NovaBay Pharmaceuticals Inc (NBY) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NovaBay Pharmaceuticals business update and 2012 outlook conference call. My name is Ed and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct question-and-answer session towards the end of this conference. ( Operator Instructions) As a reminder, this call is being recorded for replay purposes. At this time I'd like to turn the call over to Mr. Tom Paulson, Chief Financial Officer of NovaBay Pharmaceuticals. Please proceed, sir.

Thank you. Good morning or afternoon, as the case may be to everybody. Thanks for joining the call. With me today are Dr. Ron Najafi, NovaBay's Founder, Chairman, and CEO; Dr. David Stroman, Senior Vice President of Ophthalmic Drug Development; Russell Hoon, our Vice President of Advanced Wound Care; Dr. Behzad Khosrovi, our Senior Vice President of Product Development and Chief Alliance Officer; and Roy Wu, NovaBay's Senior Vice President for business Development. Before we begin, I'd like to review the following Safe Harbor statement.

Our commentary and responses to your questions on this conference call will contain forward-looking statements, including statements relating to our future goals, plans, and objectives. These forward-looking statements are not guarantees of future performance and a variety of factors could cause our actual results to differ materially from the anticipated or expected results expressed in these forward-looking statements. Additional information concerning other factors that could cause actual results to differ materially from those contained in the forward-looking statements is available in the documents that we file from time to time with the SEC, including the Company's most recent quarter report on Form 10-Q for the quarter ended September 30, 2011, which was filed with the SEC on November 7, 2011.

With that, I'd like to turn the call over to Ron.

Thank you, Tom. Hello to everyone on the call and thank you for joining us. Today, I would like to give you an update on accomplishments and progress that NovaBay has made over the last year, and provide guidance on what we see ahead in 2012. Later on the call, I will ask members of NovaBay Management team to comment on their individual areas of responsibility. Before I get started, I would like to remind everyone that NovaBay is perfectly positioned to address the growing crisis of antibiotic resistance, and we are continuing to confirm this in our clinical trials and laboratory studies.

Let me provide you with a brief and important history lesson. How did we cure infection during the 19th century? Of course, we used the homeopathic medicines, teas, potions, et cetera. In some cases, our bodies fought back and patients recovered, and in many cases patients died, hence our shorter life expectancy in the 19th centuries. In the early part of the 20th century, with the invention of sulfur drugs and antibiotics, we now had the opportunity to save millions of lives. The wonder drug penicillin, in fact, saved millions of lives, and hundreds of thousands of lives during World War II alone. But soon, penicillin developed resistance and, of course, researchers went on to develop another 150 antibiotics. I can tell you that bacteria has developed some level of resistance to every one of those 150 antibiotics. Now we are faced with the option of developing another antibiotic, or think beyond antibiotics, and that is what NovaBay is doing.

Over the last 11 years, NovaBay has embarked on the path of discovery and innovation based on a technology that has been around for millions of years, and that has shown to be effective without giving rise to resistance. That technology is molecule-generated by our white blood cells. NovaBay has developed new patented chemical entities that mimic the actual molecules and their mechanism of actions. Resistance to NovaBay technology is futile, and we have show that in many studies. During 2012, we were recognized by Fast Company as one of the top 10 most innovative biotech companies in the United States. We make good on that title with continued progress on our four business units in Ophthalmology, Urology, Dermatology, and Hospital Infection. Let me provide a brief update on our accomplishments, and then provide you with a look ahead on the progress we expect to make in each business segment.

In our urology program, we announced the Interim Phase 2 data, this is back in December of this last year, from our urology program, and demonstrating 80% effectiveness, and we are looking forward to announcing the final results of this study in the second quarter of this year, 2012. With regards to our hospital wound care program, we announced a partnership agreement for NeutroPhase, our non-antibiotic antimicrobial solution, which is the only pure, 97% pure, form of hypochlorous acid, to be marketed with the help of Pioneer Pharma in Shanghai, China and for commercialization in Mainland China. We are proud to tell you that NeutroPhase is now being manufactured in the United states and will be exported worldwide under our brand name, NeutroPhase. In the United States alone, NovaBay and its future partner will be addressing a six-million-patient market suffering from a chronic non-healing wound.

