NovaBay Pharmaceuticals CEO Issues Letter to Stockholders

EMERYVILLE, Calif.–(BUSINESS WIRE)–NovaBay^® Pharmaceuticals, Inc. (NYSE American: NBY) announces that Chief Executive Officer Justin Hall has issued the following Letter to Stockholders:

To My Fellow Stockholders:

I am pleased to report that we have made solid progress since the acquisition of DERMAdoctor last November. By combining the two companies, we have successfully transitioned from a single-product company to one with a strong presence in both the large and growing eyecare and skincare markets. Not only have we diversified our product portfolio, we have gained substantial opportunities for growth with multiple products in both domestic and international sales channels.

We strengthened our Avenova franchise in 2021 as more people than ever purchased our antimicrobial lid and lash spray. Sales of Avenova spray increased by 15% on 31% growth in the number of units sold. Importantly, 74% of Avenova spray product revenue came from non-prescription channels, reflecting the ongoing success of our consumer marketing initiatives.

Among our strategic growth initiatives for this year is to introduce innovative, scientifically developed over-the-counter products under both the Avenova brand and various DERMAdoctor collections. To date, we have already introduced three new products. All of our product launches are being executed under our low-cost model, allowing us to test market acceptance before committing a large investment.

In January we expanded our Avenova product portfolio with the launch of lubricating eye drops. These new eye drops were designed to provide immediate relief of irritated, gritty, scratchy or blurry eyes with a mode of action that is novel to the eyecare market. While effective as a standalone treatment, these drops combine with Avenova Warm Eye Compress and Avenova spray to become our “science for sore eyes” three-step daily regimen for the at-home management of dry eye. Like other Avenova products, these new eye drops are available on Amazon.com and Avenova.com, and are offered for resale by eyecare specialists through our physician dispensed channel.

More recently we launched two products within the DERMAdoctor Calm Cool + Corrected collection. Both products were created by our new Chief Product Officer Dr. Audrey Kunin, a board-certified dermatologist and founder of DERMAdoctor. This collection is specifically formulated to hydrate and repair challenged, dry, eczema-prone skin. The first new product is a hyaluronic acid moisture recovery serum that is uniquely formulated with vitamin C, dragon fruit and water-binding cactus botanicals to restore natural hydration to parched skin. Our newest launch is a hydrating cleansing oil, a soap-free and pH-balanced product designed to moisturize skin and remove makeup while keeping the skin hydrated. Both products are available on Amazon.com and dermadoctor.com.

Importantly, several more products are under development or are being prepared for commercial launch. Our focus is to create science-based, problem-solving accessible skin solutions for the improved well-being of everyone.

Beyond our product pipeline, we have opportunities for growth by expanding the marketing and distribution of our current products. The combined Avenova and DERMAdoctor teams bring NovaBay extensive expertise in developing robust social media programs and a strong marketing presence across all digital channels, allowing consumers to engage with our brands through social media and influencer campaigns. Among these, we are building upon Audrey’s established position as a skincare key opinion leader through interviews with popular online publications such as Glam.com, Cosmopolitan.com, CNN.com and MarieClaire.com. You may also have seen Audrey as a recent guest on QVC programs “Cheers! to shopping with Leah and Shawn” and “Get Ready, Gorgeous with Ali” featuring our DERMAdoctor Calm Cool + Corrected 1% Colloidal Oatmeal Eczema + Dermatitis Clinical Repair Balm. Due to the popularity and success of her appearances, Audrey is expected to make additional QVC appearances this year.

We also are expanding marketing activities outside the United States. We recently engaged a premier Chinese marketing firm to drive consumer sales of DERMAdoctor products in the vast China market. In March, our new partner began managing DERMAdoctor’s flagship store on Tmall.com, which is the leading business-to-consumer online retailer in China. Social media platforms like TikTok are effective ways to attract new customers in China, and our marketing partner brings an extensive network of bloggers and influencers, along with strong social media brand building capabilities. Additionally, we are looking at ways to leverage our network of international distributors and retailers to further sales of NovaBay products throughout the world.

