SecProbe.io

Mail Stop 6010

         March 20, 2007

Ron Najafi, Ph.D.
Chairman of the Board, Chief Executive Officer and President
NovaBay Pharmaceuticals, Inc.
5980 Horton Street – Suite 550
Emeryville, California  94608

Re:   NovaBay Pharmaceuticals, Inc.
Form S-1 Registration Statement
 File No. 333-140714

Dear Mr. Najafi:

We have reviewed your filing and have the following comments.  Where indicated, we
think you should revise your document in response to these comments.  If you disagree, we will
consider your explanation as to why our comment is inapplicable or a revision is unnecessary.  Please be as detailed as necessary in your explanation.  In some of our comments, we may ask you to provide us with supplemental information so we may better understand your disclosure.  After reviewing this information, we may or may not raise additional comments.

Please understand that the purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to enhance the overall disclosure in your filing.  We look forward to working with you in these respects.  We welcome any questions you may have about our comments or on any other aspect of our review.  Feel free to call us at the telephone numbers listed at the end of this letter.

Comments Applicable to the Entire Document

1. We note that your filing contains numerous omissions throughout the prospectus which relate to the offering price range or the number of shares you will sell.  These omissions include but are not limited to:

• Summary Financial Data
• Use Of Proceeds
• Capitalization • The Option Grants Table
• Shares Eligible For Future Sale
• The Principal Stockholders Table

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 2
• Dilution • Description of Capital Stock

 Rule 430A requires you to include this information in your filing based upon an estimate of the offering price within a bona fide range you disclose on the cover page and based upon an estimate of the number of shares you will sell.  We consider a bona fide range to be $2 if the price is under $20 and 10% if it is above $20.  You should include the required information in an amendment prior to circulating a “red herring” prospectus.

2. Provide us with copies of all the graphic, photographic or artistic materials you intend to include in the prospectus prior to its printing and use.  Please note that we may have comments.  Please also note that all textual information in the graphic material should be brief and comply with the plain English guidelines regarding jargon and technical language.

3. We note that you have not filed a number of agreements, including your collaboration and licensing agreement with Alcon Manuf acturing, your opinion of counsel and your
financial advisory and investor relations consulting agreement with PM Holdings Ltd.  We note further that the Exhibit List indicates that you are seeking confidential treatment for portions of the Alcon agreement.  As of today’s date, Commission records do not indicate that you have filed such a request.   Please note that Rule 406, which applies to requests for confidential treatment, specifies that your request for confidential treatment should have been filed at the same time you filed the registration statement.   Please file the application promptly.

4. Please update your financial statements and related financial information as required by Rule 3-12 of Regulation S-X.

Prospectus Summary – page 1

Overview

5. Please disclose, in the “Overview” section of the summary, that you have had no revenues to date and provide quantified disclosure regarding your losses.  Also briefly discuss the source of your funds to date.

6. Please also disclose in the “Overview” section that you have only conducted in vitro tests and have not begun human testing of any of your products.

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 3
7. Please revise the sections called “Our Solution” and “Our Strategy” to present a balanced picture of your company.  You should identify the impediments to your strategy and your solution with the same degree of detail you use to describe the positive aspects.

8. Do you have a website?  If so, include its address with your other corporate information on page 3.

Risk Factors – page 7

We currently do not have any marketable products, and if we are unable to develop and obtain
regulatory approval for products that we devel op, we may never generate product revenues. –
page 8

If we fail to obtain the necessary regulatory approvals, we will not be able to commercialize our
proposed products, and we will not generate product revenues. – page 12

9. These risk factors appear to be duplicative.  Please consolidate them and eliminate any overlap.

If we do not maintain our current research collaboration with Alcon and enter into additional
collaborations, a portion of our funding may decrease and inhibit our ability to develop new
products. – page 9

10. Please expand the risk factor to identify and briefly describe the terms of your agreement with Alcon, including the term.  The disclosure should also be quantified.

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. – page 10

11. The disclosure in this risk factor should be quantified to the extent practicable.  For example, how much do you anticipate it will cost to commercialize one of your proposed products?  How long do you anticipate the proceeds from this offering will last?  What is your current burn rate?  Do you anticipate that it will increase in the future?  You need to provide a factual context for an investor to evaluate the risk you are describing.

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 4
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 our business
will be harmed, which would impair our future revenue and profitability – page 11

It may be difficult to recruit and retain independe nt members for our Board of Directors. – page
11

12. In both risk factors, please disclose any difficulties you may have had to date.

If our facilities become inoperable, we will be unable to perform our research and development
activities, fulfill the requirements under our collaboration agreement and continue developing
products and, as a result, our business will be harmed. – page 12

13. Please expand the risk factor to explain why your insurance coverage for damage to your property and the disruption of your business may not be sufficient to cover all of your potential losses.

Government agencies may establish usage guidelines that directly apply to our proposed
products or change legislation or regulations to which we are subject. – page 13

14. You appear to be describing two separate risks in this risk factor.  Please separate the risks and present each of them under an appropriate and descriptive subheading.

15. Please expand the second paragraph of the risk factor to identify the indications you are referring to and briefly explain why they might be regulated as medical devices.  You also need to be more specific and descriptive about the potential adverse consequences.

Conducting clinical trials of our product candidates may expose us to expensive liability claims,
and we may not be able to maintain liability insurance on reasonable terms or at all. – page 14

16. Please disclose the amount of the liability coverage you carry.

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, maintain or
access essential patient samples or data to continue our research and development efforts in the
future on reasonable terms and conditions, which may adversely affect our business. – page 16

17. Please identify the “certain privacy-related laws” you are referring to and describe the obligations they impose on you.  Also, explain why you might not be able to “access essential patient samples or data.”  The information in the risk factor is currently so

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 5
vague and generic that the risk to you is not clear.  Please revise it to include an adequate factual context.