In dermatology, in support of product registration, successfully we concluded safety studies with several hundred healthy volunteers, and we expect our partner Galderma to launch a global Phase 2b for the treatment of impetigo in 2012. Finally, in ophthalmology, we saw encouraging results from our Phase 2 study for NVC-422, for viral -- adenoviral conjunctivitis. We have also recently announced that we have selected very experienced CROs to manage our global Phase 2b study, which we expect to launch in the second quarter of 2012.

On the management side, we have also strengthened NovaBay's Management team to provide additional expertise as we move forward with our program. We've bolstered our NeutroPhase team by naming Russ Hoon, who is sitting here, as Vice President of Advanced Wound Care, and in our Ophthalmology program, we appointed Dr. David Stroman as Head of Opthalmic Drug Development. With Dr. Stroman's leadership, NovaBay has also formed a prestigious Ophthalmology Advisory Board consisting of world-renowned experts in the field. Dave will review the members on the call later. I am very pleased to have Dave, Behz, Tom, Roy, and Russ with us on the call today to talk about the progress and outlook for each of our business segments. Together, we will go into future details about each of our existing programs. We will now go into a review for accomplishment of our four business units, starting with Urology.

In Urology, previously NovaBay announced positive results from our Phase 2a clinical study of its irrigation solution containing NVC-422. The Company's lead Aganocide compounds demonstrate activities against uropathogens that form biofilm or urinary catheters on the urinary catheter surfaces, and cause urinary catheter blockage and encrustation, UCBE for short, due to formation of bladder stone. These results were supported recently by interim data from a Phase 2 clinical study, which demonstrated preliminary proof-of-concept for NVC-422 catheter irrigation solution in preventing UCBE and maintaining catheter patency. Our Aganocide-based irrigation solution is currently the only therapy that has the potential to reduce morbidity and mortality by killing the pathogens responsible for the formation of bladder stone and UCBE.

We are currently in the middle of part two of our Phase 2b study of the NVC-422 solution, and we anticipate results in the second quarter of 2012. In this portion of the study, we are using an enhanced formulation, and we expect this solution could reduce the number of required catheter irrigation from the current standard of care of 14 to 21 treatments per week to only 3 or 2 treatments per week, significantly improving the quality of life for these catheterized patients and their caregivers. It is estimated that there are over 300,000 chronically catheterized patients in the US alone, and NVC-422 catheter irrigation solution may provide significant clinical benefits by reducing the risk for bladder stone and urinary tract infections, as well as improving continence.

NovaBay is proud to have won the first place award for outstanding scientific presentation at the Simon Foundation for Continence conference, demonstrating NovaBay's NVC-422's potential impact on the treatment of urinary continence. We are evaluating our commercial options for this product in the United States, and we will be seeking appropriate partners for commercialization outside of the US.

Now I will hand the call over to Russ Hoon, who will be talking to you about NeutroPhase program.

Thank you, Ron. Good morning to everyone. I am pleased to have a chance to tell you more about the NeutroPhase program. As you likely know, the chronic non-healing wound market is a very promising market opportunity for NovaBay, and NeutroPhase is well-positioned to meet that need. In addition to having two FDA510-K clearances, NeutroPhase will be the only 100% pure hypochlorous acid solution on the market. Those clearances allow us to have a number of possible applications, including diabetic ulcers, venous stasis ulcers, pressure ulcers Stage 1 through 4, and our current marketing strategy is to export globally through licensing the commercial rights for NeutroPhase to pharmaceutical partners worldwide. These partners, of course, would be sales and marketing organizations. We intend to select partners who have optimal infrastructures already in place in order to maximize the commercial potential in each area or territory. Indeed, we have begun to execute that strategy.

Earlier in the quarter, we announced a partnership that Ron referred to with Pioneer Pharma in Shanghai, China to commercialize NeutroPhase in Mainland China. Pioneer Pharma's sales force is over 1000 sales reps. These sales reps have access to 7500 hospitals and 40,000 pharmacies, and our partnership with them is worth up to $1.3 million in pre-commercialization milestones. We are currently exploring additional partnerships in other international territories. I am excited about all of these opportunities for NeutroPhase, and I look forward to continuing the development and the commercialization of this program.

