Shares of NovaBay Pharmaceuticals (NBY) were cruising along for months in a price range pretty much centered at right around the $1.30 mark until a sudden slide took shape along as the general market started to experience an overall downturn. No news hit the streets to justify the share price drop and volume, while above the norm, did not indicate a mass exodus of any sort.
Once the short term dust settled, however, NovaBay shares were quick to regain the one dollar foothold when news hit the wires last week announcing that the company had enrolled its first patient in a Phase IIb study that will evaluate the Company's lead compound, NVC-422, in the treatment of adenoviral conjunctivitis, a highly contagious form of "pink eye."
The initiation of this trial, entitled BAYnovation, and the enrollment of the first patient should be viewed as a significant milestone for NovaBay, as there is currently no treatment for viral conjunctivitis on the market. The company is also working closely with the FDA to ensure that all guidelines and criteria are met to ensure the most efficient compilation of data in preparation for achieving the goal of commercialization as quickly as possible.
BAYnovation commences on the heels of Phase IIa results that produced encouraging results. According to last weeks press release announcing the first patient enrollment,
"Previously, NovaBay reported very encouraging data from its Phase 2a clinical study, which suggested that NVC-422 may be efficacious in patients infected with adenoviral serotypes associated with epidemic keratoconjunctivitis (EKC), the most highly contagious and potentially sight-threatening form of adenoviral conjunctivitis."
Aside from potentially treating conjuctivits, NovaBay is advancing its technology in other indications as well, and the company may be in the right place at the right time to position its products as a potential replacement for the commonly-used and over prescribed antibiotics of today.
Antibiotic resistance is one of the medical communities growing concerns, and has even been labeled as a crisis by some in the field. The ever-increasing cases of resistance are threatening to become a growing financial burden on the global health care system at a time when governments and professionals are looking to cut costs. Additionally, lives could be at risk as a result of this dilema, as patients may have no immediate answer to fast-spreading infection as a result of the resistance to antibiotics.
The Centers for Disease Control and Prevention has even chimed in, warning of a pending crisis on its website and stating that, "These drugs have been used so widely and for so long that the infectious organisms the antibiotics are designed to kill have adapted to them, making the drugs less effective. People infected with antimicrobial-resistant organisms are more likely to have longer, more expensive hospital stays, and may be more likely to die as a result of the infection."
NovaBay's Aganocide technology, which forms the basis of NVC-422, inherently mimics a body's own defense system by acting as white blood cells do, which greatly reduces the risk of resistance to treatment. With that in mind, and considering the pipeline potential should already-recognized positive results be repeated through late stage trials, NBY may be hugely undervalued as a speculative play moving forward.
The push late last week back to the dollar mark gave NovaBay a market cap of just thirty million. It could be argued that the technology alone, without any successful trial results behind it, would be worth at least that much to a larger pharmaceutical company - Pfizer (PFE), for one, we know is a company on the prowl - who might be looking to boost its pipeline in the wake of multiple patent expirations.
NVC-422 is also being examined for effectiveness in the treatment of Impetigo and urinary catheter blockage and encrustation (UCBE), with near term trial catalysts due for each of those indications. Encouraging initial results from the UCBE trial have already rolled in from the 'Part A' portion, while 'Part B' data is anticipated to be announced over the short term.
While the ongoing trials continue, revenue may not be too far off.
A commercial launch of the company's first marketable product, NeutroPhase, is slated for this year, as well, and not too long ago the company announced its first strategic partner for the product. Even a modest move into the chronic wound care market could provide NovaBay the means to alleviate many of the financing concerns that often accompany developing biotech/biopharma companies.
Still with numerous catalysts pending for the remainder of 2012, and with a proprietary technology that might not be adequately valued in terms of the company's market cap, NBY is one to keep an eye on - especially in light of the recent pullback.
Success in just one of the indication areas of treatment for which NVC-422 is being investigated could justify a much higher share price, and if investors take note of the Aganocide technology and its potential to offer an alternative to ineffective antibiotic treatments, then the market cap could swiftly move towards fair value - based on potential.
I'm adding at these levels.
Disclosure: Long NBY.
Contact VFC's Stock House: vfc@vfcsstockhouse.com
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