Item 1.01 Entry into a Material Definitive Agreement.

NovaBay Pharmaceuticals, Inc. announced on March 25, 2009, that it entered into an agreement with Galderma S.A. to develop and commercialize NovaBay's novel proprietary AganocideŽ compounds. Under the terms of the agreement, Galderma receives exclusive worldwide, with the exception of certain Asian markets, of pharmaceutical products incorporating Aganocide compounds for dermatological conditions, excluding onychomycosis (nail fungus) and orphan drug indications.

Under the terms of the agreement, NovaBay expects to receive from Galderma up to $50 million upon achievement of certain development and regulatory milestones related to acne and impetigo indications and future royalties on net sales of products. The agreement also envisages further cooperation for additional dermatological products and indications. Under the agreement, NovaBay will also receive escalating double-digit royalties on net sales of products.

Galderma will be responsible for the development costs for acne and other indications, except in Japan, and for the ongoing development program for impetigo, after the achievement of a specified milestone. Galderma will also reimburse NovaBay for the use of its personnel in support of the collaboration. NovaBay retains the right to co-market products resulting from the agreement in Japan. In addition, NovaBay has retained all rights in other Asian markets outside Japan, and has exclusive rights to promote the products developed under the agreement in the hospital and other healthcare institutions in North America.

The statements in this Form 8-K relating to expected financial and other benefits to be received from the Galderma agreement are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. These risks and uncertainties include, among others:
the risk that results obtained in animal models may not be obtained in humans; the risk that milestones and net sales may not be achieved under the Galderma agreement; and the risk of unexpected delays in the regulatory process may delay the commencement or completion of clinical trials. Other risks relating to NovaBay and AganocideŽ compounds, including risks that could cause actual results to differ materially from those projected in the forward-looking statements in this press release, are detailed in NovaBay's Quarterly Report on Form 10-Q/A for the period ended September 30, 2008, under the caption "Risk Factors" in Item 1A of Part II of that report, which was filed with the Securities and Exchange Commission on November 14, 2008.

---