Clinical stage biotech NovaBay Pharmaceuticals, Inc (NBY) has been busy. Measurable progress is apparent. The progress extends across their pipeline. The company has Phase 2b clinical trials underway for conjunctivitis, urinary catheter blockage and encrustation (UCBE). Their partner, Galderma, is expected to begin their global Phase 2b for impetigo by the end of the third quarter, 2012. The company began to enroll patients in their Phase 2b study for adenoviral conjunctivitis during the quarter and they expect that enrollment will continue to grow through completion in the second quarter of 2013. Company officials met with the FDA and Galderma for Phase 2a, the impetigo program, and reports that they are on track to commence our Phase 2b in the third quarter 2012. In addition, they expanded their global Aganocide(R) patent with seven new patents.
As the company, stakeholders, and investors look ahead to 2013; clinical trials present catalysts that all are looking for.
Well documented and proven by big and small pharma firms alike, is that positive clinical trial results are not guaranteed. While not a guarantee; the trials, data, and results are indeed catalyst points that represent possible opportunities. Good news and the ability to move forward is, of course, what all involved are striving for. Enrollment issues, delays, bad trial results, and additional FDA information requests all represent challenges but are manageable if the company can keep the lights on and adapt accordingly. The firms that take great precautions to mitigate these risks are often worth getting involved in. This may just be the case with Novabay.
While some investors understand the volatility associated with biotech stocks, less experienced ones get caught off guard. Drama is not new to investing in this industry. Investors who think long, and perhaps have a dose of patience in their DNA, can do well by paying attention to catalysts, management's mitigation efforts, and the overall company progress. Calling attention to trial catalysts and seeking a strategy accordingly while trying to capitalize on the run-up to an FDA approval is one idea.
There are multiple opportunities that present themselves for Novabay as indicated by their activities. The entry point is low with a low stock price currently trading at $1.16. As these events develop, an interested party can also digest their financial results to get an indication of how management has been doing.
The company reported second quarter financial results for the period ended June 30, 2012. Cash and equivalents totaled $10.4 million. This represents a decreased amount when compared to end of year 2011 but was expected. Its attributable to its Phase 2b conjunctivitis trial, and to support provided for its partner Galderma regarding the Phase 2b impetigo trial. Cash was also allocated for the clinical trial for NVC-422 in urinary catheter blockage and encrustation (UCBE).
The company's license and collaboration revenue for the three and six months ended June 30, 2012, were $856,000 and $2.2 million, respectively. Compared to $4.5 million and $7.0 million in the corresponding periods in 2011. Company officials attributed the decrease to termination of an agreement with former partner Alcon, for which NovaBay received semi-annual support payments and a $2.0 million termination payment in 2011.
Research and development expenses decreased 15% to $2.4 million for the three months ended June 30, 2012, and decreased by 19% to $4.6 million for the six months ended June 30, 2012. This compares with the same periods in 2011. This decrease was attributed to the termination of the research activities related to Alcon in 2011.
General and administrative expenses reported flat for the three and six months ended June 30, 2012, at $1.4 million and $2.9 million, as expected. Compared to the same periods in 2011.
Net loss for the three months ended June 30, 2012 was $2.2 million. Compared to a net income of $425,000 for the same period in 2011. Net loss for the six months ended June 30, 2012 was $4.8 million. Compared to $1.6 million for the same period in 2011.
Note: Attributed to license and collaboration revenue decrease noted above, offset to some degree by a noncash gain on warrants issued as part of our July 2011 financing and the reduction in research and development expenses resulting from the termination of the Alcon agreement in 2011.
Conclusion: Smallcap Novabay is a company to keep an eye on and benefit from in both the short and long term arenas.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
