ARYx Therapeutics, Inc. Announces Procter & Gamble Exercises Option to End Collaboration on ATI-7505

ARYx Therapeutics, Inc. Announces Procter & Gamble Exercises Option to End Collaboration on ATI-7505
Company Seeks New Partner

FREMONT, Calif., Jul 02, 2008 (BUSINESS WIRE) -- ARYx Therapeutics, Inc., (NASDAQ:ARYX), a biopharmaceutical company, today announced that Procter & Gamble Pharmaceuticals, Inc. (P&G) has utilized a one-time thirty day cancellation option linked to the completion of a Thorough QT (TQT) study to end the collaboration agreement between the companies covering the late-stage development and commercialization of ATI-7505, a prokinetic agent in Phase 2 clinical trials for chronic constipation and functional dyspepsia. The results of the TQT study are contained in an accompanying press release.

"We are surprised P&G would cancel our collaboration after receiving the results of the TQT study given that we achieved a successful result at the study's primary endpoint, and are disappointed in their decision to return the rights to ATI-7505 to us. We have been informed by P&G their decision is based on their view of certain commercial and technical criteria, and that the program no longer fits into their future plans. This decision by P&G does not in any way diminish our confidence in ATI-7505, and we believe the results from the TQT study, along with continued positive clinical and preclinical data, will allow moving ATI-7505 into late-stage development once the program is in the hands of a new partner," said Dr. Paul Goddard, Chief Executive Officer and Chairman of ARYx Therapeutics.

Under the terms of the collaboration agreement between P&G and ARYx Therapeutics, the results from the just-completed TQT study qualified ARYx for the Tier 1, or highest, milestone payment from P&G. The collaboration agreement provides P&G a thirty-day option period from the lock of the database for the TQT study to cancel the collaboration or agree to pay ARYx the milestone payment provided for under our collaboration agreement. P&G has exercised their option to cancel the agreement effective immediately. However, P&G has also been very supportive in agreeing to a transition plan for handing the program back to ARYx to allow it to pursue an optimal partnering package.

As part of the transition plan, the on-going Phase 2 studies in chronic constipation and functional dyspepsia will be terminated in an orderly method. No new patients will be enrolled and those currently on therapy will be withdrawn from the studies over the coming weeks. This will allow ARYx to continue to focus its resources on the on-going trials on ATI-5923 and ATI-2042.

Conference Call and Webcast Information

A conference call and simultaneous webcast to discuss these results and accompanying events will be held today, July 2, 2008, at 2:30pm Pacific Time. The webcast will be available live via the internet by accessing the ARYx website at www.aryx.com or through Thomson at www.earnings.com. Alternatively, the call can be accessed by dialing 866-700-5192. Participants outside of the U.S. should dial 617-213-8833. The passcode for the call is 32052837. Replays of the call will be available until July 16, 2008 at the Company's website or by dialing 888-286-8010 or 617-801-6888 (international), passcode 49969932.

About ARYx Therapeutics, Inc.

ARYx Therapeutics is a biopharmaceutical company focused on developing a portfolio of internally discovered products designed to eliminate known safety issues associated with well-established, commercially successful drugs. ARYx uses its RetroMetabolic Drug Design(TM) technology to design structurally unique molecules that retain the efficacy of these original drugs but are metabolized through a potentially safer pathway to avoid specific adverse side effects associated with these compounds. ARYx currently has four products in clinical trials: an oral anticoagulant agent for patients at risk for the formation of dangerous blood clots, ATI-5923; an oral anti-arrhythmic agent for the treatment of atrial fibrillation, ATI-2042; a prokinetic agent for the treatment of various gastrointestinal disorders, ATI-7505; and, an agent for the treatment of schizophrenia and other psychiatric disorders, ATI-9242. Please visit our web site at www.aryx.com for additional information.

About ATI-7505

ATI-7505 is our product designed to normalize upper and lower gastrointestinal motility to treat various GI disorders. A potent agonist of 5-HT4 receptors which exist throughout the GI tract regulating gastric emptying and the motility of food through the intestines, ATI-7505 is engineered to maintain the efficacy of cisapride, a drug that reached peak sales of $1.0 billion a year prior to being withdrawn from the market in 2000 due to life-threatening cardiac toxicities. However, unlike cisapride, ATI-7505 is not dependent upon a rate-limiting cytochrome P450 enzyme in the liver for metabolism and therefore avoids the build-up of drug levels associated with cisapride's toxicities. In addition, ATI-7505 is more selective than cisapride having minimal activity on the hERG channel in the heart and virtually no activity at the 5-HT3 or other serotonergic receptors. To date, over 600 patients have been treated with ATI-7505 and intensely monitored for cardiac effects with no cardiac QT prolongation seen.

Forward-looking Statements

This press release contains forward-looking statements, including, without limitation, statements related to the timing and availability of our clinical results, the initiation of new clinical trials, the completion of preclinical work, the ability of preclinical packages to lead to further clinical trials, the ability to find partners to help advance our product candidates through clinical development. Words such as "expect," "will," "believes" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon the company's current expectations. Forward-looking statements involve risks and uncertainties. The company's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, the risk that collaborative arrangements will likely place the development of our product candidates outside of our control, the risk that we may have to alter our development and commercialization plans if collaborative relationships are not established for ATI-7505, ATI-5923 and ATI-2042, the risk that our product candidates may not demonstrate safety and efficacy or lead to regulatory approval, the risk that we may be unable to raise additional capital when needed which would force us to delay, reduce or eliminate product development programs, the risk that any failure or delay in commencing or completing clinical trials for our product candidates could severely harm our business, and the risk that third party manufacturers could delay or prevent the clinical development of our product candidates. These and other risk factors are discussed under "Risk Factors" and elsewhere in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein.

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