Zicam woes cause Matrixx(MTXX) to lose sense of sell

In February 2007(sadly one of our more recent posts), we wrote about Matrixx(MTXX) Initiatives.  At the time, Jove Partners had filed a 13D urging a sale of the company.  Jove noted at the time that the company’s single brand would benefit from the scale of being part of a larger company.

At the time, we noted:

One potential concern are claims that Zicam has caused users to lose their sense of smell. The company has already settled several lawsuits, but it is unclear what potential future exposure might be. This would clearly be a concern of a potential buyer.

What we didn’t discuss was how this particular risk, combined with Zicam being the company’s only product placed the company in a precarious situation.

Today, the FDA warned the public against using several Zicam products and declared that their sale should be subject to FDA approval as a drug.  The FDA’s entire letter can be found here.  As a result, MTXX plummeted nearly 70% today.   The company had been trading close to its 52 week high, was profitable and well-capitalized.  This will likely be a fatal blow to the company.  The future holds anemic sales and a slew of new lawsuits. MTXX holders might want to consider taking some Zicam; perhaps it will allow them to live with the stench of this stock.

Disclosure: No position in MTXX