Product development cycles are an aspect of new product development that many investors fail to address as they go about assessing a company. Some years are “work” years while others find revenue growth from work performed years ago. An investor that can find and recognize when that revenue growth is about to happen is one that will profit.

Novabay Pharmaceuticals Inc., a clinical stage specialty pharmaceuticals company, works to develop synthetic anti-infective products for in-hospital and out-patient applications. The company’s latest product, based on synthetic N-chlorinated molecules, is showing solid progress in later stage development. These results could lead to a solid platform for anti-infective products of many varieties.

Although this latest product is designed to be used in applications that might suggest wide ranging sales and revenue growth in anti-infection eye, ear, sinus, bladder and contact lens solution applications, it is the product’s platform potential for other applications that may generate the largest revenue growth. “Platform,” as it were, is the real key to growth where specialty pharma is concerned. Many biotech type companies focus on developing products, as does Novabay, but if a platform can be developed where other like products can be delivered is found, revenue will likely jump far past individual product sales. In this respect, the company’s ongoing relationships with Alcon Manufacturing and Galderma S.A., where there is a project to market dermatological products under way, will aide in providing that future growth if the platform can be developed successfully. In either respect, however, it does seem that the company’s current lead product is nearing approvals, relatively speaking, and ready for marketing by related license partners.

The nature of developing products for dermatological and anti-infection application is such that one year’s revenue growth is difficult to compare with the next. Novabay, however, is currently in a development cycle where cash payments from its partners is flowing in very nicely. Its Acme research projects with Galderma S.A. has yielded approximately $5.5 million in milestone payments while its support from Alcon has brought in commitments of over $2 million for work being performed on catheter and other urinary tract infection projects. Given the product development cycle, these payments have also coincided with lower clinical trial costs, cost cutting measures and revenue cycle increases to make the company fairly attractive where its balance sheet is concerned.

Novabay Pharmaceuticals may not be the sexiest of investments but it has a solid measure of management working on a product and platform base that is generally considered a cash cow. If there were a time to consider looking deeper at a clinical stage pharma company, it may be now where Novabay is concerned.