DEF 14A 1 a2192305zdef14a.htm DEF 14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )


	Filed by the Registrant ý
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	Check the appropriate box:
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	ý		Definitive Proxy Statement
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	o		Soliciting Material Pursuant to §240.14a-12


ARYx Therapeutics, Inc.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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ARYX THERAPEUTICS, INC.
6300 Dumbarton Circle
Fremont, California 94555

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 20, 2009

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of ARYX THERAPEUTICS, INC., a Delaware corporation (the "Company"). The meeting will be held on Wednesday, May 20, 2009 at 9:00 a.m. local time, at our headquarters located at 6300 Dumbarton Circle, Fremont, California 94555, for the following purposes:

1.: To elect the three nominees for director named herein to hold office until the 2012 Annual Meeting of Stockholders.
2.: To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent registered public accounting firm of the Company for the year ending December 31, 2009.
3.: To conduct any other business properly brought before the meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice. The record date for the Annual Meeting is April 7, 2009. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.


		By Order of the Board of Directors

		David Nagler Secretary

Fremont, California
April 22, 2009

You are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please complete, date, sign and return the enclosed proxy, or vote over the telephone or the Internet as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) has been provided for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to Be Held on Wednesday, May 20, 2009, at 9:00 a.m. local time at
6300 Dumbarton Circle, Fremont, California 94555.

The proxy statement and annual report to stockholders
are available at http://www.envisionreports.com/ARYX.

ARYX THERAPEUTICS, INC.
6300 Dumbarton Circle
Fremont, California 94555

PROXY STATEMENT
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS

May 20, 2009

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these materials?

We have sent you this proxy statement and the enclosed proxy card because the Board of Directors of ARYX THERAPEUTICS, INC. (sometimes referred to as the "Company" or "ARYx") is soliciting your proxy to vote at the 2009 Annual Meeting of Stockholders, or the Annual Meeting, including at any adjournments or postponements of the Annual Meeting. You are invited to attend the Annual Meeting to vote on the proposals described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or via the Internet.

We intend to mail this proxy statement and accompanying proxy materials on or about April 22, 2009 to all stockholders of record entitled to vote at the Annual Meeting.

Who can vote at the Annual Meeting?

Only stockholders of record at the close of business on April 7, 2009 will be entitled to vote at the Annual Meeting. On this record date, there were 27,372,235 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If on April 7, 2009 your shares were registered directly in your name with ARYx's transfer agent, Computershare Trust Company, N.A., then you are a stockholder of record. As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on April 7, 2009 your shares were held not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in "street name" and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent.

What am I voting on?

There are two matters scheduled for a vote:

•: Proposal 1, election of three directors; and
•: Proposal 2, ratification of the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as independent registered public accounting firm of the Company for the year ending December 31, 2009.

What if another matter is properly brought before the meeting?

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy card to vote on those matters in accordance with their best judgment.

How do I vote?

•: For Proposal 1, you may either vote "For" all the nominees to the Board of Directors or you may "Withhold" your vote for any nominee you specify.
•: For Proposal 2, you may vote "For" or "Against" or abstain from voting.

The procedures for voting are fairly simple:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the Annual Meeting, vote by proxy using the enclosed proxy card, vote by proxy over the telephone, or vote by proxy via the Internet. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy.

•: To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
•: To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.
•: To vote over the telephone, dial toll-free 1-800-652-VOTE (8683) using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 1:00 a.m., Central Time, on May 20, 2009 to be counted.
•: To vote via the Internet, go to http://www.envisionreports.com/ARYX to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 1:00 a.m., Central Time, on May 20, 2009 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from ARYx. Simply complete and mail the proxy card to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you own as of the close of business on April 7, 2009.

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, "For" the election of all three nominees for director and "For" the ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2009. If any other matter is properly presented at the Annual Meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his best judgment.

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What does it mean if I receive more than one set of proxy materials?

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

•: You may submit another properly completed proxy card with a later date.
•: You may grant a subsequent proxy by telephone or via the Internet.
•: You may send a timely written notice that you are revoking your proxy to ARYx's Corporate Secretary at 6300 Dumbarton Circle, Fremont, California 94555.
•: You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

Your most current proxy vote is the one that is counted.

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

When are stockholder proposals due for next year's Annual Meeting?

Stockholders may submit proposals on matters appropriate for stockholder action at meetings of our stockholders in accordance with Rule 14a-8 promulgated under the Securities Exchange Act of 1934. For such proposals to be included in the proxy materials relating to our 2010 Annual Meeting of Stockholders, all applicable requirements of Rule 14a-8 must be satisfied and such proposals must be

received by us no later than December 21, 2009. However, if our 2010 Annual Meeting of Stockholders is not held between April 20, 2010 and June 18, 2010, then the deadline will be a reasonable time prior to the time we begin to print and mail the proxy materials for such meeting. Such proposals should be delivered to the attention of our Corporate Secretary at 6300 Dumbarton Circle, Fremont, California 94555.

Pursuant to our Bylaws, if you wish to bring a proposal before the stockholders or nominate a director at the 2010 Annual Meeting of Stockholders, but you are not requesting that your proposal or nomination be included in next year's proxy materials, you must notify our Corporate Secretary, in writing, not later than the close of business on February 19, 2010 nor earlier than the close of business on January 20, 2010. However, if our 2010 Annual Meeting of Stockholders is not held between April 20, 2010 and June 18, 2010, to be timely, your notice must be so received not earlier than the close of business on the 120^th day prior to the 2010 Annual Meeting of Stockholders and not later than the close of business on the later of the ninetieth 90^th day prior to the 2010 Annual Meeting of Stockholders or the 10^th day following the day on which public announcement of the date of the 2010 Annual Meeting of Stockholders is first made. You are also advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. Among other things, a stockholder's notice to our Corporate Secretary must set forth the information required by our Bylaws with respect to each matter the stockholder proposes to bring before the 2010 Annual Meeting of Stockholders. The chairman of the 2010 Annual Meeting of Stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting. In addition, the proxy solicited by our Board of Directors for the 2010 Annual Meeting of Stockholders will confer discretionary voting authority with respect to (i) any proposal presented by a stockholder at that meeting for which we have not been provided with timely notice and (ii) any proposal made in accordance with our Bylaws, if the 2010 proxy statement briefly describes the matter and how our management's proxy holders intend to vote on it, if the stockholder does not comply with the requirements of Rule 14a-4(c)(2) promulgated under the Securities Exchange Act of 1934.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count "For" and "Withhold" and, with respect to Proposal 2, "Against" votes, abstentions and broker non-votes. A broker non-vote occurs when a nominee, such as a broker or bank, holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner. In the event that a broker, bank, custodian, nominee or other record holder of our common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a nominee, such as a broker or bank, please be sure to instruct your nominee how to vote to ensure that your vote is counted on each of the proposals.

Abstentions and broker non-votes will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Annual Meeting. Abstentions will be counted towards the vote total for each proposal, and will have the same effect as "Against" votes. Broker non-votes have no effect and will not be counted towards the vote total for any proposal.

How many votes are needed to approve each proposal?

•: For the election of directors, the three nominees receiving the most "For" votes (among votes properly cast in person or by proxy) will be elected. Only votes "For" or "Withheld" will affect the outcome.

•: To be approved, "Proposal No. 2—Ratification of Selection of Independent Registered Public Accounting Firm," must receive "For" votes from the holders of a majority of shares present and entitled to vote either in person, by remote communication or by proxy. If you "Abstain" from voting, it will have the same effect as an "Against" vote. Broker non-votes will have no effect.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the outstanding shares entitled to vote are present at the meeting in person or represented by proxy. On the record date, April 7, 2009, there were 27,372,235 shares outstanding and entitled to vote.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting in person or represented by proxy may adjourn the meeting to another date.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in our Quarterly Report on Form 10-Q for the second quarter of 2009.

What proxy materials are available on the Internet?

This proxy statement and accompanying proxy materials, including our Annual Report on Form 10-K for the year ended December 31, 2008, are available at http://www.envisionreports.com/ARYX.

PROPOSAL 1

ELECTION OF DIRECTORS

Our Board of Directors, or our Board, is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including a vacancy created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director's successor is duly elected and qualified or such director's earlier death, resignation or removal.

Our Board presently has eight members. In 2008, our Board had nine members, including Dr. Robert Adelman who resigned from our Board in February 2009. In connection with Dr. Adelman's resignation, our Board reduced the authorized number of directors constituting the Board to eight members in accordance with our Bylaws.

There are three directors in the class whose term of office expires in 2009, Dr. Ekman and Messrs. Leonard and Sekhri, each of whom is currently a director of ARYx. If elected at the Annual Meeting, each of these nominees would serve until our 2012 Annual Meeting of Stockholders and until his successor has been duly elected and qualified, or, if sooner, until the director's death, resignation or removal. We encourage directors and nominees for director to attend the Annual Meeting.

Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The three nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of a substitute nominee proposed by our management. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve.

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE TO THE BOARD.

MEMBERS OF THE BOARD OF DIRECTORS

The following is information for each of the members of our Board as of the date of this proxy statement.

Name	Position with ARYx		Director Since

Paul Goddard, Ph.D.	Chairman of the Board and Chief Executive Officer	59	August 2003	2010
Peter G. Milner, M.D.	President, Research and Development and Director	53	February 1997	2011
David Beier	Director	60	August 2008	2010
Lars G. Ekman, M.D., Ph.D.	Director	58	November 2003	2009
Keith R. Leonard	Director	46	September 2005	2009
Herm Rosenman	Director	60	January 2006	2010
Paul J. Sekhri	Director	50	September 2004	2009
Nicholas Simon	Director	54	June 2002	2011

NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT OUR 2012 ANNUAL MEETING

Lars G. Ekman, M.D., Ph.D.

Dr. Ekman is currently chairman and chief executive officer of Cebix Inc. Dr. Ekman has also served as executive vice president and president, global R&D of Elan Pharmaceuticals. Prior to joining Elan, he served as executive vice president, R&D, at Schwarz Pharma AG, a pharmaceutical company. Dr. Ekman has also served in a variety of senior scientific and clinical functions at Pharmacia Corp., which was acquired by Pfizer, Inc., a pharmaceutical company. Dr. Ekman is a board certified surgeon with a Ph.D. in experimental biology and has held several clinical and academic positions in both the United States and Europe. He obtained his doctorate degree and doctorate of medicine degree from the University of Gothenburg, Sweden. Dr. Ekman serves on the board of directors at Elan Pharmaceuticals, Amarin Corp., InterMune, and Cebix Inc.

Keith R. Leonard

Mr. Leonard has served as president and chief executive officer of Kythera Biopharmaceuticals, a biopharmaceutical company, since August 2005. From October 1991 to November 2004, Mr. Leonard held various positions with Amgen, Inc., a biopharmaceutical company, and its affiliates, most recently as senior vice president and general manager of Amgen Europe. Mr. Leonard holds a master of business administration from The Anderson School of Management, University of California, Los Angeles, a master of science in mechanical engineering from University of California, Berkeley, a bachelor of arts in history from University of Maryland, College Park, and a bachelor of science in engineering from University of California, Los Angeles.

Paul J. Sekhri

Mr. Sekhri has served as head of TPG Biotech, a financial services institution since January 2009. From December 2004 to December 2008, Mr. Sekhri served as President and Chief Executive Officer of Cerimon Pharmaceuticals. Prior to founding Cerimon, from October 2003 to December 2004, Mr. Sekhri was President and Chief Business Officer of ARIAD Pharmaceuticals, Inc., an oncology company. From December 2002 to September 2003, Mr. Sekhri was a partner at the Sprout Group, a venture capital affiliate of Credit Suisse, a financial services institution. From August 1999 to January 2003, Mr. Sekhri held various positions with Novartis Pharma AG, a pharmaceutical company, most recently as its senior vice president and head of global search and evaluation. Mr. Sekhri received his M.Sc. and B.Sc. from the University of Maryland, School of Medicine. Mr. Sekhri also serves on the Board of Directors at A.P.T. Pharmaceuticals, KAI Pharmaceuticals and the Cancer Research Institute. He is also a member of the Advisory Board for The BioExec Institute, Inc and an advisor to the Brookings Global Health Financing Initiative.

DIRECTORS CONTINUING IN OFFICE UNTIL OUR 2010 ANNUAL MEETING

David Beier

Mr. Beier is currently Senior Vice President of global government and corporate affairs for Amgen Inc., one of the world's leading biotechnology companies. Mr. Beier is responsible for global health care issues, health economics and outcomes research, corporate communications and philanthropy, and government affairs at the United States federal and state levels as well as with international governmental entities and organizations. Prior to joining Amgen, Mr. Beier was a partner in the international law firm of Hogan & Hartson, and was Vice President of government affairs and public policy for Genentech, Inc. Mr. Beier's extensive government experience includes serving as chief domestic policy advisor to Vice President Al Gore and as staff counsel in the U.S. House of Representatives. He received a B.A. from Colgate University and his J.D. from Albany Law School.

