ARYx Therapeutics announces operating results for the third quarter of 2009

ARYx Therapeutics, Inc. (NASDAQ:ARYX) today reported results of operations and provided a general business update for the third quarter ended September 30, 2009.

“Our highest priority remains completing a partnership with a large pharmaceutical company on our oral antiarrythmic agent, budiodarone, for its late-stage development and anticipated commercialization,” stated Dr. Paul Goddard, ARYx chairman and chief executive officer. “We remain confident that a budiodarone partnership will be completed and that with the recently-executed $35 million committed equity line financing in place, we have the flexibility to get the right deal done with the right company. Looking beyond the completion of a budiodarone partnership, we continue to actively pursue a similar partnership for our oral gastrointestinal prokinetic agent, ATI-7505, and are seeking guidance from the United States Food and Drug Administration on the continued development of tecarfarin, our oral anticoagulant compound.”

Company Highlights

• Significant interest and activity by several large pharmaceutical companies is accelerating in the partnering efforts for budiodarone, leading ARYx to believe that the compound will be partnered in the near term. The early market penetration of Multaq® in the United States, a recently launched therapy also for the treatment of atrial fibrillation, continues to demonstrate a growing demand and interest for antiarrythmic therapies.
• Results were reported in July (see press release dated July 7, 2009) from the EmbraceAC study, the Phase 2/3 clinical trial comparing our oral anticoagulant therapy, tecarfarin, against warfarin in a blinded head to head study. At that time, 104 patients from the tecarfarin arm of the study were continued on treatment in an open-label safety extension and 95 of these patients will have remained on tecarfarin through the end of the extension treatment period that ends November 15, 2009. None of the patients in this extension phase dropped out due to drug related side effects. A total of 124 patients will have been treated with tecarfarin for at least one year by the end of this safety extension phase, a key safety milestone in the investigation of all chronic therapies under ICH guidelines.
  
  During this additional treatment period, patients continued to be monitored using the standard measure of anticoagulation, INR (International Normalized Ratio), at an interval of up to four weeks. The average time within therapeutic range of INR for these patients in the extension phase is 79% of the time treated (interpolated), based upon a preliminary interpretation of the results. This compares to the 74% of the time in range (interpolated) that was demonstrated in the blinded phase of the trial. Importantly, there were no serious bleeding events during this safety extension phase, and tecarfarin continued to be well tolerated. These additional results, while on a small subset population of those participating in EmbraceAC, suggest once again that tecarfarin appears to maintain patients within the target INR range between 74% and 79% of the time treated, whether the dosing is tightly controlled or in an open label fashion that equates more closely to real world standard of care. Extending the interval between monitoring to thirty days does not appear to substantially impact the ability of tecarfarin to maintain patients within the target therapeutic range of INR. Monitoring less often than once a month has not been tested with tecarfarin but would appear to be feasible based on the stability of patients in this open label extension.

• ARYx entered into an agreement with Commerce Court Small Cap Value Fund for a committed equity line of financing under which ARYx has the option to sell up to $35.0 million in value of our common shares over a 24 month period at pre-agreed discounts to our common shares’ open market price ranging from 4.2% to 7%. It is entirely at ARYx’s option whether to utilize this financing facility and to date no shares have been sold. Under the terms of the agreement, ARYx is required to file a Form S-1 registration statement with the US Securities and Exchange Commission (SEC) by early December 2009 to allow Commerce Court to resell any common shares that ARYx requires them to purchase.
• ARYx implemented a staffing plan to operate the company that anticipates licensing its lead development programs and resuming development of earlier stage product candidates. The staffing changes impacted functions throughout ARYx and included a reduction in personnel from 73 employees to 56 employees. ARYx expects to record a charge of less than $500,000 in the fourth quarter of 2009 related to this reduction in personnel. This staffing reduction was accompanied by changes in the organizational structure that allow ARYx to improve both the efficiencies and flexibility of operations.

Financial Results

As of September 30, 2009, ARYx had cash, cash equivalents and marketable securities totaling approximately $14.5 million. For the quarter, ARYx reported a net loss of $8.2 million or $0.30 per share, compared to net income of $3.2 million or $0.17 cents per diluted share in the same quarter of 2008 that included a substantial non-recurring revenue amount. ARYx had no revenue in the third quarter of 2009 compared to revenue of $17.5 million for the third quarter of 2008. The $17.5 million in revenue was recorded in the third quarter of 2008 because the Company’s former collaborative partner, Procter & Gamble Pharmaceuticals, terminated its agreement with ARYx in July 2008 and the remaining portion of the $25.0 million up-front payment that ARYx had previously received became fully earned. Without this amount, the loss for the third quarter of 2008 would have been approximately $14.3 million compared to this quarter’s $8.2 million loss.

Research and development expenses for the third quarter of 2009 were $5.0 million, compared to $11.7 million during the same period of 2008. The decrease in 2009 is primarily due to completion of both the Phase 2b clinical study of budiodarone in December 2008 and the Phase 2/3 EmbraceAC clinical study of tecarfarin completed in July 2009. External clinical expenses for the remainder of the year are expected to decline significantly since the only remaining significant clinical costs relate to the ongoing safety-extension study of EmbraceAC and other study completion costs.

ARYx's general and administrative expenses during the third quarter of 2009 were $2.6 million compared to $2.4 million for the same period last year. The increase in expense for 2009 is primarily due to expenses related to Sarbanes-Oxley regulatory compliance and increased patent filing and maintenance costs. Our third quarter 2009 general and administrative expense also includes approximately $345,000 of non-cash stock compensation expense.