NovaBay Pharmaceuticals (NBY) 2011年年度報告「NYSE」.pdf

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1、 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K(Mark One)x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2011ORooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF

2、 1934For the transition period from toCommission file number 001-33678NOVABAY PHARMACEUTICALS,INC.(Exact name of registrant as specified in its charter)Delaware 68-0454536(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)5980 Horton Street,Suite 550,Eme

3、ryville CA 94608(Address of principal executive offices)(Zip Code)Registrants Telephone Number,Including Area Code:(510)899-8800Securities registered pursuant to Section 12(b)of the Act:Title of each class Name of each exchange on which registeredCommon Stock,$0.01 par value per share NYSE AmexSecur

4、ities registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes o No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of

5、the Act.Yes o No xIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been su

6、bject to such filing requirements for the past 90 days.Yes x No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,if any,every Interactive Data File required to be submitted and postedpursuant to Rule 405 of Regulation S-T during the pre

7、ceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes x No oIndicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrantsknowled

8、ge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x 1 Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,or a smaller reporting company.See t

9、he definitions of largeaccelerated filer,”accelerated filer”and smaller reporting company”in Rule 12b-2 of the Exchange Act.(Check one):Large accelerated fileroAccelerated fileroNon-accelerated fileroSmaller reporting companyx(Do not check if a smaller reporting company)Indicate by check mark whethe

10、r the registrant is a shell company(as defined in Exchange Act Rule 12b-2).Yes o No xAs of June 30,2011,the aggregate market value of the voting stock held by non-affiliates of the registrant,computed by reference to the last sale price of such stock as of such date onthe NYSE Amex,was approximately

11、$20,734,207.Excludes an aggregate of 4,105,983 shares of common stock held by officers and directors as of June 30,2011.Exclusion of shares held byany of these persons should not be construed to indicate that such person possesses the power,direct or indirect,to direct or cause the direction of the

12、management or policies of theregistrant,or that such person is controlled by or under common control with the registrant.As of March 16,2012,there were 28,916,562 shares of the registrants common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants definitive Proxy Statem

13、ent for the 2012 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation14A not later than 120 days after the end of the fiscal year covered by this Form 10-K,are incorporated by reference in Part III,Items 10-14 of this Form 10-K.2 NOVABAY PHARM

14、ACEUTICALS,INC.ANNUAL REPORT ON FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31,2011TABLE OF CONTENTS PagePART I ITEM 1.BUSINESS4ITEM 1A.RISK FACTORS11ITEM 1B.UNRESOLVED STAFF COMMENTS24ITEM 2.PROPERTIES24ITEM 3.LEGAL PROCEEDINGS24ITEM 4.MINE SAFETY DISCLOSURES24 PART II ITEM 5.MARKET FOR REGISTRANTS

15、 COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES25ITEM 6.SELECTED FINANCIAL DATA27ITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS28ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK36ITEM 8.FINANCIAL STAT

16、EMENTS AND SUPPLEMENTARY DATA37ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE63ITEM 9ACONTROLS AND PROCEDURES63ITEM 9B.OTHER INFORMATION63 PART III ITEM 10.DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE63ITEM 11.EXECUTIVE COMPENSATION64ITEM 12.SECU

17、RITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS64ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,AND DIRECTOR INDEPENDENCE64ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES64 PART IV ITEM 15.EXHIBITS,FINANCIAL STATEMENT SCHEDULES65Unless the context re

18、quires otherwise,all references in this report to we,”our,”us,”the Company”and NovaBay”refer to NovaBay Pharmaceuticals,Inc.and its subsidiaries.NovaBay,NovaBay Pharma,AgaNase,Aganocide,NeutroPhase,AgaDerm,and Going Beyond AntibioticsTM are trademarks of NovaBay Pharmaceuticals,Inc.All othertrademar

19、ks and trade names are the property of their respective owners.3 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis report contains forward-looking statements that are based on our managements beliefs and assumptions and on information currently available to our management.Theseforward-looking st

20、atements include but are not limited to statements regarding our product candidates,market opportunities,competition,strategies,anticipated trends andchallenges in our business and the markets in which we operate,and anticipated expenses and capital requirements.In some cases,you can identify forwar

21、d-looking statements byterms such as anticipates,”believes,”could,”estimates,”expects,”intends,”may,”plans,”potential,”predicts,”projects,”should,”will,”would”and similarexpressions intended to identify forward-looking statements.Forward-looking statements involve known and unknown risks,uncertainti

22、es and other factors that may cause our actualresults,performance or achievements to be materially different from any future results,performances or achievements expressed or implied by the forward-looking statements.We discussmany of these risks in this report in greater detail under the heading Ri

23、sk Factors”in Item 1A of this report.Given these uncertainties,you should not place undue reliance on theseforward-looking statements.You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with theunderstanding that our

24、actual future results may be materially different from what we expect.Also,forward-looking statements represent our managements beliefs and assumptionsonly as of the date of this report.Except as required by law,we assume no obligation to update these forward-looking statements publicly,or to update

25、 the reasons actual results coulddiffer materially from those anticipated in these forward-looking statements,even if new information becomes available in the future.PART IITEM 1.BUSINESSOverviewNovaBay Pharmaceuticals is a clinical-stage biotechnology company focused on addressing the large unmet t

26、herapeutic needs of the global anti-infective market with its two distinctcategories of products.We were incorporated under the laws of the State of California on January 19,2000 as NovaCal Pharmaceuticals,Inc.,and subsequently changed our name to NovaBayPharmaceuticals,Inc.In June 2010,we changed t

27、he state in which we are incorporated(the Reincorporation),and are now incorporated under the laws of the State of Delaware.Allreferences to we,”us,”our,”or the Company”herein refer to the California corporation prior to the date of the Reincorporation,and to the Delaware corporation on and after th

28、e date ofthe Reincorporation.Aganocide Compounds NovaBays first-in-class Aganocide compounds,led by NVC-422,are patented,synthetic molecules with a broad spectrum of activity against bacteria,viruses andfungi.Mimicking the mechanism of action that human white blood cells use against infections,Agano

29、cides possess a reduced likelihood that bacteria or viruses will be ableto develop resistance,which is critical for advanced anti-infectives.Having demonstrated therapeutic proof-of-concept in three Phase 2 clinical studies,these compounds arewell suited to treat and prevent a wide range of local,no

30、n-systemic infections.NovaBay is currently focused in three large therapeutic markets:Dermatology-Partnered with Galderma,a leading dermatology company,the companies are developing a gel formulation of NVC-422 for treating the highly contagious skininfection,impetigo.Current product offerings give r

31、ise to resistance and not effective against methicillin-resistant S.aureus,or MRSA.A Phase 2b clinical study is plannedfor 2012.Ophthalmology-NovaBay is developing an eye drop formulation of NVC-422 for treating viral conjunctivitis,for which there is currently no FDA-approved treatment.Thecompany e

32、xpects to launch a global Phase 2b clinical study in this indication in the second quarter of 2012.Urology NovaBays irrigation solution containing NVC-422 is currently in Phase 2 clinical studies,with the goal of reducing the incidence of urinary catheter blockage andencrustation(UCBE)and the associ

33、ated urinary tract infections.The company reported positive data from Part A of this study and expects to announce top-line results fromPart B of this study in the second quarter of 2012.NeutroPhase NovaBay is also developing another class of molecule,NeutroPhase,which is an FDA 510(k)-cleared produ

34、ct for advanced wound care.With a distinct mechanism of actionfrom Aganocides,we believe that NeutroPhase is the only patented pure hypochlorous acid solution available and has the potential to be best suited to treat the six-million-patientsin the U.S.who suffer from chronic non-healing wounds,such

35、 as pressure,venous stasis and diabetic ulcers.NovaBay has begun securing commercial partnerships for NeutroPhase.In January 2012,NovaBay announced it had entered into a strategic marketing agreement with PioneerPharma Co.,Ltd.,a Shanghai-based company that markets high-end pharmaceutical products i

36、nto China.NovaBay expects to announce additional marketing agreements in selectgeographic markets around the world during 2012.Our Technology and Research In 2002,the World Health Organization predicted that within ten years we will enter a post-antibiotic”era,where there will be infections for whic

37、h there will be no effective antibiotictreatments.This prediction is proving to be true as there are now more multi-drug resistant bacteria(Superbugs)appearing,and even a few pan-resistant species.By using naturesblueprint for the development of new anti-infective products,we start with the intent t

38、hat natural molecules do not allow pathogens to develop resistance.Aganocide compounds haveexhibited this characteristic in laboratory studies.The ability of our Aganocide compounds to be effective without developing resistance is critical in a situation where bacteria arecontinuing to develop ever

39、more sophisticated mechanisms for protecting themselves from antibiotics.4 Due to the significant problem of antibiotic resistance,the problem is monitored by global surveillance of the development of resistance to antibiotics used clinically.In the laboratorythe propensity for a given antibiotic to

40、 develop resistance may be determined by applying the antibiotic,at sub-lethal dose,to a pathogen in several passages.All antibiotics will developresistance at different rates,often after a few passages.Aganocides,by virtue of their novel mechanism of action,are unlikely to develop resistance.We hav

41、e subjected our leadcompound NVC-422 to such serial passage with a number of pathogens and have confirmed that no resistance develops even after many passages.As expected,antibiotics tested inparallel all developed resistance.In preclinical studies,the Aganocide compounds have demonstrated efficacy

42、against bacteria in biofilm.Biofilm is a cocoon-like shield that forms around a colony of bacteria.Oncethe biofilm is formed,bacteria go into dormancy.Dormant bacteria in biofilm reproduce slowly and are protected from attack by the bodys killer cells by their biofilm shield.We nowunderstand that bi

