NovaBay Announces Advancements In Dermatology Program

By July 17, 2008

NovaBay Pharmaceuticals, Inc. (AMEX: NBY) a clinical stage biopharmaceutical company, gave more details today on its dermatology program. Dr. Ron Najafi, Chairman and CEO, said that “NovaBay is now accelerating its efforts in dermatology. We formed our DermaBay subsidiary in 2007, to build up our expertise and move forward in dermatology. Our Aganocide® compounds have appeared all along to be of significant potential interest in dermatology, but we needed to deliver the compounds in acceptable dermatological formulations. We now have the necessary capabilities to proceed with product development in dermatology.”

Dr. Eric Memarzadeh, Senior Director, Pharmaceutical Development, explained that as a result of work done over the last year, NovaBay has succeeded in developing several pharmaceutical formulations of Aganocide® compounds for use in its programs, including some that are specifically designed for use in dermatology. One formulation, known as AgaDerm™, had been tested in a challenging animal model of dermatophyte infection. The AgaDerm formulation delivered an Aganocide® compound effectively when applied on the surface of the skin and enhanced its penetration into hair follicles. The infectious agent was a dermatophyte, Trichophyton mentagrophytes, a parasitic fungus that causes infections of the nails, hair and skin, including ringworm. The Aganocide® compound in the AgaDerm formulation was shown to be highly effective not only on the skin surface, but also showed potent ability to kill organisms invading the hair. It was equal or greater in antifungal efficacy to ciclopirox 8% (Sanofi-Aventis, Penlac®), a standard and well established topical antifungal agent that is also sold as a 0.77% gel and as a 1% shampoo by Medicis (Loprox®).

Colin Scott, M.D., Vice-President of Clinical Research and Development, explained that NovaBay was now optimizing the concentration to be used for clinical studies. He said that NovaBay will complete the necessary IND-enabling toxicology studies before beginning a Phase I study. He added that other NovaBay Phase I studies in humans had already demonstrated the safety in humans of the compound in nasal passages and in the bladder.

Dr. Najafi said that he was very satisfied with the way that the program was proceeding and that he has appointed Jack O’Reilly as General Manager of DermaBay to manage the company’s strategic development in dermatology.

Mr. O’Reilly, who also continues as SVP Corporate and Business Development for NovaBay, pointed out that there were several important potential target indications in dermatology. He said that “with the growth of antibiotic resistance, many health authorities aim to reduce the use of antibiotics in skin infections. Patients with these infections still need treatment. The Aganocide® compounds, which are not antibiotics, are expected to deliver the same or better efficacy without giving rise to resistant bacteria. We also aim to address acne, nail fungus and topical viral infections, where antibiotics are not effective. In laboratory testing, we have shown that our Aganocide® compounds kill all bacteria, fungi and viruses against which they have been tested. DermaBay aims to bring to market products for all indications where the Aganocide® compounds are appropriate. Because of the interest already shown in the results of our Aganocide® compounds, we are exploring several strategic opportunities to enhance our efforts and ensure the broadest use of the Aganocides in dermatology.”

About NovaBay Pharmaceuticals, Inc.
NovaBay Pharmaceuticals, Inc. is a clinical stage biopharmaceutical company focused on developing innovative product candidates targeting the treatment or prevention of a wide range of infections in hospital and non-hospital environments. NovaBay has discovered and is developing a class of non-antibiotic anti-infective compounds, which it has named Aganocide® compounds, which are based upon small molecules that are generated by white blood cells that defend the body against invading pathogens. NovaBay believes that Aganocide® compounds could form a platform on which to create a variety of products to address differing needs in the treatment and prevention of bacterial and viral infections, including resistant bacteria such as MRSA. NovaBay has entered into a licensing and research collaboration agreement with an affiliate of Alcon, Inc. for use of the Aganocide® compounds in the eye, ear and sinus, and in contact lens solutions. The company also has a license agreement with an affiliate of Kinetic Concepts, Inc. for the use of NovaBay’s NeutroPhase product in woundcare applications.

NovaBay™, AgaDerm™ Aganocide®, AgaNase™, and NeutroPhase™ are trademarks of NovaBay Pharmaceuticals, Inc. All other trademarks and trade names are the property of their respective owners.

Forward-Looking Statements

This release contains forward-looking statements, which are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding the development and potential benefits of, and the market opportunities for, NovaBay’s product candidates. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse 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 discovery, development, testing, 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. 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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