This Week's Pharma IPO: ARYx Therapeutics

ARYx Therapeutics (ARYX), a specialty pharmaceutical company focused on retrometabolic drug design, is going public this week. The company, based in Fremont, California, makes drugs for gastrointestinal disorders, anticoagulation therapy and atrial fibrillation.

Akela Pharma (AKLA) and Merrion Pharmaceuticals (MERR) are both making another attempt to go public this week. Click on the company names to read our previous writeups.

All quotations are from the company's' most recent S-1 filing with a link provided.

ARYX THERAPEUTICS (ARYX)
Business Overview (from prospectus)

We are a biopharmaceutical company focused on developing a portfolio of internally discovered product candidates designed to eliminate known safety issues associated with well-established, commercially successful drugs. We use our RetroMetabolic Drug Design 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. Our most advanced product candidate, ATI-7505, is based on cisapride and has successfully completed Phase 2 clinical trials for the treatment of gastroesophageal reflux disease and symptoms associated with functional dyspepsia, a condition resulting in pain or a sense of fullness due to impaired digestion. Our second product candidate, ATI-5923, is based on warfarin and recently completed a Phase 2 proof-of-concept clinical trial for use as an anticoagulant to treat patients at risk for the formation of dangerous blood clots. Our third product candidate, ATI-2042, is based on amiodarone and is in Phase 2 clinical trials for the treatment of atrial fibrillation, a form of irregular heartbeat. We have multiple product candidates in preclinical development. Each of our product candidates is an orally available, patentable new chemical entity designed to address similar indications as those of the original drug upon which it is based. Our product candidates target what we believe to be multi-billion dollar markets. We have entered into a worldwide collaboration with Procter & Gamble Pharmaceuticals, Inc., or P&G, for the development and commercialization of ATI-7505 and we hold all worldwide commercial rights to our other product candidates.

Offering: 5.0 million shares at $14.00 - $16.00 per share. Net proceeds of approximately $67.8 million will be used to fund R&D, clinical trials, general and administrative expenses, working capital needs and other general corporate purposes.

Lead Underwriters: Morgan Stanley, CIBC World Markets

Financial Highlights:

We generated no revenue during the six months ended June 30, 2006. For the six months ended June 30, 2007, we generated $186,000 of service revenue consisting of reimbursements for certain pharmaceutical development and patent costs incurred and $1.9 million of deferred license fee revenue recognized... R&D expense decreased to $11,016,000 for the six months ended June 30, 2007 as compared to $14,849,000 for the same period in 2006... Selling, general and administrative expense for the six months ended June 30, 2007 increased to $3,624,000 as compared to $3,512,000 for the same period in 2006.

Additional Resources:

• Company website
• Online road show
• East Bay Business Times: 'Aryx Therapeutics in Fremont signs huge deal with Procter & Gamble'
• Press Release: 'GenomeQuest, Inc. Signs ARYx Therapeutics As GenomeQuest™ Customer'