43、ofilm is a natural,ever present defense mechanism of bacteria.Single free floating bacteria are much easier to kill than colonies consisting of millions of bacteria as foundin biofilm.Antibiotics are generally more effective against fast reproducing bacteria as opposed to bacteria colonized in biofi

44、lm.We continue to expand our understanding of Aganocideaction on biofilm.In controlled laboratory studies,our Aganocide compounds were found to be effective at killing bacteria in biofilm.Furthermore,in animal studies our Aganocidecompounds have been found to be more effective against biofilm coloni

45、zation than mupirocin,a widely used topical antibiotic.We believe efficacy of Aganocide compounds in biofilmwould be an important property that may contribute to their utility in many commercial applications.Our Target Indications and Product CandidatesOur goal is to advance our product candidates t

46、hrough confirmatory Phase 2 proof of concept trials,after which we will evaluate further advancing each program on our own orentering a co-development collaboration agreement with a proven market leader.In the event that we enter into a co-development collaboration agreement with a proven market lea

47、der,thisstrategy provides the benefit of their product development expertise and proven commercial capabilities.In these collaborations,our strategy has been to defray costs while retainingparticipation in the long-term commercial economics of our products.This strategy enhances our probability of s

48、uccess in product and commercial development.In many instances,webelieve we can build upon the safety data generated in one indication to accelerate early development of other indications.We are also learning from our own and our partners experiencein developing appropriate formulations and usage of

49、 our compounds.The more development programs that are undertaken by our partners and by ourselves,the greater productdevelopment synergy we expect to achieve.By virtue of their anti-microbial versatility,the Aganocide compounds offer NovaBay an opportunity to potentially address a wide variety of to

50、pical,non-systemic indications in large,underserved markets.Topical indications include treatment and prevention of infections on any surface that may harbor pathogens,such as skin,bladder,sinus,lungs,the eye,as well asmedical devices such as catheters.We are focusing on four major market opportunit

51、ies:ophthalmology,dermatology,urology and hospital infections.Our strategy is to build four distinctbusiness units around these markets in the years to come.To date,we have not commercialized any of our product candidates,and so have not generated any revenues from the sale of products.Ophthalmology

52、In May 2011,NovaBay announced encouraging results from the proof-of-concept study with NVC-422 for treating adenoviral conjunctivitis,a form of pink eye.While the study didnot meet the primary endpoints,the study uncovered a compelling and clinically meaningful outcome,with a subset of patients with

53、 epidemic keratoconjunctivitis(EKC)infections thatwas later highlighted in the August 2011 edition of Cataract&Refractive Surgery Today.In addition to demonstrating activity against multiple adenoviral serotypes,NVC-422demonstrated clinical resolution of signs and symptoms associated with adenoviral

54、 conjunctivitis,including redness and blurred vision.The study showed that NVC-422 was most activein patients with EKC.In June 2011,we and Alcon Manufacturing Ltd.(Alcon),an affiliate of Alcon,Inc.,terminated the collaboration and license agreement that provided Alcon with the exclusive rights todev

55、elop,manufacture and commercialize products incorporating our Aganocide compounds for the treatment of eye,ear and sinus infections as well as for use in contact lenssolutions.Pursuant to the terms of the Termination Agreement,Alcon will have no further financial obligations to NovaBay as a result o

56、f the termination of the License Agreement.Allrights under the licenses that NovaBay granted to Alcon under the License Agreement were terminated and reverted back to NovaBay,including rights to NovaBays lead Aganocidecompound,NVC-422,as well as other Aganocide compounds developed as a result of the

57、 almost five-year collaboration.Rights returned to NovaBay include all previously licensed areasin ophthalmic,otic,and sinus applications.As part of the Termination Agreement Alcon paid a$2.0 million termination fee and the balance of the research funding for 2011.Dr.David Stroman,who led the develo

58、pment of NVC-422 for use in ophthalmology at Alcon,has joined NovaBay as our Senior Vice President of Ophthalmic DrugDevelopment.Under Dr.Stromans leadership,NovaBay has formed an Ophthalmology Advisory Board(OAB)to provide advice on the development of NVC-422 to treat ocular infections,specifically

59、 viral conjunctivitis.5 Based on the findings in our Phase 2a study announced in May 2011,NovaBay has chosen to continue an expanded global clinical trial under Dr.Stromans leadership and enrollmentis expected to commence in the second quarter of 2012.NovaBay has selected top-tier contract research

60、organizations(CROs)to manage the trial as it begins enrolling patients in the second quarter of 2012.The CROs selected are:QuintilesResearch Ltd.(India),Chiltern International(Brazil)and Symbio,LLC(United States).Globally,adenoviral conjunctivitis remains a significant unmet medical need across all

61、ocular infections,and NovaBay believes NVC-422 could represent a significant advancement inthe treatment of this condition,particularly in treating sight-threatening EKC.DermatologyWe are focused on developing products that will potentially eliminate the need to use antibiotic-based products in the

62、dermatology market.Our technology goes beyondantibiotics:we are focused on developing non-antibiotic anti-infective products which would not be susceptible to drug-resistant pathogens.As resistance to antibiotics becomes acritical public health issue,NovaBay intends to aggressively pursue the develo

63、pment of non-antibiotic anti-infectives that are unlikely to cause resistance,as a first-line treatment for arange of topical infections.Galderma Collaboration On March 25,2009,we entered into a collaboration and license agreement with Galderma S.A.to develop and commercialize our Aganocide compound

64、s,which covers acne andimpetigo and potentially other major dermatological conditions,excluding onychomycosis(nail fungus),orphan drug indications and most post surgical use and use in woundcare.We amended this agreement in December 2009 and again in December 2010.Based on the Impetigo Phase 2a clin

65、ical trial results,in December 2010,NovaBay and Galderma S.A.,agreed to expand their partnership to focus on the development of NovaBays Aganocide compound NVC-422 for the topical treatment of impetigo.This expansion is intended toprovide NovaBay with the additional funding and resources required fo

66、r the clinical development of its NVC-422 topical gel formulation for impetigo and other topicalinfections.Moving NVC-422 gel into Phase 2b clinical development in 2012 is the current top priority,with the potential to move into Phase 3 development in 2013.This agreement is exclusive and worldwide i

67、n scope,with the exception of Asian markets and North America,as described in the next paragraph.Galderma is responsible for the development costs of product candidate compounds,except for costs incurred in Japan.In Japan,Galderma has the option to request that we sharesuch development costs.Under t

68、he original agreement,we were supporting the ongoing development program for impetigo;however under the second amendment,entered into onDecember 2,2010,Galderma has exercised its option and increased its support to cover the cost of development for this indication.Upon the achievement of a specified

69、 milestone,Galderma will reimburse NovaBay for specified,previously incurred expenses related to the development of the impetigo program.NovaBay retains the right to co-market productsresulting from the agreement in Japan.In addition,NovaBay has retained all rights to co-promote the products develop

70、ed under the agreement in hospitals and other healthcareinstitutions in North America.From the inception of the agreement to December 31,2011,we have received$16.8 million from Galderma including a technology access fee,continuation fee,milestone paymentsand research and development funding.NovaBay

71、has the potential to receive up to$62.0 million in predetermined fees,including milestones and personnel reimbursement,withadditional funding available to cover product and clinical development.We are entitled to royalties ranging from 10%to 30%on cumulative net sales of products once commercialized

72、,subject to some reductions based on any development costs incurred directly by Galderma.Upon the termination of the agreement under certain circumstances,Galderma will grantNovaBay certain technology licenses which would require NovaBay to make royalty payments to Galderma for such licenses with ro

73、yalty rates in the low-to mid-single digits.ImpetigoImpetigo is a highly contagious superficial bacterial infection of the skin that affects mostly children.Most cases are caused by Staphylococcus aureus,Streptococcus pyogenes,or a mixture of both organisms.Methicillin-resistant S.aureus(MRSA)is bei

74、ng observed with increasing frequency in this population.Impetigo is currently being treated withantibiotic ointments,to which bacteria may develop resistance.Under the terms of the second amendment to the agreement with Galderma,for the research and development of impetigo and acne,Galderma has agr

75、eed to exercise its option toadvance the clinical development of the impetigo program and paid a$3.25 million continuation fee together with additional research and development funding through thedevelopment of the program.6 We believe that there is a significant market for the treatment of impetigo

76、,with approximately 13 million prescriptions for the treatment of impetigo annually,and 1.3 millionprescriptions in the U.S.alone.UrologyIt is estimated that there are greater than 300,000 chronically catheterized patients in the U.S.alone.NVC-422 catheter irrigation solution may provide significant

77、 clinical benefit byreducing the risk of complications associated with UCBE,thereby greatly enhancing the quality of life for patients and their caregivers.In 2011,NovaBay won the First Place Award forOutstanding Scientific Presentation at the Simon Foundation for Continence Conference.The criteria

78、for this distinction included the significance of the research and its contributions tothe theme of the conference:Innovating for Continence:The Engineering Challenge.Previously,NovaBay announced positive results from a Phase 2a clinical study of its irrigation solution containing NVC-422,the compan

79、ys lead Aganocide compound.NVC-422demonstrated activity against uropathogens that form biofilm on urinary catheter surfaces and can cause UCBE due to formation of bladder stones and crystals that block thecatheter.These results were supported recently by interim data from a Phase 2 clinical study,wh

80、ich demonstrated preliminary proof of concept for NVC-422 catheter irrigation solution inpreventing UCBE and maintaining catheter patency.Part 2 of the Phase 2 study is currently underway and is expected to be completed,with top-line results expected in the second quarter of 2012.Part 2 uses a more

