Letter to NovaBay Shareholders

By July 10, 2014

NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company focusing on non-antibiotic anti-infectives, announced today the distribution of a letter from Ron Najafi, the Company’s Chairman, Chief Executive Officer, to its stockholders. A downloadable version of this letter may be obtained by visiting the CEO Blog on the NovaBay website (www.novabay.com/blog).

Dear Shareholders:

The purpose of this letter is to provide a brief update on some important upcoming milestones.

As we recently reported, enrollment in our BAYnovation clinical trial for viral conjunctivitis has been completed and we are in the process of accumulating the data from U.S. and international sites. We anticipate reporting top-line results mid-August.

This global multi-centered, randomized clinical study was conducted in the United States, India, Sri Lanka, and Brazil. Fifty-four clinical investigators participated in the study, including 18 in the US, 19 in India, 6 in Sri Lanka and 11 in Brazil. BAYnovation was designed to evaluate the efficacy of NovaBay’s Auriclosene Ophthalmic Solution in the treatment of adenoviral infection, specifically for accelerated clearing the “red eye”. While clearing of “red eye” is the primary efficacy measure, there are a number of valuable and important secondary measures that will allow us to evaluate the ability to expand our ultimate label claims. These include: clearing of virus from the eye; clearing of blurred vision; reduction in the spread of infection from one eye to the other; prevention of and/or reduction in the severity of subepithelial infiltrates (or “SEI’s”) post infection.

We are happy to announce that three of our FDA cleared products have now entered into the commercialization stage:

NovaBay i-Lid™ Cleanser was introduced at the 2014 American Society of Cataract and Refractive Surgery and highlighted at the American Optometric Association meeting recently by Dr. Sindt. We expect i-Lid Cleanser to be a major commercial opportunity. Over the next several weeks we plan to announce our commercialization plan. I encourage everyone to stay tuned for our upcoming announcements.

To advance the international commercial launch of NeutroPhase®, we have been working closely with our partner in China and Southeast Asia, Pioneer Pharma, to secure final regulatory clearance from the China Food and Drug Administration, which we expect to receive in the next few months. This clearance will trigger the commercial launch of NeutroPhase in mainland China.

Recently introduced at The Aesthetics Meeting in April 2014, our CelleRx™ product for the aesthetic surgery and dermatology markets is expected to be a popular post-procedure product in those markets. More information on this product will be forthcoming at the end of 2014.

Last year we reported positive, statistically-significant results from our first UCBE Phase 2 study (UROvation) of Auriclosene Irrigation Solution to prevent blockage and encrustation in indwelling long-term urinary catheters. We are now in the final stages of initiating a second Phase 2 study to demonstrate superior efficacy of auriclosene compared to its vehicle. We anticipate announcing the first patient enrollment in this study this quarter. Enrollment is expected at 25 investigational sites in the United States. We intend to enroll 135 patients into either active or vehicle treatment arms. If this study is successful, it is possible that this study could serve as one of the two pivotal studies typically required for FDA approval.

Lastly, working with our partner Galderma, we are using our formulation development expertise and knowledge gained from previous clinical studies to create an optimized topical formulation of auriclosene for skin infections such as impetigo. So far, in vitro data suggest that we have developed several improved formulations with significantly longer durations of action. The best performing new formulation will be evaluated in a clinical study in healthy volunteers, which we expect to initiate before the end of the calendar year. If this study is supportive of further development, we will take the new improved formulation into a Phase 2 efficacy study for impetigo.

I look forward to providing further updates as we continue to advance our programs.

Ron Najafi, Ph.D.
Chairman & CEO
NovaBay Pharmaceuticals, Inc.

This letter to the stockholders of NovaBay Pharmaceuticals, Inc. contains forward looking statements that are subject to risks and uncertainties. These statements include statements regarding our expectations regarding timing of reporting clinical findings, commercial prospects, receipt of regulatory clearances, and expected regulatory developments. Words such as “anticipate,” “expect,” “will be,” “will,” and other words and variations of these words that imply future events and opinions, identify these statements as forward looking statements. Actual results may differ materially from those implied by the forward looking statements due to a number of risks and uncertainties, including: the regulatory approval process is subject to unexpected delays or changes; and demand for NovaBay’s products may be different than NovaBay expects. Other risks relating to NovaBay and its products, including risks that could cause results to differ materially from those projected in the forward-looking statements in this letter, are detailed in NovaBay’s latest 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 letter 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.