NovaBay Pharmaceuticals Signs Option Agreement with Virbac Animal Health for Aganocide Compounds

By March 20, 2012

NovaBay Pharmaceuticals, Inc. (NYSE Amex:NBY), a clinical-stage biotechnology company today announced that it has entered into a feasibility and option agreement with Virbac Animal Health for the development and potential commercialization of Aganocides for a number of veterinary uses. NovaBay is developing its first-in-class, non-antibiotic, anti-infective Aganocide® compounds for the topical treatment and prevention of a wide variety of bacterial, viral and fungal infections.

Under the terms of the agreement, NovaBay will receive an upfront payment plus additional support for research and development. Virbac will conduct veterinary studies using NovaBay’s Aganocide compounds in order to assess feasibility for treating several veterinary indications.

Virbac will have the option to license exclusive worldwide rights to market Aganocides for one or more of these indications. If exercised, NovaBay may receive additional payments, which include an exercise fee as well as development and pre-commercial milestones for a line of veterinary products. NovaBay will also receive royalties on sales of any successfully commercialized Aganocide products to arise from this agreement.

NovaBay is developing its proprietary Aganocide compounds to address the significant unmet medical need in the global anti-infective market. These novel, synthetic molecules have demonstrated broad antimicrobial activity against highly drug-resistant organisms, without promoting further resistance. The Company’s lead compound NVC-422 is in advanced Phase 2 clinical development in the areas of ophthalmology, dermatology, and urology.

About NovaBay Pharmaceuticals, Inc.
Going Beyond Antibiotics

NovaBay Pharmaceuticals is an advanced 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 synthetic molecules with a broad spectrum of activity that have been awarded extensive patent coverage. 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 uniquely 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, the leading dermatology company in the world, to develop a gel formulation of NVC-422 for treatment of highly contagious skin infection, impetigo. Current product offerings give rise to resistance and not effective against MRSA. A Phase 2b 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. The Company expects to launch a global Phase 2b clinical study in this indication in the second quarter of 2012.

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. The Company reported positive data from Part A of this study and expects to announce top-line results from Part B in the second quarter of 2012.

For additional information, visit:www.novabaypharma.com

About Virbac Animal Health
Virbac [EPA: VIRP] is the one of the largest veterinary pharmaceutical company in the world and is the first independent company worldwide dedicated exclusively to animal health. Founded in 1968 and headquartered in Carros, France, Virbac develops, manufactures and distributes a wide range of vaccines and medicines for the prevention and treatment of common pathologies in both companion and food-producing animals. With an operating presence on every continent and in more than 100 countries worldwide, Virbac offers a comprehensive range of products and services intended for veterinarians, farmers and animal owners.

For more information about Virbac Animal Health and the company’s products, please visit www.virbac.com

Cautionary Information Regarding Forward-Looking Statements
This release contains forward-looking statements, which are based upon management’s current expectations, assumptions, estimates, projections and beliefs. The statements in this press release including, but not limited to, statements regarding NovaBay’s expectations on the benefits from its relationship with Virbac; NovaBay’s plans and expectations regarding ongoing and future clinical trials, the timing of commencement and receiving results of clinical trials, the building of its own commercial organization with respect to NeutroPhase, as well as other statements that relate to future events or results 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: the risk that negative results of the feasibility studies of Virbac could preclude Virbac from exercising its option to license exclusive worldwide rights for the development and potential commercialization of Aganocides for veterinary use; the risk that negative results from development programs could preclude Galderma from providing additional funding to NovaBay; the risk of unexpected delays in the regulatory process may delay the commencement or completion of clinical trials; inherent risks and uncertainties relating to difficulties or delays in conducting clinical trials; the inherent uncertainty of patent protection for the company’s intellectual property or trade secrets; 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 7, 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.

Investors:
NovaBay Pharmaceuticals Contacts
Thomas J. Paulson  
Chief Financial Officer
510-899-8809
Contact Thomas Paulson
Investors and Media:
The Ruth Group

Joshua Drumm, PhD (Investors)
(646) 536-7006
jdrumm@theruthgroup.com

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

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