NovaBay Pharmaceuticals (NYSE: NBY) CEO Interview

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NovaBay Pharmaceuticals
Ron Najafi, Founder, President, and CEO

Ron VV


Corporate Profile:
NovaBay Pharmaceuticals is a clinical stage company developing first-in-class, anti-infective compounds for the treatment and prevention of antibiotic-resistant infections. The company’s Aganocide compounds mimic the body’s immune system, acting rapidly and effectively to defeat multi-drug resistant pathogens without causing resistance. NovaBay’s lead Aganocide compound is in Phase 2 clinical testing for treating Pink Eye, Impetigo and Catheter-Associated Urinary Tract Infection.

The company has significant corporate partnerships with Alcon, the world’s leading ophthalmology company, and Galderma S.A., a global pharmaceutical firm dedicated to dermatology. NovaBay has also retained proprietary early stage programs addressing large markets such as onychomycosis, or nail fungus, and common cold.


WSR: Good day from Wall Street. This is Juan Costello, Senior Analyst with the Wall Street Reporter, and joining us today is Ron Najafi, CEO and Chairman of NovaBay Pharmaceuticals. The company trades on the New York Stock Exchange AMEX. The ticker symbol is NBY, and they are a clinical stage biotechnology company, focused on developing its proprietary and patented, Aganocide. Thanks for joining us today, Ron.

Ron Najafi: Thank you sir for having me.

WSR: Great, anytime. Now, starting off, talk to us about some of your Q1 results. What were some of the drivers?

Ron Najafi: Essentially, we are engaged in four clinical programs right now with our partner and on our own. Let me just start with our programs that we are engaged in. We are developing a product, a solution that would be used as an irrigation solution for patients who are permanently catheterized. These are 770,000 patients in the United States alone, who are permanently catheterized and these patients are at huge risk to catheter-associated urinary tract infection. This is a device related infection. They end up two or three times a year in emergency room with a urinary tract infection. It’s pretty nasty and sometime leads to life-threatening situations. We are in Phase II clinical programs. We’ve just announced some positive results and based on those positive results, we are moving into the clinic, into a Phase IIb trial in, four or five centers I believe, and we are going to be expanding the trial and hoping that we will be able to perform the kind of work we need to lead into a Phase III. As far as our other programs, again, we’ve shown that we have good penetration, nail penetration, for nail fungus infection, we have a proprietary formulation that we are hoping to move into the clinical trials this year. And with our partners, we have, as you know, we have two world-class partners, Alcon and Galderma. Alcon is the largest ophthalmology company in the world and Galderma is the largest dermatology company in the world. We have ongoing programs in eye infection. We are developing an eye drop with Alcon and that’s in the clinic with 250 patients to be enrolled before the end of the year. And with Galderma, we are conducting two programs, one in acne, which everybody is familiar with and the other one is impetigo, which is superficial skin infection in children ages two to ten, and we have roughly a million patients afflicted with impetigo in United States alone and it’s much bigger outside of United States. And we are in Phase II human trials in both studies. We’re near completion of the enrollment of our impetigo studies, which NovaBay is conducting, and we’re very hopeful that the results will be available to our investors sometime in July of this year.

WSR: You also last month announced some new data for your anti-infective compound over at the ARVO meeting. How did that go?

Ron Najafi: We had three very important publications with our partner Alcon and that was — we had actually one poster on the Aganocide jointly with Alcon and then Alcon and University of Pittsburgh, Dr. Jerry Gordon, University of Pittsburgh. Campbell Laboratory had two posters on the Aganocide at the conference. So we were very proud of that and we got good reception as a result of that.

WSR: That’s great. Talk to us about some of the market trends right now, Ron, and how well positioned the company is with some of your technology to capitalize on them?

