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Matrixx shifts to higher-margin products

This article was originally published in The Tan Sheet

Executive Summary

The maker of Zicam brand cough/cold and allergy relief products improved gross margins to 71 percent from 66 percent during fiscal 2009, thanks to a shift toward higher-margin Zicam cold and allergy products and away from multi-symptom cold and flu items. The success of Matrixx Initiatives' single-use swab applicators continues to be a boon for the firm, as its Zicam swabs now comprise about 35 percent of total company sales. A weak cold/flu season helped drop Matrixx's fourth quarter net sales 6.8 percent to $30.8 million, though net sales for its fiscal 2009 were up 10.6 percent to $111.6 million, the firm reported May 11. In a same-day earnings call, Chief Financial and Operating Officer Bill Hemelt said Matrixx projects 5 percent sales growth for fiscal 2010 and will ship two new Zicam cold remedy oral products in the second quarter. Hemelt, who also is acting president, said the Scottsdale, Ariz.-based firm is seeking a $30 million to $50 million acquisition in the OTC consumer health area to diversify beyond the cold/flu season (1"The Tan Sheet" Feb. 23, 2009, p. 5). ... NAD knocks down oral Zicam claims: Matrixx is advised to specify its oral Zicam products "may" reduce or lessen the severity of cold symptoms, since the supporting evidence applies to the brand's nasal gel products, the National Advertising Division says. The Council of Better Business Bureaus unit says May 12 the firm should additionally indicate whether a scientific study looked at its oral or nasal products. In response to NAD's conclusion, Matrixx says there is solid evidence behind oral zinc's ability to reduce cold severity, but will take the recommendation under advisement. Quigley, maker of Cold-Eeze products, challenged Zicam's claims

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