81、potent formulation,which could reduce the number of required catheter irrigations from the current standard of care of 14 to 21 per week to only 3 treatments per week or less.NovaBay is evaluating the potential of building a commercial team in the U.S.to market this product along with other compleme

82、ntary products for the urology and neurologymarkets.NovaBay believes that the potential market for the treatment of spinal cord injury patents with bacterial colonization of the catheter and bladder,specifically Proteus mirabilisinfections,may be approximately$180 million annually.Advanced Wound Car

83、eNovaBay is preparing to market its FDA-cleared NeutroPhase wound cleanser for the chronic non-healing wound market,which represents a promising worldwide commercialopportunity.Potential applications for NeutroPhase that are covered by its two FDA 510(k)clearances include diabetic ulcers,venous stas

84、is ulcers and pressure ulcer stages I-IV.NovaBays marketing strategy for NeutroPhase is to collaborate with wound care companies with optimal infrastructure to maximize its commercial potential in each territory around theworld.In September 2011,NovaBay announced the appointment of Russell Hoon as V

85、ice President of its Advanced Wound Care Business Unit.With more than three decades of experiencein medical product development and commercialization,Mr.Hoons expertise will be instrumental for the success of NeutroPhase.In January 2012,NovaBay announced it had entered into a distribution agreement

86、with Pioneer Pharma Co.Ltd.,worth up to$1.3 million in pre-commercialization milestones related tothe launch of NeutroPhase in mainland China,excluding Hong Kong,Macau and Taiwan.The agreement is for a term of five years and thereafter may be renewed for additional fiveyears.Pioneer Pharma has acces

87、s to 7,500 hospitals and 40,000 pharmacies with over 1,000 sales representatives.NovaBay anticipates establishing additional partnerships in otherterritories in the near future.The cost of treating chronic wounds is estimated at$5 billion to$7 billion in the U.S.,and the occurrence of these wounds i

88、s increasing at a rate of 10%per year.NovaBay is currentlyseeking commercial partners for NeutroPhase to cover the North and South American,European,African,Middle Eastern,S.E.Asian,Australia/New Zealand and Japanese markets.Research and DevelopmentAs of December 31,2011,we had 17 employees dedicate

89、d to research and development.Our research and development expenses consist primarily of personnel-related expenses,laboratory supplies and contract research services provided to our research,development and clinical groups.We expense our research and development costs as they are incurred.Research

90、and development expenses for 2011,2010 and 2009 were$9.9 million,$8.6 million,and$7.3 million,respectively.All of our research and development employees are engaged indrug research and development activities,including those related to the Galderma agreement as described above.We expect to incur sign

91、ificant research and development expenses for theforeseeable future.Intellectual PropertyWe rely on a combination of patent,trademark,copyright and trade secret laws in the U.S.and other jurisdictions,as well as confidentiality procedures and contractual provisions,toprotect our proprietary technolo

92、gy.We also enter into confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with otherthird parties,and we rigorously control access to our proprietary technology.7 We are the assignee of record of five issued patents in the U.S.and fif

93、teen issued patents in foreign countries.In addition to our issued patents,we own or co-own 24 patentapplications in various stages of prosecution in the U.S.and over 60 applications pending in foreign countries and regions including Brazil,Canada,China,Europe,India,South Korea andJapan.Additional a

94、pplications will enter the foreign national phase once they pass through the international phase of the Patent Cooperation Treaty.The subject matter of our patents and patent applications covers four types of technologies:methods relating to the manufacture and use of our hypochlorous acid solutionN

95、eutroPhase(NVC-101),compositions of matter of our Aganocide compounds,methods of treating or preventing microbial ailments utilizing NeutroPhase and/or our Aganocidecompounds,and formulations.In April of 2009 we entered into an exclusive worldwide license to certain patent applications relating to m

96、ethods of use of N-chlorotaurine.Theseapplications are pending in the U.S.and abroad.U.S.Patent No.6,424,066 provides coverage for a method of treating burns or promoting wound healing,tissue repair or tissue regeneration using a specific range of formulations ofhypochlorous acid.This patent was iss

97、ued on July 30,2002 and will expire in 2020 with payment of maintenance fees.Corresponding patents have been issued in Australia,China,India,Israel,Hong Kong,Mexico and South Korea.U.S.Patent No.7,393,522 provides coverage for a method of disinfecting open wounds and burns,promoting wound healing or

98、 providingocular disinfection using a specific range of formulations of hypochlorous acid.This patent was issued on July 1,2008 and will expire in 2020 with payment of maintenance fees.U.S.Patent No.7,462,361 provides composition-of-matter coverage of our lead development candidate,NVC-422,and other

99、 Aganocide compounds.This patent was issued onDecember 9,2008 and will expire in 2026 with payment of maintenance fees.U.S.Patent No.7,893,109 is a continuation application of U.S.Patent No.7,462,361 and provides composition-of-matter coverage of additional N,N-dichloroamine compounds related to NVC

100、-422.This patent was issued on February 22,2011 and will expire in 2024.Corresponding patents were issued inNew Zealand,China,Hong Kong,India,Korea and Mexico.Corresponding applications are pending in Argentina,Australia,Brazil,Canada,Europe,Israel,Japan,South Korea,NewZealand,Singapore,and Taiwan.U

101、.S.Patent No.7,846,971 provides composition-of-matter coverage of additional Aganocide compounds.This patent was issued on December 7,2010 and will expire in 2028 with thepayment of maintenance fees.Corresponding patents have been issued in Singapore,and corresponding applications are pending in Aus

102、tralia,Brazil,Canada,China,Europe,Hong Kong,Israel,India,Japan,South Korea,Mexico,Taiwan and South Africa.NovaBay,NovaBay Pharma,AgaNase,Aganocide,and NeutroPhase are registered U.S.trademarks of NovaBay Pharmaceuticals,Inc.In addition to the U.S.registrations,NovaBay is registered in the European C

103、ommunity,Israel,Mexico,Australia and Brazil while applications are pending in Canada and India;AgaNase is registered in the EuropeanCommunity,Australia,Israel,Japan,Mexico,China,South Korea,and Taiwan and applications are pending in Brazil,Canada,China and India;NeutroPhase is registered in Australi

104、a,theEuropean Community,Ireland and the United Kingdom and applications are pending in Canada and India;and Aganocide is registered in the European Community and Japan.Applicationsfor registration of the trademarks AgaDerm and Going Beyond Antibiotics are pending in the U.S.and Canada.CompetitionThe

105、 market for topical,non-systemic anti-infective drugs is highly competitive.If developed,and commercialized,our Aganocide products would compete against a wide variety ofexisting products,products and technologies that are currently in development,and products and technologies that could be develope

106、d and reach the market before or after ourproducts.In particular,we would be competing against existing topical antibiotics and anti-infective products that are sold by many major pharmaceutical companies,or generic equivalentsthat are being distributed,typically at low prices.NeutroPhase,when launc

107、hed for use in wound management,will be competing against multiple products with similar product profiles andindications for use.However,we believe there is currently no dominant product in this indication.Our potential competitors include large and small pharmaceutical and medical device companies,

108、such as Pfizer,Inc.,Johnson&Johnson,Abbott Grp.Plc.,GlaxoSmithKline Plc,Sanofi-Aventis SA,Novartis AG,Smith&Nephew Plc,C.R.Bard,Puricore and Oculus Innovative Sciences.We believe the principal competitive advantage of our products in our target markets include their effectiveness in killing viruses,

109、fungi and bacteria,including bacteria in biofilm,verylow potential for the development of resistance,fast time to kill bacteria,wide safety margin,low side effect profile and cost effectiveness.We believe that our compounds may,ifapproved by the regulatory authorities,have significant advantages ove

110、r existing compounds and compounds in development of which we are aware,because our Aganocide andNeutroPhase compounds could be used to prevent infections or to treat infections with bacterial and viral components such as conjunctivitis.Manufacturing and SupplyWe do not currently operate manufacturi

111、ng facilities for clinical or commercial production,as we rely on and leverage the manufacturing and distribution infrastructure of thirdparties.We have no plans to establish our own manufacturing facilities in the future.Third party vendors supply us with the Active Pharmaceutical Ingredient(API)of

112、 NVC-422 and thefinished clinical trials materials for NeutroPhase,which are required to be manufactured in compliance with the FDAs Current Good Manufacturing Practice”,or CGMP,regulations.NeutroPhase is a medical device and is manufactured for us by third parties that are required to comply with F

113、DAs Quality Systems Regulations(QSR).We also intend to workwith third parties for future clinical trial materials and commercial supplies of NVC-422 and our other Aganocide compounds.8 The Galderma agreement provides for the manufacture by Galderma of finished dosage forms of products incorporating

114、Aganocide compounds for sale under our label in those marketswhere we have retained marketing rights.Sales and MarketingOur lead Aganocide product candidate,NVC-422,as well as many of the product candidates we expect to develop in the future,are primarily intended to address a variety of differentno

115、n-systemic,anti-infective market segments,some of which are large,primary care markets.We do not currently have,nor do we intend in the near term to create,a commercializationorganization capable of marketing,selling and distributing our targeted product candidates to large,primary care markets.This

116、 applies to markets in both the U.S.and elsewhere.Rather,weintend to establish commercialization partnerships with pharmaceutical,biotechnology or other leading organizations with the experience and resources to bring our products to market.Insome cases,we may enter into agreements with these organi

117、zations during the development stage of a product candidate to further benefit from their clinical development,regulatory,market research,pre-marketing and other expertise,as is the case with Galderma.In other cases,we may enter into a distribution agreement,as we have done with Pioneer Pharma.Asapp