Ron Najafi: Basically, this morning, May the 13th, I was just handed an article from The Daily Caller; it says congressional briefing offers plan to combat antibiotic resistance. Antibiotic resistance is a major, major problem. It’s like a storm that’s brewing in the Atlantic and it’s coming near our shores. World Health Organization has been talking about it and has been worrying about it. Obviously the 150 antibiotics we have today in the hands of our physicians, each and everyone of them have given rise to resistance at least to one or two bacteria and primarily major pharmaceutical companies have shied away from developing antibiotics because of resistance and because they are acute indications and because once they develop resistance, nobody needs them, nobody buys them. So, this morning’s report is very interesting and it says, listed by the World Health Organization as one of the three greatest threats to human health, antibiotic resistance has become a growing concern to infectious disease experts who fear that we are no more than two generations away from being nearly defenseless against various bacterial infections. That is an ominous warning. This is from World Health Organization, and I highly suggest you and your audience to take a look at this article, it was on the Daily Caller, it’s a “Congressional briefing offers plan to combat antibiotic resistance”. So what are we doing about it? We are developing products primarily that will have an opportunity to meet the antibiotic performance, meet or beat the antibiotic performance and do not give rise to resistance. That is the promise of NovaBay and we are making good progress. So in our impetigo study that we are conducting today in Dominican Republic along with our partner Galderma, we’ve had patients who’ve had MRSA. These are kids with MRSA. And we are hopeful that our compound will be very effective against those patients with MRSA. Our compounds had been very effective in the lab. We’ve shown that they do not give rise to resistance, resistance is not expected vis-a-vis the mechanism of action of these compounds. So our goal is to have products that do not give rise to resistance, that we could replace the antibiotics that are currently being used for these indications. For example, if your kid ends up with impetigo today, doctors immediately prescribe Bactroban, which is a GlaxoSmithKline product, and Bactroban has resulted in significant rise in the resistant bacteria and resistant staph in the hospitals and elsewhere. And we hope to be able to contribute to reducing this antibiotic resistance problem. So that’s really our — that’s how we’re — that’s why we are in business. We want to develop products that do not give rise to resistance. In urinary tract infection, same problem. In eye infection, same problem. In acne, similar issues. So that’s the promise and that’s the goal of NovaBay. That’s our mission, to be recognized as a company that has developed products that do not give rise to resistance.

WSR: Anything else that you want to share with your investor audience on why you feel that NovaBay Pharmaceuticals is unique from some of the other players in the sector?

Ron Najafi: I think how we distinguish ourselves is, we are developing first-in-class anti-infectives. These are derivatives of chlorotaurine. Our patents go to 2026 and potentially beyond. Our compounds are not expected to develop resistance based on their mechanism of action and based on very established criteria used to see whether they do give rise to resistance or not. We have rich pipeline of clinical programs in the clinic, in human trials, in Phase II, and we’re involved with two major partners, Alcon and Galderma. We are well funded and we’re going after very large established markets and I think we are well poised to really significantly capture some of the markets I just mentioned.

WSR: Walk us through your background and experience, Ron, and that of some the key management team over at NBY.

Ron Najafi: Okay. I am the Founder and President and CEO of NovaBay. The company was founded ten years ago by me. My background, I am a synthetic organic chemist. I am a chemist by training. And I’ve had an entrepreneurial flair. I’ve also founded an environmental company shortly after I left the pharmaceutical industry. My background, went to University of San Francisco, went to UC Davis, University of Pittsburgh, and I have a PhD in chemistry. I joined Sigma-Aldrich Corporation in Wisconsin, and worked in the lab and in the pilot plants and then I was recruited to work for Rhone Poulenc Rorer, another pharmaceutical company in the Philadelphia area, which is now called sanofi-aventis and also Applied Biosystems in Foster City, where I was selected as the Scientist of the Year in 1996. My senior management team are extremely experienced pharmaceutical development guys. Behzad Khosrovi is — he is the VP of Product Development and our Chief Alliance Officer. He’s been with the company since 2003. Mark Anderson is our Chief Scientific Officer, formerly with Pfizer and Myriad Genetics. Roy Wu is our Head of Business Development, formerly with Genelabs and Syntex. And Tom Paulson is our CFO, formerly with Avigen and Neurogen and he is a veteran of pharmaceutical industry. And our Chief Medical Officer is Ken Krantz, and he is a veteran of industry; he’s done many INDs and NDAs, new drug applications. On the Board, since the very beginning of the company, I’ve had the honor of having Paul Freiman as one of our senior board members. Paul was the former CEO of Syntex Pharmaceutical, the inventor of birth control pills, you may recall. And also just last year we had the honor of having Harry Hixson, former President of Amgen joining our Board and we have a number of other Board members who are very experienced in pharmaceutical and other businesses who are on the Board of NovaBay.

