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Shares of NovaBay Pharmaceuticals (NYSEMKT:NBY) looked like quite the attractive speculative buy just days ago, when company shares saw the stock trade for right around ninety cents. However, a rebound over the past couple of trading days on increased volume indicates that investors may still consider NovaBay as an undervalued growth story, based mainly on the potential of the company's potential blockbuster technology.

As the broad markets rebounded heavily on Wednesday as concerns of an economic catastrophe in Europe eased (funny how opinions change so remarkably from day to day), NBY also rebounded. The stock opened the day significantly higher - in terms of percentages - than the previous day's close, with volume that was roughly four times the daily norm barely a couple of hours into the trading day.

Wednesday's spike was accompanied by another encouraging news release regarding NVC-422, NovaBay's Aganocide compound that is currently being tested in multiple avenues as a potential alternative to antibiotics, against which large portions of the patient population have developed resistance.

The release concerned an End-of-Phase IIa meeting with the FDA regarding the clinical development of NVC-422 in treating impetigo, a highly contagious skin infection that affects millions of children and adults worldwide. During the FDA meeting, according to Wednesday's PR, "the FDA provided guidance related to the proposed study protocol and statistical analysis plan, as well as the overall development plan. This valuable guidance is being incorporated into the Phase 2b protocol and analysis plan thereby enhancing the design of study."

NovaBay has already landed a big partner in Galderma S.A. for the development of NVC-422 in impetigo, and Phase IIb implementation plans are now being put in place following the positive FDA guidance. In emphasizing the potential of NVC-422 in the impetigo market, Dr. Ron Najafi, Chairman and Chief Executive Officer of NovaBay, stated the following:

"Impetigo is a major worldwide market, with over thirteen million prescriptions written annually for traditional antibiotics in developed countries alone. We expect our proprietary topical formulation of NVC-422 to advance the treatment of impetigo as it has the potential to clear infections, including those caused by methicillin-resistant Staphylococcus aureus, MRSA, without giving rise to resistance. Our market research has clearly shown that physicians urgently need an improved product to fight infections with the properties of NVC-422."

Given that NovaBay is advancing pipeline development on multiple fronts in markets at least as lucrative as the impetigo market, it's understandable why NBY could be considered a solid speculative play, especially while trading for a market cap that might not even be worth the value of the company's patent portfolio alone.

NovaBay also has catalysts pending on its other pipeline fronts. Results from Part B of a phase II study for urinary catheter blockage and encrustation (UCBE) and associated urinary tract infections are expected later this year, following the announcement of positive Part A results, and top line data from a Phase II adenoviral conjunctivitis trial are due early next year. It's wholly possible that NovaBay could have three ongoing Phase III trials at some point next year, and should that be the case, then a much higher share price would be justified.

The early spike on Wednesday morning is also an indication that investors have itchy trigger fingers regarding NBY. If no one is paying attention to a company, then spikes rarely occur immediately following the issuance of a PR. The quick spike could be an indicator that some investors are expecting more quantitative news over the short haul. Also on the horizon is an expected launch of NeutroPhase for the treatment of chronic wounds, the company's first FDA-cleared product.

If the current positive trends stand in terms of pipeline results, then it may not be too long from now when investors consider these current prices as the bottom floor of a solid growth story. Those that bought in for right around ninety cents have already experienced the potential of NBY to move quickly, when it moves. Keep an eye on this one. If the upcoming catalysts turn out to the positive, then it could be a quick ride higher.

Disclosure: Long NBY.

Source: NovaBay's Mid-Week Move: A Hint Of More To Come?