NovaBay Pharmaceuticals Provides Third Quarter 2012 Financial Results

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| Source: NovaBay Pharmaceuticals, Inc.

Enrollment Continues to Advance in Three Phase 2b Clinical Trials for Conjunctivitis, Impetigo and UCBE

Recent Highlights

  • Global Phase 2b clinical study of lead Aganocide® NVC-422 for impetigo initiated triggering $2.6 million from partner Galderma
  • Enrollment continues in conjunctivitis trial at 15 U.S. clinical sites; Brazil and India segments scheduled to start enrollment by year end
  • Expanded commercial partnership with partner Pioneer Pharma for NeutroPhase® in Southeast Asian markets
  • Presented case study of NeutroPhase® for treatment of necrotizing fasciitis (flesh-eating bacteria) at the 2012 Fall Symposium on Advanced Wound Care
  • Received additional FDA 510(k) clearance for NeutroPhase® under widened indications and for administration by spray pump

EMERYVILLE, Calif., Nov. 1, 2012 (GLOBE NEWSWIRE) -- NovaBay Pharmaceuticals, Inc. (NYSE MKT:NBY), a biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with first-in-class compounds such as its proprietary Aganocides®, today reported third quarter financial results for the period ended September 30, 2012.

Dr. Ron Najafi, Chairman and CEO, remarked, "Thanks in large part to the groundwork we have been laying over the past few years, we are now involved in three ongoing Phase 2b trials studying our lead Aganocide® compound, NVC-422. We are pleased with the progress being made in each of our areas of focus for NVC-422: dermatology, ophthalmology, and urology. Results are anticipated for each of these programs in 2013. Further, the additional FDA 510(k) clearance for our wound care product, NeutroPhase®, gives surgeons greater flexibility in the management of graft and donor-site surgical procedures."

Dr. Najafi concluded, "Given the recent influx of capital, NovaBay was cash flow positive for the third quarter. We will continue to prudently deploy our resources to fund our ongoing Phase 2b trials."

Third Quarter Financial Results

As of September 30, 2012, the Company's cash, cash equivalents and short-term investments totaled $11.9 million, compared to $14.1 million at the end of 2011 and $10.4 million as of June 30, 2012. This increase in cash on a sequential quarter basis was primarily attributable to the $2.6 million payment received from NovaBay's partner Galderma S.A. It was partially offset by the Company's two ongoing Phase 2b trials, for conjunctivitis and urinary catheter blockage and encrustation (UCBE), respectively, and by continued support for Galderma's Phase 2b impetigo trial.

NovaBay's license and collaboration revenue for the three and nine months ended September 30, 2012 was $3.6 million and $5.8 million, respectively, compared to $2.8 million and $9.8 million in the corresponding periods in 2011. The increase in the quarter was primarily a result of the payment from Galderma. The decrease in the nine months revenue can be attributed to semi-annual support payments and the termination payment the Company received in 2011 from former partner Alcon.

Research and development expenses increased by 24% to $2.5 million for the three months ended September 30, 2012, and decreased by 7% to $7.2 million for the nine months ended September 30, 2012, compared with the same periods in 2011. The quarterly increase was mainly attributable to the increase in clinical activities as the Company continued its adenoviral conjunctivitis and UCBE trials and provided support for the impetigo trial. The year-ago periods were affected by the termination of the research activities related to Alcon in 2011.

NovaBay expects to incur increasing research and development expenses in 2012 and in subsequent years as it continues to advance its clinical programs in ophthalmology and urology.

General and administrative expenses for the three and nine months ended September 30, 2012 were $1.2 million and $4.1 million, respectively, compared to $1.1 million and $3.9 million in the corresponding periods in 2011.

Net income for the three months ended September 30, 2012 was $80,000, compared to a net income of $106,000 for the same period in 2011. Net loss for the nine months ended September 30, 2012, was $4.7 million, compared to $1.5 million for the same period in 2011. This change was primarily a result of the license and collaboration revenue increase noted above. The 2011 period was affected by the Company's July 2011 financing and the reduction in research and development expenses resulting from the termination of the Alcon agreement in 2011.

2012 Q3 Highlights

About NovaBay Pharmaceuticals, Inc.

Going Beyond Antibiotics

NovaBay Pharmaceuticals is a biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with its two distinct categories of compounds, Aganocides® and NeutroPhase® Skin and Wound Cleanser. The Company's four core business units, DermaBay, UroBay, EyeBay and MediBay, are developing treatments that tackle infections in the dermatology, urology, ophthalmology, and wound care areas.

