NovaBay Pharmaceuticals’ Non-antibiotic Anti-infective Successful in Phase 2 Skin Infection Trial

By July 21, 2010

NovaBay Pharmaceuticals, Inc. (AMEX: NBY, www.novabaypharma.com) today announced that its lead product candidate was safe and efficacious against the highly contagious skin infection impetigo in a Phase 2a proof-of-concept clinical trial. This dose-ranging study showed that the drug cleared impetigo infections, including those in the trial caused by a drug-resistant strain of bacteria called methicillin-resistant Staphylococcus aureus or MRSA. Impetigo afflicts approximately 1 million people, primarily infants and children, in the United States annually.

Robust efficacy was demonstrated in all three doses in this randomized, double-blind, dose-ranging study enrolling 129 patients ages 2 to 12. Clinical response rates at the end of the treatment were 85%, 87% and 92% respectively for the low, medium or high doses. Bacteriological response rates at the end of the treatment were 87%, 89% and 95% for the ascending doses. The response rate for the 10 patients infected with MRSA who completed treatment was 100%. These response rates compare favorably to previously published results from studies of topical antibiotics, and are substantially higher than the historical placebo response rates of 30-50%. The results showed a trend towards a dose response, and the treatment was well-tolerated.

The data from this trial is undergoing further analysis and will be submitted to an appropriate scientific conference for presentation.

“This clinical trial is a significant validation of our Aganocide® platform technology, which holds the promise for producing a range of safe, broad-spectrum anti-infectives that would be unlikely to cause drug resistance,” said CEO Ron Najafi, Ph.D. “As resistance to antibiotics becomes a critical public health issue, NovaBay intends to aggressively pursue the development of our non-antibiotic anti-infectives as a first-line treatment for a range of topical infections.”

This double-blind, randomized, dose-ranging study examined the safety and clinical efficacy of NVC-422 for the topical treatment of patients with impetigo due to Staphylococci, including those patients with drug-resistant strains of bacteria called methicillin-resistant Staphylococcus aureus or MRSA, as well as patients with infections due to Group A beta-hemolytic streptococci (also known as Streptococcus pyogenes). The trial was conducted at two experienced clinical centers in the Dominican Republic. Patients were treated with low, medium or high doses of NVC-422 gel three times a day for seven days. Clinical response and bacteriological efficacy were evaluated after one week of treatment and during a follow-up visit one week later. Clinical response was evaluated using the Skin Infection Rating Scale (SIRS), a widely used numerical scale.

“The results of this trial are very encouraging for the medical community. If NVC-422 were approved, physicians would potentially have a weapon against superficial skin infections caused by MRSA,” said Dr. Richard Odom, former president of the American Academy of Dermatology and former chair and current professor of clinical dermatology at UCSF. “As importantly, we in the medical profession would not have to worry about whether the infection was resistant or not, allowing us to prescribe one treatment without the cost or time involved in conducting cultures and lab tests to determine the causative strain of infection.”

NovaBay’s Aganocide compounds are proprietary, synthetic N-chlorinated, antimicrobial molecules specifically designed to mimic how the body’s own white blood cells fight infection, making them unlikely to cause resistance. In preclinical testing, NovaBay’s Aganocide compounds have shown to be highly effective against bacteria, including drug-resistant strains, viruses and fungi.

Based on the encouraging results of this trial, NovaBay intends to present its development plans for NVC-422 for the treatment of impetigo to the U.S. Food and Drug Administration. NovaBay also plans to evaluate this drug for the treatment of additional superficial skin and skin structure infections, including atopic dermatoses, secondarily infected lesions and simple abscesses, which represent large market opportunities. Uncomplicated skin infections account for almost 200 million physician visits in the United States annually, with treatment costs estimated to be in excess of $350 million each year.

Conference Call Scheduled
Members of NovaBay’s management team will host a conference call to discuss results of the trial on Wednesday, July 21, at 11 a.m. EDT (8 a.m. PDT), To join the audio conference and participate in the question and answer session, please call
888-632-5950 (outside the U.S., 713-481-1320). Participants should dial into the call approximately 5-10 minutes prior to the conference call.

Live audio of the conference call will be webcast simultaneously over the internet. Please click on the following link or paste it into your browser:http://viavid.net/dce.aspx?sid=00007838

This event is optimized for MS Windows Media Player version 9. To download go to: http://www.microsoft.com/windows/windowsmedia/download

A replay of the webcast will be available shortly after the call and may be accessed at www.novabaypharma.com
About Impetigo
Impetigo usually starts when Staphylococcus aureus or Streptococcus pyogenes bacteria enter a small break in the skin, such as a cut, scratch or insect bite. Symptoms begin with reddened blisters or pimple-like sores on the face, arms and legs, with clear or purulent discharge containing the infectious organisms. The incidence of MRSA-related skin infections, including impetigo, is rising, and these infections can be difficult to treat. Impetigo can spread from person to person over several days through direct contact with the sores or by sharing towels, clothing, or utensils that come in contact with the drainage from the sores. Impetigo is primarily treated with topical antibiotic ointments, or a combination of topical and oral antibiotics when topical treatments fail or when there are larger areas of infection. Although highly contagious, impetigo is an acute, self-limiting infection that usually clears within two to three weeks.

About Aganocides
NovaBay’s Aganocide compounds are novel, synthetic N-chlorinated antimicrobial molecules specifically designed and developed to mimic the body’s natural defense against infection. The Aganocide compounds maintain biological activities while demonstrating improved stability over the naturally occurring N-chlorinated antimicrobial molecules. In preclinical testing, NovaBay’s Aganocide compounds have been shown to be highly effective against bacteria, including some multi-drug resistant strains (such as MRSA), viruses and fungi. NovaBay’s Aganocide compounds have the potential to deliver the same or better efficacy than antibiotics, and to address the growing problem of antibiotic resistance by employing a novel mechanism of action.

About NovaBay Pharmaceuticals, Inc.
NovaBay Pharmaceuticals is a clinical stage biotechnology 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 Aganocide compounds 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 Aganocide compounds in acne, impetigo and other dermatological indications. For more information on NovaBay, visit:www.novabaypharma.com

Cautionary Information Regarding Forward-Looking Statements
The statements in this press release of NovaBay’s expectations (i) regarding the potential for NovaBay’s Aganocide platform technology, including to produce a range of safe, broad-spectrum anti-infectives that would be unlikely to cause drug resistance, (ii) that NovaBay intends to aggressively pursue the development of its non-antibiotic anti-infectives as a first-line treatment for a range of infections for which antibiotics are losing their effectiveness, (iii) that NovaBay intends to discuss with the U.S. Food and Drug Administration the most appropriate regulatory pathway and (iv) that it may evaluate its product candidate for the treatment of additional superficial skin and skin structure infections, are forward-looking statements. The words holds promise, would, intends, may, potential are intended to identify these statements as forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these forward-looking statements. Such risks and uncertainties include the risk that regulatory approvals or requirements may prevent NovaBay from being able to commercialize its Aganocide compounds. Other risks relating to NovaBay and its 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 Quarterly Report on Form 10-Q for the period ended March 31, 2010, under the caption “Risk Factors” in Item 1A of Part II of that report, filed with the Securities and Exchange Commission on May 12, 2010. 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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