Paul Goddard, Ph.D.

Dr. Goddard has served as the Chairman of our Board since August 2003 and was appointed our Chief Executive Officer in April 2005. From March 2000 to August 2005, Dr. Goddard served as chairman and part-time executive of several companies including A.P. Pharma, Inc. and XenoPort, Inc., a biopharmaceutical company. From October 1998 until March 2000, he was chief executive officer of Elan Pharmaceuticals, Inc., the largest division of Elan Corporation plc, a biotechnology company. He was chief executive officer of Neurex Corporation, a biotechnology company, from February 1991 until October 1998 when the company was acquired by Elan Corporation plc. Prior to 1991, Dr. Goddard held various senior management positions at SmithKline Beecham plc, a pharmaceutical company, including senior vice president strategic marketing and senior vice president Far East region. He obtained his doctorate degree from St. Mary's Hospital, London, in the area of etiology and pathophysiology of colon cancer. Dr. Goddard serves on the board of directors of Adolor Corporation, a biopharmaceutical company, as chairman of A.P. Pharma, Inc., a pharmaceutical company, and as lead director of Onyx Pharmaceuticals, Inc., a biopharmaceutical company.

Herm Rosenman

Since June 2001, Mr. Rosenman has served as the senior vice president of finance and chief financial officer of Gen-Probe Incorporated, a company that produces products for the clinical laboratory and blood screening. Mr. Rosenman received a B.B.A. in finance and accounting from Pace University and an M.B.A. in finance from the Wharton School of the University of Pennsylvania. Mr. Rosenman serves on the board of directors of Infinity Pharmaceuticals, Inc., a biopharmaceutical company.

DIRECTORS CONTINUING IN OFFICE UNTIL OUR 2011 ANNUAL MEETING

Peter G. Milner, M.D.

Dr. Milner is our co-founder and has served as our President, Research and Development, since April 2005. From February 1997 until February 2005, Dr. Milner served as our Chief Executive Officer. Dr. Milner is a board certified physician and cardiologist, and serves as voluntary clinical faculty at Stanford Veterans' Hospital. In June 1992, Dr. Milner co-founded CV Therapeutics, Inc., a biopharmaceutical company. Prior to CV Therapeutics, Inc., Dr. Milner was an assistant professor of medicine at Washington University in St. Louis, Missouri. Dr. Milner has numerous patents in his name and is the author of several scientific articles published in peer-reviewed journals. Dr. Milner attended the University of Liverpool, England where he received a bachelor of sciences degree with honors in biochemistry and a degree in medicine. He completed his postgraduate training in medicine at Johns Hopkins Medical School, cardiology and pharmacology at University of Virginia and molecular biology at Washington University in St. Louis. Dr. Milner is a Fellow of the American College of Cardiology, serves on the board of directors of California Healthcare Institute and the Scientific Advisory Board of Novartis Institute of Biomedical Research in Cambridge, Massachusetts.

Nicholas Simon

Mr. Simon has served as a Managing Director of Clarus Ventures, a venture capital firm focused on life sciences companies, since the firm's inception in February 2005. In addition, Mr. Simon has been a general partner of MPM BioVentures III, a healthcare venture capital fund, since October 2001. From April 2000 to July 2001, Mr. Simon was chief executive officer and founder of Collabra Pharma, Inc., a pharmaceutical company. Mr. Simon served in various management positions at Genentech, Inc., including as its vice president of business and corporate development. Mr. Simon is currently on the board of directors of several pharmaceutical companies: Achillion, Inc., Avanir, Inc., Neosil, Inc., QuatRx Pharmaceuticals Company, Pearl Therapeutics, Inc., Poniard Pharmaceuticals, Inc., Sientra, Inc. and Verus Pharmaceuticals, Inc. He is also on the advisory council of the Gladstone Institute, a private not-for-profit research institute affiliated with the University of California, San Francisco. Mr. Simon received a bachelor of sciences degree in microbiology from the University of Maryland and a masters in business administration in marketing from Loyola College.

CORPORATE GOVERNANCE AND BOARD MATTERS

INDEPENDENCE OF ARYX THERAPEUTICS' BOARD OF DIRECTORS

The NASDAQ Stock Market LLC ("NASDAQ") listing standards require that a majority of the members of a listed company's Board of Directors qualify as "independent," as affirmatively determined by the Board of Directors. Our Board consults with our outside counsel to ensure that the Board's determinations are consistent with relevant securities and other laws and regulations regarding the definition of "independent," including within the meaning of the applicable NASDAQ listing standards, as in effect from time to time.

Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his family members, and ARYx, our senior management and our independent registered public accounting firm, the Board has affirmatively determined that the following six current directors are independent directors within the meaning of the applicable NASDAQ listing standards: Dr. Ekman and Messrs. Beier, Leonard, Rosenman, Sekhri and Simon. The Board has also affirmatively determined Dr. Adelman, who served as a director during 2008 and resigned from the Board in February 2009, to be an independent director in accordance with the applicable NASDAQ listing standards. In making this determination, the Board found that none of these directors or nominees for director had a material or other disqualifying relationship with ARYx. Dr. Goddard, our Chief Executive Officer, and Dr. Milner, our President, Research and Development, are not independent directors by virtue of their employment with the Company.

MEETINGS OF THE BOARD OF DIRECTORS

The Board met nine times during 2008. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he served, held during the portion of 2008 for which he was a director or committee member.

As required under applicable NASDAQ listing standards, in 2008, our independent directors met four times in regularly scheduled executive sessions at which only independent directors were present.

INFORMATION REGARDING COMMITTEES OF THE BOARD OF DIRECTORS

The Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each of these committees has a written charter approved by the Board. The following table provides membership and meeting information for 2008 for each of the Board committees:

Name	Audit	Compensation	Nominating and Corporate Governance

Paul Goddard, Ph.D.
Peter G. Milner, M.D.
David W. Beier
Lars G. Ekman, M.D., Ph.D.			X*
Keith R. Leonard	X		X
Herm Rosenman	X*
Paul J. Sekhri	X	X*
Nicholas Simon		X
Total meetings in 2008	- 5 -	- 5 -	- 2 -

*: Committee Chairman.

The above table does not reflect the service of Dr. Adelman, who resigned from our Board in February 2009, on our Compensation Committee and Nominating and Corporate Governance Committee during 2008. In connection with Dr. Adelman's resignation, our Board appointed Mr. Beier as a member of our Compensation Committee and Nominating and Corporate Governance Committee in February 2009.

Below is a description of each committee of the Board. The Board has determined that each member of each committee meets the applicable NASDAQ rules and regulations regarding "independence" and that each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company. Each of our Board committees has adopted a written charter that is available to stockholders on our website at http://www.aryx.com, under the "Investors—Corporate Governance" tab. The contents of our website are not a part of this proxy statement.

Audit Committee

Our Audit Committee was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, to discharge the responsibilities of the Board with respect to our accounting, financial and other reporting and internal control practices and to oversee our independent registered public accounting firm. Specific responsibilities of our Audit Committee include:

•: appointing and retaining a registered public accounting firm to serve as independent auditors to audit our financial statements, overseeing the independent auditors' work and determining the independent auditors' compensation;
•: approving in advance all audit services and non-audit services to be provided to us by our independent auditors;
•: reviewing and discussing with management and our independent auditors the results of the annual audit and the independent auditors' review of our quarterly financial statements;
•: conferring with management and our independent auditors about the scope, adequacy and effectiveness of our internal accounting controls;
•: reviewing and discussing with management and our independent auditors significant issues regarding accounting principles and policies and any material disagreements regarding financial reporting and accounting practices and policies;
•: reviewing and approving all related-party transactions; and
•: handling complaints regarding accounting, internal accounting controls or auditing matters and establishing procedures for the receipt, retention and treatment of such complaints.

The Board reviews the NASDAQ listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee satisfy the independence requirements of Rule 10A-3 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the applicable NASDAQ listing standards. The Board has also determined that Mr. Rosenman is qualified as an audit committee financial expert within the meaning of the regulations of the Securities and Exchange Commission and the applicable NASDAQ listing standards. In making this determination, the Board has considered the nature and scope of experience Mr. Rosenman has previously had with reporting companies and his employment in the corporate finance sector. Both our independent registered public accounting firm and management periodically meet privately with our Audit Committee.

Report of the Audit Committee of the Board of Directors

The Audit Committee has reviewed and discussed the audited financial statements for the year ended December 31, 2008 with our management. The Audit Committee has discussed with our independent registered public accounting firm the matters required to be discussed by the Statement on Auditing Standards No. 114, The Auditor's Communication with Those Charged with Governance, as adopted by the Public Company Accounting Oversight Board ("PCAOB") in Rule 3200T. The Audit Committee has also received the written disclosures and the letter from our independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent accountants' communications with the audit committee concerning independence, and has discussed with the independent registered public accounting firm its independence. Based on the foregoing, the Audit Committee has recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008.

Mr. Herm Rosenman (Chairman)
Mr. Keith R. Leonard
Mr. Paul J. Sekhri

The material in this report is not "soliciting material," is furnished to, but not deemed "filed" with, the SEC and is not deemed to be incorporated by reference in any filing of ARYx under the Securities Act or the Exchange Act, other than our Annual Report on Form 10-K, where it shall be deemed to be "furnished," whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

The purpose of our Compensation Committee is to discharge the responsibilities of the Board to oversee our compensation policies, plans and programs, and to review and determine the compensation to be paid to our executive officers and directors. Specific responsibilities of our compensation committee include:

•: reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers;
•: evaluating and approving the compensation plans and programs advisable for ARYx, as well as evaluating and approving the modification or termination of existing plans and programs;
•: establishing policies with respect to equity compensation arrangements;
•: reviewing regional and industry-wide compensation practices and trends to assess the adequacy and competitiveness of our executive compensation programs among comparable companies in our industry;
•: reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements (including, without limitation, perquisites and any other form of compensation) for our executive officers;
•: evaluating the efficacy of our compensation policy and strategy in achieving expected benefits to ARYx and otherwise furthering the Compensation Committee's policies; and
•: reviewing with management our Compensation Discussion and Analysis and considering whether to recommend that it be included in our proxy statements and other filings.

Each member of our Compensation Committee is independent within the meaning of applicable NASDAQ listing standards, is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act, and is an "outside director" as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is currently or has been at any time one of our officers or employees. None of our officers currently serves, or has served during the year ended December 31, 2008, as a member of the board of directors or compensation committee of any entity that has one or more officers serving as a member of our Board or the Compensation Committee.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis ("CD&A") contained in this proxy statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the CD&A be included in this proxy statement and incorporated into our Annual Report on Form 10-K for the year ended December 31, 2008.

Mr. Paul J. Sekhri (Chairman)
Mr. David W. Beier
Mr. Nicholas Simon

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee of our Board is responsible for, among other things:

•: establishing criteria for Board membership and identifying, evaluating, reviewing and recommending candidates for election to our Board, as well as making recommendations to our Board regarding the membership of the committees of our Board;
•: assessing the performance of our Board and its committees and of individual directors;
•: developing, reviewing and assessing our corporate governance principles; and
•: overseeing our legal, regulatory and ethical compliance programs, other than handling complaints related to accounting and financial matters, which are delegated to the Audit Committee.

Each member of our Nominating and Corporate Governance Committee is independent within the meaning of applicable NASDAQ listing standards.

Our Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including the ability to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of ARYx, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating and Corporate

Governance Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board and ARYx, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, unless the Board chooses to undertake this assessment, the Nominating and Corporate Governance Committee reviews these directors' overall service to ARYx during their terms, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair the directors' independence. For the Annual Meeting, the Nominating and Corporate Governance Committee assessed the qualifications and overall service of Dr. Ekman and Messrs. Leonard and Sekhri, before recommending to our Board these director nominees for reelection by our stockholders at the Annual Meeting. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee is independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Corporate Governance Committee meets to discuss and consider the candidates' qualifications and then selects a nominee for recommendation to the Board by majority vote.

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. The Nominating and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at the following address: c/o ARYx Therapeutics, Inc., 6300 Dumbarton Circle, Fremont, California 94555 at least 120 days prior to the anniversary date of the mailing of our proxy statement for the last Annual Meeting of Stockholders. Submissions must include the full name of the proposed nominee, a description of the proposed nominee's business experience for at least the previous five years, complete biographical information, a description of the proposed nominee's qualifications as a director and a representation that the nominating stockholder is a beneficial or record holder of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.

LEAD INDEPENDENT DIRECTOR

If at any time the Chairman of our Board is not an independent director, the Board may designate one of the independent directors then on our Board to serve as our lead independent director. The responsibilities of our lead independent director include:

•: consulting with and acting as a liaison between the Board and Chairman of the Board;
•: establishing the agendas for meetings of the Board and serving as chairman of such meetings in the absence of the Chairman of the Board;
•: establishing the agenda and presiding over meetings of the independent members of the Board;
•: coordinating with Board committee chairs regarding committee meeting agendas and informational requirements;
•: presiding over any portions of meetings of the Board at which the evaluation or compensation of our Chief Executive Officer or the performance of the Board is presented or discussed;

•: coordinating the activities of the other independent directors and performing such other duties as may be established or delegated by the Chairman of the Board; and
•: otherwise consulting with the Chairman of the Board and management on matters relating to corporate governance and Board performance matters.

