An investor with Matrixx Initiatives, Inc. the maker of Zicam, has filed a proposed securities class action lawsuit in the United States District Court for the District of Arizona on behalf of shareholders of Matrixx Initiatives, Inc., who purchased Matrixx stock between December 22, 2007 and June 15, 2009, in relation to Matrixx Initiatives alleged violations of FDA regulations involving the Zicam Cold Remedy products.
According to the complaint the plaintiff alleges that between December 22, 2007 and June 15, 2009, Matrixx Initiatives and other Defendants failed to disclose material adverse facts concerning Matrixx’s operational well-being and future prospects. The plaintiff accuses that the defendants violated Federal Securities Laws.
Matrixx Initiatives, Inc. has recalled its Zicam nasal products, but Matrixx Initiatives, Inc. has been investigated by the SEC with respect to its marketing practices, and according to the investigation it is believed that information surrounding the Zicam line of products, as well as Matrixx Initiatives liability in connection with these products, was not reaching Matrixx’s shareholders.
On June 13, the FDA advised consumers to stop using three Matrixx-manufactured over-the-counter cold remedy products marketed under the Zicam name because they are associated with the loss of smell, which may be long-lasting and permanent.
According to the FDA, as of Dec. 2007, Matrixx Initiatives was required to provide reports of adverse reactions to the agency per the Dietary Supplement and Nonprescription Drug Consumer Protection Act.
On June 16, 2009 Matrixx Initiatives announced that it has received a Warning Letter from the Food and Drug Administration (the FDA). The FDA has asserted that Matrixx Initiatives is in violation of its regulations by failing to file a new drug application for its Zicam Cold Remedy Nasal Gel and Zicam Cold Remedy Gel Swabs and that those products are misbranded under their regulations for failing to adequately warn of risks.
The FDA informed Matrixx Initiatives it concluded that certain Zicam products may pose serious risks to consumers who use them, and that Matrixx marketing practices violate several laws relating to the products, so the investigation.
Matrixx Initiatives stated in its press release that “Since Zicam Cold Remedy intranasal Cold Remedy products were first introduced in the market in 1999, more than 35 million retail units representing over 1 billion doses have been sold “ and it “believes these products are safe and do not cause anosmia”, but then announced in a second press release on the same day that “Matrixx Initiatives Voluntarily Withdraws Zicam Cold Remedy Swabs, Zicam Cold Remedy Nasal Gel” as “Consumer safety is and has always been the company’s top priority”.
Then on June 22, 2009 nearly 120 individual claims were filed in Arizona Superior Court against Matrixx Initiatives on behalf of individuals from 32 states, from Hawaii to a U.S. contractor in Afghanistan, as well as for a dozen Arizona residents who reported side effects ranging from a complete loss of smell and taste, to diminished senses of smell.
The FDA stated in its letter from June 16, 2009 that the “agency is aware that Matrixx appears to have more than 800 reports related to loss of sense of smell associated with Zicam Cold Remedy intranasal products” and directed Matrixx ”to arrange submission of all reports related to loss of sense of smell associated with Zicam Cold Remedy intranasal products” and to “indicate which of these reports have been previously submitted to the FDA.”
Upon release of this letter by the FDA, so the investigation, Matrixx Initiatives stock (NASDAQ: MTXX) declined from approximately $19 per share to less than $7 per share. On July 23, 2009, Matrixx Initiatives acknowledged the Securities and Exchange Commission is launching an informal inquiry.
Matrixx Initiatives, Inc. is located in Phoenix, Arizona . It develops, produces, markets and sells over-the-counter (OTC) healthcare products with an emphasis on those that utilize delivery systems that provide consumers with Better Ways to Get Better. Through its subsidiary, Zicam, LLC, the Company markets and sells products under the Zicam brand.
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