Thank you, Russ, and I'd like to add that Russ comes to us with over 30 years of experience in wound care. You can look him up, he's on LinkedIn. He was the President of Xylos, so a lot of years of experience in wound care. I would now like to turn the call over to Dr. Behz Khosrovi, who will go through our Dermatology program.

Thank you, Ron, and hello, everyone. As was mentioned previously, NovaBay successfully concluded safety studies in 310 healthy volunteers of our dermal preparation of NVC-422 in support of FDA product registration for the treatment of impetigo. Our partner Galzema, the world's leading dermatology company, is currently preparing to initiate a major global clinical study. Galzema is funding all pre-commercialization development activities related to this program. As you know, impetigo is a highly-contagious bacterial skin infection that affects children worldwide. This program remains a top priority for both NovaBay and Galzema. NVC-422's mechanism of action, with its low potential for the development of resistance and its robust activity against antibiotic-resistent antigens, uniquely differentiates it from topical antibiotics. A recent study in emerging infectious diseases shows that common topical antibiotics may promote the drug-resistant forms of Staphylococcus aureus, MRSA, or methicillin-resistant Staphylococcus aureus, which is a common cause of impetigo.

NovaBay's clinical results of NVC-422 published in August of 2011 in the International Journal of Clinical and Experimental Pathology, demonstrated excellent clinical and microbiological cure in this 129-patient study for the treatment of impetigo, with 100%, that's 10 out of 10, response rate for infections caused by MRSA. Our in vitro results also show a significantly reduced risk of promoting drug resistance compared to antibiotics. We are confident that NVC-422 has the potential to become a much-needed alternative to the traditional topical antibiotics that currently address large global markets, and which have a higher likelihood of causing drug resistant bacteria.

Thank you, Behz, and finally, to discuss the Ophthalmology program, I will hand over the call to Dr. Dave Stroman. If you recall, Dave ran the Alcon program for the last five years, was the Head of Anti-infective Ophthalmology at Alcon, and since August, he has joined NovaBay and we are very proud to have him running this program. Dave?

Thank you, Ron. We recently announced encouraging results from the Phase 2a study of NVC-422 solution to treat adnoconjuntivitis, which as you know is a form of pink eye. Globally, adnoconjuntivitis remains the greatest unmet medical need across all ocular infections. In addition to demonstrating activity against multiple adenoviral serial types, NVC-422 demonstrated clinical resolution of signs and symptoms associated with adnoconjuntivitis, including elimination of the redness in the eye and blurred vision. The study also showed that NVC-422 was most active in patients with epidemic keratoconjunctivitis, or EKC for short. EKC is generally caused by serial types 8, 19, and 37 and maybe sight-threatening. Based on these findings, NovaBay has chosen clinical endpoints as the primary efficacy measures in the next global Phase 2b study, which is planned to begin enrollment in second quarter of 2012.

We selected three top-tier CROs in the various countries to manage the clinical trial. Quintiles Research Limited for India, Chiltern International for Brazil, and Symbio in the United States. As Ron mentioned earlier, we have also assembled an Opthalmic Advisory Board composed of experts in the field to support the team as we begin this next study, and as we continue the development of 422 to treat ocular infections. We have been fortunate to be able to attract some key opinion leaders from around the world. Their interest in supporting NovaBay's Opthalmic Drug Development program speaks not only to their desire to have therapy for the most serious illness that they face globally, but also their belief that NovaBay's Aganocide compounds represent a real opportunity for clinical success.

They include several names familiar to ophthalmologists -- Dr. Rubens Belfort from San Paulo, Brazil; Dr. Reza Dana, from Harvard; Dr. Eric Donnenfeld in New York; Dr. Prashant Garg from Hyderbad, India; Dr. Stuart Levy from Boston, Massachusetts, Tufts University; Dr. Steven Lichtenstein, Pediatric Ophthalmologist from Peoria, Illinois; Dr. Kathryn Najafi-Tagol from Marin County in San Francisco; Dr. Robert Sambursky from Sarasota, Florida, who founded and is the CEO of Rapid Pathogen Screening Inc; and Dr. Stephen Wilmarth from Sacramento. In closing, I'd like to say, with the data developed from the previous proof-of-concept study, NVC-422 has the potential to become the first therapy to help millions who suffer from adnoconjuntivitis every year, particularly, the EKC form. We look forward to keeping you updated as the trial progresses.

