NovaBay Pharmaceuticals, Inc. Reports First Quarter Financial Results

Company Strengthens Phase 2 Pipeline With the Initiation of a Phase 2b Trial for Urinary Catheter Blockage and Encrustation (UCBE)

Net Cash Flow Effectively Break-Even for Over Two Years While Clinical Progress Continues in NovaBay's Four Business Units

EMERYVILLE, Calif., May 16, 2011 (GLOBE NEWSWIRE) -- NovaBay® Pharmaceuticals, Inc.(NYSE Amex:NBY), a clinical-stage biotechnology company developing its first-in-class, anti-infective Aganocide® compounds for the local non-systemic treatment and prevention of antibiotic-resistant infections, has reported first quarter 2011 financial results and also highlighted recent progress of its proprietary and partnered development programs within its four business units.

As of March 31, 2011, the Company's cash, cash equivalents and short-term investments totaled $12.6 million, compared with $12.8 million at the end of the previous year, reflecting an approximate $200,000 net cash burn through the first three months of the year. NovaBay's minimal cash burn over the three-month period reflects prudent cash management and receipt of milestone and support payments from its partners, Galderma S.A. and Alcon. Furthermore, with combined average balances of cash, cash equivalents and short-term investments of approximately $12 million since December 2008 (2¼ years), NovaBay has effectively accomplished its primarily non-dilutive financing strategy through upfront, milestone, and R&D reimbursement revenues received from its two collaboration partners.

NovaBay's license and collaboration revenue for the three months ended March 31, 2011 was $2.5 million, compared with $2.1 million for the first quarter 2010. The Company earns license and collaboration revenue from its significant corporate partnerships with Galderma S.A. and Alcon.

During the first quarter, NovaBay continued to advance three Phase 2 clinical trial programs. These consist of: 1) in its Dermatology Business Unit: impetigo, a highly contagious skin infection – planning an expanded Phase 2b trial scheduled to start in the second half of 2011; 2) in its Urology Business Unit: urinary catheter blockage and encrustation (UCBE), potentially leading to urinary tract infections - Phase 2 trial currently underway; and 3) in its Ophthalmology Business Unit: viral conjunctivitis or pink eye – the results of the Phase 2 study have been analyzed for safety, microbiological and clinical efficacy. The trial results are expected to be released during May 2011. The Company will continue to review the data with its partner and other experts in the ophthalmic community to determine its next steps. NovaBay also reported that the manufacture of NeutroPhase®, its FDA 510(k) approved product, continues at a contract manufacturing facility in the US. Assuming successful scale up can be achieved, NovaBay expects to see this product on the market next year with select partners.

The Company's research and development and clinical expenses were $2.9 million in the first quarter of 2011, compared with $2.2 million in the first quarter of 2010, reflecting increased clinical activity in the impetigo program.

NovaBay reported a first quarter net loss of $2.0 million, or $0.08 per share, compared with a net loss of $1.6 million or $0.07 per share for the quarter ended March 31, 2010. The net loss was primarily due to increased research, development and clinical trial expenses as the Company moves forward in its in-house Phase 2b clinical trial for UCBE. 

First Quarter and Recent Highlights:

• April 2011: NovaBay Pharmaceuticals Spotlights Positive Results From NeutroPhase® Study of 26 Patients With Chronic Non-Healing Wounds
• April 2011: NovaBay Pharmaceuticals Awarded 1st Place for Outstanding Scientific Presentation at The Simon Foundation for Continence Conference
• April 2011: NovaBay Pharmaceuticals Spotlights Positive Results for Its Novel Anti-Infective at 2011 Simon Foundation for Continence Conference
• March 2011: NovaBay updated investors on the status of its Phase 2b clinical trial for UCBE in chronically catheterized spinal cord injury patients prone to frequent urinary tract infections. The multi-center, randomized, double-blind proof-of-concept clinical trial compares the use of a catheter irrigation solution containing NVC-422 to the use of a saline irrigation, the most commonly used option for treating UCBE. NovaBay expects the trial to be completed in Q3 2011 with results available in Q4 2011. The Company plans to discuss the Phase 2 results and the Phase 3 study protocol with the FDA and initiate a Phase 3 registration study for UCBE in 2012. 
• February 2011: Fast Company ranks NovaBay No. 7 in their annual list of the world's most innovative biotech companies. The magazine praises NovaBay "for antibiotic-like compounds that fight their battles by mimicking the human immune system."
• January 2011: Aganocide NVC-422 shown effective against "Superbug" producing NDM-1 (New Delhi Metallo-beta-lactamase-1) and six other highly drug-resistant pathogens. NovaBay currently is engaged in testing additional strains of E. coli and K. pneumoniae encoded with the NDM-1 gene. The Company previously reported that NVC-422 was effective in vitro against resistance phenotypes of E. coli and K. pneumoniae, including extended-spectrum beta-lactamase (ESBL) and multidrug-resistant (MDR) strains. NovaBay intends to publish and present the full data set at the upcoming Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC).  