In performing the duties described above, the lead independent director is expected to consult with the chairmen of the committees of the Board and solicit their participation in order to avoid diluting the authority or responsibilities of such committees. If the Chairman of the Board is an independent director, then he or she shall perform the functions otherwise assigned to our lead independent director.

Since the Board has deemed Dr. Goddard, our current Chairman of the Board, to not be an independent director within the meaning of the applicable NASDAQ listing standards, the Board has designated Herm Rosenman as the lead independent director of the Board.

STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Historically, we have not provided a formal process related to stockholder communications with the Board. Nevertheless, every effort has been made to ensure that the views of our stockholders are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to our stockholders in a timely manner. We believe our responsiveness to stockholder communications to the Board has been excellent. Nevertheless, during the upcoming year the Nominating and Corporate Governance Committee will give full consideration to the adoption of a formal process for stockholder communications with the Board and, if adopted, publish it promptly and post it to our website.

CODE OF CONDUCT

In 2007, our Board adopted a Code of Conduct that applies to all of our employees, executive officers, directors and consultants, and incorporates guidelines designed to deter wrongdoing and to promote the honest and ethical conduct and compliance with applicable laws and regulations. In addition, our Code of Conduct incorporates our guidelines pertaining to topics such as conflicts of interest and workplace behavior. We have posted the text of our Code of Conduct on our website at http://www.aryx.com under the "Investors—Corporate Governance" tab. The contents of our website are not a part of this proxy statement. We intend to promptly disclose (1) the nature of any amendment to our Code of Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our Code of Conduct that is granted to one of these specified officers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

CORPORATE GOVERNANCE GUIDELINES

In 2007, our Board adopted Corporate Governance Guidelines to assure that the Board and its Committees have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices the Board intends to follow with respect to board composition and selection, board meetings and involvement of senior management, Chief Executive Officer performance evaluation and succession planning, and Board committees.

DIRECTOR COMPENSATION

Cash Compensation Arrangements

Pursuant to our compensation program for non-employee directors, during 2008 each member of our Board who was not an employee or an officer of ARYx received the following cash compensation for Board services, as applicable:

•: a $15,000 annual retainer for service as a Board member;
•: a $5,000 supplemental annual retainer for service as chairman of the Audit Committee;
•: a $2,500 supplemental annual retainer for service as chairman of the Nominating and Corporate Governance Committee or Compensation Committee;
•: $2,000 for each Board meeting attended in person ($1,000 for meetings attended by video or telephone conference); and
•: $1,000 for each Board committee meeting attended in person ($500 for meetings attended by video or telephone conference).

We reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our Board and committees of the Board.

In 2008, the Compensation Committee retained Radford Surveys + Consulting, or Radford, an independent compensation consulting firm, to provide us and the Compensation Committee with assistance in reviewing our non-employee director compensation. After reviewing the Radford report and related recommendations, the Compensation Committee and Board revised our cash compensation arrangement for non-employee directors, effective January 1, 2009, as follow:

•: a $20,000 annual retainer for service as a Board member;
•: a $15,000 or $7,500 supplemental annual retainer for service as chairman or member of the Audit Committee, respectively;
•: a $10,000 or $5,000 supplemental annual retainer for service as chairman or member of the Compensation Committee, respectively;
•: a $5,000 or $2,500 supplemental annual retainer for service as chairman or member of the Nominating and Corporate Governance Committee, respectively;
•: a $5,000 supplemental annual retainer for services as lead independent director of the Board; and
•: $2,000 for each Board meeting attended in person ($1,000 for meetings attended by video or telephone conference).

We continue to reimburse our non-employee directors for their reasonable expenses incurred in attending meetings of our Board and committees of the Board.

2007 Non-Employee Directors' Stock Option Plan

Our 2007 Non-Employee Directors' Stock Option Plan, or 2007 Directors' Plan, became effective in connection with our initial public offering in November 2007. The 2007 Directors' Plan provides for the automatic grant of nonstatutory stock options to purchase shares of our common stock to our non-employee directors over their period of service on our Board. As of December 31, 2008, the number of shares of common stock that may be issued under the 2007 Directors' Plan is 266,662 shares. The number of shares of common stock reserved for issuance will automatically increase on January 1st of each year through and including January 1, 2017, by the excess of (a) the

number of shares of common stock subject to options granted during the preceding calendar year, over (b) the number of shares added back to the share reserve during the preceding calendar year. If any option expires or terminates for any reason, in whole or in part, without having been exercised in full, the shares of common stock not acquired under such option will become available for future issuance under the 2007 directors' plan. The following types of shares issued under the 2007 directors' plan may again become available for the grant of new options: (a) any shares withheld to satisfy withholding taxes, (b) any shares used to pay the exercise price of an option in a net exercise arrangement and (c) shares tendered to us to pay the exercise price of an option.

Pursuant to the terms of the 2007 Directors' Plan, any individual who first becomes a non-employee director is automatically granted an option to purchase 16,666 shares of our common stock, with an exercise price equal to the then fair market value of our common stock. Each initial option vests in a series of 36 successive equal monthly installments measured from the date of grant. In addition, on April 30th of each year beginning in 2009, each non-employee director will automatically be granted a non-statutory stock option to purchase 6,666 shares of our common stock on that date with an exercise price equal to the then fair market value of our common stock. The shares subject to each such annual option vest in a series of 12 successive equal monthly installments measured from the date of grant. All stock options granted under the 2007 Directors' Plan will have a maximum term of ten years.

If a non-employee director's service relationship with us, or any of our affiliates, whether as a non-employee director or subsequently as an employee, director or consultant of ours or an affiliate, ceases for any reason other than disability or death, or after any 12-month period following a change in control, the optionee may exercise any vested options for a period of three months following the cessation of service. If such an optionee's service relationship with us, or any of our affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary may exercise the option for a period of 12 months in the event of disability, and 18 months in the event of death. If such an optionee's service terminates within 12 months following a specified change in control transaction, the optionee may exercise the option for a period of 12 months following the effective date of such a transaction. The option term may be extended in the event that exercise of the option following termination of service is prohibited by applicable securities laws. In no event, however, may an option be exercised beyond the expiration of its term.

In the event of certain significant corporate transactions, all outstanding options under the 2007 Directors' Plan may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such options, then (a) with respect to any such options that are held by optionees then performing services for us or our affiliates, the vesting and exercisability of such options will be accelerated in full and such options will be terminated if not exercised prior to the effective date of the corporate transaction and (b) all other outstanding options will terminate if not exercised prior to the effective date of the corporate transaction. Our Board may also provide that the holder of an outstanding option not assumed in the corporate transaction will surrender such option in exchange for a payment equal to the excess of (a) the value of the property that the optionee would have received upon exercise of the option, over (b) the exercise price otherwise payable in connection with the option. In addition, the vesting and exercisability of options held by non-employee directors who are either required to resign their position in connection with a specified change in control transaction or are removed from their position in connection with such a change in control will be accelerated in full.

Director Compensation Table

The following table sets forth certain information with respect to the compensation of all our non-employee directors for the year ended December 31, 2008. Dr. Goddard, our Chief Executive Officer, and Dr. Milner, our President, Research and Development, are not listed in the following table since they are employees of ARYx and receive no additional compensation for serving on our Board or its committees.

Name	Fees Earned or Paid in Cash(1)		Option Awards(2)		Total

Robert Adelman, M.D.(3)	$	29,500	$	41,118	$	70,618
David Beier.		10,500		24,219		34,719
Lars G. Ekman, M.D., Ph.D.		29,500		40,393		69,893
Keith R. Leonard		30,500		41,570		72,070
Herm Rosenman		35,500		42,179		77,679
Paul J. Sekhri		32,000		41,118		73,118
Nicholas Simon		30,000		41,118		71,118

(1): Consists of fees earned for Board and committee meeting attendance.
(2): The dollar amounts in this column represent the compensation cost for the year ended December 31, 2008 of stock option awards granted pursuant to our equity compensation plans and thus include amounts from outstanding stock option awards granted in and prior to 2008. These amounts have been calculated in accordance with SFAS 123(R) using Black-Scholes option-pricing model. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. No stock options were forfeited by any of our directors during 2008. Assumptions used in the calculation of these amounts are included in the notes to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008. These amounts reflect our accounting expense for these awards and do not correspond to the actual value that may be recognized by our directors.
(3): Dr. Adelman resigned from our Board in February 2009.

The following table shows certain information as to the grant dates and the fair market value of stock option grants to our non-employee directors:

Name			Exercise Price ($/Sh.)		Grant Date Fair Value ($)(1)

Robert Adelman, M.D.(2)	06/09/2005	15,000	$	1.80	$	29,004
	11/07/2007	16,666		8.10		71,878
David Beier(3)	08/28/2008	16,666		6.33		72,189
Lars Ekman, M.D., Ph.D.(4)	01/21/2004	7,500		0.90		—
	06/09/2005	7,500		1.80		14,502
	11/07/2007	16,666		8.10		71,878
Keith R. Leonard(5)	07/20/2005	15,000		1.80		29,043
	11/07/2007	16,666		8.10		71,878
Herm Rosenman(6)	04/19/2006	15,000		3.00		23,913
	11/07/2007	16,666		8.10		71,878
Paul J. Sekhri(7)	06/09/2005	15,000		1.80		29,004
	11/07/2007	16,666		8.10		71,878
Nicholas Simon(8)	06/09/2005	15,000		1.80		29,004
	11/07/2007	16,666		8.10		71,878

(1): Total stock-based compensation as determined under SFAS No. 123(R). Amounts are amortized over the requisite service period for each award.
(2): As of December 31, 2008, Dr. Adelman held options to purchase 31,666 shares of our common stock. Any outstanding options held by Dr. Adelman subject to vesting as of February 5, 2009, were cancelled as a result of Dr. Adelman's resignation from our Board.
(3): As of December 31, 2008, Mr. Beier held options to purchase 16,666 shares of our common stock.
(4): As of December 31, 2008, Dr. Ekman held options to purchase 31,666 shares of our common stock.
(5): As of December 31, 2008, Mr. Leonard held options to purchase 31,666 shares of our common stock.
(6): As of December 31, 2008, Mr. Rosenman held options to purchase 31,666 shares of our common stock.
(7): As of December 31, 2008, Mr. Sekhri held options to purchase 31,666 shares of our common stock.
(8): As of December 31, 2008, Mr. Simon held options to purchase 31,666 shares of our common stock.

PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has selected Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2009 and has further directed that management submit the selection of Ernst & Young LLP as our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our statement of financial positions since 2002 and the related statements of operations, stockholders' equity, and cash flows since our inception in 1997. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of ARYx and our stockholders.

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter has been approved.

THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 2.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND SERVICES

Aggregate fees billed to us by Ernst & Young LLP, our independent registered public accounting firm, during the years ended December 31, 2008 and 2007 were as follows:

	Year Ended

	December 31, 2008		December 31, 2007
	(in thousands)
Audit Fees(1)	$	371,791	$	263,961
Audit-Related Fees(2)		44,163		788,914
Tax Fees(3)		—		4,100
All Other Fees(4)		—		—

Total Fees	$	415,954	$	1,056,975

(1): Audit Fees—This category includes aggregate fees billed by our independent registered public accounting firm for the audit of our annual financial statements, review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings for those years.
(2): Audit-Related Fees—This category consists of services by our independent registered public accounting firm that, including accounting consultations on transaction related matters and required SEC regulatory filings, are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees.

(3): Tax Fees—This category consists of fees billed by our independent registered public accounting firm for services related to tax compliance, tax advice and tax planning. During the year ended December 31, 2007, Ernst & Young LLP provided services related to the transfer of certain tax work papers.
(4): All Other Fees—During the years ended December 31, 2008 and 2007, we did not incur any fees from Ernst & Young LLP for other professional services.

PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has adopted a policy and procedures for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Ernst & Young LLP. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee's approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee's members, but the decision must be reported to the full Audit Committee at its next scheduled meeting.

Because our initial public offering commenced on November 13, 2007, the Audit Committee was not required to, and did not pre-approve, all of the fees described above in 2007. However, the Audit Committee has pre-approved all audit and permissible non-audit services by Ernst & Young LLP and has pre-approved all new services since the commencement of our initial public offering.

