Novabay Pharmaceuticals Boost Potential

| About: NovaBay Pharmaceuticals, (NBY)

Novabay Pharmaceuticals has good news that could boost its value.

Novabay Pharmaceuticals (AMEX:NBY) announced that it received a $2.6M clinical milestone payment from Galderma S.A., its development and marketing partner with Novabay's NVC-422 anti-infective drug. Galderma's involvement is that it has plans to utilize the drug for treatment of topical treatment of impetigo, a highly contagious skin infection that can become deadly when caused by methicillin-resistant Staphylococcus aureus (MRSA).

While the funding is a positive news indicator for Novabay, the bigger picture here is that a disturbing trend is apparent with MRSA. There are higher rates of MRSA being reported, with an increasing resistance to other topical treatments, therefore positioning NVC-422 to be a widely deployed, significant remedy from which Novabay can benefit handsomely in the not too distant future. Comparison to Glaxosmithkline's Bactroban ointment and cream (with revenues reportedly to be over $1 billion) are valid. The milestone payment and the level of clinical activity represent validity, and likely a step closer to commercialization, as an application to the FDA perhaps will be forthcoming.

It is well understood that, for small biotech firms, the massive expense and development costs of clinical trial and the FDA approval process creates a challenge of keeping the lights burning along the way. A very positive factor with the Galderma and Novabay licensing agreement, is that Galderma is responsible for the ongoing clinical development of NVC-422 for impetigo and other indications. This is a significant load off of Novabay in terms of financial resource and responsibility. If NVC-422 makes it through commercialization, NovaBay likely will still benefit via royalty payments of anywhere in the 10 to 30% range. At either end of that spectrum, a solid revenue stream will be apparent.

On the marketing rights spectrum, Galderma reportedly holds most marketing rights to the compound in major worldwide markets, but NovaBay has retained rights in several Asian markets. Stock wise, Novabay is relatively an inexpensive buy in at $1.22 at this point and with the aforementioned incremental benefits surfacing, an increase in value looks probable.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.