WSR: Yes, it truly sounds like a pretty well rounded team. As you guys look out into the near horizon, what are some of the goals and milestones that you hope to accomplish over the next 12 months?

Ron Najafi: Our goal is to reach Phase III in our catheter-associated UTI study and also with Galderma, our partner, move some of our projects forward into Phase III programs. With Alcon, the same. Our eventual goal and my goal is to develop a sales force, a small sales force that we could potentially put around our catheter-associated UTI program and move that forward. I believe that’s going to be a very nice market for NovaBay to develop and we are going to be the best sales person for that product, and our goal is to really save patients’ lives in that area. Some of these patients really are waiting. There are no other products that could do what we can do; so I use the words patients are waiting. And we hope to really achieve an outstanding results, financial results as a result of getting those products to the market.

WSR: In terms of investors and the investment community, Ron, do you believe right now that they understand your story and your company’s upside potential?

Ron Najafi: We are trying to get the word out. We are a small company. We are roughly 50 people at NovaBay. So, we are very much focused on the business itself and making sure we get the products that we are working on to the marketplace. And obviously, one of our goals is — in 2010, is to get a lot of publications out to really let the world know what NovaBay is doing and how we plan to really contribute to our community and to the health of our planet and our nation, and produce good return on the investments of our investors.

WSR: So, with that in mind, what do you think that investors are missing from your story, which if they better understood would result in a higher valuation for the NBY stock?

Ron Najafi: I think they should understand that antibiotics and anti-infectives in general have a much lower hurdle in terms of development, cost and time than other therapeutic areas. For example, when you take a molecule into the lab, if it doesn’t kill the bacteria or virus or fungi, you eliminate that molecule from your — in your screening versus cardiovascular, Alzheimer’s, which are extremely time consuming and extremely difficult to know if you got something that works or doesn’t work. And then once you take these compounds into the clinic, the Phase I human safety of these compounds are essentially very important. So we’ve passed the Phase I stage in ophthalmology in the hands of Alcon, in dermatology in the hands NovaBay associated UTI. So, I believe much of the risk has already been eliminated. So I think that’s very important for investors to understand that we have a much lower risk than say Alzheimer and cardiovascular or cancer companies.

WSR: Once again, joining us today is Ron Najafi, CEO – President, Founder, and Chairman of NovaBay Pharmaceuticals, which trades on the New York Stock Exchange AMEX. Ticker symbol is NBY, currently trading at $2.44 a share with a market cap of $57.11 million. Before we conclude, Ron, why do you believe investors should consider NovaBay Pharmaceuticals today?

Ron Najafi: Because I think we are extremely at a discounted price and we have a huge number of potential, huge number of upside, multiple programs. Historically, it’s been shown that one out of three anti-infectives that make it into Phase I become a commercial product and if one of our programs — one out of five or six programs we have undergoing succeeds, this company is going to be incredibly successful, and I’m very optimistic that several of our programs will succeed in the near future.

WSR: We certainly do look forward to that as well as continue to track the company’s upcoming growth and future progress and I’d like to thank you for taking the time to join us today, Ron, and to update our investors on NovaBay. It’s always good to have you guys on.

Ron Najafi: My pleasure, and anytime.

WSR: Thank you.

Ron Najafi: Thank you.

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