NovaBay Pharmaceuticals Reports 2014 Fourth Quarter and Full Year Financial Results and Provides Business Update

By March 26, 2015

NovaBay® Pharmaceuticals, Inc. (NYSE MKT: NBY), a biopharmaceutical company commercializing and developing topical non-antibiotic antimicrobial products for the global eye care market, today reported financial results for the three and 12 months ended December 31, 2014, and provided a business update.

Fourth Quarter 2014 and Recent Commercial Highlights

• Increased the size of the sales force promoting Avenova™ in early 2015 to 35 medical sales representatives from 15 representatives previously.  Avenova is now promoted to ophthalmologists and optometrists in all major markets across the U.S.
• Signed nationwide distribution agreements for Avenova with McKesson Corporation and Cardinal Health.  Avenova is now available to be ordered through 90% of the 67,000 retail pharmacies across the U.S.
• Announced partner China Pioneer Pharma’s launch of NeutroPhase Skin and Wound Cleanser® in China beginning March 1, 2015.
• Received regulatory clearance for NovaBay’s NeutroPhase from Taiwan’s Food and Drug Administration with anticipated product launch in Taiwan in the first half of 2015 by China Pioneer Pharma.
• Signed exclusive distribution agreements with the following:
o Biopharm Group to market NeutroPhase in Egypt, Saudi Arabia, Algeria, Sudan and Libya;
o Alpha Pharma LLC to market NeutroPhase in the Ukraine;
o Sarmedic Ltd to market Avenova in Israel.

“We are making progress on the three-part strategy we outlined early this year to achieve near-term revenue growth and, ultimately, drive NovaBay to profitability,” said Ron Najafi, Ph.D., Chairman and CEO of NovaBay.

“At the core of our strategy is the successful U.S. commercialization of our Avenova daily-use prescription eye care product.  We are making progress on our sales and marketing plan to make this product available to the 30 million Americans who suffer from blepharitis and dry eye syndrome.  I’m pleased to report that Avenova sales in February were double January sales, and that sales in March are well outpacing those in February.”

In early 2015, NovaBay added 20 medical sales representatives, all with experience promoting ophthalmic products, thereby expanding its salesforce to 35 representatives.  The company’s commercial organization is under the leadership of Vice President Glenn Moro, who has 27 years of marketing eye care products at Alcon.

“Patients with blepharitis have few alternatives with currently marketed products offering little to no benefit,” added Dr. Najafi.  “Avenova is bringing relief to some patients in as little as two weeks.  We are getting support from early-adopter ophthalmologists and optometrists who are incorporating Avenova into their practices.  We are working to raise awareness with additional eye care specialists.  This includes incorporating testimonials from key opinion leaders in advertising currently appearing in trade journals, and featuring Avenova at industry conferences throughout the year.

“We also are making progress on the second component of our plan of introducing innovative eye care products to leverage our salesforce.  We expect to introduce a cream version of Avenova for overnight use and are developing additional products that we plan to launch in the coming 12 to 18 months.

“Lastly, we are seeking to reduce expenses and add additional sources of revenue by licensing or selling select assets from non-core businesses,” added Dr. Najafi.  “That said, we remain fully committed to our partnerships in wound care.  Early this year, we received an order for 200,000 units of our NeutroPhase product to our partner China Pioneer Pharma, and are in the process of shipping the product to China.”

NeutroPhase is also marketed by Principle Business Enterprise in the U.S., Shin-Poong Pharma in South Korea and Biopharm Group in the Middle East.  Earlier this month, NovaBay announced an exclusive agreement Alpha Pharma LLC for the Ukraine.  NovaBay also has partnerships in animal care with Virbac and in dermatology with Galderma.

Fourth Quarter 2014 Financial Results

NovaBay reported sales revenue of $385,000 for the quarter ended December 31, 2014, with gross profit of $89,000.  License, collaboration, distribution and other revenue for the fourth quarter of 2014 was $106,000.

