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Zicam's Cold Remedy Makes Stock Sick

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Even users with no sense of smell affirm Zicam stinks.

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What's a surefire recipe for a drug company's stock to drop 70% in one day of trading?

Permanently reduce customers' 5 senses to approximately 3 and a half.

On Tuesday, federal regulators released a report warning customers to stop using 3 over-the-counter cold remedies manufactured by Matrixx Initiatives (MTXX) because they can permanently damage the user's sense of smell. The US Food and Drug Administration (FDA) linked Zicam Cold Remedy Nasal Gel, Gel Swabs, and Kids Size swabs to severe nerve damage.

More egregious, both the FDA and Matrixx were aware of such links for 10 years.

Since 1999, the FDA had received over 130 reports by customers who have used a Zicam product and underwent the harmful effects. And according to Deborah M. Autor -- head of the FDA's Office of Compliance -- Matrixx has 800 more. In 2006, the company paid out $12 million in injury claims -- yet continues to deny that any harm is directly linked to Zicam.

Even now, Matrixx called the FDA's claims "unwarranted," assuring the public that its products are safe. (It may hope that its former customers can't smell crap from a mile away.)

Despite the cold remedies' presence in the pharmacy aisle, they aren't officially considered drugs, and thus didn't have to undergo approval or registration with the FDA; they are, however, subject to federal oversight.

In light of the complaints, the FDA is now citing Matrixx for improper labeling and inadequate risk warnings for its Zicam products.

Once news about the harmful effects was made public, Matrixx stocks plummeted from $19.06 to $8.56 over the course of 30 minutes. By the end of the day, the stock closed at $5.78.

Matrixx's competitors include Schering-Plough (SGP), Quigley (QGLY) and Proctor & Gamble (PG).
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