Press Releases

NovaBay Pharmaceuticals Provides Business Update and 2013 Outlook

EMERYVILLE, CA - December 13, 2012

Recent $7 Million Financing to Accelerate and Expand Clinical Trials

Steady Progress Across Four Business Units:

Ophthalmology
• Viral conjunctivitis (unmet medical need)
- Financing to accelerate Phase 2b global 450 patient trial in adenoviral conjunctivitis by expanding number of clinical sites in the U.S. Results from the global trial expected 2H13.
• Bacterial conjunctivitis (new clinical target)
- Financing to fund Phase 2a proof-of-concept bacterial conjunctivitis trial, facilitating ultimate goal of one product for the treatment of both viral and bacterial conjunctivitis.

Dermatology – Impetigo
• Partner Galderma S.A. initiated Phase 2b global trial of NVC-422 for treatment of impetigo, a highly contagious skin infection, in September 2012. Galderma expects to report results in mid 2013.

Urology – UCBE
• Ongoing Phase 2 clinical trial for treatment of urinary catheter blockage and encrustation (UCBE). Clinical data expected 1H13.

Chronic Non-Healing Wounds – NeutroPhase®
• Secured agreement with Pioneer Pharma to market NeutroPhase throughout China in January 2012; expanded agreement to include Southeast Asia in September 2012. NeutroPhase recently utilized as part of successful new therapeutic technique for management of necrotizing fasciitis (NF, or “flesh-eating bacteria”). First commercial shipment of NeutroPhase to Southeast Asia completed in December 2012. Additional marketing agreements expected worldwide in 2013.

Resources
• Cash, cash equivalents and short-term investments at September 30, 2012 totaled $12 million, and are expected to be approximately $17 million at December 31, 2012. Year-end cash resources expected to be sufficient to achieve above milestones.

EMERYVILLE, CA – December 13, 2012 – NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with first-in-class compounds such as its proprietary Aganocides®, today provided a business update highlighting recent accomplishments and outlook for 2013.

Dr. Ron Najafi, Chairman and Chief Executive Officer, said, “2012 was an exciting year for NovaBay. As a result of the hard work from our talented employees and partners, all three of our Aganocide programs, in ophthalmology, dermatology, and urology, are currently in Phase 2 clinical trials. Data is expected from all of these trials in 2013.”

“We plan to use our recent $7 million financing to accelerate and expand these clinical trials,” Dr. Najafi continued. “For example, we anticipate that these funds will allow us to speed enrollment of patients with additional sites in our global Phase 2b study for adenoviral conjunctivitis. Additionally, we intend to use proceeds from this financing to conduct a Phase 2 study of NVC-422 in bacterial conjunctivitis. We believe that having one product to treat both bacterial and viral conjunctivitis will place NovaBay in a leading position in the market. NVC-422 has the potential to be the conjunctivitis prescription, without need for a test to determine if a patient has the bacterial or the viral form of the disease.”

Dr. Najafi continued, “Our dermatology partner, Galderma, remains highly committed to our NVC-422 treatment for impetigo. Galderma’s dedication to develop this exciting and differentiated product candidate, with a very low potential of developing bacterial resistance, for the global 13 million prescription impetigo market is unwavering.”

Dr. Najafi concluded, “In another confirmation of our products’ potential, Pioneer Pharma expanded our January strategic marketing agreement around NeutroPhase® to include Southeast Asia as well as China. The agreement expansion included a $2.5 million investment in NovaBay, with the potential of another $3 million in 2013. We were pleased to complete the first commercial shipment of NeutroPhase to Southeast Asia in December. NovaBay remains dedicated to our mission of addressing the large unmet therapeutic needs of the global anti-infective market, and we are very pleased to see such commitment from our partners as well.”

BUSINESS OVERVIEW:

Ophthalmology
NovaBay’s development focus in ophthalmology is to use the confirmed anti-viral and antibacterial properties of its proprietary NVC-422 compound to develop the only single product capable of serving the $2 billion global bacterial and viral conjunctivitis markets.

The U.S. portion of the currently ongoing 450 patient global Phase 2b study for NVC-422 in adenoviral conjunctivitis launched in May, and recruitment is running ahead of schedule. Indian enrollment is expected to begin this month, with Brazilian enrollment expected in January of 2013. The recent financing will enable NovaBay to accelerate this global Phase 2b study through the expansion of the number of clinical sites. The Company expects to report global trial results in the second half of 2013.

The recent financing also provides NovaBay with the resources to conduct a Phase 2 study of NVC-422 as a treatment for bacterial conjunctivitis, facilitating NovaBay’s ultimate goal of one product capable of treating both viral and bacterial conjunctivitis.

Dermatology
NovaBay’s development focus in dermatology is to support the ongoing Phase 2b global clinical trial for impetigo, a highly contagious skin infection that mainly affects children. The study is being conducted by NovaBay’s partner Galderma S.A., the world-leading pharmaceutical company for the treatment of dermatological conditions.

In June 2012, NovaBay announced a successful End-of-Phase 2a meeting with the U.S. Food and Drug Administration (FDA), who provided valuable protocol guidance for the design of the Phase 2b study that started in September. Also in September, Galderma paid NovaBay $2.6 million in a previously agreed upon milestone payment, in addition to ongoing research and development funding. As previously stated, Galderma expects to report Phase 2b clinical data for the impetigo study in mid 2013.