The Audit Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the independent registered public accounting firm's independence.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview

Our executive compensation program is designed to help us attract, as needed, talented individuals to manage and operate all aspects of our business, to reward those individuals fairly over time and to retain those individuals who continue to meet our high expectations. The goals of our executive compensation program are to align our executive officers' compensation with our business objectives and the interests of our stockholders, to incentivize and reward our executive officers for our successes and to reflect the teamwork philosophy of our executive management team. To achieve these goals, our Compensation Committee establishes executive compensation and benefit packages that are generally based on a mix of base salary, cash incentive payments and equity awards, in the proportions that our Compensation Committee believes are the most appropriate to incentivize and reward our executive officers for achieving our objectives. Our executive compensation program is also intended to make us competitive in the San Francisco Bay Area and in the pharmaceutical and biotechnology industry, where there is significant competition for talented employees, and to be fair relative to other professionals within our organization. We believe that we must provide competitive compensation packages to attract and retain the most talented and dedicated executive officers possible and to help our executive management function as a stable team over the longer term.

Role of Our Compensation Committee in Setting Executive Compensation

Our Compensation Committee approves, administers and interprets our executive compensation program. The Compensation Committee was appointed by our Board, and consists solely of directors who are "outside directors" for purposes of Section 162(m) and "non-employee directors" for purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Our Compensation Committee is comprised of Messrs. Sekhri, Simon and Beier.

The Compensation Committee has established a compensation philosophy for our company. It is applied to all employees including officers. Generally, the philosophy establishes that base cash salary, company-provided benefits (health, dental and vision care insurance, paid vacation and other holidays, and matches to employee contributions into a 401(k) plan), equity awards and discretionary cash incentive payments constitute total compensation. Although our Compensation Committee has not adopted any formal guidelines for allocating total compensation among these elements, we intend to implement and maintain compensation plans that tie a substantial portion of our executives' overall compensation to the achievement of corporate goals and value-creating milestones. We believe that performance and equity-based compensation are important components of the total executive compensation package for maximizing stockholder value while, at the same time, attracting, motivating and retaining highly-qualified executives. Our compensation philosophy also provides that total compensation is intended to remain competitive with similar biotechnology and pharmaceutical companies so that we can attract and retain the most talented and dedicated employees. However, the compensation of our executive officers is based in part on the terms of employment agreements we entered into with each of our executive officers at the time they joined the company. These agreements set forth the initial base salaries for our executive officers as well as initial targeted cash incentive payments and the equity awards provided (subject, in each case, to the final determination of our Compensation Committee or the Board).

None of our executive officers, other than our Chief Executive Officer, participate in the Compensation Committee's executive compensation discussions. The Compensation Committee does not delegate any of its functions to others in determining executive compensation. However, our Compensation Committee retains the services of a third-party executive compensation specialist from

time to time, as it sees fit, in connection with the establishment and administration of our executive compensation program and related policies.

Annual Review and Benchmarking of Executive Compensation

To assess the competitiveness of our executive compensation program and compensation levels, we conduct an annual benchmark review of the aggregate level of our executive compensation program, as well as the mix of elements used to compensate our executive officers. As part of this review, the Compensation Committee considers recommendations from Paul Goddard, our Chief Executive Officer, and human resources input from David Nagler, our Vice President Corporate Affairs, in determining executive compensation. While Dr. Goddard and Mr. Nagler provide valuable input to the Compensation Committee, they do not participate in determining their own compensation. The information provided by our human resources department consists of the results of our annual performance reviews.

After our initial public offering in November 2007, the Compensation Committee retained Radford Surveys + Consulting, or Radford, an independent compensation consulting firm, to provide us and the Compensation Committee with assistance in reviewing our overall compensation philosophy for 2008 in comparison to market trends and industry standards, designating a new peer group of companies for benchmarking and assessing competitive market data on executive compensation, as well as for non-executive employees. Radford also attends meetings from time to time at the request of the Compensation Committee and makes recommendations, including recommendations relating to executive compensation. Based on Radford's assessment and recommendation, 18 publicly-traded peer companies in the pharmaceuticals and biotechnology industry were used by the Compensation Committee as benchmarks for 2008 compensation, including the following:

•: ACADIA Pharmaceuticals, Inc;
•: Affymax, Inc.;
•: Alexza Pharmaceuticals, Inc.;
•: Cadence Pharmaceuticals, Inc;
•: Coley Pharmaceuticals, Inc;
•: MAP Pharmaceuticals, Inc;
•: Synta Pharmaceuticals Inc.;
•: Trubion Pharmaceuticals, Inc; and
•: XenoPort, Inc.

The peer companies used for benchmarking for 2008 compensation were chosen because they had recently made initial public offerings and were generally similar to ours in terms of industry, capital structure, financial attributes, phase of products in development and competition for talent. During 2008, the Compensation Committee again retained Radford to advise on executive compensation, including assessing pay philosophy and recommending modification of our peer group of companies based on our current business parameters.

In connection with Radford's review, the Compensation Committee reviewed and updated the group of peer companies based on the criteria of similarly sized newly public companies by market capitalization, employee size and stage of development. Based on Radford's assessment and recommendation, the Compensation Committee revised our peer group to remove Coley Pharmaceuticals, Inc., among others, and add Cytori Therapeutics, Poniard Pharmaceuticals and Rigel Pharmaceuticals, among others, resulting in a peer group of 19 publicly traded companies.

Based on the Compensation Committee's philosophy, we benchmark our executive compensation against the median updated compensation paid by these peer companies. Elements of compensation benchmarked included base salary, cash incentive payments and long-term equity compensation. While benchmarking may not always be appropriate as a stand-alone tool for setting compensation due to the aspects of our business and objectives that may be unique to us, we generally believe that it is an important part of our decision-making process.

Elements of Our Executive Compensation Program

Our executive compensation program consists of three principal components: base salary, cash incentive payments based on achievement of performance milestones and long-term incentive compensation in the form of equity awards. Each component of our executive compensation program is designed to address specific compensation objectives. Base salary is generally reviewed independently of the incentive components and is designed to keep salaries at the lowest potential competitive level, allowing a greater portion of total compensation to be performance based. The Compensation Committee generally reviews cash incentive payments and long-term equity incentives in a more integrated manner, attempting to ensure that our executive officers are rewarded both on an annual basis (through cash incentive payments designed to recognize performance over an annual period) as well as over a sustained period (through long-term equity incentives based on an increase in stockholder value). In determining the amount and mix of compensation elements and whether each element provides the correct incentives and rewards for performance consistent with our short and long-term goals and objectives, the Compensation Committee relies on its judgment about each individual rather than adopting a formulaic approach to compensation decisions it believes are too narrowly responsive to short-term changes in business performance. As a result, the Compensation Committee does not utilize a fixed weighting system between compensation elements for each executive officer, but rather utilizes a subjective assessment of each executive officer's overall contribution to the business, scope of the executive officer's responsibilities and the executive officer's historical performance to determine that executive officer's annual compensation. Our executive officers are also eligible to participate, on the same basis as other employees, in our 401(k) plan and our other benefit programs generally available to all employees. Our executive officers do not receive any perquisites.

Base Salary. Each of our executive officers entered into an employment agreement with us at the time they joined the company that provided for an initial base salary, subject to annual increases determined by the Compensation Committee. We review company and individual performance annually, shortly after the end of each calendar year. As discussed above, Dr. Goddard and Mr. Nagler review the executive officers' salaries with the Compensation Committee in connection with the Compensation Committee's annual performance review. In establishing the base salaries of our executive officers for 2008 and 2009, our Compensation Committee took into account a number of factors, including the executive's seniority, position, functional role and level of responsibility and individual performance, and awarded salary increases based on increases in cost of living and competition for talent in the San Francisco Bay Area. The Compensation Committee believes that the base salaries of our executive officers should be generally targeted to the 50^th percentile of the base salaries for comparable positions paid in comparable companies in the biotechnology and pharmaceutical industry. Base salaries of our executive officers will continue to be reviewed on an annual basis and adjustments will be made to reflect individual performance-based factors, as well as our company's financial status and the above-mentioned competitive factors. We do not intend to apply specific formulas to determine increases. Components of individual performance include core competencies such as job knowledge, delivery of results, communication, teamwork, quality, initiative and dependability, and also expense management, planning, process improvements, recruitment, retention, coaching, mentoring and other measurable company-specific goals.

Cash Incentive Payment. In addition to base salaries, our Compensation Committee has the authority to award discretionary cash incentive payments, or cash bonuses, annually to all of our employees, including our executive officers. The annual cash incentive payments are intended to compensate our executive officers for achieving corporate goals and for achieving what the Compensation Committee believes to be value-creating milestones. Our annual cash incentive payments are paid in cash in an amount reviewed and approved by our Compensation Committee and ordinarily are each paid in a single installment in the first quarter following the end of a given calendar year for performance in the prior year. Each executive officer is eligible for a discretionary annual cash incentive payment up to an amount equal to a specified percentage of such executive officer's salary. The target percentages are set at levels that, upon achievement of the target percentage, are likely to result in cash incentive payments that our Compensation Committee believes to be at approximately the 50th percentile of target amounts for comparable companies in the biotechnology and pharmaceutical industry. However, the actual cash incentive payments awarded in any year, if any, may be more or less than the established target percentages, depending on individual performance and the achievement of our corporate objectives. Whether or not a cash incentive payment is paid for any year is within the discretion of the Compensation Committee. The Compensation Committee also determines the size of the total pool of cash incentive payments that may be awarded, which is based in large part on our Board's determination of our success in achieving our corporate objectives for the plan year. The Compensation Committee determines the portion of the total pool, if any, that will be allocated to the executive officers as a group and the cash incentive payments for each of our executive officers. Dr. Goddard provides input to the Compensation Committee with respect to cash incentive payments for executive officers other than himself.

At the end of each year, our Compensation Committee determines the level of achievement for each corporate goal and value-creating milestone and for each individual performance goal, and awards credit for the particular level of achievement. Final determinations as to bonus levels are then based in part on the achievement of these corporate and individual goals or milestones, as well as our Board's assessment as to the overall success of our company and the development of our business. These goals and milestones and the proportional emphasis placed on each goal and milestone are subjective determinations which may vary, from time to time, depending on our overall strategic objectives and the job responsibilities of each executive officer, but relate generally to factors such as development and progression of our existing product candidates, achievement of clinical and regulatory milestones, this establishment of new collaborative arrangements, achievement of sales and marketing targets, and to financial factors such as raising or preserving capital and improving our results of operations.

In February 2008, the Compensation Committee established cash incentive payments to be paid in 2009 for performance in 2008 at a target percentage up to 50.0% of base salary for our Chief Executive Officer, up to 35.0% of base salary for our President, Research and Development and Chief Operating Officer, and up to 30.0% of base salary for each of our other executive officers. The corporate goals established by our Board for 2008 were substantially met, as generally were the individual goals of the executive officers. However, based on the cash position of the Company and our management's recommendation that all employees be eligible, the Board declined to award cash incentive payments or bonuses to named executive officers for performance in the year ended December 31, 2008. Each executive officer's individual performance goals are more fully described in the section below entitled "—Compensation Actions for our Executive Officers." The 2008 corporate goals and milestones for our executive officers included the successful continued clinical development of our three lead product candidates: tecarfarin, budiodarone and ATI-7505. This included initiation of a Phase 2/3 clinical trial for tecarfarin, completion of a Phase 2b clinical trial for budiodarone and continued cooperation with strategic partner Procter & Gamble Pharmaceuticals, Inc., or P&G, in the development of ATI-7505 through termination of the collaboration with P&G in July 2008. An additional goal was set for the entrance of ATI-9242 into clinical development. Finally, the Company set goals for the continued advancement of additional potential product candidates into late stage research.

In February 2009, the Compensation Committee determined the corporate and individual goals and milestones that it will apply in determining cash incentive payments to executive officers, if any, for performance in 2009. The determination of whether actual cash incentive payments will be paid to individual executive officers will be made at the discretion of the Compensation Committee, provided that no payments shall be made until the Company has completed a corporate partnering transaction for one of its product candidates. The Board established the cash incentive payments to be paid under the Plan over the course of 2009 at target amounts expressed as a percentage of the 2009 annual base salary for each named executive officer: up to 75.0% of base salary for our Chief Executive Officer, up to 52.5% of base salary for our President, Research and Development and Chief Operating Officer, and up to 45.0% of base salary for each of our other executive officers. Given the strategic importance to us of entering into corporate partnerships for the full development and eventual commercialization of each of our lead product candidates, should they be approved by the appropriate regulatory agency, our Board has established the entering of such partnerships as the primary factor in determining whether cash incentive payments will be granted to our executive officers for performance in 2009. In the event that we complete one or more corporate partnering transactions, the Compensation Committee will determine the amount and timing of any bonus payment by evaluating the terms of the corporate partnering transaction, and the named executive officer's performance in such transaction.

The Compensation Committee has not determined whether it would attempt to recover cash incentive payments paid to our executive officers if the performance objectives that led to the determination of such payments were to be restated, or found not to have been met to the extent originally believed by the Compensation Committee. However, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, as a result of misconduct, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of Section 304 of the Sarbanes-Oxley Act of 2002.