Thank you, Dave. So to conclude our overview, it's been a good year, with progress being made in each area of our businesses. We expect upcoming clinical and business development milestones to generate additional shareholder value over the coming months and our stronger Management team will build on growing momentum that we have. We look forward to announcing additional partnerships agreements throughout 2012 and beyond.

With that we will be happy to take any questions. Operator, please let's open the line for Q&A.

(Operator Instructions) Yale Jen, NovaBay Pharmaceuticals.

Thanks for providing us this update. Just some brief ones. Let's just start with the deal you have with the Pioneer Pharma in China for the NeutroPhase. Could you give a little bit detail in terms of the timeline, when things may be developed and possible market potential and other colors on that deal.

So, Roy is going to take that question.

Let me address each of the segments of the question. I think you were talking about timelines and also about the process. So, let me address the regulatory process first. As you know in our agreement, NovaBay will be responsible for registering the product in China, and we will be exporting from the US to China as a finished product. The registration process in China requires that we send our finished products to be tested, and it takes approximately four months.

Then the submission will be made to the SFDA, and that submission will be based on our [MAA] approval in the US. We don't expect any additional studies to be conducted in China. The total process typically takes about 18 months. So that's the general process. Once that's done, we will export to China and Pioneer will distribute for the product for us.

What about markets size?

So, for market size, as you know, China is a very big market. The population in China is significant, 1.3 billion, and demographics there, about 10% of the population is over 60 years old. Middle-class population is growing rapidly and some of these diseases, like diabetes, is expanding quite rapidly in China. So, we are entering a very favorable environment in China. We have certain milestones, minimum purchase requirements, in our agreement with Pioneer. However, we haven't disclosed sales forecast and minimum purchases to the public for competitive reasons.

Okay, great, thanks. What about the NeutroPhase development, let's say in the United States and potentially in the rest of the world. Any timeline or any color we can get?

Yale, what I can tell you is, we are talking to potential partners and we are hopeful that we will have a partner in place by the end of 2012 to market NeutroPhase around the United States. What I can tell you is, this product for us is going to be cash-positive from get-go, and we are not planning to put any sales force out on the field selling NeutroPhase. Russ is primarily going to be in charge of making sure that process goes smoothly.

Great. And just two more quick ones. For the UCBE, I know you are going to present Phase II data, second part of Phase II data, in second quarter of this year. Should that be positive? What would be the next step and what may be the timeline for that?

So, our part two of this product, the part two of this trial, is positive, this would be the first time we will have a product that somebody can use twice a week instead of 21 doses for the competing products that are on the market. So, it would be tremendous, and we plan to pursue development of this vigorously to basically commercialization. Our goal right now is to market this product ourselves in the United States and partner outside the US. The timeline, you ask, we hope to begin registration studies sometime next year and hopefully have it on the market soon after that.

And registration of the Phase III study, how big do you anticipate that might be?

We are really looking to get some guidance from the FDA. We hope the regulatory pathway would be a device pathway and it would be a PMA. If we can get the device designation, we think a couple hundred patients will be sufficient.

Last question here is for the conjunctivitis, for the study to be started by Galderma. First of all, is there any more color in terms of when the study might be -- what I mean by that is whether that would be the second half of this year or earlier, and secondly, you mentioned the clinical endpoint, what specific clinical endpoint, to be specific if you have anything?

So you mentioned conjunctivitis and Galderma --

I'm sorry, that's in-house. I apologize

Conjunctivitis is in-house, and Dave is running that trial. The timeline for that is, we are looking to start that program second quarter of this year. On the dermatology program, we are very hopeful that sometime before the first half of the year, Galderma will begin the trial. Of course, as you know, they are in charge of the program, and we just wrapped up a very large safety study associated with registration of the products, so we are very happy that we made it past the very important safety program, that got done. So, we are really hopeful that our partner Galderma will begin the trial within the next few months.

Okay, great, thanks a lot. Congrats on the development.

David Moskowitz, Roth Capital Partners

Just back to the impetigo trial with Galderma, can you give us a sense of when your partner expects to start enrolling patients in the trial?

Behz is going to take that one, David.