Urology
NovaBay’s development focus in urology is to use the confirmed antimicrobial properties of NVC-422 to develop a urinary catheter irrigation solution for the poorly served 330,000 chronically catheterized patients who suffer from urinary catheter blockage and encrustation (UCBE). Current standard of care for these patients involves flushing their catheters three times daily. Results have demonstrated that NVC-422 Irrigation Solution reduces the need to flush catheters to only two to three times weekly, significantly improving patient quality of life.

The ongoing Phase 2 Proof of Concept clinical trial for the use of NVC-422 in the treatment of UCBE continues at a steady pace, with data expected in the first half of 2013.

Chronic Non-Healing Wounds
NovaBay’s focus in wound care is to commercialize its unique pure hypochlorous acid product, NeutroPhase®, for the treatment of chronic non-healing and surgical wounds, by forming clinical partnerships in select markets around the world. In January, NovaBay announced a strategic agreement with Pioneer Pharma to market NeutroPhase in China, and in September the two companies expanded the agreement to include Southeast Asia. The expansion included a $2.5 million investment in NovaBay, with the potential of an additional $3 million in 2013. NovaBay completed its first commercial shipment of NeutroPhase to Southeast Asia in December.

In April, NovaBay reported patient studies supporting the use of NeutroPhase in the management of chronic wounds at the Spring Symposium on Advanced Wound Care. In August, NovaBay received additional FDA 510(k) clearance for the use of NeutroPhase in the management of graft and donor-site surgical procedures. In September, NeutroPhase was utilized as a vital component of a successful new therapeutic technique for the management of necrotizing fasciitis, better known as “flesh-eating bacteria.” Additionally, NeutroPhase manufacturing was validated in the fourth quarter.

NovaBay expects to continue to enter into additional NeutroPhase marketing alliances around the world in 2013.

About NovaBay Pharmaceuticals, Inc.

Going Beyond Antibiotics
NovaBay Pharmaceuticals is a biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with its two distinct categories of compounds, Aganocides® and NeutroPhase® Skin and Wound Cleanser. The Company’s four core business units, DermaBay, UroBay, EyeBay and MediBay, are developing treatments that tackle infections in the dermatology, urology, ophthalmology, and wound care areas.

Aganocide® Compounds NovaBay’s first-in-class Aganocide compounds, led by NVC-422, are patented, topical antimicrobials with a broad spectrum of activity against bacteria, viruses and fungi. Mimicking the mechanism of action that human white blood cells use against infections, Aganocides are not subject to bacterial or fungal resistance, which has been demonstrated in in-vitro and in-vivo studies. Having demonstrated clinical efficacy in Phase 2 proof-of-concept clinical studies, NVC-422 is suited to treat and prevent a wide range of local, non-systemic infections. NovaBay’s clinical development activities are focused on three disease areas:

Dermatology – Partnered with Galderma, a leading dermatology company, to develop a formulation of NVC-422 for treatment of highly contagious skin infection, impetigo, which occurs most commonly in children. Enrollment into a global Phase 2b clinical study has begun and clinical data results are expected in mid-2013.

Ophthalmology – NovaBay is developing an eye drop formulation of NVC-422 for treating adenoviral conjunctivitis, a highly contagious viral eye infection for which there is no approved acute treatment. Enrollment into a global Phase 2b clinical study has begun, and clinical data results are expected in the second half of 2013.

Urology – NovaBay’s urinary catheter irrigation solution containing NVC-422 is currently in a Phase 2b study, with the goal of reducing the incidence of urinary catheter blockage and encrustation (UCBE) and associated urinary tract infections. The Company reported positive data from the Phase 2a study and is evaluating the effect of an alternate more potent formulation of NVC-422 in Phase 2b. Results are expected in the first half of 2013.

NeutroPhase® NeutroPhase is the only pure hypochlorous acid (HOCI) skin and wound cleanser cleared by the U.S. Food and Drug Administration (FDA) to target the six-million-patient U.S. market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers. The saline-based solution is the only wound cleanser on the market to include a stabilized, pure form of HOCl shown in studies to kill bacteria in solution, including flesh-eating bacteria. For additional information, visit:www.neutrophase.com

Stay informed on NovaBay’s progress:
Like us on Facebook
Follow us on Twitter
Connect with NovaBay onLinkedIn
Join us on Google+
Visit NovaBay’s Website

Forward-Looking Statements
This release contains forward-looking statements, which are based upon NovaBay’s current expectations, assumptions, estimates, projections and beliefs. Many of these statements are identified by the use of words denoting future events, such as “expect,” “anticipate,” “plan,” “intend,” “will,” and variations of such words. These forward-looking statements include, but not limited to, NovaBay’s plans and expectations regarding ongoing and future clinical trials, the timing of commencement and receiving results of clinical trials, the potential additional investment from Pioneer Pharma in 2013 and the execution of potential global partnerships for NeutroPhase in 2013. 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, risks and uncertainties relating to difficulties or delays in development, clinical trial, regulatory approval, production and marketing of the company’s product candidates, unexpected adverse side effects or inadequate therapeutic efficacy of the product candidates, the uncertainty of patent protection for the company’s intellectual property or trade secrets, the company’s ability to obtain additional financing as necessary and unanticipated research and development and other costs. Other risks relating to NovaBay and 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 Form 10-K and Form 10-Q filings with the Securities and Exchange Commission, especially under the heading “Risk Factors.” 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.

Contact Information
NovaBay Pharmaceuticals Contacts
Thomas J. Paulson  
Chief Financial Officer
510-899-8809
Contact Thomas Paulson

The Ruth Group
Stephanie Carrington / Nicole Greenbaum (Investors)
(646) 536-7017 / 7009
scarrington@theruthgroup.com/ngreenbaum@theruthgroup.com