Long-Term Equity Compensation. The salary and cash incentive payment components of our executive compensation program are intended to compensate our executive officers for short-term performance. We believe that long-term performance is achieved through an ownership culture that encourages such performance by our executive officers through the use of equity-based awards. Our equity benefit plans have been established to provide certain of our employees, including our executive officers, with incentives to help align those employees' interests with the interests of our stockholders. Our Compensation Committee believes that the use of equity and equity-based awards offers the best approach to achieving our compensation goals and currently provides tax and other advantages to our employees relative to other forms of equity compensation. We believe that our equity benefit plans are an important retention tool for our employees.

We have not adopted stock ownership guidelines, and, other than for our co-founders, our equity benefit plans have provided the principal method for our executive officers to acquire equity or equity-linked interests in our company. Prior to our initial public offering in November 2007, we granted equity awards primarily through our 2001 Equity Incentive Plan, which was adopted by our Board and stockholders to permit the grant of stock options, stock appreciation rights, restricted stock and other stock-based awards to our officers, directors, scientific advisory board members, employees and consultants. In connection with our initial public offering, our Board adopted new equity benefit plans described under "—Equity Benefit Plans" below. The 2007 Equity Incentive Plan replaced our 2001 Equity Incentive Plan and, as described below, affords our Compensation Committee much greater flexibility in making a wide variety of equity awards. Participation in our 2007 Employee Stock Purchase Plan is available to all executive officers on the same basis as our other employees. The 2007 Non-Employee Directors Stock Option Plan provides for non-discretionary equity awards to our

non-employee directors. See "Information Regarding the Board of Directors and Corporate Governance—Director Compensation" for more detailed information on these non-discretionary equity awards.

In 2007 and 2008, certain of our named executive officers, who are designated below under "—Summary Compensation Table," were awarded stock options and restricted stock awards under our equity benefit plans in the amounts indicated in the section below entitled "—Grants of Plan Based Awards." In determining the size of the equity awards granted to our named executive officers in 2007 and 2008, as well as in February 2009, the Compensation Committee (or in certain instances our Board) took into account each named executive officer's position, scope of responsibility, ability to affect stockholder value, the individual's historic and recent performance, and our policy of looking to benchmark data from our peer companies with a goal of ensuring a level of long-term incentive compensation for our named executive officers as a group at approximately the 50th percentile of long-term incentive compensation for executive officers in similar positions with similar responsibilities at our peer companies. In the future, the Compensation Committee may deviate from this target level based on an executive officer's position and level of responsibility, potential contribution to the achievement of our long-term goals, equity award guidelines established by us and any other relevant factors.

Employment Agreements. Our executive officers are parties to employment agreements with us, which are more fully described under "—Employment Agreements" below.

Severance and Change of Control Benefits. Under their employment agreements, our executive officers are entitled to certain severance and change of control benefits, the terms of which are more fully described below under "—Severance and Change of Control Benefits." Our executive officers are generally entitled to a combination of a lump-sum severance payment, health insurance reimbursement and, in certain cases, accelerated vesting of stock options. We have found this combination of benefits to be generally typical for peer companies in our industry. With respect to change of control benefits, we provide severance compensation if an executive officer is terminated in connection with a change of control transaction to further promote the ability of our executive officers to act in the best interests of our stockholders even though they could be terminated as a result of the transaction. We also believe that the other severance benefits are appropriate, particularly with respect to a termination by us without cause, since in that scenario we and the executive have a mutually-agreed-upon severance package that is in place prior to any termination event which provides us with more flexibility to make a change in executive management if such a change is in our stockholders' best interests. As a result, we believe these severance and change of control benefits are an essential element of our executive compensation program and assist us in recruiting and retaining talented individuals.

Stock Appreciation Rights. Our 2007 Equity Incentive Plan authorizes us to grant stock appreciation rights, or SARs, which are more fully described below under "—Equity Benefit Plans." To date, no SARs have been awarded to any of our executive officers. However, our Compensation Committee, in its discretion, may in the future elect to make such grants to our executive officers if it deems it advisable.

Restricted Stock Awards. The Compensation Committee authorized the grant of restricted stock awards pursuant to our 2001 Equity Incentive Plan to our Chief Executive Officer in 2007 in the amount and under terms more fully described in the section below entitled "—Compensation Actions for Our Executive Officers." The Compensation Committee, in its discretion, may in the future elect to make additional restricted stock awards to our executive officers if they deem it advisable.

Other Benefits. We maintain a 401(k) plan in which all of our employees are entitled to participate. For more information about our 401(k) plan see the section below entitled "—Post-Retirement Benefits." We provide health care, dental and vision benefits to all full-time employees, including our executive officers. We also have a flexible benefits healthcare plan and a

flexible benefits childcare plan under which employees can set aside pre-tax funds to pay for qualified health care expenses and qualified childcare expenses not reimbursed by insurance. Under certain circumstances, we also provide limited reimbursement for the costs of childcare for children up to five years old. These benefits are available to all employees, including our executive officers, subject to applicable laws.

Compensation Actions for Our Executive Officers

Paul Goddard, Ph.D.—Chairman and Chief Executive Officer. Dr. Goddard's base salary effective as of January 1, 2009 is $451,000, reflecting an approximately 3% increase over his base salary in 2008. The Compensation Committee approved this increase in part to be competitive with the compensation offered by peer companies in our geographic area and to provide Dr. Goddard an adequate retention incentive. Dr. Goddard's individual performance goals mirrored our corporate goals, although he had the added goal of strengthening our management team and ensuring that our management team worked together effectively in continuing to move our products through research and development and in funding ARYx. In February 2008, the Compensation Committee granted Dr. Goddard a stock option under our 2007 Equity Incentive Plan to purchase 100,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests at the rate of 2,083 shares per month, measured from the date of grant, provided however, that to the extent Dr. Goddard ceases to serve as the Company's Chief Executive Officer but continues to serve as Chairman, the shares subject to the option award shall vest at a reduced rate, commencing from the date of Dr. Goddard's resignation or removal as Chief Executive Officer, of 1,041 shares per month for so long as Dr. Goddard continues to serve as Chairman. In addition, in February 2009 the Compensation Committee granted Dr. Goddard a stock option under our 2007 Equity Incentive Plan to purchase 200,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests at the rate of 4,168 shares per month, measured from the date of grant, provided however, that to the extent Dr. Goddard ceases to serve as the Company's Chief Executive Officer but continues to serve as Chairman, the shares subject to the option award shall vest at a reduced rate, commencing from the date of Dr. Goddard's resignation or removal as Chief Executive Officer, of 2,084 shares per month for so long as Dr. Goddard continues to serve as Chairman.

Peter G. Milner, M.D.—President, Research and Development and Director. Dr. Milner's base salary effective as of January 1, 2009 is $333,000, reflecting an approximately 3% increase over his base salary in 2008. The Compensation Committee approved this increase in part in order to be competitive with the compensation offered by peer companies in our geographic area and to provide Dr. Milner an adequate retention incentive. Dr. Milner received a discretionary non-cash bonus in the form of a gift card of $437, which reflects his contribution to achieving the ATI-9242 performance milestone. Dr. Milner's individual performance goals in 2008 included ensuring departments met their 2008 goals on time and on budget, reorganizing the research department, and supporting company business development. In February 2008, the compensation committee granted Dr. Milner a stock option under our 2007 Equity Incentive Plan to purchase 40,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests in equal monthly installments over 48 months measured from the date of grant. In addition, in February 2009, the Compensation Committee granted Dr. Milner a stock option under our 2007 Equity Incentive Plan to purchase 90,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests as follows: 25% of the shares subject to the award shall vest on the one-year anniversary of the date of grant, with the remaining shares vesting equally over the ensuing 36 months.

John Varian—Chief Operating Officer and Chief Financial Officer. Mr. Varian's base salary effective as of January 1, 2009 was $324,000, reflecting an approximately 3% increase over his base salary in

2008. The Compensation Committee approved this increase in part in order to be competitive with the compensation offered by peer companies in our geographic area and to provide Mr. Varian an adequate retention incentive. Mr. Varian's individual performance goals in 2008 included implementing a corporate development program, developing a pool of potential bidders for budiodarone, developing a financial model for business development purposes, and leading an effort to identify alternate plans to optimize the value of the research and feasibility programs. In February 2008, the compensation committee granted Mr. Varian a stock option under our 2007 Equity Incentive Plan to purchase 44,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests in equal monthly installments over 48 months measured from the date of grant. In addition, in February 2009, the Compensation Committee granted Mr. Varian a stock option under our 2007 Equity Incentive Plan to purchase 100,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests as follows: 25% of the shares subject to the award shall vest on the one-year anniversary of the date of grant, with the remaining shares vesting equally over the ensuing 36 months.

Pascal Druzgala, Ph.D.—Senior Vice President and Chief Scientific Officer. Dr. Druzgala's base salary effective as of January 1, 2009 was $283,000, reflecting an approximately 3% increase over his base salary as of June 1, 2008. The Compensation Committee approved this increase in part in order to be competitive with the compensation offered by peer companies in our geographic area and to provide Dr. Druzgala an adequate retention incentive. Dr. Druzgala received a discretionary non-cash bonus in the form of a gift card of $437, which reflects his contribution to achieving the ATI-9242 performance milestone. Dr. Druzgala's individual performance goals in 2008 were to select lead candidates for Investigational New Drug, or IND, applications in connection with ATI-24,000 and ATI-20,000; develop an IND-enabling package consisting of studies for the chosen IND program; and to continue to build and strengthen the role of research and pharmacology and take a leadership in publication strategy. In February 2008, the compensation committee granted Dr. Druzgala a stock option under our 2007 Equity Incentive Plan to purchase 35,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests in equal monthly installments over 48 months measured from the date of grant. In addition, in February 2009, the Compensation Committee granted Dr. Druzgala a stock option under our 2007 Equity Incentive Plan to purchase 60,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests as follows: 25% of the shares subject to the award shall vest on the one-year anniversary of the date of grant, with the remaining shares vesting equally over the ensuing 36 months.

Daniel Canafax, Pharm.D.—Vice President and Chief Development Officer. Dr. Canafax's base salary effective as of January 1, 2009 was $270,000, reflecting an approximately 3% increase over his base salary in 2008. The Compensation Committee approved this increase in part in order to be competitive with the compensation offered by peer companies in our geographic area and to provide Dr. Canafax an adequate retention incentive. Dr. Canafax received a discretionary non-cash bonus in the form of a gift card of $437, which reflects his contribution to achieving ATI-9242 performance milestone. Dr. Canafax's individual performance goals in 2008 were principally focused on leading the company's development team in the completion of a Phase 2 clinical trial and initiation of a Phase 2/3 clinical trial for tecarfarin, the completion of our Phase 2 clinical trial for budiodarone, and initiation of a clinical trial for ATI-9242. In February 2008, the compensation committee granted Dr. Canafax a stock option under our 2007 Equity Incentive Plan to purchase 60,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests in equal monthly installments over 48 months measured from the date of grant. In addition, in February 2009, the Compensation Committee granted Dr. Canafax a stock option under our 2007 Equity Incentive Plan to purchase 40,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This

stock option vests as follows: 25% of the shares subject to the award shall vest on the one-year anniversary of the date of grant, with the remaining shares vesting equally over the ensuing 36 months.

David Nagler—Vice President, Corporate Affairs and Secretary. Mr. Nagler's base salary effective as of January 1, 2009 was $256,000, reflecting an approximately 3% increase over his base salary in 2008. The Compensation Committee approved this increase in part in order to be competitive with the compensation offered by peer companies in our geographic area and to provide Mr. Nagler an adequate retention incentive. Mr. Nagler's individual goals for 2008 included supporting corporate development through corporate communications and investor relations, executing a corporate workforce plan, acting as budiodarone project team leader, and working with management to implement a research team restructuring. In February 2008, the compensation committee granted Mr. Nagler a stock option under our 2007 Equity Incentive Plan to purchase 30,000 shares of common stock at an exercise price of $7.55 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests in equal monthly installments over 48 months measured from the date of grant. In addition, in February 2009, the Compensation Committee granted Mr. Nagler a stock option under our 2007 Equity Incentive Plan to purchase 60,000 shares of common stock at an exercise price of $2.70 per share, reflecting the fair market value of our common stock on the date of grant. This stock option vests as follows: 25% of the shares subject to the award shall vest on the one-year anniversary of the date of grant, with the remaining shares vesting equally over the ensuing 36 months.

Accounting and Tax Considerations

Effective January 1, 2006, we began accounting for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, or SFAS 123(R). Under the provisions of SFAS 123(R), compensation expense related to stock-based transactions, including employee and director stock-based awards, is estimated at the date of grant based on the stock award's fair value and is recognized as expense over the requisite service period. The Compensation Committee has determined to retain for the foreseeable future our stock option program as the sole component of its long-term executive compensation program, and, therefore, to record this expense on an ongoing basis according to SFAS 123(R). The Compensation Committee has considered, and may in the future consider, the grant of restricted stock or restricted stock units to our executive officers in lieu of or in addition to stock option grants in light of the accounting impact of SFAS 123(R) with respect to stock option grants and other considerations. Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.

