NovaBay shares routed after lead program fails another clinical study

About 9 months after NovaBay Pharmaceuticals ($NBY) reported that its lead anti-infective therapy auriclosene had failed a Phase IIb study for impetigo, the little biotech was forced to come back and concede another setback as an opthalmic solution of the same treatment flunked a IIb for viral conjunctivitis, or pink eye, failing the primary and all secondary endpoints.

That failure will end the company's work on this opthalmic condition, and it dashed the hopes of a large number of its investors as well. NovaBay's shares plunged 35% on Wednesday, closing the day at a mere 81 cents a share. The company has a market cap of only $41 million.

The biotech has specialized in developing topical anti-infectives based on its research of the molecules generated by white blood cells as a second line of defense against invading pathogens. But its R&D operation has been anything but smooth. The company released an eyelid cleanser approved through the FDA's 510(k) process back in the spring in hopes of staunching a steady flow of red ink.

Investigators for the company noted that they had enrolled patients around the globe, working at sites in the United States, India, Sri Lanka and Brazil. "The endpoints measured clearing of bulbar conjunctival injection (red eye), eradication of adenovirus from the tear film, spread of infection to the fellow eye, reduction in sub-epithelial infiltrates, clearing of blurred vision compared to its Vehicle at Test-of-Cure Visit," the company reported.

Back in November 2013, the Emeryville, CA-based company and its partner Galderma reported that a late mid-stage study of the drug, also called NVC-422, failed for impetigo, without releasing the data. A couple of months later NovaBay said it would try again, and began enrolling patients in a new study. Gladerma, meanwhile, initiated a major restructuring at its operations in Fort Worth, TX.

"Demonstrating clinical benefit in patients with adenoviral conjunctivitis remains a significant challenge for the entire pharmaceutical industry. Our energies and resources in the future will be committed to supporting our sales force, which is now deployed across the United States supporting our i-Lid Cleanser launch," said Dr. Ron Najafi, CEO of NovaBay, in a statement.

- here's the release