Net loss for the fourth quarter of 2014 was $4.5 million, or $0.09 per share, compared with a net loss for the fourth quarter of 2013 of $4.1 million, or $0.10 per share.  The higher net loss in the 2014 quarter was due to spending on sales and marketing activities for Avenova, offset partially by lower spending on research and development. Research and development expenses for the fourth quarter of 2014 of $2.4 million decreased from $4.1 million for the fourth quarter of 2013.  Sales, general and administrative expenses for fourth quarter of 2014 of $2.7 million increased from $1.2 million for the fourth quarter of 2013.

Full Year 2014 Financial Results

NovaBay sales revenue for 2014 of $684,000 increased from $223,000 in 2013 primarily due to the introduction of Avenova in August.  Gross profit on product sales was $198,000 for 2014.  License, collaboration, distribution and other revenue for 2014 was $370,000, compared to $3.3 million for 2013.  The decrease in 2014 was related to the full amortization of the upfront payments from Galderma in 2013 and the end of the FTE funding from the same contract.

Net loss for 2014 was $15.2 million, or $0.31 per share, compared with a net loss for 2013 of $16.0 million, or $0.42 per share. The lower net loss in 2014 was due mainly to decreased spending on research and development activities in 2014, partially offset by collaboration revenue from Galderma recorded in 2013 and spending on sales and marketing activities for Avenova beginning in August 2014.

Research and development expenses for 2014 of $9.5 million decreased from $12.5 million for 2013 due to a decrease in clinical activities as NovaBay completed its adenoviral conjunctivitis trial in March 2014 and its urology (UCBE) trial in the second half of 2013.

Sales, general and administrative expenses for 2014 were $7.9 million compared with $6.3 million for 2013. The increase in 2014 was due to sales and marketing activities for Avenova, which began in August 2014, offset partially by lower travel and entertainment expenses in 2014.

Cash, cash equivalents and short-term investments were $5.4 million as of December 31, 2014, compared with $13.1 million as of December 31, 2013. The decrease in cash balance was attributable primarily to expenses associated with multiple clinical trials, offset partially by $6.0 million in net proceeds from a March 2014 equity financing.  In March 2015, NovaBay received net proceeds of $4.6 million from an equity financing.

Conference Call
NovaBay management will host an investment community conference today, March 26, 2015 beginning at 4:30 p.m. Eastern time, 1:30 p.m. Pacific time, to discuss financial results, provide a company update and answer questions.  Shareholders and other interested parties may participate in the conference call by dialing 866-880-4999 from within the U.S. or 702-495-1913 from outside the U.S.  A live webcast of the call will be available at https://novabay.com/investors/events and will be archived for 90 days.

A replay of the call will be available for 48 hours, beginning two hours after call completion, by dialing 855-859-2056 from within the U.S. or 404-537-3406 from outside the U.S. and entering the conference identification number 2379523.

About NovaBay Pharmaceuticals, Inc.: Going Beyond Antibiotics®
NovaBay Pharmaceuticals is a biopharmaceutical company focusing commercializing and developing its non-antibiotic anti-infective products to address the unmet therapeutic needs of the global, topical anti-infective market with its two distinct product categories: the NEUTROX™ Family of Products, including AVENOVA™ for the eye care market and NEUTROPHASE® for wound care, which was initially cleared by FDA, and CELLERX™ for the dermatology market; and its AGANOCIDE® compounds, led by AURICLOSENE™.

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 regulatory approvals for our products, the anticipated market acceptance of our products, and the company’s expected future financial results. 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 development, clinical trial, 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. Other risks relating to NovaBay and 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 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 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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From the Company
Thomas J. Paulson  
Chief Financial Officer
510-899-8809
Contact Thomas Paulson

Investor Contact
LHA
Jody Cain
310-691-7100
jcain@lhai.com

For NovaBay Avenova purchasing information, please contact:
Toll Free: 1-800-890-0329
www.avenova.com

NOVABAY PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS
(in thousands)
2014-03-NBY-CONSOLIDATED-BALANCE-SHEETS

NOVABAY PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except per share data)
2014-03-NBY-CONSOLIDATED-STATEMENTS-OF-OPERATIONS-AND-COMPREHENSIVE-LOSS

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