Section 162(m) of the Internal Revenue Code limits our deduction for federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is "performance-based compensation." The Compensation Committee has not yet established a policy for determining which forms of incentive compensation awarded to our executive officers shall be designed to qualify as "performance-based compensation." To maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, the Compensation Committee has not adopted a policy that requires all compensation to be deductible. However, the Compensation Committee intends to evaluate the effects of the compensation limits of Section 162(m) on any compensation it proposes to grant, and the compensation committee intends to provide future compensation in a manner consistent with our best interests and those of our stockholders.

Conclusion

It is the opinion of the Compensation Committee that our compensation philosophy and related policies and elements described above provide the necessary incentives to properly align our performance and the interests of our stockholders while maintaining equitable and competitive executive compensation practices that enable us to attract and retain the highest caliber of executives.

SUMMARY COMPENSATION TABLE

The following table sets forth all of the compensation awarded to, earned by, or paid to our principal executive officer, principal financial officer and our four other highest paid executive officers for the years ended December 31, 2008, 2007 and 2006. The officers listed in the table below are referred to in this proxy statement as our "named executive officers."

Name and Principal Position

Paul Goddard, Ph.D.	2008	437,850		—	20,271	396,204	—	2,602	(5)	856,927
Chairman and Chief	2007	408,692		40,417	75,464	355,260	240,000	1,896	(6)	1,121,729
Executive Officer	2006	400,000		40,175	60,500	198,441	110,000	1,806	(6)	810,922

Peter G. Milner, M.D.	2008	322,857		437	—	125,260	—	13,335	(7)	461,889
President, Research and	2007	309,695		417	—	40,320	80,000	11,172	(8)	441,604
Development and Director	2006	300,675		175	—	24,528	110,000	688	(6)	436,066

John Varian	2008	314,774		—	—	142,958	—	4,618	(9)	462,350
Chief Operating Officer and	2007	301,941		417	—	62,030	70,000	10,084	(10)	444,472
Chief Financial Officer	2006	284,850		175	—	39,821	75,000	791	(11)	400,637

Pascal Druzgala, Ph.D.	2008	270,118	(20)	437	—	110,856	—	36,783	(12)	418,194
Senior Vice President and	2007	252,368		417	—	38,804	60,000	38,054	(13)	389,643
Chief Scientific Officer	2006	240,350		175	—	15,606	55,000	38,023	(14)	349,154

Daniel Canafax, Pharm.D.	2008	263,287		437	—	195,140	—	10,611	(15)	469,475
Vice President and Chief	2007	224,091	(21)	100,417	—	76,717	45,000	5,202	(16)	451,426
Development Officer(20)	2006	—		—	—	—	—	—		—

David Nagler	2008	249,223		—	—	93,825	—	3,704	(17)	346,752
Vice President, Corporate	2007	239,063		417	—	30,390	55,000	74,757	(18)	399,626
Affairs and Secretary	2006	232,100		175	—	25,916	43,000	101,802	(19)	402,993

(1): The amount for 2008 represents a discretionary non-cash bonus paid in the form of a gift card for the achievement of a performance milestone. The amounts for 2007 and 2006 represent a discretionary non-cash holiday bonus paid by us. For Dr. Goddard, the amounts for 2006 and 2007 also included a discretionary cash bonus of $40,000 in connection with the consummation of our collaboration with P&G. For Dr. Canafax, the amount in 2006 also included a sign-on bonus of $100,000.
(2): Represents the compensation expense attributable to stock awards earned by the named executive officers for 2008, whether granted in 2008 or in prior years. The compensation expense is based on the grant-date fair value of each performance share award as determined under Statement of Financial Accounting Standards No. 123 (revised), Share-Based Payment , or SFAS 123(R). Assumptions used in the calculation of the SFAS 123(R) grant-date fair value are set forth in Note 9 to our consolidated financial statements for the year ended

December 31, 2008 included in our Annual Report on Form 10-K for such year. Pursuant to SEC rules, the amount shown excludes the impact of estimated forfeiture related to service-based vesting conditions.

(3): Represents the SFAS 123(R) compensation expense attributable to stock options earned by the named executive officers for the applicable year, whether granted in the current year or in prior years. The compensation expense is based on the grant-date fair value of each stock option grant. Assumptions used in the calculation of the SFAS 123(R) grant-date fair value are set forth in Note 9 to our consolidated financial statements for the year ended December 31, 2008 included in our Annual Report on Form 10-K for such year. Pursuant to SEC rules, the amount shown excludes the impact of estimated forfeiture related to service-based vesting conditions.
(4): Represents cash incentive payments earned for the respective year but paid in the subsequent year based on our Compensation Committee's review of corporate performance and individual achievements for the respective year. For more information on our long-term incentive compensation program see "Compensation Discussion and Analysis—Long-Term Equity Compensation."
(5): Consists of $2,602 in group term life insurance premiums paid by us.
(6): Represents group term life insurance premiums paid by us.
(7): Consists of $1,236 in group term life insurance premiums and $12,099 in matching 401(k) plan contributions paid by us.
(8): Consists of $714 in group term life insurance premiums and $10,459 in matching 401(k) plan contributions paid by us.
(9): Consists of $791 in group term life insurance premiums and $3,827 in matching 401(k) plan contributions paid by us.
(10): Consists of $450 in group term life insurance premiums and $9,635 in matching 401(k) plan contributions paid by us.
(11): Consists of $421 in group term life insurance premiums and $370 in long term disability insurance premiums paid by us.
(12): Consists of $1,095 in group term life insurance premiums and $35,688 housing allowance paid by us.
(13): Consists of $554 in group term life insurance premiums and a $37,500 housing allowance paid by us.
(14): Consists of $523 in group term life insurance premiums and a $37,500 housing allowance paid by us.
(15): Consists of $1,978 in group term life insurance premiums, $7,718 in matching 401(k) plan contributions and $915 in long-term disability insurance premiums paid by us.
(16): Consists of $970 in group term life insurance premiums, $608 in long-term disability insurance premiums and $3,624 in matching 401(k) plan contributions paid by us.
(17): Consists of $1,900 in group term life insurance premiums, $1,454 in matching 401(k) plan contributions and $350 in long-term disability insurance premiums paid by us.
(18): Consists of $971 in group term life insurance and $670 in long-term disability insurance premiums paid by us, and $73,116 resulting from our forgiveness of the principal amount and accrued interest due on a relocation loan made by us to Mr. Nagler.
(19): Consists of $338 in group term life insurance, $370 in long-term disability insurance premiums and a $70,987 housing allowance paid by us, together with $30,107 resulting from our forgiveness of the principal amount and accrued interest due on a relocation loan made by us to Mr. Nagler.
(20): The amount reflects an increase of Dr. Druzgala's base salary effective June 1, 2008.
(21): Dr. Canafax was hired in February 2007 and the amount reflects compensation earned for the period since hired.

GRANTS OF PLAN-BASED AWARDS DURING 2008

The following table sets forth certain additional information regarding grants of plan-based awards to our named executive officers for the year ended December 31, 2008.

Name

Paul Goddard, Ph.D.	2/06/08	—	—	100,000	7.55	528,596
	—	258,925	—	—	—	—
Peter G. Milner, M.D.	2/06/08	—	—	40,000	7.55	211,439
	—	113,000	—	—	—	—
John Varian	2/06/08	—	—	44,000	7.55	232,583
	—	110,171	—	—	—	—
Pascal Druzgala, Ph.D.	2/06/08	—	—	35,000	7.55	185,008
	—	81,035	—	—	—	—
Daniel Canafax, Pharm.D.	2/06/08	—	—	60,000	7.55	317,157
	—	78,986	—	—	—	—
David Nagler	2/06/08	—	—	30,000	7.55	158,578
	—	74,767	—	—	—	—

(1): This column sets forth the target cash bonus amounts for each named executive officer for the year ended December 31, 2008 under our cash incentive payment program established by our Board of Directors. For Dr. Goddard, the target bonus was 50% of his salary and a potential discretionary cash bonus of $40,000. For Dr. Milner and Mr. Varian the target bonus was 35% of their respective base salaries and the target bonuses for Drs. Druzgala and Canafax and Mr. Nagler were 30% of their respective base salaries for 2008. The actual cash bonus award earned for the year ended December 31, 2008 is set forth in the Summary Compensation Table above. As such, the amounts set forth in this column do not represent additional compensation earned by our named executive officers for the year ended December 31, 2008. For a description of our cash incentive payment program, please see "Compensation Discussion and Analysis—Elements of Our Executive Compensation Program—Cash Incentive Payments" above.

EXECUTIVE EMPLOYMENT AGREEMENTS

Paul Goddard, Ph.D. In September 2005, we entered into an employment agreement with Dr. Goddard, Chairman of the Board and our Chief Executive Officer. The agreement provides that Dr. Goddard would receive an annual base salary of $400,000 and would be eligible to earn an annual bonus of up to 50% of his annual base salary contingent on the completion of specific business objectives to be determined by the Board. While not addressed in the agreement, these business objectives for Dr. Goddard were subsequently determined by our Compensation Committee to be as follows: (i) his successful assumption of the duties of Chief Executive Officer, (ii) his contribution towards our consummation of a strategic collaboration arrangement for ATI-7505 and (iii) his contribution towards the successful completion of our Series E preferred stock private financing. The agreement provided that the Board would set additional business objectives that, if the Board deemed accomplished, would raise Dr. Goddard's annual bonus by up to an additional $40,000 per year. The agreement provides that Dr. Goddard is employed "at-will," and his employment may be terminated at any time by us or Dr. Goddard. Dr. Goddard is also eligible to participate in our general employee benefit plans in accordance with the terms and conditions of such plans. The agreement provides Dr. Goddard with certain severance and change of control benefits. See "—Severance and Change of

Control Benefits" below. In December 2008, non-substantive amendments were made to this employment agreement in accordance with Internal Revenue Service regulations. Dr. Goddard's base salary has been increased since the date of his employment agreement primarily as a result of market conditions rather than Dr. Goddard's achievement of any business objectives.

Peter G. Milner, M.D. In September 2005, we entered into an employment agreement with Dr. Milner, our President, Research and Development and a member of the Board. The agreement provided that Dr. Milner would receive an annual base salary and would be eligible to earn an annual bonus appropriate to his position as established by the Compensation Committee, and contingent on the successful completion of specific business objectives mutually determined by Dr. Milner and our Board. These business objectives for Dr. Milner were mutually determined by our compensation committee and Dr. Milner to be as follows: (i) his successful transition to the duties of President, Research and Development, (ii) his contribution towards our consummation of a strategic collaboration arrangement for ATI-7505 and (iii) his contribution towards the successful completion of our Series E preferred stock private financing. The agreement reaffirmed prior issuances of stock options, including a stock option to purchase 33,333 shares of common stock under our 2001 Equity Incentive Plan issued pursuant to a prior employment agreement entered into in February 2005 and amended in September 2005. The shares subject to such stock option shall vest over a four year period, with 1/4th of the shares subject to the stock option vesting on the first anniversary of the grant date, and 1/48th of the shares subject to the stock option vesting monthly thereafter. The agreement provides that Dr. Milner is employed "at-will," and his employment may be terminated at any time by us or Dr. Milner. Dr. Milner is also eligible to participate in our general employee benefit plans in accordance with the terms and conditions of such plans. The agreement provides Dr. Milner with certain severance and change of control benefits. See "—Severance and Change of Control Benefits" below. Dr. Milner's base salary has been increased since the date of his employment primarily as a result of market conditions rather than Dr. Milner's achievement of any business objectives. In December 2008, non-substantive amendments were made to this employment agreement in accordance with Internal Revenue Service regulations.

John Varian. In November 2003, we entered into an employment agreement with Mr. Varian, our Chief Operating Officer and Chief Financial Officer. The agreement provided that Mr. Varian would receive an annual base salary of $260,000, a starting bonus of $30,000 and would be eligible to earn a bonus of $50,000 in 2004 for satisfaction of certain specified milestones. The agreement also provided for the issuance of a stock option to purchase 83,333 shares of common stock under our 2001 Equity Incentive Plan. The shares subject to such stock option vest over a four year period, with 1/4th of the shares subject to the stock option vesting on the first anniversary of the grant date, and 1/48th of the shares subject to the stock option vesting monthly thereafter. The agreement provides that Mr. Varian is employed "at-will," and his employment may be terminated at any time by us or Mr. Varian. Mr. Varian is also eligible to participate in our general employee benefit plans in accordance with the terms and conditions of such plans. The agreement provides Mr. Varian with certain severance and change of control benefits. See "—Severance and Change of Control Benefits" below. In December 2008, non-substantive amendments were made to this employment agreement in accordance with Internal Revenue Service regulations.

