NovaBay Pharmaceuticals (NBY) Announces Expansion of Strategic Marketing Agreement for NeutroPhase in Southeast Asia

By September 14, 2012

NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), today announced that it has expanded its commercial partnership agreement with Naqu Area Pioneer Pharma Co., Ltd., a Shanghai-based company that markets high-end pharmaceutical products into China, for the commercialization of NeutroPhase Skin and Wound Cleanser in select Asian markets in addition to China. Under the terms of the agreement, NovaBay will receive an upfront payment of $500,000, with additional payments totaling $200,000 that may be triggered by certain milestones. In addition, Pioneer Pharma (Singapore) Pte Ltd., an affiliate of Naqu Area Pioneer Pharma Co., Ltd., has agreed to make a two-tranche equity investment in unregistered and untradeable NovaBay common stock that could reach $5.5 million. After an initial investment of $1.0 million immediately, plus another $1.5 million contingent on obtaining regulatory approval, for the issuance of units consisting of shares and warrants (a total of two million shares and warrants to purchase two million shares) in 2012, Pioneer has the option to invest up to another two million shares at $1.50 per share over the next twelve months upon exercise of the warrants.

Developed by NovaBay, NeutroPhase is the only pure hypochlorous acid (HOCI) skin and wound cleanser cleared by the U.S. Food and Drug Administration (FDA) for the treatment of chronic non-healing wounds, including, Stage I-IV pressure ulcers, stasis ulcers, leg ulcers, diabetic foot ulcers, post surgical wounds, first and second degree burns, abrasions and minor irritations of the skin. Recently, NovaBay received an additional 510K clearance from the FDA for the use of NeutroPhase to moisten and debride graft and donor sites and to be administered through a new convenient spray pump.

“The expanded partnership with a premier marketing organization such as Pioneer Pharma opens up the opportunity for NovaBay to provide NeutroPhase in multiple emerging markets in Southeast Asia,” said Dr. Ron Najafi, Chairman and Chief Executive Officer of NovaBay. “The healthcare market in this region is growing rapidly with the change in lifestyle resulting in an increasing need for new medicines. We have invited Mr. XinZhou “Paul” Li, President of Pioneer, to be the Asia-Pacific Advisor to NovaBay’s Board of Directors.”

“In fact, these areas represent the fastest growing diabetic and venous ulcer markets in the world,” continued Dr. Najafi. “This will allow for NovaBay to expand the marketing of NeutroPhase at an accelerated rate and provide these territories with a specialized wound cleanser that has been developed for the treatment of non-healing wounds.”

“Our partnership with NovaBay continues to grow due to large unmet medical need NeutroPhase addresses in the Asian continent,” stated President of Pioneer, Mr. XinZhou “Paul” Li. “With the product profile NeutroPhase possesses, it has the capacity to satisfy the large market opportunity that Southeast Asia represents. Our sales and marketing organization is looking forward to launching NeutroPhase over the coming months.”

Under the expanded five year agreement, NovaBay will continue to manufacture NeutroPhase in the United States and export the finished product to Pioneer’s subsidiary in Southeast Asia at a set transfer price. In addition to China, where regulatory approval to commence marketing is expected mid-2013, the agreement provides exclusive distribution of NeutroPhase in Hong Kong, Macau, Taiwan, Singapore, Malaysia, Indonesia, Myanmar, Philippines, Thailand, Vietnam, Brunei, Cambodia and Laos, where commercial launch in smaller selected markets is expected by the end of 2012 and others by 2014. The NovaBay will also assist in the training of Pioneer sales representatives and support Pioneer with Key Opinion Leader (KOL) development in the specific markets.