118、ropriate,we may establish a specialty sales force with expertise in marketing and selling any future approved products to specialty physicians for specific target indications.We mayalso establish other complementary capabilities related to marketing and selling targeted medicines,particularly where

119、those capabilities may not currently exist at other organizations.In2011,2010 and 2009,substantially all of our revenues have been generated from Galderma and Alcon.Following the termination of the agreement with Alcon(located in Switzerland),werely on Galderma for a significant portion of our reven

120、ues for the foreseeable future;Galderma is located in France.Substantially all of our long-lived assets are located in the U.S.Galdermaaccounted for 54%,22%and 42%of our revenues,and Alcon accounted for 46%,78%and 58%of our revenues,in 2011,2010 and 2009,respectively.Additional information on ourrev

121、enues,profit and loss and total assets is set forth in our financial statements included in Item 8 of this Annual Report on form 10-K.Government RegulationThe testing,manufacturing,labeling,advertising,promotion,distribution,export and marketing of our product candidates are subject to extensive reg

122、ulation by the FDA,stateagencies and comparable regulatory authorities in other countries.Because our programs involve product candidates that are considered as drugs and others that are medical devices,weintend to submit applications to regulatory agencies for approval or clearance of both drug and

123、 medical device product candidates.U.S.Government RegulationIn the U.S.,the FDA regulates drugs and medical devices under the Federal Food,Drug,and Cosmetic Act and the agencys implementing regulations.If we fail to comply with theapplicable U.S.requirements at any time during the product developmen

124、t process,clinical testing,and the approval process or after approval,we may become subject to administrative orjudicial sanctions.These sanctions could include the FDAs refusal to approve pending applications,license suspension or revocation,withdrawal of an approval,warning letters,adversepublicit

125、y,product recalls,product seizures,total or partial suspension of production or distribution,injunctions,fines,civil penalties or criminal prosecution.Any agency enforcementaction could have a material adverse effect on us.Our products are classified by the FDA as a drug or a medical device dependin

126、g upon the mechanism of action and indications for use or claims.The use of NVC-101 as a solution forcleansing and debriding wounds,NeutroPhase,is considered a medical device.Similarly,NVC-422 may be classified as a medical device depending on the indication for use.For example,we believe if the ind

127、ication is for maintaining catheter patency,it would be classified as a medical device,whereas we believe it would be considered a drug when it is indicated for theprevention of urinary tract infection.The determination as to whether a particular product and indication is considered a drug or a devi

128、ce is based in part upon prior precedent.Drug Approval ProcessThe process required by the FDA before a drug may be marketed in the U.S.generally involves satisfactorily completing each of the following:preclinical laboratory tests,animal studies,toxicology and formulation studies all performed in ac

129、cordance with the FDAs Good Laboratory Practice regulations;submission to the FDA of an Investigational New Drug(IND)application for human clinical testing,which must become effective before human clinical trials may begin;performance of adequate and well-controlled clinical trials to establish the

130、safety and efficacy of the product candidate for each proposed indication;these clinical trialsmust be conducted in accordance with Good Clinical Practice(GCP)Guidelines,including Institutional Review Board oversight of the consent of subjects and registrationof applicable studies with clinicaltrial

131、s.gov;clinical trials generally progress through Phases 1,2 and 3,testing,respectively,initial safety,population and dose finding,and finally,testing of the anticipated commercial dose,formulation and indication at multiple sites in randomized,placebo-controlled studies that must provide replicateev

132、idence of safety and effectiveness;9 submission to the FDA of a New Drug Application(NDA)including payment of substantial User Fees;satisfactory completion of an FDA inspection of the manufacturing facility or facilities,including those of third-parties,at which the product is produced to assesscomp

133、liance with strictly enforced current GMP regulations,as well as FDA audit for GCP compliance of one or more clinical investigator sites;and FDA review and approval of the NDA before any commercial marketing,sale or shipment of the product.There is continuing and pervasive FDA regulation of drug pro

134、duct manufacturing,labeling,distribution,advertising and promotion once approved,and approval may be subject toadditional required clinical studies or risk evaluation and mitigation strategies,or REMS.Medical DevicesNeutroPhase,as well as some of our product candidates,may be regulated as medical de

135、vices.Unless an exception applies,each medical device we wish to commercialize in the U.S.will require either prior 510(k)clearance or premarket approval from the FDA.The FDA classifies medical devices into one of three classes.Devices deemed to pose lower risks are placed ineither Class I or II,whi

136、ch requires the manufacturer to submit to the FDA a premarket notification requesting permission to commercially distribute the device.This process is generallyknown as 510(k)clearance.Some low risk devices are exempt from this requirement.Any post-clearance modifications made to a 510(k)device may

137、require the submission of a new 510(k)notification prior to commercialization.Devices deemed by the FDA to pose the greatest risk,such as life-sustaining,life-supporting or implantable devices,or devices deemed notsubstantially equivalent to a previously cleared 510(k)device,are placed in Class III,

138、requiring human clinical study prior to premarket approval.The 510(k)process is undergoingprogramatic change at FDA and our ability to obtain 510(k)clearance for future device products may be adversely impacted but such regulatory changes.Continuing Food and Drug Administration Regulation of Medical

139、 DevicesAfter the FDA permits a device to enter commercial distribution,numerous regulatory requirements apply.These include:the FDAs Quality Systems Regulations(QSRs),which require manufacturers to follow stringent design,testing,production,control,labeling,packaging,storage,shipping,documentation

140、and other quality assurance procedures during all aspects of the manufacturing process;labeling regulations which impose restrictions on labeling and promotional activities,and FDA prohibitions against the promotion of products for uncleared,unapproved,or off-label”uses;post-market surveillance requ

141、irements which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device;the FDA Medical Device Reporting regulations,which require that manufacturers report to the FDA if their device may have caused or contributed to a death or seriousi

142、njury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur;and notices of correction or removal,and recall regulations.In addition,we are required to register our facility and list our products with the FDA,and are subject to unannounced in

143、spections by the FDA and the Food and Drug Branch of theCalifornia Department of Health Services to determine compliance with the QSRs and other regulations,and these inspections may include the manufacturing facilities of oursubcontractors.International RegulationIn addition to being subject to the

144、 laws and regulations in the U.S.,we will be subject to a variety of laws and regulations in those other countries in which we seek to study andcommercialize products.European and Canadian regulatory requirements and approval processes are similar in principle to those in the U.S.Whether or not we o

145、btain FDA approval for aproduct,we must obtain approval of a product by the comparable regulatory authorities of the European Union,European countries,Canada and other countries before we can commenceclinical trials or marketing of the product in those respective countries.The approval process may b

146、e longer or shorter than that required for FDA approval.The requirements governingpricing,reimbursement,clinical trials,and to a lesser extent,product licensing vary from country to country.Third Party Reimbursement and Pricing ControlsIn the U.S.and elsewhere,sales of pharmaceutical products depend

147、 in significant part on the availability of reimbursement to the consumer from third party payers,such as governmentand private insurance plans.Third party payers are increasingly challenging the prices charged for medical products and services.It will be time consuming and expensive for us to gothr

148、ough the process of seeking reimbursement from Medicare and private payers.Aganocide products from which we may receive revenue in the future may not be considered cost-effective,and reimbursement may not be available or sufficient to allow these products to be sold on a competitive and profitable b

149、asis.10 Anti-Kickback and False Claims LawsIn the U.S.,we are subject to various federal and state laws pertaining to healthcare fraud and abuse,”including anti-kickback and false claims laws.The federal Anti-Kickback Lawmakes it illegal for any person,including a prescription drug or medical device

150、 manufacturer(or a party acting on its behalf)to knowingly and willfully solicit,offer,receive or pay anyremuneration,directly or indirectly,in exchange for,or to induce,the referral of business,including the purchase,order or prescription of a particular drug or device,for which payment maybe made

151、under federal healthcare programs such as Medicare and Medicaid.Violations of the law are punishable by up to five years in prison,criminal fines,administrative civil moneypenalties,and exclusion from participation in federal healthcare programs.In addition,many states have adopted laws similar to t

152、he federal Anti-Kickback Law.Some of these stateprohibitions apply to referral of patients for healthcare services reimbursed by any source,not only the Medicare and Medicaid programs.Due to the breadth of these laws,it is possiblethat our future sales and marketing practices or our future relations

153、hips with physicians might be challenged under anti-kickback laws,which could harm us.False claims laws prohibit anyone from knowingly presenting,or causing to be presented,for payment to third party payors(including Medicare and Medicaid)claims for reimburseditems or services,including drugs and me

154、dical devices,that are false or fraudulent,claims for items or services not provided as claimed,or claims for medically unnecessary items orservices.Our future activities relating to the reporting of prices for our products,the reporting of Medicaid rebate information and other information affecting

155、 federal,state and third partyreimbursement of our products,and the sale and marketing of our products,will be subject to scrutiny under these laws.In addition,pharmaceutical and medical device companies havebeen prosecuted under the federal False Claims Act in connection with their off-label promot

156、ion of products.Suits filed under the False Claims Act,known as qui tam”actions,can bebrought by any individual on behalf of the government and such individuals(known as relators or,more commonly,as whistleblowers)may share in the amounts paid by the entity to thegovernment in fines or settlement.Em

157、ployeesAs of December 31,2011,we had 27 full-time employees,including 9 with doctoral degrees.Of our full time workforce,17 employees were engaged in research and development,and 10in finance,legal and administration.None of our employees are represented by labor unions or covered by collective barg

