NovaBay Pharmaceuticals Earns $3.75 Million in Milestone Payments from Galderma, S.A.

By January 11, 2010

NovaBay Pharmaceuticals, Inc.(NYSE Amex: NBY), a clinical stage biopharmaceutical company developing a new class of anti-infectives for treating multi-drug resistant pathogens, announced today that it has received $3.75 million in milestone payments from partner Galderma S.A.

A $2 million milestone payment was triggered by the completion of formulation feasibility studies with NovaBay’s Aganocide® compounds for topical use. NovaBay also received a separate $1.75 million milestone payment, consistent with its development agreement, for completing an exploratory clinical study for the treatment of adult acne.

“We are pleased with the continuing and timely progress of our partnership with Galderma, the world’s leading dermatology company, and look forward to fulfilling our long-term goal of bringing novel, non-antibiotic anti-infective products to the dermatology market,” said NovaBay CEO Ron Najafi, Ph.D. “As antibiotic resistance escalates at an alarming rate, we hope to provide alternative treatments to treat dermatological infections without perpetuating the global spread of drug-resistant bacteria.”

In March 2009, NovaBay and Galderma entered into an agreement to develop and commercialize NovaBay’s novel, proprietary Aganocide compounds. The exclusive agreement is worldwide in scope, with the exception of certain Asian markets, where NovaBay has commercialization rights, and in North America where NovaBay has the option to exercise co-promotion rights. The agreement covers acne, impetigo and potentially additional major dermatological conditions, excluding onychomycosis (nail fungus) and orphan drug indications.

Under the terms of the agreement, NovaBay could receive up to $50 million from Galderma upon achievement of certain development and regulatory milestones related to the acne, impetigo and other dermatological indications. Inclusive in the agreement, the company could also receive escalating double-digit royalties on net sales of products. The agreement anticipates further cooperation for additional dermatological indications.

As part of the collaboration between the two companies, NovaBay and Galderma also initiated a Phase 2a proof-of-concept study of NovaBay’s lead Aganocide compound NVC-422 for the treatment of impetigo in September 2009. Impetigo is a highly contagious bacterial skin infection and one of the most common bacterial skin infections among children, affecting over one million people in the US alone. Results of that study are expected in the first half of 2010.

About NovaBay

NovaBay Pharmaceuticals is a clinical stage biopharmaceutical company focused on developing its proprietary and patented Aganocide compounds, which are novel, synthetic anti-infective product candidates with equivalent activity to the active antimicrobial molecules generated within white blood cells. NovaBay’s Aganocides are being developed to treat and prevent a wide range of infections without causing bacterial resistance. NovaBay has internal development programs aimed at addressing hospital and respiratory infections. The company has a license and research collaboration agreement with Alcon, Inc. for use of its Aganocide compounds to treat eye, ear and sinus infections as well as for contact lens care. NovaBay has also entered into an agreement with Galderma S.A. to develop and commercialize Aganocides in acne, impetigo and other dermatological indications. NovaBay™ and Aganocide® are trademarks of NovaBay Pharmaceuticals, Inc. For more information on NovaBay, visit: www.novabaypharma.com

Cautionary Information Regarding Forward-Looking Statements

The statements in this press release regarding NovaBay’s expectations regarding its partnership with Galderma and of bringing products to market for dermatological indications, including the expected timing or the results of the Phase 2a proof of concept study, are forward-looking statements subject to risks and uncertainties. Actual results may be different than those NovaBay expects due to a number of factors, including the risk that negative results from the development programs could preclude Galderma from providing additional funding to NovaBay, risks and uncertainties in obtaining regulatory approvals for NovaBay’s products, as well other as risks relating to NovaBay and its Aganocide compounds detailed in NovaBay’s Quarterly Report on Form 10-Q, under the caption “Risk Factors” in Item 1A of Part II of that report, which was filed with the Securities and Exchange Commission on November 12, 2009.

Contact:

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

Media:
Susan Thomas
510-899-8841
sthomas@novabaypharma.com

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