Press Releases

NovaBay Pharmaceuticals Reports Results from Phase 2 Clinical Trial of NVC-422 for Adenoviral Conjunctivitis

Encouraging and Unexpected Results Found in Patients Infected with Epidemic
Keratoconjunctivitis (EKC) Viruses and All Patients with Blurred Vision

CONFERENCE CALL AND WEBCAST TO BE HELD AT 10:00AM EDT (7:00AM PDT)

EMERYVILLE, CA - May 18, 2011

NovaBay(R) Pharmaceuticals, Inc. (NYSE Amex:NBY) today announced the results of a Phase 2 clinical study for the treatment of adenoviral conjunctivitis. Of a total of 452 patients randomized 1:1 for treatment with NVC-422 ophthalmic solution or its vehicle as placebo, 81 patients were confirmed by laboratory findings to have adenoviral conjunctivitis. The predetermined primary endpoint of sustained microbiological success of 20% greater than placebo was not met. However, encouraging and unexpected results were found in the 38% of patients infected with adenovirus serotypes commonly associated with epidemic keratoconjunctivitis (EKC). An additional efficacy analysis of this subset is suggestive of positive treatment effects in clinical signs, symptoms, and microbiological findings. EKC is a highly contagious eye infection affecting both the cornea and the conjunctiva. Importantly, a positive effect was seen for sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo.

“We are particularly pleased to find that the clinical results were most impressive in patients infected with viruses associated with EKC, the condition which is most likely to result in severe damage to the vision of infected patients, and which is of primary concern to the ophthalmology community,” said Ron Najafi, Ph.D., Chairman and CEO at NovaBay. “As a ‘proof-of-concept’ study, this trial has successfully generated many important hypotheses as to the mechanism of action of the drug and its potential benefits for the treatment of viral conjunctivitis, a serious unmet medical need in ophthalmology. We were also very encouraged by the fact that the treatment was well-tolerated,” Dr. Najafi concluded.

The company said it will continue to review the data with its partner and other experts in the ophthalmic community to determine its next steps for the Aganocide ophthalmology program.

Background

Adenoviral conjunctivitis, a highly contagious ocular infection, is an unmet medical need with no FDA approved treatments. The highly contagious nature of the disease and efficient transmission within families cause significant work and school-related absenteeism. Epidemic keratoconjunctivitis (EKC), commonly associated with adenovirus serotypes 8, 19 and 37, is responsible for worldwide epidemics with major economic consequences. EKC is known to cause considerable morbidity. Once the cornea becomes involved, subepithelial infiltrates (SEIs), an immune response to viruses infecting the cornea, photophobia (glare), and blurred vision may persist for months to years. EKC may produce pseudomembranes and membranes leading to significant conjunctival scarring with loss of goblet cells and symblepharon formation resulting in chronic dry eyes and the need for chronic tear supplementation.

Phase 2 Study Design and Findings

In this comprehensive, multi-center, double-masked, parallel, randomized U.S. study, patients were enrolled based on diagnosis of adenoviral infection using a rapid antibody-based kit or by a positive diagnosis by a physician’s checklist. Patients were randomized 1:1 for daily treatment with NVC-422 ophthalmic solution or a placebo control, dosed 1 drop per eye 8 times a day for 10 days. Microbiological, clinical and safety evaluations were performed on Days 3, 5, 7, 9 and 11 with a follow-up one week later at Day 18. Originally intended to evaluate a total of 220 patients with confirmed adenovirus infection (110 in each for NVC-422 and placebo treated patients), the study was concluded early based on an interim analysis of the first 50 adenoviral-positive patients at Day 5 or 7 and a lower than expected rate of enrollment of adenoviral-positive patients. Of a total of 452 patients enrolled, 81 patients were confirmed to have adenoviral conjunctivitis by laboratory findings.

Primary Study Endpoint

The original primary study endpoint was defined as the proportion of patients with microbiological success for eradication of adenoviruses at any day. In February 2010, the protocol was amended, and only Day 5 or 7 were selected for primary endpoint analysis. Success was defined as sustained eradication of adenovirus that remained eradicated at all subsequent visits. Out of the 81 evaluable patients, 10 in the active group and 8 in the placebo group met this endpoint at Day 5. At Day 7, the patients meeting the endpoint increased to 20 in the active group and 19 in the placebo group. The difference was not statistically significant at either day.

