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The drug industry and the weapons industry are comparable on many fronts. Heavily regulated, lots of lobbying and special interests involved, the military-industrial complex and the pharma-industrial complex are remarkably similar, and of course big pharma is right behind defense in the amount of money spent annually.

But there's another parallel that needs mentioning, and that is the arms race. Bigger and better weapons inspire bigger and better defenses, which inspire even bigger and better weapons in a positive feedback loop until you end up off the coast of Cuba in a missile crisis, so cross your fingers.

In the pharmaceutical arms race, take an everyday disease like impetigo, a bacterial skin infection caused by staph. Back in the old days your kid would come home from school with sores, you'd pat them dry and keep them clean, and eventually the immune system would fight off the infection. But then someone decided it would be a good idea to use antibiotics and start a biological arms race. So impetigo decided it would be a good idea to mutate, and now 20,000 people die each year from MRSA (methicillin-resistant staph) according to the CDC. So now we have no choice. We have to fight back hard.

GlaxoSmithKline (GSK) developed a new weapon on 2007 called Altabax, which attacks the bacteria's ability to synthesize proteins. It has been proven effective against some forms of MRSA, but not all of them, or we wouldn't have 20,000 Americans dying every year. Plus, the danger of any antibiotic treatment that attacks only one bacterial function (in this case protein synthesis) invites the danger of further mutation and resistance leading to the possibility of the drug's eventual obsolescence.

In 2009, Theravance (THRX) one-upped Glaxo with a drug called Vibativ. This one attacks MRSA impetigo at two points - cell wall and cell membrane function - instead of Altabax's singular protein attack. Better, yes, but MRSA continues to be a lethal problem.

The real answer may lie with a tiny company called NovaBay (NBY). Their anti-impetigo drug is called NVC-422 or AgaDerm (I would have gone with "Impetigone"). It is currently enrolling its first patients in a Phase IIb trial that will encompass 300 patients in 4 countries.

NVC-422 is the equivalent of non-conventional warfare against these staph infections. It functions completely differently than antibiotics as a class in that it attacks many different targets in one shot, and is designed to mimic the way the immune system attacks bacteria. Previous trials have shown a 100% response rate for treating MRSA impetigo.

The risks with NBY are more associated with their drug itself rather than company-related fiscal issues at this point. NovaBay is a development stage microcap and so they are always struggling with cash flow, but their partnership with Galderma, a private venture between Nestle and L'Oreal, has guaranteed them cash as long as they keep hitting milestones. Most recently, they bagged $2.6 million from Galderma for reaching Phase IIb, which equals 24% of their gross profit for 2011. Their balance sheet is manageable for development stage with assets more than doubling liabilities, so the real risks are the unseen and essentially not seeable with AgaDerm.

It is useless to guess what could go wrong with a drug so new in its class that few people understand, but it could always happen. We all remember the Accutane and fen-phen fiascos, which is reason enough to maintain cautious optimism despite the promising results so far. But with any luck, those 20,000 claimed by this disease will go down to zero.

Source: NovaBay Goes Where No Biotech Has Gone Before In Medical Arms Race