NovaBay Pharmaceuticals Inc., a clinical-stage biotechnology company has signed a feasibility and option agreement with Virbac Animal Health for the development and potential commercialization of Aganocides for a number of veterinary uses. NovaBay is developing its first-in-class, non-antibiotic, anti-infective Aganocide compounds for the topical treatment and prevention of a wide variety of bacterial, viral and fungal infections.

Under the terms of the agreement, NovaBay will receive an upfront payment plus additional support for research and development. Virbac will conduct veterinary studies using NovaBay’s Aganocide compounds in order to assess feasibility for treating several veterinary indications.

Virbac will have the option to license exclusive worldwide rights to market Aganocides for one or more of these indications. If exercised, NovaBay may receive additional payments, which include an exercise fee as well as development and pre-commercial milestones for a line of veterinary products. NovaBay will also receive royalties on sales of any successfully commercialized Aganocide products to arise from this agreement.

NovaBay is developing its proprietary Aganocide compounds to address the significant unmet medical need in the global anti-infective market. These novel, synthetic molecules have demonstrated broad antimicrobial activity against highly drug-resistant organisms, without promoting further resistance.  The Company’s lead compound NVC-422 is in advanced phase II clinical development in the areas of ophthalmology, dermatology, and urology.

NovaBay Pharmaceuticals is an advanced clinical-stage biotechnology company focused on addressing the large unmet therapeutic needs of the global anti-infective market with its two distinct categories of products.

NovaBay’s first-in-class Aganocide compounds, led by NVC-422, are synthetic molecules with a broad spectrum of activity that have been awarded extensive patent coverage. Mimicking the mechanism of action that human white blood cells use against infections, Aganocides possess a reduced likelihood that bacteria or viruses will be able to develop resistance, which is critical for advanced anti-infectives.  Having demonstrated therapeutic proof-of-concept in three phase II clinical studies, these compounds are uniquely suited to treat and prevent a wide range of local, non-systemic infections.

NovaBay is currently concentrated on three large therapeutic markets:

Dermatology - Partnered with Galderma, the leading dermatology company in the world, to develop a gel formulation of NVC-422 for treatment of highly contagious skin infection, impetigo. Current product offerings give rise to resistance and not effective against MRSA. A phase II b clinical study is planned for 2012.

Ophthalmology - NovaBay is developing an eye drop formulation of NVC-422 for treating viral conjunctivitis, for which there is currently no FDA-approved treatment. The Company expects to launch a global phase II b clinical study in this indication in the second quarter of 2012.

Urology – NovaBay’s irrigation solution containing NVC-422 is currently in phase II clinical studies, 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 Part A of this study and expects to announce top-line results from Part B in the second quarter of 2012.

Virbac is the one of the largest veterinary pharmaceutical company in the world and is the first independent company worldwide dedicated exclusively to animal health. Virbac develops, manufactures and distributes a wide range of vaccines and medicines for the prevention and treatment of common pathologies in both companion and food-producing animals.