158、aining agreements.We consider our relationship with ouremployees to be good.Available InformationOur annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K,and amendments to those reports filed or furnished pursuant to Sections 13(a)and 15(d)of the Securities Exchange

159、 Act of 1934,as amended,are available free of charge on our corporate website,located at ,as soon as reasonably practicable after weelectronically file such material with,or furnish it to,the Securities and Exchange Commission(SEC).ITEM 1A.RISK FACTORSOur business is subject to a number of risks,the

160、 most important of which are discussed below.You should consider carefully the following risks in addition to the other informationcontained in this report and our other filings with the SEC,before deciding to buy,sell or hold our common stock.The risks and uncertainties described below are not the

161、only onesfacing our company.Additional risks and uncertainties not presently known to us or that we currently believe are not important may also impair our business operations.If any of thefollowing risks actually occur,our business,financial condition or results of operations could be materially ad

162、versely affected,the value of our common stock could decline and youmay lose all or part of your investment.Risks Relating to Our BusinessCurrent worldwide economic conditions may limit our access to capital,adversely affect our business and financial condition,as well as further decrease our stock

163、price.General worldwide economic conditions have continued to be depressed due to the effects of the subprime lending crisis,general credit market crisis,the Greek debt crises and theeffects that it has had on the Eurozone,collateral effects on the finance and banking industries,concerns about infla

164、tion,slower economic activity,decreased consumer confidence,reduced corporate profits and capital spending,adverse business conditions and liquidity concerns.Although the impact of the downturn on our business is uncertain at this time,downturn may adversely affect our business and operations in a n

165、umber of ways,including making it more difficult for us to raise capital as well as making it more difficult to enter intocollaboration agreements with other parties.Like many other stocks,our stock price has been subject to fluctuations in recent months.Our stock price could decrease due to concern

166、s thatour business,operating results and financial condition will be negatively impacted by a worldwide economic downturn.We may be unable to raise additional capital on acceptable terms in the future which may in turn limit our ability to develop and commercialize products and technologies.While we

167、 have reduced our staff levels and reduced both our research and general expenditures,we expect our capital outlays and operating expenditures to increase over at least thenext several years as we expand our clinical and regulatory activities.Conducting clinical trials is very expensive,and we expec

168、t that we will need to raise additional capital,through futureprivate or public equity offerings,strategic alliances or debt financing,before we achieve commercialization of any of our Aganocide compounds.In addition,we may require even moresignificant capital outlays and operating expenditures if w

169、e do not continue to partner with third parties to develop and commercialize our products.11 Our future capital requirements will depend on many factors,including:the extent to which we receive milestone payments or other funding from Galderma,if any;the scope,rate of progress and cost of our pre-cl

170、inical studies and clinical trials and other research and development activities;future clinical trial results;the terms and timing of any collaborative,licensing and other arrangements that we may establish;the cost and timing of regulatory approvals;the cost of establishing clinical and commercial

171、 supplies of our product candidates and any products that we may develop;the effect of competing technological and market developments;the cost of filing,prosecuting,defending and enforcing any patent claims and other intellectual property rights;and the extent to which we acquire or invest in busin

172、esses,products and technologies,although we currently have no commitments or agreements relating to any of thesetypes of transactions.We do not currently have any commitments for future external funding.Additional financing may not be available on favorable terms,or at all.Our ability to obtain addi

173、tional financingmay be negatively affected by the recent volatility in the financial markets and the credit crisis,as well as the general downturn in the economy and decreased consumer confidence.Even ifwe succeed in selling additional securities to raise funds,our existing stockholders ownership pe

174、rcentage would be diluted and new investors may demand rights,preferences or privilegessenior to those of existing stockholders.If we raise additional capital through strategic alliance and licensing arrangements,we may have to trade our rights to our technology,intellectualproperty or products to o

175、thers on terms that may not be favorable to us.If we raise additional capital through debt financing,the financing may involve covenants that restrict our businessactivities.In addition,it is often the case that the cost of pharmaceutical development can be significantly greater than initially antic

176、ipated.This may be due to any of a large number of possiblereasons,some of which could have been anticipated,while others may be caused by unpredictable circumstances.A significant increase in our costs would cause the amount of financingthat would be required to enable us to achieve our goals to be

177、 likewise increased.If we determine that we need to raise additional funds and we are not successful in doing so,we may be unable to complete the clinical development of some or all of our productcandidates or to seek or obtain FDA approval of our product candidates.Such events could force us to dis

178、continue product development,enter into a relationship with a strategic partnerearlier than currently intended,reduce sales and marketing efforts or forego attractive business opportunities.We are an early stage company with a history of losses and expect that we will incur net losses in the future,

179、and that we may never achieve or maintain sustained profitability.We have incurred net losses each year since our inception through December 31,2011,with the exception of 2009.For the years ended December 31,2011 and 2010 we had net lossesof approximately$5.1 million and$4.3 million,respectively,and

180、 for the year ended December 31,2009,we had net income of$2.7 million.We were able to record a profit in 2009 due to ourreceipt of a$3.75 million milestone payment under our agreement with Galderma;however,there is no assurance that we will receive any additional large milestone payments under thisa

181、greement and,as a result,may not be able to achieve or maintain profitability in the future.Through December 31,2011,we had an accumulated deficit of approximately$33.3 million.Wehave been,and expect to remain for the foreseeable future,mostly in a research and development stage as we proceed throug

182、h clinical trials.We have incurred substantial research anddevelopment expenses,which were approximately$9.9 million,$8.6 million and$7.3 million for the years ended December 31,2011,2010 and 2009,respectively.We expect to continue tomake,for at least the next several years,significant expenditures

183、for the development of products that incorporate our Aganocide compounds,as well as continued research into thebiological activities of our Aganocide compounds,which expenditures are accounted for as research and development expenses.We do not expect any of our current drug productcandidates to be c

184、ommercialized within the next several years,if at all.We expect to incur substantial losses for the foreseeable future,and we may never achieve or maintain sustainedprofitability.We anticipate that our expenses related to our clinical trials and regulatory activities will increase substantially in t

185、he foreseeable future as we:conduct pre-clinical studies and clinical trials for our product candidates in different indications;develop,formulate,manufacture and commercialize our product candidates either independently or with partners;pursue,acquire or in-license additional compounds,products or

186、technologies,or expand the use of our technology;12 maintain,defend and expand the scope of our intellectual property;and hire additional qualified personnel.We will need to generate significant revenues to achieve and maintain profitability.If we cannot successfully develop,obtain regulatory approv

187、al for and commercialize our drugproduct candidates,either independently or with partners,we will not be able to generate such revenues or achieve or maintain profitability in the future.Our failure to achieve andsubsequently maintain profitability could have a material adverse impact on the market

188、price of our common stock.We have limited data on the use of our products in humans and will need to perform costly and time consuming clinical trials in order to bring our products to market.Much of the data that we have on our products is from in-vitro(laboratory)studies,in-vivo animal studies,Pha

189、se 1 human safety studies,or small-scale Phase 2a or other exploratoryclinical studies.We will need to conduct additional Phase 1,2 and 3 human clinical trials to confirm such results in larger patient populations in order to obtain approval from the FDA of ourdrug product candidates.Often,positive

190、in-vitro,in-vivo animal studies,or early human clinical trials are not followed by positive results in later clinical trials,and we may not be able todemonstrate that our products are safe and effective for indicated uses in humans or that they are active against antibiotic resistant microbes,do not

191、 allow pathogens to develop resistanceor are active against bacteria in biofilm.In addition,for each indication,we estimate that it will take between three and five years to conduct the necessary clinical trials.We currently do not have any marketable products,and if we are unable to develop and obt

192、ain regulatory approval for products that we develop,we may never generate product revenues.To date,our revenues have been derived solely from research and development collaboration and license agreements.We have never generated revenues from sales of products andwe cannot guarantee that we will eve

193、r have marketable drugs or other products.Satisfaction of all regulatory requirements applicable to our product candidates typically takes many years,is dependent upon the type,complexity,novelty and classification of the product candidates,and requires the expenditure of substantial resources for r

194、esearch and development andtesting.Before proceeding with clinical trials,we will conduct pre-clinical studies,which may,or may not be,valid predictors of potential outcomes in humans.If pre-clinical studies arefavorable,we will then begin clinical trials.We must demonstrate that our product candida

195、tes satisfy rigorous standards of safety and efficacy before we can submit for and gain approvalfrom the FDA and regulatory authorities in other countries.In addition,to compete effectively,our products will need to be easy to use,cost-effective and economical to manufacture on acommercial scale.We

196、may not achieve any of these objectives.We cannot be certain that the clinical development of any of our current product candidates or any other product that wemay develop in the future will be successful,that they will receive the regulatory approvals required to commercialize them,or that any of o

197、ur other in-licensing efforts or pre-clinical testingwill yield a product suitable for entry into clinical trials.Our commercial revenues from sales of products will be derived from sales of products that may not be commercially available for atleast the next several years,if at all.We have limited

198、experience in developing drugs and medical devices,and we may be unable to commercialize any of the products we develop.Development and commercialization of drugs and medical devices involves a lengthy and complex process.We have limited experience in developing products and have nevercommercialized

199、 any of our product candidates.In addition,no one has ever developed or commercialized a product based on our Aganocide compounds,and we cannot assure you that itis possible to develop,obtain regulatory approval for or commercialize any products based on these compounds or that we will be successful

200、 in doing so.Before we can develop and commercialize any new products,we will need to expend significant resources to:undertake and complete clinical trials to demonstrate the efficacy and safety of our product candidates;maintain and expand our intellectual property rights;obtain marketing and othe