Improved Blurred Vision Clearing Rate

In the adenovirus-positive population, 50 of the 81 patients reported blurred vision at entry. In the subset of patients infected by adenovirus types 8, 19 and 37 (EKC patients), 21 of the 30 patients reported blurred vision at entry.

Results for All Patients

On Day 11, in the adenovirus-positive population, sustained blurred vision clearing rate was 70% (19/27) for the active group compared to 61% (14/23) for the placebo group, a difference of 9%.

On Day 18, in the adenovirus-positive population, sustained blurred vision clearing rate was 89% (24/27) for the active group compared to 74% (17/23) for the placebo group, a difference of 15%.

Results for EKC Patients

On Day 11 for the EKC population sustained blurred vision clearing rate was 85% (11/13) for the active group, compared to 38% (3/8) for the placebo group, a difference of 47%.

On Day 18 for the EKC population sustained blurred vision clearing rate was 92% (12/13) for the active group, compared to 50% (4/8) for the placebo group, a difference of 42%.

Sustained Microbiological Success

Sustained microbiological success was defined as eradication of adenovirus at an indicated visit that remained eradicated at all subsequent visits.

Results for All Patients

In the 81 adenovirus-positive patient population, the sustained microbiological success rate increased throughout the 18 days of the study to 83% (35/42) for the active group and 74% (29/39) for the placebo group at Day 18, a difference of 9%. The maximal difference at any treatment day was 12% in favor of the active group.

Results for EKC Patients

In the EKC population (30 patients), the sustained microbiological success rate increased throughout the 18 days of the study to 77% (13/17) for the active group and 62% (8/13) for the placebo at Day 18, a difference of 15%. Throughout the study, the difference in success rates between active and placebo for the EKC population was always positive and ranged from approximately 6% to 18%, starting at Day 3.

Sustained Clinical Cure

Sustained clinical cure was defined as a zero score of symptoms (sum of bulbar conjunctival injection and foreign body sensation) that remained zero for all subsequent visits. Evaluable patients are those who entered the study with a non-zero score for these clinical indicators.

Results for All Patients

The sustained clinical cure rate in the 76 evaluable adenovirus-positive patients increased throughout the 18 days of the study to 67% (26/39) for the active group compared to 60% (22/37) for the placebo group, a difference of 7%.

Results for EKC Patients

For the 29 evaluable patients, the clinical cure rate increased throughout the 18 days to 69% (11/16) for the active group and 54% (7/13) for the placebo group, a difference of 15%. The cure rate of the active group for the EKC patients was always greater than the placebo treatment group and ranged from approximately 7% to 15%, starting at Day 3.

Transmission of Infection to Fellow Eye

Of patients who were positive at baseline for adenovirus in only one eye (55 evaluable patients), transmission to fellow eye was prevented in 6 patients treated with NVC-422 compared to 2 patients treated with placebo.

Severity of Subepithelial Infiltrates (SEIs)

SEIs or superficial corneal inflammatory deposits are an immune-mediated reaction that can persist from a few weeks to months. These infiltrates can cause decreased visual acuity, foreign body sensation, glare and light sensitivity.

Results for EKC Patients

By Day 11 in the EKC population, mean scores for severity of SEIs in the placebo group increased to 0.9 (scale of 0-3), and there was a treatment effect of up to 0.4 in favor of NVC-422.

Safety and Tolerability

The treatment was considered to be well-tolerated and safe, with the most frequent treatment-related adverse event being eye irritation (14.2% NVC-422, 1.3% placebo). Most of these events were assessed as mild or moderate in intensity and the majority resolved without treatment. Approximately 5% of patients discontinued for both treatment and non-treatment-related adverse events in the 452 treated patients. No severe adverse events were reported.