If we are unable to protect our intellectual pr operty, our competitors could develop and market
products similar to ours that may reduce demand for our products. – page 16.

18. We note that the risk factor indicates that you apply for patents covering your “technologies.”  Please disclose whether you also apply for patents covering the substance of your proposed products.  If the substance of your proposed products is not patentable, you should clearly say so and discuss the potential adverse consequences.

19. Please disclose the types of intellectual property you currently possess.  For example, do you own patents, trademarks, licenses, etc.?  If so, you should disclose how many you have and briefly describe what they cover.   If not, you should clearly say that you don’t.

If we are unable to protect the intellectual property and market exclusivity of Aganocide
compounds and products, thereby enabling other parties to commercialize competing products,
our ability to generate revenues from the sale of our products may be limited or diminished. –
page 17

20. Please refer to the discussion of NVC-101 in the fourth paragraph of the risk factor.  This appears to be the first reference to this product in the registration statement, so readers will not know what you are referring to.   Pleas e provide appropriate disclosure regarding
the product, its developmental status, purpose, etc.  The information you need to provide is that which will put the risk and its consequences in context.

If we were deemed to be an investment compa ny, we would become subject to provisions of the
Investment Company Act that likely would have a material adverse impact on our business. –
page 24

21. The information included in this risk factor raises more questions than it answers. Please identify the exception that you are relying on and why it is applicable to you.  Explain why you might be considered an investment company.  Please also explain what circumstances would require you to register as an investment company, and what, specifically the consequences would be for the way you operate your business.

22. It is unclear to us why you suggest that the SEC has not “interpreted” the exception you are relying on.  Please either delete the statement, or explain to us, with a view towards disclosure in the registration statement, why your situation is outside the safe harbor

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 6
established by the Commission for companies involved in research and development activities.  We may have additional comments after reviewing your response.

Use of Proceeds – page 26

23. Please expand the disclosure to describe, in significantly greater detail, what you will use the proceeds of this offering for.  For example, please expand the first bullet to identify the specific products that the proceeds will be used to develop, the indication the product will be targeted toward, how much will be used for each product, how far along in the development process you anticipate the funds will take you, how much additional funding you will need to complete development, where you anticipate obtaining those funds, and other material information.  Provide similar information for each proposed purpose included in the second bullet.  In this regard, it appears that Alcon is paying for the research on your primary product.  Your revised disclosure should also show how you are allocating proceeds you receive from Alcon among your research programs.

Management’s Discussion and Analysis – page 32

24. Please delete the cross reference to the risk factor disclosure currently found in the last paragraph of page 32.  Since the risk factors summarize more detailed disclosure contained here, the cross reference is inappropriate.

Research and Development Expense - page 33

25. Please expand your disclosure by referring to  the Division of Corporation Finance
“Current Issues and Rulemaking Projects Quarterly Update” under section VIII – Industry Specific Issues – Accounting and Disclosure by Companies Engaged in Research and Development Activities.  You can find it at the following website address:
http://www.sec.gov/divisions/corpfin/cfcrq032001.htm#secviii .

a. Please disclose the costs incurred during each period presented and to date for each of your major research and development projects. If you do not maintain any research and development costs by project; disclose that fact and explain why management does not maintain and evaluate research and development costs by project.  Provide other quantitative or qualitative disclosure that indicates the amount of the company’s resources being used on the project; and,

b. The risks and uncertainties associated with completing development on schedule and the consequences to operations, financial position and liquidity if the project is not completed timely.

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 7

Critical Accounting Policies and Estimates

Stock-Based Compensation - page 35

26. It appears that you have elected to use the calculated value method for stock-based awards to employees and directors and use the fair value method for non-employees.  If you grant awards to non-employees it appears that you must use the fair value method for employees, as well.  Please explain to us your basis for using the calculated value method for employees when you use the fair value method for non-employees.

27. Notwithstanding the preceding comment, please describe the change in accounting policy that will be required by SFAS 123R in subsequent periods as a public entity and the reasonably likely material future effects.  Please refer to the Interpretive Response to Question 4 in SAB Topic 14:B.

Liquidity and Capital Resources, page 38

28. You disclose that recently begun to generate revenue through your agreement with Alcon.  Please include a discussion of the expected effects of material new contracts and the achievement of milestones on operations and financial position.  Disclose the amount and timing of estimated milestone fees scheduled to be received and to be recognized as revenue from your collaborative agreement over each of the next five years.  Discuss any material uncertainties affecting the future realization of these revenues.

Quarterly Results of Operations, page 41

29. Please revise your pro forma net loss per share amounts to present this data only for the most recent fiscal year and interim period consistent with your presentations in other sections of the filing.  Please refer to Rule 11-02(c) of Regulation S-X.

Contractual Obligations, page 42

30. Please include the capital lease entered into in December 2006 in your updated table of Contractual Obligations.

Business – page 44

31. We note that your development efforts are all at the pre-clinical stage.  We do not understand why you have included so much detailed disclosure regarding your

Ron Najafi, Ph.D. Novabay Pharmaceuticals, Inc. March 20, 2007 Page 8
preliminary development of proposed products, and why you have given prominence to conclusions such as that you have “established proof of concept.”   In several instances you have even included statements such as “proof of concept expected 2008” and “test of concept expected 2008.”  Statistics indicate that most proposed drugs do not reach clinical testing, and even fewer result in products that are actually commercialized.  We think that inclusio