201、r approvals from the FDA and other regulatory agencies;and select collaborative partners with suitable manufacturing and commercial capabilities.The process of developing new products takes several years.Our product development efforts may fail for many reasons,including:the failure of our product c

202、andidates to demonstrate safety and efficacy;the high cost of clinical trials and our lack of financial and other resources;and our inability to partner with firms with sufficient resources to assist us in conducting clinical trials.Success in early clinical trials often is not replicated in later s

203、tudies,and few research and development projects result in commercial products.At any point,we may abandondevelopment of a product candidate or we may be required to expend considerable resources repeating clinical trials,which would eliminate or adversely impact the timing for revenues fromthose pr

204、oduct candidates.If a clinical study fails to demonstrate the safety and effectiveness of our product candidates,we may abandon the development of the product or product featurethat was the subject of the clinical trial,which could harm our business.13 Even if we develop products for commercial use,

205、these products may not be accepted by the medical and pharmaceutical marketplaces or be capable of being offered at prices that willenable us to become profitable.We cannot assure you that our products will be approved by regulatory authorities or ultimately prove to be useful for commercial markets

206、,meet applicableregulatory standards,or be successfully marketed.Our current research collaboration with Galderma may fail,resulting in a decrease in funding and inhibition of our ability to continue developing products.We have entered into an agreement with Galderma S.A.to develop and commercialize

207、 our Aganocide compounds,which covers acne and impetigo and potentially other majordermatological conditions,excluding onychomycosis(nail fungus)and orphan drug indications.With the termination of our collaboration with Alcon,our collaboration with Galderma isour only collaboration,and so unless and

208、 until we enter into additional collaborations or are able to market products on our own,we will be dependent on Galderma for all of our revenues.We cannot assure you that our collaboration with Galderma will be successful,or that we will receive the full amount of research funding,milestone payment

209、s or royalties,or that anycommercially valuable intellectual property will be created,from this arrangement.If Galderma were to breach or terminate its agreement with us or otherwise fail to conduct its collaborativeactivities successfully and in a timely manner,the research contemplated by our coll

210、aboration with them could be delayed or terminated and our costs of performing studies may increase.Our research collaboration with Alcon has ended,which will result in a decrease in funding and may impede our ability to develop our Aganocide compounds for application in connectionwith the eye,ear a

211、nd sinus and for use in contact lens solutions unless we are able to enter into a new collaboration with another collaboration partner.In June 2011,we and Alcon terminated our collaboration and license agreement.Under the terms of the collaboration and license agreement prior to termination,we recei

212、ved semi-annual payments to support on-going research and development activities over the term of the agreement,which payments were reduced beginning in 2011.During 2010 we received$6.0million in funding payments from Alcon,and in the first five months of 2011 we received$2.1 million in funding paym

213、ents from Alcon.We received a payment of approximately$3.0 millionin connection with the termination,but will not receive any additional payments from Alcon.As a result,we expect our revenues to be significantly less than we have recognized inprevious years.Further,as we continue the development of

214、NVC-422 for application in connection with the eye,ear and sinus and for use in contact lens solutions,we have to fund suchdevelopment unless we are able to enter into a new collaboration with another collaboration partner,which we may not be able to do.If we are not able to enter into a new collabo

215、rationwith another collaboration partner and we continue the development of NVC-422 for application in connection with the eye,ear and sinus and for use in contact lens solutions,we will needto rely on our own funds,and any additional funds we may raise.If we are not able to enter into a new collabo

216、ration with another collaboration partner or are not able to raise additionalfunds,we may not be able to develop NVC-422 for these applications.A key part of our business strategy is to establish collaborative relationships to commercialize and fund development of our product candidates.We may not s

217、ucceed in establishing andmaintaining collaborative relationships,which may significantly limit our ability to develop and commercialize our products successfully,if at all.A key part of our business strategy is to establish collaborative relationships to commercialize and fund development of our pr

218、oduct candidates.We may not be able to negotiateadditional collaborations on acceptable terms,if at all,and if we do enter into collaborations,these collaborations may not be successful.Our current and future success depends in part onour ability to enter into successful collaboration arrangements a

219、nd maintain the collaboration arrangement we currently have with Galderma.The process of establishing and maintainingcollaborative relationships is difficult,time-consuming and involves significant uncertainty,including:our partners may seek to renegotiate or terminate their relationships with us du

220、e to unsatisfactory clinical results,a change in business strategy,a change of control or otherreasons;our shortage of capital resources may impact a willingness on the part of potential companies to collaborate with us;our contracts for collaborative arrangements may be terminable for convenience o

221、n written notice and may otherwise expire or terminate,and we may not have alternativefunding available;our partners may choose to pursue alternative technologies,including those of our competitors;we may have disputes with a partner that could lead to litigation or arbitration;we do not have day-to

222、-day control over the activities of our partners and have limited control over their decisions;our ability to receive milestones and royalties from our partners depends upon the abilities of our partners to establish the safety and efficacy of our drug candidates,obtainregulatory approvals and achie

223、ve market acceptance of products developed from our drug candidates;14 we or our partners may fail to properly initiate,maintain or defend our intellectual property rights,where applicable,or a party may utilize our proprietary information in such away as to invite litigation that could jeopardize o

224、r potentially invalidate our proprietary information or expose us to potential liability;our partners may not devote sufficient capital or resources towards our product candidates;and our partners may not comply with applicable government regulatory requirements.If we are unable to establish and mai

225、ntain collaborative relationships on acceptable terms or to successfully transition terminated collaborative agreements,we may have to delay ordiscontinue further development of one or more of our product candidates,undertake development and commercialization activities at our own expense or find al

226、ternative sources of capital.Consequently,if we are unable to enter into,maintain or extend successful collaborations,our business may be harmed.Our long-term success depends upon the successful development and commercialization of other products from our research and development activities.Our long

227、-term viability and growth will depend upon the successful development and commercialization of other products from our research and development activities.Productdevelopment and commercialization is very expensive and involves a high degree of risk.Only a small number of research and development pr

228、ograms result in the commercialization of aproduct.Success in early stage clinical trials or preclinical work does not ensure that later stage or larger scale clinical trials will be successful.Even if later stage clinical trials are successful,the risk remains that unexpected concerns may arise fro

229、m additional data or analysis or that obstacles may arise or issues may be identified in connection with review of clinical data withregulatory authorities or that regulatory authorities may disagree with our view of the data or require additional data or information or additional studies.Conducting

230、 clinical trials is a complex,time-consuming and expensive process.Our ability to complete our clinical trials in a timely fashion depends in large part on a number of keyfactors including protocol design,regulatory and institutional review board approval,the rate of patient enrollment in clinical t

231、rials,and compliance with extensive current good clinicalpractice requirements.We are in many cases using the services of third-party contract clinical trial providers.If we fail to adequately manage the design,execution and regulatory aspects ofour clinical trials,our studies and ultimately our reg

232、ulatory approvals may be delayed or we may fail to gain approval for our product candidates altogether.If we do not successfully execute our growth initiatives through the acquisition,partnering and in-licensing of products,technologies or companies,our future performance could beadversely affected.

233、In addition to the expansion of our pipeline through spending on internal development projects,we anticipate growing through external growth opportunities,which include theacquisition,partnering and in-licensing of products,technologies and companies or the entry into strategic alliances and collabo

234、rations.If we are unable to complete or manage theseexternal growth opportunities successfully,we may not be able to grow our business in the way that we currently expect.The availability of high quality opportunities is limited and we arenot certain that we will be able to identify suitable candida

235、tes or complete transactions on terms that are acceptable to us.In order to pursue such opportunities,we may require significantadditional financing,which may not be available to us on favorable terms,if at all.The availability of such financing is limited by the recent tightening of the global cred

236、it markets.We may acquire other businesses or form joint ventures or in-license compounds that could disrupt our business,harm our operating results,dilute your ownership interest in us,orcause us to incur debt or significant expense.As part of our business strategy,we may pursue acquisitions of com

237、plementary businesses and assets,and enter into technology or pharmaceutical compound licensingarrangements.We also may pursue strategic alliances that leverage our core technology and industry experience to enhance our ability to commercialize our product candidates and expandour product offerings

238、or distribution.We have no experience with respect to acquiring other companies and limited experience with respect to the formation of commercial partneringagreements,strategic alliances,joint ventures or in-licensing of compounds.If we make any acquisitions,we may not be able to integrate these ac

239、quisitions successfully into our existingbusiness,and we could assume unknown or contingent liabilities.If we in-license any additional compounds,we may fail to develop the product candidates,and spend significantresources before determining whether a compound we have in-licensed will produce revenu

240、es.Any future acquisitions or in-licensing by us also could result in significant write-offs or theincurrence of debt and contingent liabilities,any of which could harm our operating results.Integration of an acquired company also may require management resources that otherwisewould be available for

241、 ongoing development of our existing business.We may not identify or complete these transactions in a timely manner,on a cost-effective basis,or at all,and we maynot realize the anticipated benefits of any acquisition,technology license,strategic alliance or joint venture.To finance any acquisitions

242、,we may choose to issue shares of our common stock as consideration,which would dilute your interest in us.If the price of our common stock is low orvolatile,we may not be able to acquire other companies for stock.Alternatively,it may be necessary for us to raise additional funds for acquisitions by

243、 incurring indebtedness.Additionalfunds may not be available on terms that are favorable to us,or at all.15 We do not have our own manufacturing capacity,and we plan to rely on partnering arrangements or third-party manufacturers for the manufacture of our potential products.We do not currently oper

244、ate manufacturing facilities for clinical or commercial production of our product candidates.We have no experience in drug formulation or manufacturing,andwe lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale.As a result,we have par

