Novabay Pharmaceuticals (AMEX:NBY) could trade up today after the company announced the receipt of a $2.6M milestone payment from its development and marketing partner, Galderma S.A., a leading pharmaceutical company focused on the dermatology segment. The milestone is related to the clinical advancement of NVC-422, a novel anti-infective in development with Galderma for the topical treatment of impetigo. Impetigo is a highly contagious skin infection that can become deadly when caused by methcillin-resistant Staph aureus (MRSA). Given the recent trend for higher rates of MRSA in the U.S. and increasing resistance to current topical treatments like Bactroban ointment and cream, the need for new treatments is high. Galderma, a private venture between L’Oreal and Nestle, books over $1 billion in annual revenues, and as a leader in the dermatology segment, adds significant credibility to the NVC-422 program. The milestone payment announced today indicates that the compound is moving closer to commercialization.
While NBY lists the impetigo program with Galderma as Phase II on its website, the current clinical trial was upsized earlier this year, and could provide pivotal results such that Galderma could apply to the FDA for approval once the study is completed. Under terms of the licensing agreement, Galderma is responsible for the ongoing clinical development of NVC-422 for impetigo and other indications, and NovaBay is entitled to escalating double-digit royalties on net product sales, if NVC-422 is commercialized. Galderma has marketing rights to the compound in most major global markets, and NovaBay retained rights in certain Asian markets. The company also has rights to promote the drug in hospitals and other healthcare institutions in North America. NBY shares are way off their highs this year, when the Galderma trial was pushed back so that the study could be designed for more patients. Expect NBY to climb back to those highs with this trial now on track to report out next year.