NovaBay Pharmaceuticals Provides Fourth Quarter And Full Year 2010 Financial Results And Business Unit Updates

NovaBay is focusing its technology on four distinct therapeutic areas:  dermatology, ophthalmology, urology and hospital infections.  In dermatology, the focus is on developing NVC-422 gel for impetigo and acne.  NovaBay has the distinct advantage of being partnered with Galderma, the leading dermatology company in the world.  In ophthalmology, the goal is to develop an eye drop for conjunctivitis with Alcon, the world's leading ophthalmology company.  In urology, NovaBay aims to reduce the incidence of urinary catheter blockage and encrustation (UCBE) and the associated urinary tract infections with an irrigation solution containing NVC-422.  In hospital infection, NovaBay is targeting the six-million-patient market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers with its proprietary antimicrobial solution, NeutroPhase ^®, which has received two 510K clearances from the Food and Drug Administration. Visit www.novabaypharma.com .

Forward-Looking Statements

This release contains forward-looking statements, which are based upon management's current expectations, assumptions, estimates, projections and beliefs. Statements regarding NovaBay's expectations including, but not limited to, (i) any potential plans for future clinical development of its Aganocide compounds and of bringing products to market including the expected timing or the results of the Phase 2b impetigo clinical trial and Phase 2 conjunctivitis trial; (ii) that Alcon and NovaBay will announce the results of the viral conjunctivitis clinical trial during the first half of 2011; (iii) the potential that the full data will differ from the interim data,(iv) the potential efficacy of Aganocide & Neutrophase compounds, (v) NovaBay's plan to commercialize Neutrophase in 2011 resulting in its availability to the 6 million patients suffering from diabetic, pressure, and venous stasis ulcers in early 2012 and potential revenue from its sales in 2012.; (vi) that the strategy of multiple product opportunities has the potential to increase NovaBay's probability of success and decrease risk of shareholder investment;  (vii) its cash burn (viii) the development and potential benefits of, and the market opportunities for, NovaBay's product candidates (ix) the potential to deliver the same or better efficacy than antibiotics and to address the growing problem of antibiotic resistance as well as other statements that relate to future events or results, are forward-looking. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to: the risk that NovaBay may incur unexpected charges or need to or determined to engage in research and development not previously planned, which will cause NovaBay's cash burn to be greater than it expects; the risk that negative results from the development programs could preclude Galderma and Alcon from providing additional funding to NovaBay; inherent risks and uncertainties relating to difficulties or delays in conducting clinical trials; the inherent uncertainty of patent protection for the company's intellectual property or trade secrets, risks and uncertainties relating to difficulties or delays in discovery, development, testing, production and marketing of the company's product candidates; unexpected adverse side effects or inadequate therapeutic efficacy of the product candidates; the company's ability to obtain additional financing as necessary; results obtained in animal models may not be obtained in humans; and the risk of unexpected delays in the regulatory process which may delay the commencement or completion of clinical trials. Other risks relating to NovaBay and Aganocide® compounds, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay's Annual Report on Form 10-K for the period ended December 31, 2010, under the caption "Risk Factors" in Item 1A of Part I of that report, filed with the Securities and Exchange Commission on March 10, 2011. The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

NOVABAY PHARMACEUTICALS, INC.
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
	December 31,
	2010	2009
ASSETS
Current assets:
Cash and cash equivalents	$ 11,534	$ 10,992
Short-term investments	1,272	300
Accounts receivable	500	3,750
Prepaid expenses and other current assets	448	564
Total current assets	13,754	15,606
Property and equipment, net	1,588	1,812
Other assets	174	105
TOTAL ASSETS	$ 15,516	$ 17,523
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 406	$ 272
Accrued liabilities	726	1,228
Capital lease obligation	--	7
Equipment loan	106	364
Deferred revenue	1,485	2,167
Total current liabilities	2,723	4,038
Deferred revenue - non-current	2,204	--
Deferred rent	99	--
Equipment loan - non-current	--	106
Deferred tax liability	--	34
Total liabilities	5,026	4,178
Stockholders' Equity:
Preferred stock, $.01 par value; 5,000 shares authorized; none outstanding at December 31, 2010 or 2009	--	--
Common stock, $0.01 par value; 65,000 shares authorized at December 31, 2010 and 2009; 23,392 and 23,254 shares issued and outstanding at December 31, 2010 and 2009, respectively	234	233
Additional paid-in capital	38,469	37,003
Accumulated other comprehensive loss	(14)	--
Accumulated deficit during development stage	(28,199)	(23,891)
Total stockholders' equity	10,490	13,345
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 15,516	$ 17,523

NOVABAY PHARMACEUTICALS, INC.
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
				Cumulative Period
				from July 1, 2002
				(inception) to
	Year Ended December 31,			December 31,
	2010	2009	2008	2010
License and collaboration revenue:	$ 9,754	$ 15,684	$ 6,722	$ 39,606
Operating Expenses:
Research and development	8,616	7,337	9,595	40,960
General and administrative	5,654	5,607	5,636	28,225
Total operating expenses	14,270	12,944	15,231	69,185
Operating income (loss)	(4,516)	2,740	(8,509)	(29,579)
Other income (expense), net	258	(36)	397	1,451
Income (loss) before income taxes	(4,258)	2,704	(8,112)	(28,128)
Income tax provision	(50)	(7)	(2)	(71)
Net income (loss)	$ (4,308)	$ 2,697	$ (8,114)	$ (28,199)
Net income (loss) per share:
Basic	$ (0.18)	$ 0.12	$ (0.38)
Diluted	$ (0.18)	$ 0.12	$ (0.38)
Shares used in computing net income (loss) per share:
Basic	23,326	22,404	21,312
Diluted	23,326	23,115	21,312

CONTACT: Investors:
         NovaBay Pharmaceuticals, Inc.
         Tom Paulson
         Chief Financial Officer
         510-899-8800
         
         Investors and Media:
         The Investor Relations Group
         11 Stone St. 3rd Floor
         New York, NY
         212-825-3210
         IR: Adam Holdsworth
         or
         PR: Laura Colontrelle/Janet Vasquez

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