245、tnered and expect to partner with thirdparties to manufacture our products or rely on contract manufacturers to supply,store and distribute product supplies for our clinical trials.Any performance failure on the part of ourcommercial partners or future manufacturers could delay clinical development

246、or regulatory approval of our product candidates or commercialization of our products,producing additionallosses and reducing the potential for product revenues.Our products,if developed and commercialized,will require precise,high quality manufacturing.The failure to achieve and maintain high manuf

247、acturing standards,including theincidence of manufacturing errors,could result in patient injury or death,product recalls or withdrawals,delays or failures in product testing or delivery,cost overruns or other problemsthat could seriously harm our business.Contract manufacturers and partners often e

248、ncounter difficulties involving production yields,quality control and quality assurance,as well asshortages of qualified personnel.These manufacturers and partners are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strictcompliance with curre

249、nt Good Manufacturing Practice and other applicable government regulations and corresponding foreign standards;however,we do not have control over third-partycompliance with these regulations and standards.If any of our manufacturers or partners fails to maintain compliance,the production of our pro

250、ducts could be interrupted,resulting indelays,additional costs and potentially lost revenues.In addition,if the FDA or other regulatory agencies approve any of our product candidates for commercial sale,we will need to manufacture them in larger quantities.Significant scale-up of manufacturing will

251、require validation studies,which the FDA must review and approve.If we are unable to successfully increase the manufacturing capacity for a product,theregulatory approval or commercial launch of any drugs may be delayed or there may be a shortage in supply and our business may be harmed as a result.

252、We depend on skilled and experienced personnel to operate our business effectively.If we are unable to recruit,hire and retain these employees,our ability to manage and expand ourbusiness will be harmed,which would impair our future revenue and profitability.Our success largely depends on the skills

253、,experience and efforts of our officers,especially our Chief Executive Officer,Chief Financial Officer,Vice President for Ophthalmic DrugDevelopment,Vice President for Advanced Wound Care,Chief Alliance Officer and Vice President of Product Development,Vice President of Medical Affairs,Vice Presiden

254、t of Businessand Corporate Development and other key employees.The efforts of each of these persons is critical to us as we continue to develop our technologies and as we attempt to transition into acompany with commercial products.Any of our officers and other key employees may terminate their empl

255、oyment at any time.The loss of any of our senior management team memberscould weaken our management expertise and harm our ability to compete effectively,develop our technologies and implement our business strategies.Our ability to retain our skilled labor force and our success in attracting and hir

256、ing new skilled employees will be a critical factor in determining whether we will be successful in thefuture.Our research and development programs and collaborations depend on our ability to attract and retain highly skilled scientists and technicians.We may not be able to attract orretain qualifie

257、d scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses,particularly in the San Francisco Bay Area.Wealso face competition from universities and public and private research institutions in recruiting and retaining highly qualifi

258、ed scientific personnel.We have also encountered difficulties inrecruiting qualified personnel from outside the San Francisco Bay Area,due to the high housing costs in the area.If we grow and fail to manage our growth effectively,we may be unable to execute our business plan.Our future growth,if any

259、,may cause a significant strain on our management,and our operational,financial and other resources.Our ability to grow and manage our growth effectivelywill require us to implement and improve our operational,financial and management information systems and to expand,train,manage and motivate our e

260、mployees.These demands mayrequire the hiring of additional management personnel and the development of additional expertise by management.Any increase in resources devoted to research and productdevelopment without a corresponding increase in our operational,financial and management information syst

261、ems could have a material adverse effect on our business,financial condition,and results of operations.If our facilities become inoperable,we will be unable to perform our research and development activities,fulfill the requirements under our collaboration agreement and continuedeveloping products a

262、nd,as a result,our business will be harmed.We do not have redundant laboratory facilities.We perform substantially all of our research,development and testing in our laboratory located in Emeryville,California.Emeryville issituated on or near active earthquake fault lines.Our facility and the equipm

263、ent we use to perform our research,development and testing would be costly to replace and could requiresubstantial lead time to repair or replace.The facility may be harmed or rendered inoperable by natural or man-made disasters,including earthquakes,flooding and power outages,whichmay render it dif

264、ficult or impossible for us to perform our research,development and testing for some period of time.The inability to perform our research and development activities mayresult in the loss of partners or harm our reputation,and we may be unable to regain those partnerships in the future.Our insurance

265、coverage for damage to our property and the disruptionof our business may not be sufficient to cover all of our potential losses,including the loss of time as well as the costs of lost opportunities,and may not continue to be available to us onacceptable terms,or at all.16 Obtaining regulatory appro

266、val in the United States does not ensure we will obtain regulatory approval in other countries.We will aim to obtain regulatory approval in the U.S.as well as in other countries.To obtain regulatory approval to market our proposed products outside of the U.S.,we and anycollaborator must comply with

267、numerous and varying regulatory requirements in other countries regarding safety and efficacy.Approval procedures vary among countries and can involveadditional product testing and additional administrative review periods.The time required to obtain approval in other countries might differ significa

268、ntly from that required to obtain FDAapproval.The regulatory approval process in other countries include all of the risk associated with FDA approval as well as additional,presently unanticipated risks.Regulatory approval inone country does not ensure regulatory approval in another,but a failure or

269、delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects associated with regulatory approval in theU.S.,

270、including the risk that our product candidates may not be approved for all indications requested and that such approval may be subject to limitations on the indicated uses for whichthe product may be marketed.In addition,failure to comply with applicable regulatory requirements in other countries ca

271、n result in,among other things,warning letters,fines,injunctions,civil penalties,recall or seizure of products,total or partial suspension of production,refusal of the government to renew marketing applications and criminal prosecution.If we are unable to design,conduct and complete clinical trials

272、successfully,we will not be able to obtain regulatory approval for our products.In order to obtain FDA approval for our drug product candidates,we must submit to the FDA a New Drug Application,or NDA,demonstrating that the product candidate is safe andeffective for its intended use.This demonstratio

273、n requires significant research and animal tests,which are referred to as preclinical studies,as well as human tests,which are referred to asclinical trials.Any clinical trials we conduct or that are conducted by our partners may not demonstrate the safety or efficacy of our product candidates.Succe

274、ss in pre-clinical testing and earlyclinical trials does not ensure that later clinical trials will be successful.Results of later clinical trials may not replicate the results of prior clinical trials and pre-clinical testing.Even if theresults of one or more of our clinical trials are positive,we

275、may have to commit substantial time and additional resources to conducting further preclinical studies or clinical trials before wecan submit NDAs or obtain FDA approvals for our product candidates,and positive results of a clinical trial may not be replicated in subsequent trials.Clinical trials ar

276、e very expensive and difficult to design and implement.The clinical trial process is also time-consuming.Furthermore,if participating patients in clinical studies sufferdrug-related adverse reactions during the course of such trials,or if we or the FDA believe that participating patients are being e

277、xposed to unacceptable health risks,we will have tosuspend or terminate our clinical trials.Failure can occur at any stage of the trials,and we could encounter problems that cause us to abandon clinical trials or to repeat clinicalstudies.Further,because our product candidates are all in the same cl

278、ass of compounds,failure in one clinical trial may cause us or our partners to have to suspend or terminate otherclinical trials.For example,if toxicity issues were to arise in one clinical trial,it could indicate that all of our product candidates have toxicity issues.In addition,the completion of

279、clinical trials can be delayed by numerous factors,including:delays in identifying and agreeing on acceptable terms with prospective clinical trial sites;slower than expected rates of patient recruitment and enrollment;increases in time required to complete monitoring of patients during or after par

280、ticipation in a trial;and unexpected need for additional patient-related data.Any of these delays,if significant,could impact the timing,approval and commercialization of our product candidates and could significantly increase our overall costs of drugdevelopment.Even if our clinical trials are comp

281、leted as planned,their results may not support our expectations or intended marketing claims.The clinical trials process may fail to demonstrate thatour products are safe and effective for indicated uses.Such failure would cause us to abandon a product candidate for some indications and could delay

282、development of other productcandidates.17 Government agencies may establish usage guidelines that directly apply to our proposed products or change legislation or regulations to which we are subject.Government usage guidelines typically address matters such as usage and dose,among other factors.Appl

283、ication of these guidelines could limit the use of products that we maydevelop.In addition there can be no assurance that government regulations applicable to our proposed products or the interpretation thereof will not change and thereby prevent themarketing of some or all of our products for a per

284、iod of time or permanently.The FDAs policies may change and additional government regulations may be enacted that could prevent ordelay regulatory approval of our product candidates.We cannot predict the likelihood,nature or extent of adverse government regulation that may arise from future legislat

285、ion oradministrative action,either in the U.S.or in other countries.Our product candidates may be classified as a drug or a medical device,depending on the mechanism of action or indication for use and prior precedent,and a change in the classificationmay have an adverse impact on our revenues or ou

286、r ability to obtain necessary regulatory approvals.Several potential indications for our product candidates may be regulated under the medical device regulations of the FDA administered by the Center for Devices and RadiologicalHealth and the same physical product may be regulated by the FDAs Center

287、 for Drug Evaluation and Research for another indication.Alternatively the products could be classified ascombination products,in which case both the device and drug centers jointly review the submission.The products may be designated by the FDA as a drug or a medical device dependingupon the regula

288、tory definition of a drug and a device,their primary mode of action and the indications for use or product claims.For example,for NVC-422,if the indication is for flushing ofurinary catheters,we believe it would be classified as a medical device,whereas we believe it would be considered a drug when

289、it is indicated for the prevention of urinary tract infection.The use of NVC-101 as a solution for cleansing and debriding,NeutroPhase,was cleared as a Class I medical device.The determination as to whether a particular indication is considered adrug or a device is also based in part upon precedent.

