Patient Enrollment Begins in Exploratory Phase II Trial of Novabay’s Lead Aganocide Compound, NVC-422, in Catherer-Associated Urinary Tract Infections

By November 18, 2008

NovaBay Pharmaceuticals, Inc. (AMEX: NBY, www.novabaypharma.com), a clinical stage biopharmaceutical company developing non-antibiotic, anti-infective compounds for the treatment or prevention of a wide range of bacterial, fungal and viral infections, announced today that it has commenced patient enrollment in a Phase II Exploratory Study of hospitalized patients who are catheterized and have bacteriuria. This Phase II study is to explore the feasibility of developing NVC-422 as a product candidate to treat or prevent catheter-associated urinary tract infections (CAUTI).

In this open-label study, designed to evaluate the activity of NVC-422 in the bladders of patients with bacteriuria, a solution of NVC-422 will be instilled into the catheter and bladder to determine whether NVC-422 can impact pre-existing bacteriuria. All patients will have levels of bacteria in their bladders that exceed 105 CFU per mL. The study is initially exploring the impact of single doses and may subsequently explore the use of multiple doses. Up to 20 patients will be enrolled.

According to the Annals of Internal Medicine (January 2006), indwelling urinary catheters, which are used in 15% to 25% of short-term care patients during their hospitalization, confer a predisposition to bacteriuria. Catheter-associated urinary tract infection (UTI) is the most common type of hospital-acquired infection, accounting for approximately 40% of such infections and for most of the 900,000 patients with nosocomial bacteriuria in U.S. hospitals each year. Adverse consequences include local and systemic morbidity, secondary bloodstream infection, death, a reservoir of drug-resistant microorganisms, and increased health care costs.

“After the successful completion of our Phase I study that demonstrated the safety and tolerability of an NVC-422 solution in the bladder, we are now beginning the exploration of its activity in patients. We expect to learn from this early Phase II study whether NVC-422 may be used to reduce bacteriuria which is seen to be a precursor to symptomatic Urinary Tract Infections that can be very serious for the patient and can significantly increase the costs of hospitalization,” said Dr. Colin Scott, M.D., NovaBay’s Vice President of Clinical Research and Development. He added that “We expect that there will be several small scale Phase II trials to test different modalities of treating or preventing CAUTI with NVC-422”.

About CAUTI

Catheter-associated urinary tract infections are the most common type of infection found in hospitals and long-term care institutions, with some reports putting the number as high as 1,000,000 cases per year. CAUTI accounts for 40% of all nosocomial (hospital) infections. When a urinary tract infection develops, there is the possibility of it progressing to become a serious and even life-threatening bloodstream infection. The use of urinary catheters is a routine part of the management of patients in hospitals and often of persons in long-term care facilities. However, the catheter provides a means of access for bacteria to the bladder. They rapidly form bacterial biofilm on the catheter and cause bacteriuria, which is a condition in which bacteria grow within the bladder without giving rise to symptoms, but may lead to serious medical complications. Typically, approximately 5% of catheterized patients per day develop bacteriuria. After a patient has been catheterized for a month, it is virtually certain that the patient will have bacteriuria. If the patient progresses to a urinary tract infection, physicians are faced with an increasing problem of resistant bacteria. According to the Centers for Disease Control, several recent studies have shown that prophylactic systemic antibiotics delay the emergence of catheter-related infection, but this protective effect was transient and was associated with the selection of antibiotic-resistant microorganisms.

About the Aganocide® Compounds

The Aganocide® compounds are proprietary novel molecules developed by NovaBay and are designed to mimic the same antimicrobial action as the small molecules produced naturally by white blood cells. The naturally produced molecules are highly effective against all bacteria, viruses and fungi, but are produced and used by the body “on demand” and do not have the chemical stability to permit their use as pharmaceutical products. In laboratory testing, the Aganocide® molecules maintain the efficacy and safety of the natural molecules but are stable, enabling their potential use as potent antimicrobial products.

About NVC-422

NVC-422 is the lead Aganocide® compound and has been shown to be safe at intended doses in a number of potential areas of use. It is N,N-dichlorodimethyltaurine, a close but stable analog of N,N-dichlorotaurine, the natural molecule produced by the human immune system,. In addition to development being conducted by NovaBay in nasal decolonization, urinary tract infections and dermatology, this compound is also being developed by Alcon, Inc. under a collaborative research and development agreement, for infections of the eye and ear. Alcon has also rights to use NVC-422 in the treatment of sinus infections.

About NovaBay Pharmaceuticals, Inc.

NovaBay Pharmaceuticals, Inc. is a biopharmaceutical company focused on developing innovative non-antibiotic, antimicrobial 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®, Aganocide®, AgaNase™, AgaDerm™, 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 within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements about NovaBay’s Aganocide® compounds’ safety, efficacy and treatment capabilities on patients with urinary tract infections and the ability of Aganocide® compounds to become a new type of drug for comprehensive treatment or prevention of a wide range of infections in hospital and non-hospital environments. These statements are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These forward-looking statements can often be identified by words such as “expects”, “intends”, “plans”, “believes”, “estimates”, “may”, “will”, and similar expressions, and variations or negatives of these words. 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.

Contact:

Investors:
NovaBay Pharmaceuticals Contacts
Theresa Granados
510-899-8870
Head of Investor Relations
tgranados@novabaypharma.com

or

The Investor Relations Group Investor Relations:
Adam Holdsworth / Rachel Colgate / Erica Ruderman 212-825-3210

or Media Relations:

Janet Vasquez / Laura Colontrelle 212-825-3210

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