicam is used to treat. The company says it believes the FDA warning to be unwarranted, and indicates that they hope to meet with the agency to resolve the issue.

Earlier this week, more than 100 people filed Zicam lawsuits against Matrix Initiatives, alleging that they suffered damage to their sense of smell after using the cold remedy. The complaints, filed in Florida and Arizona, bring claims for negligence, fraud, negligent misrepresentation and breach of warranties.

Although the company says it has never lost a court case where plaintiffs accused their product of causing anosmia, Matrixx Initiatives has reportedly settled over 300 lawsuits over Zicam in 2006.