290、A reclassification by the FDA of an indication from a device to a drug indication during our development for that indication couldhave a significant adverse impact due to the more rigorous and lengthy approval process required for drugs,as compared to medical devices.Such a change in classification

291、cansignificantly increase development costs and prolong the time for development and approval,thus delaying revenues.A reclassification of an indication after approval from a drug to adevice could result in a change in classification for reimbursement.In many cases,reimbursement for devices is signi

292、ficantly lower than for drugs and there could be a significant negativeimpact on our revenues.We and our collaborators are and will be subject to ongoing FDA obligations and continued regulatory review,such as continued safety reporting requirements,and we and ourcollaborators may also be subject to

293、 additional FDA post-marketing obligations or new regulations,all of which may result in significant expense and which may limit our ability tocommercialize our medical device and drug products candidates.Any regulatory approvals that we receive may also be subject to limitations on the indicated us

294、es for which the product may be marketed or contain requirements for potentially costlypost-marketing follow-up studies.The FDA may require us to commit to perform lengthy Phase IV post-approval studies(as further described below),for which we would have to expendadditional resources,which could hav

295、e an adverse effect on our operating results and financial condition.In addition,if the FDA approves any of our drug product candidates,the labeling,packaging,adverse event reporting,storage,advertising,promotion and record keeping for the drug will be subject to extensive regulatory requirements.Th

296、e subsequent discovery ofpreviously unknown problems with the drugs,including adverse events of unanticipated severity or frequency,may result in restrictions on the marketing of the drugs or the withdrawal ofthe drugs from the market.If we are not able to maintain regulatory compliance,we may be su

297、bject to fines,suspension or withdrawal of regulatory approvals,product recalls,seizure ofproducts,operating restrictions and criminal prosecution.Any of these events could prevent us from marketing any products we may develop and our business could suffer.Conducting clinical trials of our product c

298、andidates may expose us to expensive liability claims,and we may not be able to maintain liability insurance on reasonable terms or at all.The risk of clinical trial liability is inherent in the testing of pharmaceutical and medical device products.If we cannot successfully defend ourselves against

299、any clinical trial claims,wemay incur substantial liabilities or be required to limit or terminate testing of one or more of our product candidates.Our inability to obtain sufficient clinical trial insurance at an acceptablecost to protect us against potential clinical trial claims could prevent or

300、inhibit the commercialization of our product candidates.Our current clinical trial insurance covers individual andaggregate claims up to$3.0 million.This insurance may not cover all claims and we may not be able to obtain additional insurance coverage at a reasonable cost,if at all,in the future.Ina

301、ddition,if our agreements with any future corporate collaborators entitle us to indemnification against product liability losses and clinical trial liability,such indemnification may not beavailable or adequate should any claim arise.If we use biological and hazardous materials in a manner that caus

302、es injury,we could be liable for damages.Compliance with environmental regulations can be expensive,andnoncompliance with these regulations may result in adverse publicity and potentially significant monetary damages and fines.Our activities currently require the controlled use of potentially harmfu

303、l biological materials and other hazardous materials and chemicals and may in the future require the use ofradioactive compounds.We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use,storage,handling or disposal of these materials.In theevent o

304、f contamination or injury,we could be held liable for any resulting damages,and any liability could exceed our resources or any applicable insurance coverage we may have.Additionally,we are subject,on an ongoing basis,to U.S.federal,state and local laws and regulations governing the use,storage,hand

305、ling and disposal of these materials and specifiedwaste products.The cost of compliance with these laws and regulations might be significant and could negatively affect our operating results.In addition,if more stringent laws andregulations are adopted in the future,the costs of compliance with thes

306、e new laws and regulations could be substantial or could impose significant changes in our testing and productionprocess.18 The pharmaceutical and biopharmaceutical industries are characterized by patent litigation and any litigation or claim against us may cause us to incur substantial costs,and co

307、uldplace a significant strain on our financial resources,divert the attention of management from our business and harm our reputation.There has been substantial litigation in the pharmaceutical and biopharmaceutical industries with respect to the manufacture,use and sale of new products that are the

308、 subject ofconflicting patent rights.For the most part,these lawsuits relate to the validity,enforceability and infringement of patents.Generic companies are encouraged to challenge the patents ofpharmaceutical products in the United States because a successful challenger can obtain six months of ex

309、clusivity as a generic product under the Hatch-Waxman Act.We expect that wewill rely upon patents,trade secrets,know-how,continuing technological innovations and licensing opportunities to develop and maintain our competitive position and we may initiateclaims to defend our intellectual property rig

310、hts as a result.Other parties may have issued patents or be issued patents that may prevent the sale of our products or know-how or require usto license such patents and pay significant fees or royalties in order to produce our products.In addition,future patents may issue to third parties which our

311、 technology may infringe.Because patent applications can take many years to issue,there may be applications now pending of which we are unaware that may later result in issued patents that our products mayinfringe.Intellectual property litigation,regardless of outcome,is expensive and time-consuming

312、,could divert managements attention from our business and have a material negative effect onour business,operating results or financial condition.If such a dispute were to be resolved against us,we may be required to pay substantial damages,including treble damages andattorneys fees if we were to be

313、 found to have willfully infringed a third partys patent,to the party claiming infringement,develop non-infringing technology,stop selling any products wedevelop,cease using technology that contains the allegedly infringing intellectual property or enter into royalty or license agreements that may n

314、ot be available on acceptable orcommercially practical terms,if at all.Our failure to develop non-infringing technologies or license the proprietary rights on a timely basis could harm our business.Modification of anyproducts we develop or development of new products thereafter could require us to c

315、onduct additional clinical trials and to revise our filings with the FDA and other regulatory bodies,which would be time-consuming and expensive.In addition,parties making infringement claims may be able to obtain an injunction that would prevent us from selling any products wedevelop,which could ha

316、rm our business.We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.Some of our employees may have been previously employed at universities or other biotechnology or pharmaceutical companies,inc

317、luding our competitors or potential competitors.Although no claims against us are currently pending,we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or otherproprietary information of their former employers.Litigation may be neces

318、sary to defend against these claims.Even if we are successful in defending against these claims,litigation couldresult in substantial costs and be a distraction to management.If we fail in defending such claims,in addition to paying money damages,we may lose valuable intellectual property rights orp

319、ersonnel.A loss of key research personnel or their work product could hamper or prevent our ability to commercialize product candidates,which could severely harm our business.If product liability lawsuits are brought against us,they could result in costly litigation and significant liabilities.The p

320、roduct candidates we are developing or attempting to develop will,in most cases,undergo extensive clinical testing and will require approval from the applicable regulatoryauthorities prior to sale.However,despite all reasonable efforts to ensure safety,it is possible that we or our collaborators wil

321、l sell products which are defective,to which patients react inan unexpected manner,or which are alleged to have side effects.The manufacture and sale of such products may expose us to potential liability,and the industries in which our productsare likely to be sold have been subject to significant p

322、roduct liability litigation.Any claims,with or without merit,could result in costly litigation,reduced sales,significant liabilities anddiversion of our managements time and attention and could have a material adverse effect on our financial condition,business and results of operations.If a product

323、liability claim is brought against us,we may be required to pay legal and other expenses to defend the claim and,if the claim is successful,damage awards may not becovered,in whole or in part,by our insurance.We may not have sufficient capital resources to pay a judgment,in which case our creditors

324、could levy against our assets.We may also beobligated to indemnify our collaborators and make payments to other parties with respect to product liability damages and claims.Defending any product liability claims,or indemnifyingothers against those claims,could require us to expend significant financ

325、ial and managerial resources.19 Failure to obtain sufficient quantities of products and substances necessary for research and development,pre-clinical trials,human clinical trials and product commercialization thatare of acceptable quality at reasonable prices or at all could constrain our product d

326、evelopment and have a material adverse effect on our business.We have relied and will continue to rely on contract manufacturers for the foreseeable future to produce quantities of products and substances necessary for research anddevelopment,pre-clinical trials,human clinical trials and product com

327、mercialization.It will be important to us that such products and substances can be manufactured at a cost and inquantities necessary to make them commercially viable.At this point in time,we have not attempted to identify,and do not know whether there will be,any third party manufacturers whichwill

328、be able to meet our needs with respect to timing,quantity and quality for commercial production.In addition,if we are unable to contract for a sufficient supply or required products andsubstances on acceptable terms,or if we should encounter delays or difficulties in our relationships with manufactu

329、rers,our research and development,pre-clinical and clinical testingwould be delayed,thereby delaying the submission of product candidates for regulatory approval or the market introduction and subsequent sales of products.Any such delay may have amaterial adverse effect on our business,financial con

330、dition and results of operations.Because our clinical development activities rely heavily on sensitive and personal information,an area which is highly regulated by privacy laws,we may not be able to generate,maintainor access essential patient samples or data to continue our research and developmen

331、t efforts in the future on reasonable terms and conditions,which may adversely affect our business.As a result of our clinical development,we will have access to very sensitive data regarding the patients enrolled in our clinical trials.This data will contain information that is personalin nature.Th

332、e maintenance of this data is subject to certain privacy-related laws,which impose upon us administrative and financial burdens,and litigation risks.For instance,the rulespromulgated by the Department of Health and Human Services under the Health Insurance Portability and Accountability Act,or HIPAA

333、,creates national standards to protect patientsmedical records and other personal information in the U.S.These rules require that healthcare providers and other covered entities obtain written authorizations from patients prior todisclosing protected health care information of the patient to companies like NovaBay.If the patient fails to execute an authorization or the authorization fails to conta