Pascal Druzgala, Ph.D. In July 2002, we entered into an employment agreement with Dr. Druzgala, our Senior Vice President and Chief Scientific Officer. The agreement provided that Dr. Druzgala would receive an annual base salary of $200,000 and would be eligible to earn an annual bonus of up to $50,000 for satisfaction of certain specified milestones. The agreement also provided for the issuance of a stock option to purchase 50,000 shares of common stock under our 2001 Equity Incentive Plan upon the closing of our Series C preferred stock financing. The shares subject to such stock option shall vest in equal monthly installments over four years. The agreement provides that Dr. Druzgala is employed "at-will," and his employment may be terminated at any time by us or Dr. Druzgala. Dr. Druzgala is also eligible to participate in our general employee benefit plans in

accordance with the terms and conditions of such plans. The agreement provides Dr. Druzgala with certain severance and change of control benefits. See "—Severance and Change of Control Benefits" below. In December 2008, non-substantive amendments were made to this employment agreement in accordance with Internal Revenue Service regulations.

Daniel Canafax, Pharm.D. In January 2007, we entered into an employment agreement with Dr. Canafax, our Vice President and Chief Development Officer. The agreement provided that Dr. Canafax would receive an annual base salary of $255,000, a starting bonus of $50,000, a bonus of $50,000 payable on August 1, 2007 and would be eligible to earn an annual bonus of up to 25% of his annual base salary for performance in 2007. The agreement also provided for the issuance of a stock option to purchase 83,333 shares of common stock under our 2001 Equity Incentive Plan. The shares subject to such stock option shall vest over a four year period, with 1/4th of the shares subject to the stock option vesting on the grant date, and 1/48th of the shares subject to the stock option vesting monthly from the date of the first anniversary of his employment with us. The agreement provides that Dr. Canafax is employed "at-will," and his employment may be terminated at any time by us or Dr. Canafax. Dr. Canafax is also eligible to participate in our general employee benefit plans in accordance with the terms and conditions of such plans. The agreement provides Dr. Canafax with certain severance and change of control benefits. See "—Severance and Change of Control Benefits" below. In December 2008, non-substantive amendments were made to this employment agreement in accordance with Internal Revenue Service regulations.

David Nagler. In July 2003, we entered into an employment agreement with Mr. Nagler, our Vice President, Corporate Affairs and Secretary. The agreement provided that Mr. Nagler would receive an annual base salary of $200,000 and would be eligible to earn a bonus of $25,000 in 2004 for satisfaction of certain specified milestones. The agreement also provided for the issuance of a stock option to purchase 30,000 shares of common stock under our 2001 Equity Incentive Plan. The shares subject to such stock option shall vest over a four year period, with 1/4th of the shares subject to the stock option vesting on the first anniversary of the grant date, and 1/48th of the shares subject to the stock option vesting monthly thereafter. The agreement provides that Mr. Nagler is employed "at-will," and his employment may be terminated at any time by us or Mr. Nagler. Mr. Nagler is also eligible to participate in our general employee benefit plans in accordance with the terms and conditions of such plans.

SEVERANCE AND CHANGE OF CONTROL BENEFITS

Paul Goddard, Ph.D. Our employment agreement with Dr. Goddard, our Chairman and Chief Executive Officer, provides that if he is terminated without good cause or resigns with good reason he will receive a lump sum severance payment in an amount equal to six months of his then-current base salary, subject to withholdings and deductions. In addition, if Dr. Goddard timely elects COBRA health insurance coverage, we will reimburse his COBRA premiums for a maximum of either six months following the date his employment terminates or until he is eligible for health insurance coverage from another source, whichever occurs sooner. In addition, as a condition of receiving these payments, Dr. Goddard must execute a general release of claims against the Company.

The stock option to purchase 238,333 shares of our common stock, granted to Dr. Goddard in March 2005 provides that if Dr. Goddard is terminated without good cause or resigns with good reason within 24 months following a change of control, the shares subject to such grants shall become fully vested as of Dr. Goddard's termination or resignation date. The stock option further provides that, in the absence of a change of control, Dr. Goddard shall be credited with one year of additional vesting upon his termination without good cause or resignation with good reason.

The following table describes the potential payments to Dr. Goddard upon his termination without good cause or resignation for good reason, both in connection with a change of control and not in connection with a change of control, as of December 31, 2008. The following table does not include

amounts in which Dr. Goddard had already vested as of December 31, 2008. Such vested amounts would include vested restricted stock grants and stock option awards, accrued wages and accrued vacation. The actual compensation to be paid can only be determined at the time of termination of employment.

	Change of Control						No Change of Control

Name	Salary(1)		Equity Acceleration (2)(3)		Benefits(4)		Salary(1)		Equity Acceleration (2)(3)		Benefits(4)
Paul Goddard, Ph.D.	$	218,925	$	43,695	$	6,004	$	218,925	$	43,695	$	6,004

(1): Represents six months of continued salary based on 2008 base salary.
(2): Calculated based on price per share of our common stock of $2.90, the closing price of our common stock on December 31, 2008 as quoted on the NASDAQ Global Market, assuming a change of control were to consummate on that date.
(3): The remaining unvested shares under the stock option granted to Dr. Goddard in March 2005 will become vested within one year of December 31, 2008 pursuant to the terms of such stock option and subject to Dr. Goddard's continued service to ARYx.
(4): Represents six months of COBRA health benefits at the benefit rate for 2008.

Peter G. Milner, M.D. Our employment agreement with Dr. Milner, our President, Research and Development and a member of the Board, provides that if he is terminated without good cause or resigns with good reason he will receive a lump sum severance payment in an amount equal to 12 months of his then-current base salary, subject to withholdings and deductions. In addition, if Dr. Milner timely elects COBRA health insurance coverage, we will reimburse his COBRA premiums for a maximum of either 12 months following the date his employment terminates or until he is eligible for health insurance coverage from another source, whichever occurs sooner. In addition, as a condition of receiving these payments, Dr. Milner must execute a general release of claims against the Company.

If Dr. Milner is terminated without good cause or resigns with good reason within 13 months following a change of control, the stock options to purchase 33,333 and 20,833 shares of our common stock granted in February 2005 and September 2005, respectively, granted to Dr. Milner shall become fully vested as of Dr. Milner's termination or resignation date. While our other named executive officers are entitled to a lump sum severance payment equal to six months salary and to reimbursement of up to six months of COBRA health insurance premiums, Dr. Milner's higher levels of benefits reflect his prioritization of these components of compensation as part of the negotiation of his employment agreement.

The following table describes the potential payments to Dr. Milner upon his termination without good cause or resignation for good reason, both in connection with a change of control and not in connection with a change of control, as of December 31, 2008. The following table does not include amounts in which Dr. Milner had already vested as of December 31, 2008. Such vested amounts would include vested stock option awards, accrued wages and accrued vacation. The actual compensation to be paid can only be determined at the time of termination of employment.

	Change of Control						No Change of Control

Name	Salary(1)		Equity Acceleration(2)		Benefits(3)		Salary(1)		Equity Acceleration		Benefits(3)
Peter G. Milner, M.D.	$	322,857	$	7,734	$	12,009	$	322,857	$	—	$	12,009

(1): Represents 12 months of continued salary based on 2008 base salary.

(2): Calculated based on price per share of our common stock of $2.90, the closing price of our common stock on December 31, 2008 as quoted on the NASDAQ Global Market, assuming a change of control were to consummate on that date.
(3): Represents 12 months of COBRA health benefits at the benefit rate for 2008.

John Varian. Our employment agreement with Mr. Varian, our Chief Operating Officer and Chief Financial Officer, provides that if he is terminated without good cause or resigns with good reason, he will receive a lump sum severance payment in an amount equal to six months of his then-current base salary, subject to withholdings and deductions. In addition, if Mr. Varian timely elects COBRA health insurance coverage, we will reimburse his COBRA premiums for a maximum of either six months following the date his employment terminates or until he is eligible for health insurance coverage from another source, whichever occurs sooner. In addition, as a condition of receiving these payments, Mr. Varian must execute a general release of claims against the Company.

The following table describes the potential payments to Mr. Varian upon his termination without good cause or resignation for good reason, as of December 31, 2008. The following table does not include amounts in which Mr. Varian had already vested as of December 31, 2008. Such vested amounts would include vested stock option awards, accrued wages and accrued vacation. The actual compensation to be paid can only be determined at the time of termination of employment.

Name		Salary(1)			Benefits(2)

John Varian.		$	157,387		$	6,004

(1): Represents six months of continued salary based on 2008 base salary.
(2): Represents six months of COBRA health benefits at the benefit rate for 2008.

Pascal Druzgala, Ph.D. Our employment agreement with Dr. Druzgala, our Senior Vice President and Chief Scientific Officer, provides that if he is terminated without good cause or resigns with good reason he will receive a lump sum severance payment in an amount equal to six months of his then-current base salary, subject to withholdings and deductions. In addition, if Dr. Druzgala timely elects COBRA health insurance coverage, we will reimburse his COBRA premiums for a maximum of either six months following the date his employment terminates or until he is eligible for health insurance coverage from another source, whichever occurs sooner. In addition, as a condition of receiving these payments, Dr. Druzgala must execute a general release of claims against the Company.

The following table describes the potential payments to Dr. Druzgala upon his termination without good cause or resignation for good reason, as of December 31, 2008. The following table does not include amounts in which Dr. Druzgala had already vested as of December 31, 2008. Such vested amounts would include vested stock option awards, accrued wages and accrued vacation. The actual compensation to be paid can only be determined at the time of termination of employment.

Name		Salary(1)			Benefits(2)

Pascal Druzgala, Ph.D.		$	135,059		$	4,162

(1): Represents six months of continued salary based on 2008 base salary.
(2): Represents six months of COBRA health benefits at the benefit rate for 2008.

Daniel Canafax, Pharm.D. Our employment agreement with Dr. Canafax, our Vice President and Chief Development Officer, provides that if he is terminated without good cause or resigns with good reason he will receive a lump sum severance payment in an amount equal to six months of his then-current base salary, subject to withholdings and deductions. In addition, if Dr. Canafax timely

elects COBRA health insurance coverage, we will reimburse his COBRA premiums for a maximum of either six months following the date his employment terminates or until he is eligible for health insurance coverage from another source, whichever occurs sooner. In addition, as a condition of receiving these payments, Dr. Canafax must execute a general release of claims against the Company.

If Dr. Canafax is terminated without good cause or resigns with good reason within 13 months following a change of control, the stock option to purchase 83,333 shares of our common stock granted to Dr. Canafax shall become fully vested as of Dr. Canafax's termination or resignation date. In the absence of a change of control, Dr. Canafax shall be credited with six months of additional vesting of the shares subject to such stock option upon his termination without good cause or resignation with good reason.

The following table describes the potential payments to Dr. Canafax upon his termination without good cause or resignation for good reason, both in connection with a change of control and not in connection with a change of control, as of December 31, 2008. The following table does not include amounts in which Dr. Canafax had already vested as of December 31, 2008. Such vested amounts would include vested option awards, accrued wages and accrued vacation. The actual compensation to be paid can only be determined at the time of termination of employment.

	Change of Control						No Change of Control

Name	Salary(1)		Equity Acceleration(2)		Benefits(3)		Salary(1)		Equity Acceleration(2)		Benefits(3)
Daniel Canafax, Pharm.D.	$	131,644	$	—	$	6,004	$	131,644	$	—	$	6,004

(1): Represents six months of continued salary based on 2008 base salary.
(2): Calculated based on price per share of our common stock of $2.90, the closing price of our common stock on December 31, 2008 as quoted on the NASDAQ Global Market, assuming a change of control were to consummate on that date.
(3): Represents six months of COBRA health benefits at the benefit rate for 2008.

Upon a change of control or certain other corporate transactions of ARYx, if the successor corporation refuses to assume or substitute the equity awards held by our employees, including our named executive officers, unvested stock options will fully vest. The table below shows our estimates of the amount of the benefit each of our named executive officers would have received if the unvested stock options held by them as of December 31, 2008 had become fully vested as a result of a change of control. The estimated benefit amount of unvested stock option awards was calculated by multiplying the number of in-the-money unvested options held by the applicable named executive officer by the difference between the closing price of our common stock on December 31, 2008, which was $2.90, and the exercise price of the stock option award.

