Matrixx Plans Extensive Zicam Marketing For Upcoming Cold Season

Matrixx Initiatives will promote its Zicam and Nasal Comfort cough, cold and allergy products with an original multimedia marketing campaign in the second half of 2005.

The Phoenix-based firm will employ TV, print and Internet advertising, designed by London-based ad agency McCann Erickson, to create awareness and trial use of its Zicam line extensions and new brand Nasal Comfort during the upcoming cough/cold season.

Matrixx believes the campaign will be "significantly more efficient than what we've done in the past, enabling much more impact advertising-wise for the dollars we spend," CEO Carl Johnson said during a July 27 earnings call. Matrixx chose McCann in part because of the firm's experience with Internet marketing.

Nasal Comfort, announced by the company in February, begins shipping to retailers this month. Described as "a preservative-free, sterile, hyper-tonic aqueous solution with essential salts and oils," the product is designed to "cleanse and moisturize the nose" using a sterile micro filtration pump system.

Nasal Comfort advertising will target females age 25 to 55, as well as "people who suffer from allergies, asthma [and other] nasal-related problems," Johnson said.

Two recently announced Zicam products slated for shipping this month are Zicam Flu Maximum Strength and Zicam Cold and Flu (¹ (Also see "NACDS Marketplace In Brief" - Pink Sheet, 13 Jun, 2005.), p. 6). Available in daytime and nighttime formulas, the zinc-based line extensions utilize a "novel delivery system of spoon dosing" allowing the consumer to mix the medicine into a hot or cold beverage of choice, Johnson explained.

Matrixx will unveil websites for the Zicam products and Nasal Comfort in September. The sites will be designed to "provide consumers with greater information about these products and to encourage consumers to enter into dialogue with us about their experiences with Zicam or Nasal Comfort," Johnson said.

The campaign will also feature print and television advertising to direct consumers to the websites. TV ads will include personal testimonials from actual Zicam Cold Remedy users.

Separately, Matrixx will distribute samples of its Zicam Rapid Melts at Wal-Mart stores nationwide "approximately two weeks before a major outbreak of cold is forecasted in any given market," Johnson said.

Matrixx' Zicam line extensions have performed well to date compared to the overall cough/cold market (² 'The Tan Sheet' July 5, 2004, In Brief).

The products continue to build share and outpace growth in the category, according to the firm. The line's second quarter retail sales (excluding Wal-Mart) increased 62% over the prior-year period - nearly five times the overall cough/cold market's 13% growth, Matrixx maintained.

All Zicam product groups (cough, allergy/sinus and cold) increased sales in the quarter as the firm's overall net sales jumped 84% to $6.3 mil.

However, Matrixx' bottom line continues to be impacted by Zicam product liability litigation.

The company reported a net loss of $505,000 due in part to legal expenses, despite a $600,000 pre-tax reimbursement from its principal insurance carrier.

A number of suits have been filed against the firm since 2003 in states such as Alabama, Colorado and Michigan by individuals who claim that using Zicam caused them to lose their sense of smell (³ (Also see "Zinc Gluconate Sprays Challenged In Lawsuits; Matrixx Defends Zicam Safety" - Pink Sheet, 13 Dec, 2004.), 2004, p. 13).

The first such case is scheduled to begin in California district court Aug. 8. Matrixx currently believes no additional trials will take place until the first quarter of 2006.

Matrixx expects to incur between $1 mil. and $1.5 mil. in litigation expenses per quarter going forward, offset somewhat by insurance reimbursements.

"It's an ongoing process, and we're at the beginning of the process instead of at the end," CFO Bill Hemelt said, noting the firm is in "continuing" discussions with other insurance carriers on future reimbursements.