Mattrixx CEO: FDA Warning 'Unprecedented'

Hemelt also brought up the likely prospect of getting sued. "Will this increase our product liability risk? Undoubtedly."

He said it was too early to predict the legal cost of defending itself, but Matrixx has long experience with litigation and plaintiff's attorneys. The Zicam product has been on the market since 1999, and in that time Matrixx has spent $20 million to settle lawsuits, including one class-action in 2006. The company has commissioned several studies in a bid to prove that anosmia is not a side effect of Zicam. Hemelt in the conference call said that Matrixx believed it had been "putting these issues to bed."

This time around, however, with the FDA effectively putting its imprimatur on the causal chain between Zicam and the loss of smell, the legal liabilities could be much worse.

Scott Henry, an analyst at Roth Capital, said the it was "not beyond scope" that Matrixx's coming legal liability "could put the company's survival at risk."

Matrixx dropped again in early morning trading Friday, losing 35 cents, or almost 6%, to $5.66.