I think, again, just to reiterate what Ron just said, at this point, we anticipate it will be about the middle of this year for the actual start of the enrollment. Clearly, this has moved into full development in Galderma. They are in the driver's seat, so they are essentially running the timetable. So, right now we are looking to them to give us the detailed timeline. We at this point are counting on it initiating about the middle of the year.

And approximately how many patients are going to be in that trial? I was a little unclear from the press release. It looked like it was more than 300 or 400?

At this point, it will be at least 300. I think we are in some discussion about the total number that would be needed. This is an ongoing discussion between NovaBay and Galderma, but it will be a minimum of 300.

In terms of the conjunctivitis trial, the viral conjunctivitis for the opthalmology solutions, approximately how many patients are going to be included in that study?

Dave?

We anticipate it will be over 400.

Okay. Very good. I would imagine that in both cases, the impetigo and conjunctivitis, you are talking about placebo-controlled trials. Here's my question, in one or both, could either of these trials actually qualify for registrational studies if they are successful? Is it possible that they can be included in the NDA package or perhaps would allow you guys to only need to run an additional Phase III study in each trial?

Dave, that would be fantastic. If that happens, then we can say we are in Phase III trial. So that's highly possible. We will be having discussions with the agency, but please keep it out of your model. Assume it's not going to happen until it happens.

Okay. So my question is, it is possible and these trials are being run in accordance with what we would expect a pivotal trial should look like?

Absolutely. I think it's very fair to say that in both programs, that the design of these studies has all of the elements of a pivotal study. I frankly believe that the FDA will go along with that.

Okay. Based on that last comments, you guys would be at some level talking to the FDA about whether or not these trials could be regarded as pivotal if successful.

That's correct.

Excellent. And in terms of NeutroPhase, just one follow up question there. Could you give us an indication of what the landscape of potential partners look like? In particular, the type of companies that would be marketing this drug, or this treatment, and the quantity. How many companies are interested or are you far down the road with one particular company?

That's a great question. This product addresses the chronic non-healing wound marketplace, what is traditionally known as advanced wound care. Advanced wound care is a large market. It's well-documented in size and scope, not only in the United States but worldwide. Naturally, we are talking to all of the obvious suspects.

number one, so all of these, there's a number of them, and how many of the obvious suspects are there out there in general? Is it a handful, or is it 2, or is it 10?

Is probably easier for me to qualify that by saying what the qualifications we need in one of those partners. That would be someone with a defined distribution network in sales that is highly organized and clinically-motivated. Okay. Very good.

In terms of when you would expect the partner to be selling the product, what would be the time line that you would be satisfied with, in terms of someone getting started with the product? That's another great question. I would be happy if it was right now, this second. But we've said previously and continue to be very optimistic that by the end of this year, we will be in full distribution.

Okay. In the interim, you have an approved product. You guys are manufacturing the product now. I expect you will be at large quantities sometime soon. What are you going to do in the interim? Will you be actually distributing the product and getting it out to the field?

We currently are seating key opinion leaders in the marketplace with product, so that they can do their jobs for us, which is be spokesmen on behalf of the product. We will take purchase orders. We have upcoming shows on national and regional basis that we will be attending to get the word out.

We are providing the leads that we generate with the evaluation product, and we are also asking our key opinion leaders to do cases on our behalf so that we can have marketing support case studies all teed up and ready for our potential partner. Dave? Hello? Did we lose you?

Pooya Hemami, Desjardins Securities.

I just have some quick questions on the conjunctivitis study. First of all, what is the expected cost and duration of the Phase 2b study. Secondly, what, if any, have there been any types of formulation changes in the NVC-422 that's been utilized for the study versus what was used in the Alcon study in the previous year?

Dave, would you take that question?

Sure. There has been no change in the formulation. Cost and duration, we plan to complete the study in a year. Obviously, the length of time it takes us will directly affect the cost. I can't really speak to the cost.

Can you give a range in terms of how much per patient or roughly what you expect it to be?

Well, I hesitate to say that because we haven't actually started, and there is still some discussions ongoing with all of the physicians in terms of their cost and so forth. It would be one that is typical of an anti-infective conjunctivitis study, if you are familiar with those costs.

Okay. And just as a follow-up, if the results are positive from this study, I know you would then expect to proceed to Phase III and potentially partner it before Phase III. So, because you are targeting a subpopulation of viral conjunctivitis patients, do you expect that, let's say physicians or optometrists using the drug will need to do some sort of sera typing before prescribing the product, or will they just use it on the presentation of acute redeye?

