NovaBay Announces Positive Results From Phase IIa Study of AgaNase For Nasal Decolonization of Staph including MRSA

By May 19, 2008

NovaBay Pharmaceuticals, Inc. (AMEX & TSX: NBY) a clinical stage biopharmaceutical company, announced today top line results from a Phase IIa exploratory clinical trial for NVC-422, the company’s lead non-antibiotic antimicrobial Aganocide® compound, which is being developed for the prevention and treatment of infections. In this study, AgaNase™ (NVC-422 formulated in a prototype nasal spray), was tested to decolonize Staphylococcus aureus from the lower nasal passages. Three cohorts of ten volunteer subjects each were randomly assigned to placebo or one of two different strengths of NVC-422 applied by nasal spray. All subjects had been prior carriers of Staph. aureus in screenings done on two occasions, separated by at least a week, prior to commencement of the study. However there were differing levels of carriage upon assessment at the beginning of the study, suggesting that a proportion of the subjects may have been intermittent rather than persistent carriers. Eight hours after a treatment with a solution containing 0.6% NVC-422, eighty-eight percent of evaluable subjects who entered the trial with their nasal passages colonized with Staph. aureus were successfully decolonized. Subjects treated with a 0.3% NVC-422 solution had similar but somewhat lesser decolonization. Thirty-three percent of evaluable subjects treated with a placebo solution were decolonized. Having examined these results, the company will be moving forward with continuing the evaluation of the effect of frequency of dosing and of different dosage forms for on-going development.

In order to expand knowledge of the safety of the compound in humans, subjects continued to receive treatment twice a day for five days. The treatments were well tolerated at both strengths applied.

Dr. Ron Najafi, CEO of NovaBay commented “Nasal colonization with Staph. Aureus including MRSA has been shown to be a major risk factor for surgical site and renal dialysis infections. We now have confidence that the outstanding in-vitro performance of NVC-422 should be repeatable in humans in the treatment or prevention of a large number of different infections. If we succeed with our future trials, we hope to significantly reduce the threat of infections that are becoming resistant to antibiotics. With hospitals under pressure by Medicare & CDC to reduce infections and with threat of bacterial resistance to the currently available antibiotics used for nasal decolonization, there is an urgent need for a product like AgaNase that is unlikely to contribute to further resistance.”

About Nasal Colonization with Staph. aureus

Approximately thirty to forty percent of the population carry Staph. aureus in their anterior nares (the lower part of the nostrils) on either a persistent or intermittent basis. It is likely that anyone that is a Staph. aureus carrier can become a carrier of MRSA, the drug resistant form of Staph. aureus. It is desirable to decolonize all forms of Staph. aureus from the nasal passages prior to surgery so as to reduce the risk of surgical site infection. Eighty percent of those who become infected during surgery with Staph. aureus have been shown to have had the same strain of Staph. in their nasal passages prior to surgery. Surgical site infections account for twenty-two percent of the infections in hospital and result in prolonged duration of hospital stay, resulting in added costs and, in some cases deaths. While the use of currently available antibiotic nasal cream can achieve decolonization, it takes five days. In addition, the increased use of this antibiotic is producing accelerating resistance.

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 on-going laboratory studies, 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 company’s 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 the naturally occurring immune molecule, N,N-dichlorotaurine. 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 also has rights to use NVC-422 in the treatment of sinus infections as well as the development of contact lens solutions.

Webcast Presentation Today

Jack O’Reilly, NovaBay Senior Vice President of Corporate Development will present at the Rodman & Renshaw 5th Annual Global Healthcare Conference in Monte Carlo, Monaco today at 10:55 AM EDT (4:55 PM Central European Summer Time). Mr. O’Reilly will provide a corporate overview and clinical update on the company. Members of the investment community, the media, and other interested parties can access a live audio webcast of NovaBay’s presentation by visiting the following hyperlink:

About NovaBay Pharmaceuticals, Inc.

NovaBay Pharmaceuticals, Inc. is a clinical stage biopharmaceutical company focused on developing innovative 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™, 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, which are based upon management’s current expectations, assumptions, estimates, projections and beliefs. 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.