Another synergy from the DERMAdoctor acquisition is the ability to combine warehouse operations. All orders for Avenova placed through our website are now being fulfilled by DERMAdoctor’s facility in Kansas City. This provides both a cost savings and gives us greater control over our product fulfillment and supply chain at a time when many companies have struggled with supply chain issues and the related effect on inflation and margins. I am pleased to report that to date NovaBay has experienced only minor supply chain disruptions, limiting the inflationary impact on our business from issues outside of our control. Among these issues beyond our control is Amazon’s recent decision to raise vendor fees, which is resulting in minor pressure on our margins. To mitigate any negative impact, we will likely need to modestly increase our product prices to support margins in this high inflation environment.

There is plenty of opportunity for us to expand into new addressable markets for certain existing products, and later this year we plan to enter an entirely new market that leverages our full expertise. Up until now, Avenova has been focused on the dry eye market. Many women are turning to eyelash extensions to enhance their appearance while eliminating the need for mascara, which can cause their natural lashes to fall out permanently, as well as increasing the risk of irritation and infection. We know our pure hypochlorous acid, antimicrobial Avenova spray can be a real benefit to many consumers in this marketplace. This is a significant new commercial opportunity as the global lash extension market is primed for rapid growth with a projected 7.6% growth rate through 2031, reaching $2.4 billion in sales that year. Moving into this market will be our first time integrating eyecare and beauty, which will allow for cross-selling opportunities afforded by a demographic overlap with DERMAdoctor customers.

In closing, I reiterate my enthusiasm for NovaBay’s future. We are executing on a focused strategy aimed at creating a stronger company with faster topline growth and expanded footprints in the eyecare and skincare markets. We have significant initiatives underway to augment current product sales and accelerate our growth. Given the timing of our initiatives, we expect the majority of our growth in 2022 will come in the second half of the year. Thankfully, with no major debt instruments, we are unencumbered by rising interest rates as we pursue a clear path to profitability.

As a stockholder of NovaBay, you should have received your proxy information in the mail or via email. I urge you to vote your shares and invite you to join our virtual 2021 Annual Meeting of Stockholders being held May 11, 2022 at 11:00 a.m. Pacific time. Instructions on how to vote and how to participate in the meeting are included in the proxy.

We have an ambitious agenda in front of us and I am confident that we can capitalize on our transformed company to achieve our business and financial goals. I want to thank you, our stockholders, for your continued support of NovaBay.

Sincerely,

Justin Hall, Esq.

Chief Executive Officer and General Counsel

April 25, 2022

About NovaBay Pharmaceuticals, Inc:

NovaBay Pharmaceuticals, Inc. is a pharmaceutical company that develops and sells scientifically created and clinically proven consumer products for the eyecare and skincare markets. Avenova^® is the most prescribed antimicrobial lid and lash spray and DERMAdoctor is a premium skincare brand offering more than 30 dermatologist-developed skincare products sold through traditional domestic retailers, digital beauty channels and international distributors.

NovaBay Pharmaceuticals Forward-Looking Statements

Except for historical information herein, matters set forth in this press release may be forward looking within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements about the commercial progress and future financial performance of NovaBay Pharmaceuticals, Inc. This release contains forward-looking statements that are based upon management’s current expectations, assumptions, estimates, projections and beliefs. These statements include, but are not limited to, statements regarding our business strategies, current product offerings, marketing efforts, and any future revenue that may result from selling such products, as well as generally the Company’s expected future financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or achievements to be materially different and adverse from those expressed in or implied by the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, risks and uncertainties relating to the size of the potential market for our products, the integration of DERMAdoctor’s operations into the Company’s business, the possibility that the available market for the Company’s products will not be as large as expected, the Company’s products will not be able to penetrate one or more targeted markets, and revenues will not be sufficient to meet the Company’s cash needs. Other risks relating to NovaBay’s business, including risks that could cause results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay’s latest Form 10-Q/K filings and Registration Statement on Form S-1 filing with the Securities and Exchange Commission, especially under the heading “Risk Factors.” The forward-looking statements in this release speak only as of this date, and NovaBay disclaims any intent or obligation to revise or update publicly any forward-looking statement except as required by law.

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Avenova Purchasing Information

For NovaBay Avenova purchasing information:

Please call 800-890-0329 or email [email protected]
Avenova.com

DERMAdoctor Purchasing Information

For DERMAdoctor purchasing information:

Please call 877-337-6237 or email [email protected]
DERMAdoctor.com

Contacts

NovaBay Contact
Justin Hall

Chief Executive Officer and General Counsel

510-899-8800

[email protected]

Investor Contact
LHA Investor Relations

Jody Cain

310-691-7100

[email protected]