Couple of clarifications. We are targeting adenoconjunctivitis, which does not include all viral conjunctivitis. Some viral conjunctivitis is different viruses. But within adeno, there is already an FDA approved kit for an in-office procedure to diagnose adeno, so that would be sufficient to trigger the use of our therapy.

Are you targeting all adenoconjunctivitis or just the epidemic conjunctivitis?

No, we are targeting all. Yes, we are not targeting EKC specifically.

So just as a follow-up then, if you are targeting all of viral --

No, all adenoviral.

All adenoviral. Last year when the results came out, there was a clear separation between EKC and non-EKC. The communications of the Company at a time was that they were looking to go further in EKC, and of course, the partner decided not to proceed. But what has changed in the Company's outlook for it to now want to go once again toward full adenoviral population, as opposed to just EKC. What has changed in the past year?

Well, nothing has changed. We noticed in the first study that the drug was more active against EKC viruses than others, but that didn't mean it wasn't active against others. It was just more active against EKC. That was a bit surprising because that is the form of the disease that the ophthalmologists are most concerned about, because it's the form of the disease that is sight-threatening.

The form of the disease caused by respiratory viruses are not particularly sight-threatening. They are troublesome and they are very contagious and one would like to control them, but not so concerning as the EKC sera type. So that's why we were excited about the EKC, and we will certainly look at that subpopulation.

It's kind of like a bacterial conjunctivitis study. You look at anybody who has bacteria and then you get label claim for those lost important pathogens. So we don't know exactly how label claim will go because there has never been an adeno drug approved. So we just have to see. Clearly, we will sera type all of the patients adenos so we know which type they had, but we will not use that as an entry criteria.

Okay, all right. Thank you very much.

Pooya, a good portion of the patients that we are going to enroll in this adenoviral conjunctivitis study will be EKC or will be damaging their cornea and will be sight-threatening, so I think we will be looking at that sight-threatening-end of the spectrum. So, 40% to 50% of those patients that get enrolled will be potentially valuable for us.

Keith Markey, Griffin Securities.

Just a couple, if I could follow-up on the conjunctivitis talk first. I'm wondering, is there any reason that your drug might be more effective against one adenoviral sera type than another, or do you think that the result that you got for EKC may have more to do with your ability to detect it, or the patients to maybe come in a bit earlier for that particular type of infection than another?

No. Mechanistically, there is no differentiation between the drugs and how it acts on the various sera types. If you think about it, EKC sera types replicate primarily in the corneal tissue, where as the others replicate primarily in the conjunctival tissue. So, there's a difference in where the site of infection is.

I think that may have to do more with why we were more effective in the forms that are infecting the cornea, but we don't really know. It was an unexpected result. It is fortunate because the corneal types are the most sight-threatening, but I don't believe it has anything to do with the other factors that you mentioned.

I didn't really think so, but it just --

I don't think so. Ask me after the next study completed and we will maybe have more data.

Okay. And I was wondering, is it possible, for marketing purposes, that you're making the distinction between bacterial and viral conjunctivitis since the active drug is, effective against bacteria, as well as viruses.

Well, the course of the disease, the natural course of the disease, is quite different between a viral infection and a bacterial infection. We've chosen to attack the unmet medical need, which is the viral conjunctivitis. We will go back later and pick up the other.

Okay, thanks. And then I was wondering, when will you meet with the FDA on the pivotal UCBE trial, design on the (inaudible -- technical difficulties) for registration.

So we are planning to request for that meeting in the next few months, Keith. We will know, I think based on consultations that we received from experienced people who are regulatory people, they are telling us that this can be a medical device because our claim is primarily focused on the catheter itself. We are maintaining the catheter patency, so that should be a medical device claim. But you never know until you meet with the agency.

Right, okay, thanks. And I was wondering, have you announced when you are going to be releasing your next earnings report?

No, we haven't, but the target is for March 9, when we will we issue our 10-K and earnings release.

And since you are doing a lot more of the trial funding this year yourself, the conjunctivitis trial in your hands, I was just wondering, will you be seeking additional financing, do you think?

