ARYx is floored by the decision, since Phase II trials were successful.

Procter & Gamble Pharmaceuticals (P&G) has decided to nix its support of ARYx Therapeutics’ therapy for chronic constipation and functional dyspepsia. The decision comes as a suprise to ARYx, as the company’s completed thorough QT study on ATI-7505 provided positive results.

ARYx’ stock went from about $6.57 at close yesterday to $5.98 at today’s open. Morning trading has the company’s shares at about 19.79% below yesterday’s value.

With the termination of this partnership, ARYx is shutting down the developmental program of ATI-7505 until it finds a new partner.

“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,” explains Paul Goddard, Ph.D., CEO and chairman of ARYx Therapeutics. “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.”

Under the collaboration inked in July 2006, ARYx says that these results qualified the firm for the Tier 1, or highest, milestone payment from P&G. Also according to the terms of the agreement, however, P&G had a 30-day option at this stage to cancel the arrangement.

P&G has utilized this one-time option but has agreed 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As part of the transition plan, no new patients will be enrolled, and those currently on therapy will be withdrawn from the studies over the coming weeks.

The overall results of the study, designed to demonstrate whether electrocardiographic effects are seen at therapeutic and supra therapeutic doses, were negative. This supports the favorable cardiac safety profile of ATI-7505, a prokinetic agent in Phase II testing.

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