ARYx Therapeutics reports net loss of $5.8M for fourth-quarter 2009

ARYx Therapeutics, Inc. (NASDAQ: ARYX) today reported results of operations and provided an update on its products for the fourth quarter and year ended December 31, 2009.

"2009 was a year of mixed results for ARYx. We continued to progress with the development of our three lead product candidates towards achievement of the target profiles we had set for them. However, the consequence of not completing a licensing agreement for budiodarone, our novel antiarrhythmic agent, to a large pharmaceutical company left ARYx in a difficult situation. We committed in February 2010 to optimize the value in the near-term that we believe exists for each of our product candidates by retaining Cowen and Company, an investment bank, to explore strategic alternatives. At the same time, we substantially reorganized the company to support this process and to reduce our spend," said Dr. Paul Goddard, chairman and chief executive officer of ARYx.

Company Highlights

• In February 2010, ARYx retained Cowen and Company, an investment bank, to explore and recommend strategic alternatives for the company going forward. Concurrently, ARYx restructured its operations in order to conserve resources and support the process of reviewing strategic alternatives. This followed a workforce reduction ARYx implemented in October 2009. Through these two restructuring steps, headcount was reduced from 73 to 17 employees. ARYx took these steps since it did not complete a licensing agreement on budiodarone within the timeframe it had projected and currently does not have sufficient cash resources to independently further develop budiodarone or its other two proof-of-concept stage product candidates. ARYx expects Cowen and Company to present alternatives for maximizing the value of ARYx's assets in the near-term. Those alternatives could include partnerships on one or more of the three lead product candidates, the sale of ARYx's assets, in whole or in part, or some similar arrangement through which the value of ARYx's assets to stockholders could be optimized.
• During 2009, ARYx continued to substantially progress its lead product candidates by generating clinical and preclinical safety and efficacy data supporting the target profile established for each of them. ARYx ended 2009 with three product candidates at proof-of-concept stage, one in Phase 3 and the other two in Phase 2b, with an additional product candidate in Phase 1. ARYx believes, based at least in part on its primary market research, that each of its lead product candidates has significant commercial potential, based on its target product profile. Each of these product candidates was discovered through ARYx's Retrometabolic Drug Design technology with the primary goal of retaining efficacy while improving the safety of leading chronic, oral therapies that have either been withdrawn from the market or significantly limited in their use due to safety concerns. ARYx believes that optimal value could be realized for its stockholders from its lead product candidates through the strategic process involving Cowen and Company.
• ARYx announced in October 2009 that it arranged for a committed equity financing facility under which the company could sell shares of its common stock to Commerce Court Small Cap Value Fund, Ltd. over a 24-month period. Subsequently, ARYx filed a Registration Statement on Form S-1 with the Securities and Exchange Commission covering the resale of the up to 5,494,290 shares of common stock issuable pursuant to the terms of the equity line financing facility. Beginning in December 2009 and ending March 26, 2010, ARYx has completed raising funds under the equity line financing facility through four "draw down periods" during which the company has issued substantially all of the shares that could be sold under the facility and raised a total of approximately $7.2 million in net proceeds ($6.4 million in 2010), after issuance costs. ARYx currently anticipates this additional cash, along with the approximately $7.8 million in cash and cash equivalents ARYx had as of December 31, 2009, will allow the company to operate at its current burn rate, including servicing its scheduled debt payments, into September 2010, by which time the company expects to have indications about the results of the current strategic process with Cowen and Company. ARYx further believes that it may have other options for continued funding beyond September 2010 if necessary to complete the strategic process.

As a result of the strategic process now underway, ARYx will not be conducting a conference call in conjunction with this press release and the filing with the Securities and Exchange Commission of ARYx's annual Form 10-K. This filing will occur today after the close of trading of the company's common stock on the NASDAQ exchange.

Results of Operations

As of December 31, 2009, ARYx had cash, cash equivalents and marketable securities totaling approximately $7.8 million. This amount includes net proceeds of approximately $0.8 million raised in December 2009 through utilization of the committed equity line financing facility that was announced in October 2009.

For the fourth quarter of 2009, ARYx reported a net loss of $5.8 million or $0.21 per share as compared to a net loss of $13.1 million or $0.57 cents per share in the same quarter of 2008. For the full year 2009, ARYx reported a net loss of $33.2 million or $1.21 per share as compared to a net loss of $31.2 million or $1.65 per share in 2008.

For the fourth quarter of 2009 and 2008, ARYx had no revenue. For the full year 2009, ARYx had no revenue compared to $19.7 million for the full year 2008. All revenue generated in 2008 was related to the company's previous relationship with Proctor & Gamble Pharmaceuticals, Inc. (P&G). The majority of the revenue in 2008 was attributable to an acceleration of the recognition of the original $25.0 million nonrefundable upfront license fee received from P&G as a result of P&G's termination of their collaboration agreement with ARYx covering the company's prokinetic agent, ATI-7505.

Research and development expenses for the fourth quarter and full year 2009 were $3.0 million and $21.0 million, respectively, as compared to $10.6 million and $39.8 million during the same periods of 2008. The decrease in expense for 2009 is primarily due to the substantial completion of two significant clinical studies by the third quarter of 2009 related to the company's budiodarone and tecarfarin product candidates.

General and administrative (G&A) expenses during the fourth quarter and full year 2009 were $2.3 million and $10.2 million respectively. For the same periods of 2008, G&A expenses totaled approximately $1.9 million and $10.1 million, respectively. The increase in expenses during the fourth quarter of 2009 as compared to the same period in 2008 was primarily due to costs related to our restructuring of operations announced in October 2009 totaling approximately $375,000. G&A expenses for the full-year 2009 as compared to 2008 were approximately the same year over year.