NovaBay is currently seeking appropriate potential partners to distribute NeutroPhase in North America, Europe and South America. For more information, visit:www.neutrophase.com

About NeutroPhase®

NeutroPhase Skin and Wound Cleanser is an FDA-cleared NovaBay proprietary preparation of normal saline containing stabilized pure hypochlorous acid (HOCl) as a preservative. Under the supervision of healthcare professionals it is intended for use in cleansing wounds as well as moistening and debriding acute and chronic lesions. HOCl is a bactericidal compound produced naturally by white blood cells to combat infection in the body. With its proprietary solution, NovaBay is targeting the six-million-patient US market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers. In laboratory studies, NeutroPhase was proven to disrupt bacterial biofilm and kill a range of pathogens including common wound pathogens (both Gram-positive and Gram-negative) in vitro, while leaving human cells unharmed. Extensive toxicology studies have demonstrated safety during application to skin and wounds. A 54 patient double blind investigator sponsored clinical study was conducted at San Francisco Wound Care Center of Seton Medical Center using a precursor formulation to NeutroPhase to moisten dressings in patients with diabetic ulcers, venous ulcers and bedsores. While these data have not been reviewed by the FDA, this formulation was shown to be as safe as dressings moistened with saline used for the control and the results suggested a superior healing rate.
Learn more about NeutroPhase at:www.neutrophase.com

About Pioneer Pharma Co., Ltd.

Shanghai-based Pioneer Pharma was founded in Hainan, China in 1996 and imports and markets high-end pharmaceutical products into China. Pioneer currently markets 27 different pharmaceutical products across a wide range of therapeutic categories on behalf of its strategic partners. The company has over 34 representative offices across China and covers over 7,500 hospitals and 40,000 drugstores. For more information, please visit www.pioneer-pharma.com

About NovaBay Pharmaceuticals, Inc.www.novabaypharma.com

Going Beyond Antibiotics
NovaBay Pharmaceuticals is a clinical-stage biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with its two distinct categories of products.

Aganocide® Compounds
NovaBay’s first-in-class Aganocide compounds, led by NVC-422, are patented, synthetic molecules 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 possess a reduced likelihood that bacteria or viruses will be able to develop resistance, which is critical for advanced anti-infectives. Having demonstrated therapeutic proof-of-concept in three Phase 2 clinical studies, these compounds are suited to treat and prevent a wide range of local, non-systemic infections. NovaBay is currently concentrated on three large therapeutic markets:

Dermatology – Partnered with Galderma, a leading dermatology company, to develop a formulation of NVC-422 for treatment of highly contagious skin infection, impetigo. Current product offerings give rise to resistance. A major global clinical study is planned for 2012.

Ophthalmology – NovaBay is developing an eye drop formulation of NVC-422 for treating viral conjunctivitis, for which there is currently no FDA-approved treatment. Enrollment into a global Phase 2b clinical study has begun with top-line data expected in the first half of 2013

Urology – NovaBay’s irrigation solution containing NVC-422 is currently in Phase 2 clinical studies, with the goal of reducing the incidence of urinary catheter blockage and encrustation (UCBE) and associated urinary tract infections. NovaBay reported positive data from Part A of this study and expects to announce top-line results from Part B later in 2012.

NeutroPhase®
NovaBay is also developing NeutroPhase, which is an FDA 510(k)-cleared product for advanced wound care. NovaBay believes that NeutroPhase is the only patented pure hypochlorous acid solution available and has the potential to be best suited to treat the six-million-patients in the U.S. who suffer from chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers. For additional information, visit: www.neutrophase.com

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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 expected investment of Pioneer Pharma, the expected benefits of the agreement with Pioneer Pharma (including that it will allow for expanded marketing of NeutroPhase), the capacity of NeutroPhase to satisfy the market opportunity, and the expected timing of regulatory approval for marketing in China, and commercial launch in the various countries covered by the agreement. 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: the issuance of a majority of the NovaBay common stock and warrants is subject to obtaining regulatory approvals which, if not obtained or delayed, would prevent the issuance of such shares and warrants; risks and uncertainties relating to difficulties or delays in obtaining regulatory approval, production and marketing of NeutroPhase;and certain payments to NovaBay are conditioned upon achieving specified milestones which, if not met, will cause such payments not to be made . Other risks relating to NovaBay, NeutroPhase 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 Business Development and Licensing:
Roy J. Wu
Sr. VP Business Development
(510) 899-8815
BusDev@novabaypharma.com

Investors:

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

Investors and Media:
The Ruth Group

Nicole Greenbaum (Investors)
(646) 536-7009
ngreenbaum@theruthgroup.com

Victoria Aguiar (Media)
(646) 536-7013
vaguiar@theruthgroup.com

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