NovaBay Pharmaceuticals, Inc. : NovaBay Prepares to Launch Global Phase 2b Ophthalmic Study of NVC-422

Selects Top Contract Research Organizations to Manage Clinical Trial

Study to Enroll Patients with Confirmed Adenoviral Conjunctivitis in India, Brazil and U.S.

EMERYVILLE, CA - January 23, 2012 - NovaBay® Pharmaceuticals, Inc. (NYSE AMEX:NBY), a clinical-stage biotechnology company developing its first-in-class, anti-infective Aganocide® compounds for the local non-systemic treatment and prevention of infections, today announced that it has selected multiple organizations to manage the Company's Phase 2b clinical study of NVC-422 for the treatment of adenoviral conjunctivitis, a form of "pink eye." This global study is anticipated to enroll up to 450 patients with confirmed adenoviral conjunctivitis at investigational sites in India, Brazil, and the United States.

"We are pleased to be working with Quintiles in India, Chiltern International in Brazil, and Symbio, LLC in the U.S. for our next ophthalmic clinical study" said Dr. David Stroman, Senior Vice President, Ophthalmic Drug Development at NovaBay. "I have managed successful global clinical trials in the past and have confidence these CROs are the optimal choice for our upcoming trial. We are very encouraged by the clinical findings from the previous NVC-422 conjunctivitis study. These data from our first safety and efficacy study demonstrated clinically meaningful resolution of signs and symptoms associated with adenoviral conjunctivitis. Based on these findings, we have chosen appropriate clinical endpoints for the primary efficacy measures in our Phase 2b study. We believe this strategy will support the design of future registration studies."

"Globally, adenoviral conjunctivitis remains the greatest unmet medical need across all ocular infections," said Dr. Ron Najafi, Chairman and Chief Executive Officer of NovaBay. "In the previous study, our lead Aganocide compound, NVC-422, was effective against multiple adenoviral serotypes, particularly those that cause epidemic keratoconjunctivitis, or EKC, which affects the cornea and can be vision-threatening. We believe NVC-422 could represent a significant advancement in the treatment of adenoviral conjunctivitis, particularly in treating EKC, which represents an estimated 50% of the adenoviral conjunctivitis infections, and an even higher percentage during epidemic outbreaks."

NovaBay's Phase 2b clinical trial of NVC-422 for the treatment of adenoviral conjunctivitis is expected to begin enrolling patients in the second quarter of 2012. Pending successful completion of the Phase 2b study, NovaBay may seek a partner for Phase 3 registration studies through commercialization.

About Adenoviral Conjunctivitis ("Pink Eye")
Adenoviral conjunctivitis, a highly contagious ocular infection, is an unmet medical need, with no effective treatment. Conjunctivitis is an inflammation of the conjunctiva, a thin, transparent layer covering the surface of the inner eyelid and the front of the eye. It affects people of all ages. Acute conjunctivitis from various etiologies is characterized by common symptoms and signs including a red eye, discharge, eyelash matting or crusting, foreign body sensation, and tearing. Adenovirus is a very robust virus that can survive outside the body on hard surfaces and has been cultured from such surfaces up to 7 weeks after an infection. Approximately 45% of people in a patient's close surroundings, e.g., family members, will become infected. Approximately 3 million school days are lost annually as a result of acute conjunctivitis. Although exact numbers are difficult to determine, estimates suggest the number of cases of ocular adenoviral infections may be as high as 5-10 million per year in the United States.

About Epidemic Keratoconjunctivitis (EKC)
Epidemic keratoconjunctivitis (EKC) is a serious and contagious eye infection affecting both the conjunctiva and, more problematically, the cornea (the transparent front part of the eye that covers the iris, pupil, and anterior chamber). EKC infections are commonly associated with adenoviruses types 8, 19 and 37. EKC is characterized by conjunctivitis, acute onset of watering, redness, foreign body sensation, blurred vision and severe pain. Patients affected by EKC are often advised by physicians not to attend work or school anywhere from 1-2 weeks leading to loss of work time and absenteeism. In aggressive cases of EKC, corneal scarring due to subepithelial infiltrates (SEIs) and conjunctival scarring due to membrane or pseudo membrane can be seen. During the acute phase, which persists for approximately two to three weeks, viruses are present and replicating. In the typical case, first one eye is infected, after which the infection spreads to the other eye within two to three days. Both eyes are affected in 60% of cases. The infection in the first eye is typically the more serious. In approximately 20-50% of patients, corneal opacities are developed due to SEIs, resulting in deteriorating vision that remains for weeks and months, and in rare cases even years. Since the disease is often epidemic in nature, it is called epidemic keratoconjunctivitis.

About NovaBay Pharmaceuticals, Inc.
NovaBay Pharmaceuticals is a clinical-stage biotechnology company focused on developing its proprietary and patented Aganocide compounds. These are novel, synthetic anti-infectives with activity against bacteria, fungi and viruses, and are being developed to treat and prevent a wide range of local, non-systemic infections with a low likelihood of developing bacterial resistance.

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 formulation for the highly contagious skin infection, impetigo. NovaBay has the 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. 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 infections, NovaBay is targeting the six-million-patient market of chronic non-healing wounds, such as pressure, venous stasis and diabetic ulcers with its proprietary anti-infective solution, NeutroPhase®, which has received two 510K clearances from the Food and Drug Administration. For additional information, visit: www.novabaypharma.com.

Cautionary Information Regarding Forward-Looking Statements

The statements in this press release regarding NovaBay's expectation on the potential efficacy of Aganocide compounds and any potential plans including timelines for future clinical development of NVC-422 for adenoviral conjunctivitis are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward- looking statements reflect the views of the management of NovaBay as of the date of this press release and are based on assumptions and subject to significant risks and uncertainties (many of which are outside of NovaBay's control), including: NVC-422 may not prove to be effective in treating adenoviral conjunctivitis; unexpected adverse side effects or inadequate therapeutic efficacy of NVC-422 may inhibit it from becoming a treatment for conjunctivitis; and the risk that the FDA or other regulatory agencies may delay clinical trials, or require additional studies or procedures, which could delay or prevent the development of NVC-422 compounds for adenoviral conjunctivitis. These and other risks relating to the development of Aganocide compounds are detailed in NovaBay's Quarterly Report on Form 10-Q, under the caption "Risk Factors" in Item 1A of Part II of that report, which was filed with the Securities and Exchange Commission on November 7, 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.

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