Well, Keith, we have a strong balance sheet now and a very adequate runway in the balance. As you saw from our Q3 results, essentially the highest cash balance we've had since our IPO. So, we're really well set, and we have no plans right now to raise money.

Okay, great. Thank you very much.

David Moskowitz, Roth Capital Partners.

Yes. I did get cut off before. Just wanted to follow-up on my questions about NeutroPhase. You guys talked about a marketing partner taking hold and driving sales toward the end of the year. What kind of revenue expectations should we as analysts to be thinking about with regard to this product in 2012?

Dave, we haven't really given any projections. All we can tell you is we will be cash-positive this year, and we hope that the NeutroPhase will continue to be a cash-positive program for us. Obviously, the fact that we will be receiving hopefully $1.3 million from our partners in China automatically will make us cash-positive.

We look forward to additional partnerships that Roy is working on outside ex-US and also within the US that will bring hopefully either upfront payments or continued royalty payments, it all depends on what kind of deal we construct.

Very good. Thanks for taking my question.

Andrew Phillip.

Congratulations on your progress.

Thank you. I just have a follow-up. Most of the questions I had were already answered. Could you tell me about, regarding the global Phase II study, you are going to commence it in the middle of 2012. When do you anticipate to conclude this, and how much will it cost, this Phase II?

If you're referring to our dermatology program, which is focused on a disease, impetigo,, that's completely been taken care of by our partner, Galderma. That program is a cash-positive partnership for us even as we speak. On the viral conjunctivitis program that Dave is running, we are expecting to spend about $6 million roughly by the time this is all completed. Do you have enough sufficient cash for this program? As of last reporting, we had $16 million in the bank, and we think we have enough to complete this study.

And Galderma, so they would find out the Phase II. If this goes to the Phase III, do you have another option or you will utilize them?

This is Bhez, Andrew. Galderma has moved this into full development, which means that they are continuing with this right through to registration, including additional studies that need to be done. So this will be a full development program for them.

I see. So after the Phase II, do you anticipate the Phase III is going to be done 2014?

I think right now based on the timetable, the way we know, and we don't have anything final, as I said before, about the exact start date of this next study, but a follow-up study, a formal Phase III study, would most likely initiate in around the middle of 2013.

That's great. Congratulations again, and looking forward to seeing you may be in the next few months.

(Operator Instructions) Yale Jen, NovaBay Pharmaceuticals.

Thanks for taking the follow-up question. Just on the EKC study, conjunctivitis, you mentioned the endpoint will be clinical endpoint. Could you be a little bit more specific, a little bit more color in terms of what that might be at this moment?

There is two of aspects of that. One was, the first study was a microbiological endpoint, which is not acceptable for registration. It was good for collecting a lot of data. We collected a lot of data on a whole variety of clinical endpoints. We are focusing right now on two. But there will be some further discussions with the FDA to get their full agreement on those before we initiate the study, so that's why I am a little vague on it.

Okay. No problem. And anticipate going forward before the study commences, more detail will be available.

Well, we will have discussions with FDA before we commence enrollment.

Okay, great, thanks a lot. Appreciate the update.

Bruce Jernigan, private investor.

Thanks for taking my question, it relates to the range of uses for NeutroPhase. Is it possible that it can be utilized to beyond advanced wound care for general wound care or other aspects of wound care?

The approvals that we currently have are for both acute and chronic wounds. So, the direct answer to your question is yes.

Thank you.

And there are no further questions at this time.

Thank you all for joining us on the call today. I hope you share our enthusiasm for NovaBay's future. Once again, I'd like to reiterate the fact that we are building a business by addressing large markets that currently have unmet medical needs, such as the millions who suffer from viral conjunctivitis and urinary catheter blockage and encrustations.

Furthermore, there are markets that are poorly served, like topical anti-infective markets, where current product offering gives rise to resistance and not effective against MRSA and superbug, which we are developing with our partner, Galderma. In addition, we have demonstrated our human proof-of-concept in three indications, impetigo, viral conjunctivitis, UCBE, and we are well on our way to getting these products registered.

We will also confirm that our products are safe and well-tolerated. With that, we are building hopefully a very successful Company, a very successful commercial enterprise and shareholder value as we move forward. I look forward to speaking to all of you soon and thank you for joining us on this call.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.