On July 2, 2008, ARYx Therapeutics, Inc. ("ARYx") received notice from Procter & Gamble Pharmaceuticals, Inc. ("P&G") that it has exercised a one-time option to end the collaboration agreement between P&G and ARYx covering the development and commercialization of ATI-7505, ARYx's product candidate in Phase 2 clinical trials for chronic constipation and functional dyspepsia. The parties entered into the collaboration agreement on June 30, 2006, pursuant to which ARYx was paid a $25.0 million nonrefundable upfront license fee and was eligible to receive potential development, product approval and sales-sales based milestone payments over the term of the agreement. ARYx was also entitled to receive royalties on potential sales of ATI-7505 and a share of certain payments received by P&G from its sublicensees.

Pursuant to the terms of the collaboration agreement, P&G had a one-time thirty-day option period to terminate the agreement or agree to make a milestone payment to ARYx in connection with the completion of a Thorough QT (TQT) study on ATI-7505. P&G exercised this option to terminate the agreement, effective July 2, 2008. Upon termination of the agreement by P&G, all rights to ATI-7505 revert to ARYx, and ARYx automatically receives a royalty-free license under any relevant P&G intellectual property reasonably required or useful for the exploitation of ATI-7505. In addition, P&G must assign to ARYx regulatory data and certain third-party agreements related to ATI-7505 and must provide limited technical assistance to ARYx.

The above description of the P&G collaboration agreement is qualified in its entirety by reference to the agreement, a copy of which was filed as Exhibit 10.17 to ARYx's Registration Statement on Form S-1/A (File No. 333-147385) filed with the U.S. Securities and Exchange Commission on November 5, 2007 and incorporated herein by reference.

On July 2, 2008, ARYx announced the results of a cardiac safety Thorough QT (TQT) study on ATI-7505. A copy of the press release issued by ARYx on July 2, 2008 in connection with this announcement is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

(d) Exhibits

Exhibit Number                                Description
     99.1         Press release, dated July 2, 2008, entitled "ARYx Therapeutics Inc.
                  Announces Successful Results of QT Study on ATI-7505 - Findings
                  Support Earlier Clinical Safety Data."