Aganocide® Compounds

NovaBay's first-in-class Aganocide compounds, led by NVC-422, are patented, topical antimicrobials with a broad spectrum of activity against bacteria, viruses and fungi. Mimicking the mechanism of action that human white blood cells use against infections, Aganocides are not subject to bacterial or fungal resistance, which has been demonstrated in in-vitro and in-vivo studies. Having demonstrated clinical efficacy in Phase 2 proof-of-concept clinical studies, NVC-422 is suited to treat and prevent a wide range of local, non-systemic infections. NovaBay's clinical development activities are focused on three disease areas:

  • Dermatology - Partnered with Galderma, a leading dermatology company, to develop a formulation of NVC-422 for treatment of highly contagious skin infection, impetigo, which occurs most commonly in children. Clinical data results from the Phase 2b study expected in mid-2013.
  • Ophthalmology - NovaBay is developing an eye drop formulation of NVC-422 for treating adenoviral conjunctivitis, a highly contagious viral eye infection for which there is no approved acute treatment. Enrollment into a global Phase 2b clinical study has begun, and clinical data results are expected in the second half of 2013.
  • Urology – NovaBay's urinary catheter irrigation solution containing NVC-422 is currently in a Phase 2b study, 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 the Phase 2a study and is evaluating the effect of an alternate more potent formulation of NVC-422 in Phase 2b. Results are expected in the first half of 2013.

NeutroPhase®

NeutroPhase is the only pure hypochlorous acid (HOCI) skin and wound cleanser cleared by the U.S. Food and Drug Administration (FDA) to target the six-million-patient U.S. market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers. The saline-based solution is the only wound cleanser on the market to include a stabilized, pure form of HOCl shown in studies to kill bacteria in solution, including flesh-eating bacteria. For additional information, visit: www.neutrophase.com.

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 expected timing of enrollment and commencement of clinical trials, expected timing of announcement of results of clinical studies, and 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 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.

Stay informed on NovaBay's progress:

NOVABAY PHARMACEUTICALS, INC.
(A development stage company)
 CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  September 30, December 31,
  2012 2011
(in thousands, except per share data) (unaudited) (Note 2)
ASSETS    
Current assets:    
Cash and cash equivalents  $ 7,219  $ 8,428
Short-term investments  4,663  5,710
Accounts receivable  126  3
Prepaid expenses and other current assets  508  417
Total current assets  12,516  14,558
Property and equipment, net  1,037  1,270
Other assets  117  135
TOTAL ASSETS  $ 13,670  $ 15,963
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Liabilities:    
Current liabilities:    
Accounts payable  $ 1,051  $ 472
Accrued liabilities  1,572  1,061
Deferred revenue  1,409  1,305
Total current liabilities  4,032   2,838
Deferred revenues - non-current  208  945
Deferred rent  67  115
Warrant liability  1,919  2,721
Total liabilities  6,226  6,619
     
Stockholders' Equity:    
   —   — 
Common stock, $0.01 par value; 65,000 shares authorized at
September 30, 2012 and December 31, 2011; 29,747 and 28,587
 issued and outstanding at September 30, 2012 and December 31,
2011, respectively
 297  286
     
Additional paid-in capital  45,137  42,386
Accumulated other comprehensive loss  (29)  (44)
Accumulated deficit during development stage  (37,961)  (33,284)
Total stockholders' equity   7,444  9,344
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $ 13,670  $ 15,963
     
 
NOVABAY PHARMACEUTICALS, INC.
(A development stage company)
 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
 
 
Three Months Ended
September 30,

Nine Months Ended
September 30,
Cumulative Period
from July 1, 2002
(inception) to
(in thousands, except per share data) 2012 2011 2012 2011 September 30, 2012
Revenue:          
License and collaboration revenue  $ 3,617  $ 2,762  $ 5,794  $ 9,768  $ 56,393
Other revenues  25  10  40  21  66
Total revenue  3,642  2,772  5,834  9,789  56,459
           
Operating expenses:          
Research and development  2,514  2,023  7,156  7,712  58,027
General and administrative  1,234  1,097  4,145   3,930  37,799
Total operating expenses  3,748  3,120  11,301  11,642  95,826
Operating income (loss)  (106)  (348)   (5,467)  (1,853)  (39,367)
           
Non-cash loss (gain) on change in fair value of warrants  209  453  802  453  70
Other income (expense), net  (17)  6  5  (36)  1,426
           
Income (loss) before income taxes  86  111  (4,660)   (1,436)  (37,871)
Provision for income taxes  (6)  (5)  (17)  (21)  (90)
Net income (loss)  80  106  (4,677)  (1,457)  (37,961)
           
Other comprehensive gain (loss):          
Change in unrealized gains (losses) on available-for-sale securities  33  (5)   15  5  (29)
Total comprehensive income (loss)  $ 113  $ 101  $ (4,662)  $ (1,452)  $ (37,990)
           
Net loss per share:          
Basic   $ 0.00  $ 0.00  $ (0.16)  $ (0.06)  
Diluted  $ 0.00  $ 0.00  $ (0.16)  $ (0.06)  
Shares used in per share calculations:          
Basic   28,861  27,902  28,702  24,953  
Diluted  29,284  27,902  28,702  24,953  
Investors:
NovaBay Pharmaceuticals, Inc.
Thomas J. Paulson Chief Financial Officer
510-899-8809


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(646) 536-7006