"Our team continues to pursue our clinical milestones and we are working diligently to advance our programs," commented Dr. Ron Najafi, NovaBay's Chairman and Chief Executive Officer. "During the first quarter we announced the start of our Phase 2 trial to address the unmet medical need to treat urinary catheter blockage and encrustation as well as additional pre-clinical studies confirming the broad-spectrum anti-microbial capabilities of NovaBay's Aganocide portfolio of compounds.

"We expect to announce the results of the proof-of-concept phase 2 clinical trial of NVC-422 for adenoviral conjunctivitis and our plans for this program during May and we look forward to Galderma initiating an expanded Phase 2b clinical trial with NVC-422 for the treatment of the highly contagious skin infection, impetigo," Dr. Najafi concluded.

About NovaBay Pharmaceuticals, Inc.

NovaBay Pharmaceuticals is a clinical-stage biotechnology company focused on developing its proprietary and patented Aganocide compounds. These are novel, synthetic anti-infectives with activity against bacteria, fungi and viruses, and are being developed to treat and prevent a wide range of local, non-systemic infections with a low likelihood of developing bacterial resistance.

NovaBay is focusing its technology on four distinct therapeutic areas: dermatology, ophthalmology, urology and hospital infections. In dermatology, the focus is on developing NVC-422 gel for impetigo and acne. NovaBay has the advantage of being partnered with Galderma, the leading dermatology company in the world. In ophthalmology, the goal is to develop an eye drop for conjunctivitis with Alcon, the world's foremost ophthalmology company. In urology, NovaBay aims to reduce the incidence of urinary catheter blockage and encrustation (UCBE) and the potential for urinary tract infections with an irrigation solution containing NVC-422. In hospital infection, NovaBay is targeting the six-million-patient market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers with its proprietary anti-infective solution, NeutroPhase, which has received two 510(k) clearances from the Food and Drug Administration. For additional information, visit www.novabaypharma.com.

Cautionary Information Regarding Forward-Looking Statements

This release contains forward-looking statements, which are based upon NovaBay's current expectations, assumptions, estimates, projections and beliefs. The statements in this press release of NovaBay's expectations (i) that NovaBay plans to launch the Phase 2b trial in impetigo in the second half of 2011; (ii) that the trial results for the recently completed Phase 2 viral conjunctivitis will be announced in Q2 2011;  (iii) NovaBay's plan to commercialize Neutrophase resulting in the availability of the product in the market in 2012 (iv) that the Phase 2b clinical trial for UCBE in chronically catheterized spinal cord injury patients prone to frequent urinary tract infections will be completed in Q3 2011 with results available in Q4 2011; (v) NovaBay's plan to discuss the Phase 2 results and the Phase 3 study protocol with the FDA and commencement of a Phase 3 registration study for UCBE in 2012; (vi) NovaBay intends to publish and present the full data set at the upcoming ICAAC and (vii) regarding safety and efficacy of NovaBay's NVC-422, as well as other statements that relate to future events or results, are forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: the risk that NovaBay may incur unexpected charges or need to or determined to engage in research and development or preclinical trials not previously planned, which could delay or prevent it from conducting the clinical trials it expects; inherent risks and uncertainties relating to difficulties or delays in conducting clinical trials; results of clinical trials are uncertain, and results in previous preclinical trials may not be replicated in clinical trials, which may cause the outcome of clinical trials to be different than NovaBay expects; the inherent uncertainty of patent protection for the Company's intellectual property or trade secrets, which could result in NovaBay not being able to protect its intellectual property to the extent that it expects; and the risk of unexpected delays in the regulatory process which may delay the commencement or completion of clinical trials. Further, if upon analysis of the results of the conjunctivitis clinical trial Alcon were to determine that the data does not warrant continuation of development of NVC-422 for the treatment of adenoviral conjunctivitis, further payments from Alcon may not be received. Other risks relating to NovaBay and its Aganocide compounds, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay's Annual Report on Form 10-K for the period ended December 31, 2010, under the caption "Risk Factors" in Item 1A of Part I of that report, filed with the Securities and Exchange Commission on March 10, 2011. The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.