Commenting on the study results was Eric Donnenfeld, MD, FACS. “I have thoroughly reviewed the data analyses from this adenovirus conjunctivitis study and found them to be compelling, particularly as they relate to epidemic keratoconjunctivitis. As a practicing ophthalmologist who has participated in over 40 FDA studies, some involving anti-infectives to treat viral eye infections, I appreciate the need in the market for a product that can treat these serious eye conditions. I believe NVC-422 has the potential to make a difference in the lives of these patients.” Dr. Donnenfeld is a founding partner of Ophthalmic Consultants of Long Island and Connecticut and a clinical professor of ophthalmology at New York University. He is a Fellow of the American Academy of Ophthalmology and has received its Senior Honor Award and Secretariat Award. Dr. Donnenfeld has no affiliation with NovaBay Pharmaceuticals, Inc.

About Adenoviral Conjunctivitis (“Pink Eye”)

Adenoviral conjunctivitis, a highly contagious ocular infection, is an unmet medical need, with no effective treatment. Conjunctivitis is an inflammation of the conjunctiva, a thin, transparent layer covering the surface of the inner eyelid and the front of the eye. It affects people of all ages. Acute conjunctivitis from various etiologies is characterized by common symptoms and signs including a red eye, discharge, eyelash matting or crusting, foreign body sensation, and tearing. Adenovirus is a very robust virus that can survive outside the body on hard surfaces and has been cultured from such surfaces up to 7 weeks after an infection. Approximately 45% of people in a patient’s close surroundings, e.g., family members, will become infected. Approximately 3 million school days are lost annually as a result of acute conjunctivitis. Although exact numbers are difficult to determine, estimates suggest the number of cases of ocular adenoviral infections may be as high as 15-20 million per year in the United States.

About Epidemic Keratoconjunctivitis (EKC)

Epidemic keratoconjunctivitis (EKC) is a serious and contagious eye infection affecting both the conjunctiva and more problematically, the cornea (the transparent front part of the eye that covers the iris, pupil, and anterior chamber). EKC infections are commonly associated with adenoviruses types 8, 19 and 37. EKC is characterized by conjunctivitis: acute onset of watering, redness, foreign body sensation and severe pain. Symptoms include blurred vision, light sensitivity and foreign body sensation. Patients affected by EKC are often advised by physicians not to attend work or school anywhere from 1-2 weeks leading to loss of work time and absenteeism. In aggressive cases of EKC, corneal scarring due to subepithelial infiltrates (SEIs) and conjunctival scarring due to membrane or pseudo membrane can be seen. During the acute phase, which persists for approximately two to three weeks, viruses are present and replicating. In the typical case, first one eye is infected, after which the infection spreads to the other eye within two to three days. Both eyes are affected in 60% of cases. The infection in the first eye is typically the more serious. In approximately 20-50% of patients, corneal opacities are developed due to SEIs, resulting in deteriorating vision that remains for weeks and months, and in rare cases even years. Since the disease is often epidemic in nature, it is called epidemic keratoconjunctivitis.

Conference Call Information

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About NovaBay Pharmaceuticals, Inc.

NovaBay Pharmaceuticals is a clinical-stage biotechnology company focused on developing its proprietary and patented Aganocide(R) 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. 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(R), 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

The statements in this press release regarding NovaBay Pharmaceuticals’ expectation on the potential efficacy of Aganocide compounds; the potential benefit of the Company’s NVC-422 for the treatment of adenoviral conjunctivitis and EKC; and any potential plans for future clinical development of NVC-422 are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward- looking statements reflect the views of the management of NovaBay as of the date of this press release and are based on assumptions and subject to significant risks and uncertainties (many of which are outside of NovaBay’s control), including: NVC-422 may not prove to be effective in treating adenoviral conjunctivitis or epidemic keratoconjunctivitis (EKC); our partners may terminate their development agreements with us which would require us to find other partners, and the FDA or other regulatory agencies may delay clinical trials, or require additional studies or procedures, which could delay or prevent the development of Aganocide compounds. These and other risks relating to the development of Aganocide compounds are detailed in NovaBay’s filings with the Securities and Exchange Commission, including in the section entitled “Risk Factors” in Item 1A of Part II of NovaBay’s Quarterly Report on Form 10-Q for the period ended March 31, 2011, filed with the Securities and Exchange Commission on May 16, 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.

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