Name

Paul Goddard, Ph.D.	118,890	43,695
Peter G. Milner, M.D.	49,080	7,734
John Varian	57,335	6,743
Pascal Druzgala, Ph.D.	44,585	5,386
Daniel Canafax, Pharm.D.	92,639	—
David Nagler	34,862	6,074

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008

The following table sets forth certain information regarding outstanding equity awards granted to our named executive officers as of December 31, 2008:

		Option Awards									Stock Awards

Name		Number of Securities Underlying Unexercised Options Exercisable (#)		Number of Securities Underlying Unexercised Options Unexercisable (#)		Option Exercise Price ($)			Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)(2)
Paul Goddard, Ph.D.	(5)		4,166		—		0.90	(1)		7/23/2013		—			—
	(5)		120,000		—		1.80	(1)		3/03/2015		—			—
	(6)		181,944		39,723		1.80	(1)		3/03/2015		—			—
	(5)		100,000		—		1.80	(1)		3/03/2015		—			—
	(6)		20,833		79,167		7.55	(13)		2/05/2018		—			—
	(7)		—		—		—			—		693	(3)		2,010
	(8)		—		—		—			—		14,580	(4)		42,282
Peter G. Milner, M.D.	(9)		31,944		1,389		1.80	(1)		1/15/2015		—			—
	(10)		15,191		5,642		1.80	(1)		9/20/2015		—			—
	(11)		11,284		10,382		3.30	(1)		2/14/2017		—			—
	(6)		8,333		31,667		7.55	(13)		2/05/2018
John Varian	(5)		83,333		—		0.90	(1)		12/16/2013		—			—
	(9)		75,884		1,616		1.80	(1)		1/18/2015		—			—
	(10)		12,152		4,514		1.80	(1)		9/20/2015		—			—
	(11)		17,795		16,371		3.30	(1)		2/14/2017		—			—
	(6)		9,166		34,834		7.55	(13)		2/05/2018		—			—
Pascal Druzgala, Ph.D.	(5)		50,000		—		0.90	(1)		7/23/2012		—			—
	(9)		17,951		382		1.80	(1)		1/18/2015		—			—
	(10)		12,152		4,514		1.80	(1)		9/20/2015		—			—
	(11)		13,020		11,980		3.30	(1)		2/14/2017		—			—
	(6)		7,291		27,709		7.55	(13)		2/05/2018
Daniel Canafax, Pharm.D	(12)		38,194		45,139		3.30	(1)		2/14/2017		—			—
	(6)		12,500		47,500		7.55	(13)		2/05/2018
David Nagler	(5)		3,333		—		0.90	(1)		11/13/2012		—			—
	(5)		29,999		—		0.90	(1)		7/23/2013		—			—
	(9)		47,325		1,008		1.80	(1)		1/18/2015		—			—
	(10)		12,152		4,514		1.80	(1)		9/20/2015		—			—
	(11)		6,076		5,590		3.30	(1)		2/14/2017		—			—
	(6)		6,250		23,750		7.55	(13)		2/05/2018		—			—

(1): Represents the per share fair value of our common stock as determined by our Board of Directors in good faith on the date of grant.
(2): The market value of the unvested shares has been calculated based on the closing price of our common stock as quoted on the NASDAQ Global Market on December 31, 2008.
(3): Our right to repurchase the unvested shares lapses on a monthly basis at the rate of 694.44 shares per month, contingent upon Dr. Goddard's continuous service to us.
(4): Our right to repurchase the unvested shares lapses on a monthly basis at the rate of 520.83 shares per month, contingent upon Dr. Goddard's continuous service to us.
(5): Represents fully vested but unexercised stock option awards as of December 31, 2008.

(6): 1/48^th of the shares subject to the option award vest monthly over four years. For Dr. Goddard, the option award vests at the rate of 2,083 shares per month, measured from the date of grant, provided however, that to the extent Dr. Goddard ceases to serve as the Company's Chief Executive Officer but continues to serve as Chairman, the shares subject to the option award shall vest at a reduced rate, commencing from the date of Dr. Goddard's resignation or removal as Chief Executive Officer, of 1,041 shares per month for so long as Dr. Goddard continues to serve as Chairman.
(7): 1/3^rd of the shares subject to the award vest one year from the grant date and 1/24^th of the remaining shares vest monthly over the remaining two years, contingent on Dr. Goddard's continued employment with us.
(8): 1/48^th of the shares subject to the award vest monthly over four years, contingent on Dr. Goddard's continued employment with us.
(9): Shares subject to the option award vest over a four year period, with 1/4^th of the shares vesting on the first anniversary of the vesting commencement date and 1/48^th of the shares vesting each month thereafter until fully vested. All of the shares subject to Dr. Milner's stock option award for 33,333 shares of common stock can be early exercised prior to vesting.
(10): 6/48^th of the shares subject to the option award vested in July 2006, and 1/48^th of the shares vest each month thereafter until fully vested.
(11): 1/4^th of the shares subject to the option award vested on November 14, 2007, the date immediately following the closing of our initial public offering, and the remaining shares vest monthly over the remaining three years.
(12): 1/4^th of the shares subject to the option award vested on February 15, 2007, the date of grant, and 1/48^th of the shares vest monthly from the date of the first anniversary of his employment with us until fully vested.
(13): Calculated based on the closing price of our common stock as quoted on the NASDAQ Global Market on the date of grant.

OPTION EXERCISES AND STOCK VESTED DURING 2008

The following table shows the number of restricted stock award shares vested and acquired upon exercise of stock options by our named executive officers during the year ended December 31, 2008:

	Stock Awards				Option Awards

Name	Number of Shares Acquired on Vesting		Value Realized on Vesting(1)		Number of Shares Acquired on Exercise		Value Realized on Exercise
Paul Goddard, Ph.D.		14,580	$	79,855		—	$	—

(1): Calculated based on the closing price of our common stock as quoted on the NASDAQ Global Market during 2008.

PENSION BENEFITS

Our named executive officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan sponsored by us during the year ended December 31, 2008.

POST-RETIREMENT BENEFITS

We sponsor a 401(k) plan where our employees, including named executive officers, are eligible to participate. Our 401(k) plan provides that each participant may contribute a portion of his or her pre-tax compensation, up to a statutory limit, which for most employees is $15,500 in 2008. Participants that are 50 years or older can also make "catch-up" contributions, which in 2008 may be up to an additional $5,000 above the statutory limit. Employee contributions are held and invested by the plan's trustee. As permitted under our 401(k) plan, we match participant contributions up to 3.5% of a participant's annual compensation, subject to statutory limits.

During the year ended December 31, 2008, Drs. Milner and Canafax and Messrs. Varian and Nagler elected to defer a portion of their compensation under the 401(k) plan and, as a result, received corresponding matching contribution from us. See "—Summary Compensation Table" above for more details on the matching contributions paid by us for our named executive officers.

NONQUALIFIED DEFERRED COMPENSATION

During the year ended December 31, 2008, our named executive officers did not contribute to, or earn any amounts with respect to, any defined contribution or other plan sponsored by us that provides for the deferral of compensation on a basis that is not tax-qualified.

EQUITY BENEFIT PLANS

2001 Equity Incentive Plan

Our Board adopted the 2001 Equity Incentive Plan, or 2001 Plan, in May 2001 and our stockholders approved the 2001 Plan in May 2002. Prior to November 2007, we granted options to our named executive officers under the 2001 Plan. The 2001 Plan was terminated in connection with our initial public offering so that no further awards may be granted under such plan. The Board has the authority to construe and interpret the terms of the 2001 Plan and the awards granted under it. Although the 2001 Plan has terminated, all outstanding options will continue to be governed by their existing terms. The following is a brief description of certain of the permissible terms of options granted under the 2001 Plan:

Exercise Price. The exercise price of incentive stock options may not be less than 100% of the fair market value of our common stock on the date of grant. The exercise price of nonstatutory stock options may not be less than 85% of the fair market value of our common stock on the date of grant. Each of the options granted to our named executive officers in 2008 carry an exercise price equal to 100% of the fair market value of our common stock on the date of grant.

Vesting. Shares subject to options under the 2001 Plan generally vest in a series of installments over an optionee's period of service, with a minimum vesting rate as to non-executive employees of at least 20% per year over five years from the date of grant. For the vesting terms for stock options and restricted stock awards granted to our named executive officers under the 2001 Plan, see the section above entitled "—Outstanding Equity Awards at December 31, 2008."

Term. In general, the maximum term of options granted under the 2001 Plan is ten years from the date of grant. Unless the terms of an optionee's stock option agreement provide otherwise, if an optionee's service relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionee may exercise the vested portion of any options for three months after the date of such termination. If an optionee's service relationship with us, or any of our affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary may exercise any vested options for a period of 12 months in the event of disability, and 18 months in the event of death. The option term may be extended in the event that exercise of the option following termination of service is prohibited by applicable securities laws. In no event, however, may an option be exercised beyond the expiration of its term.

Asset Sale or Merger. In the event of a sale of substantially all of our assets or a merger, the surviving or acquiring corporation may assume or substitute substantially equivalent stock awards for the outstanding stock awards granted under the 2001 Plan. If the surviving or acquiring corporation elects not to assume or substitute for outstanding stock awards granted under the 2001 Plan, then stock awards held by individuals whose service has not terminated prior to the sale of substantially all of our assets or a merger will be accelerated in full. Upon consummation of the asset sale or merger, all

outstanding stock awards will terminate to the extent not exercised or assumed by the surviving or acquiring corporation.

2007 Equity Incentive Plan

Our Board adopted the 2007 Equity Incentive Plan, or 2007 Plan, in July 2007 and our stockholders approved the 2007 Plan in October 2007. The 2007 Plan became effective in connection with our initial public offering. The 2007 Plan will terminate on July 17, 2017, unless terminated earlier by the Board. For more information on grants under the 2007 Plan during the year ended December 31, 2008, see "—Compensation Actions for Our Executive Officers." The following is a brief description of certain of the permissible terms of stock awards granted under the 2007 Plan:

Stock Awards. The 2007 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards, and other forms of equity compensation, or. collectively, stock awards, which may be granted to employees, including officers, non-employee directors and consultants.

Share Reserve. The aggregate number of shares of common stock that may be issued pursuant to stock awards under the 2007 Plan is 1,356,146 shares as of December 31, 2008. The number of shares of common stock reserved for issuance will automatically increase on January 1st of each year through and including January 1, 2017, by the lesser of (a) 4.0% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year or (b) a lesser number of shares of common stock determined by the Board prior to the start of a calendar year for which an increase applies. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options over the term of the 2007 Plan is 6,666,666 shares.

No person may be granted stock options or stock appreciation rights covering more than 666,666 shares of common stock under the 2007 Plan during any calendar year. Such limitation is designed to help assure that any deductions to which we would otherwise be entitled upon the exercise of such stock options and stock appreciation rights, or upon the subsequent sale of shares acquired under such awards, will not be subject to the $1 million limitation on the income tax deductibility of compensation paid to certain executive officers imposed by Section 162(m) of the Internal Revenue Code.

If a stock award granted under the 2007 Plan expires or otherwise terminates without being exercised in full, the shares of common stock not acquired pursuant to the stock award again become available for subsequent issuance under the 2007 Plan. In addition, the following types of shares under the 2007 Plan will become available for the grant of new stock awards under the 2007 Plan: (a) shares that are forfeited to or repurchased by us prior to becoming fully vested; (b) shares subject to stock awards that are settled in cash; (c) shares withheld to satisfy income and employment withholding taxes; (d) shares used to pay the exercise price of an option in a net exercise arrangement; (e) shares tendered to us to pay the exercise price of an option; and (f) shares that are cancelled pursuant to an exchange or repricing program. Shares issued under the 2007 Plan may be previously unissued shares or reacquired shares, including shares bought on the open market.

Administration. The Board has delegated its authority to administer the 2007 Plan to our Compensation Committee. Subject to the terms of the 2007 Plan, our Board or an authorized committee, referred to as the plan administrator, determines recipients, dates of grant, the numbers and types of stock awards to be granted and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the plan administrator will also determine the exercise price of options granted, the consideration to be paid for restricted stock awards, and the strike price of stock appreciation rights.

The plan administrator has the authority to:

•

reduce the exercise price of any outstanding option or the strike price of any outstanding stock appreciation right;

•

cancel any outstanding option or stock appreciation right and to grant in exchange one or more of the following:

•: new options or stock appreciation rights covering the same or a different number of shares of common stock,
•: new stock awards,
•: cash, and/or
•: other valuable consideration; or

•

engage in any action that is treated as a repricing under generally accepted accounting principles.

Stock Options. Incentive and nonstatutory stock options are granted pursuant to incentive and nonstatutory stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for a stock option provided that the exercise price of an incentive stock option and nonstatutory stock option cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2007 Plan vest at the rate specified by the plan administrator.

Generally, the plan administrator determines the term of stock options granted under the 2007 Plan, up to a maximum of ten years (except in the case of certain incentive stock options, as described below). Unless the terms of an optionee's stock option agreement provide otherwise, if an optionee's relationship with us, or any of our affiliates, ceases for any reason other than disability or death, the optionee may exercise any vested options for a period of three months following the cessation of service. If an optionee's service relationship with us, or any of our affiliates, ceases due to disability or death (or an optionee dies within a certain period following cessation of service), the optionee or a beneficiary may exercise any vested options for a period of 12 months in the event of disability, and 18 months in the event of death. The option term may be extended in the event that exercise of the option following termination of service is prohibited by applicable securities laws. In no event, however, may an option be exercised beyond the expiration of its term.

Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (a) cash or check, (b) a broker-assisted cashless exercise, (c) the tender of common stock previously owned by the optionee, (d) a net exercise of the option, (e) a deferred payment arrangement and (f) other legal consideration approved by the plan administrator.

Unless the plan administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution, or pursuant to a domestic relations order. An optionee may designate a beneficiary, however, who may exercise the option following the optionee's death.

Tax Limitations on Incentive Stock Options. Incentive stock options may be granted only to our employees. The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to incentive stock options that are exercisable for the first time by an optionee during any calendar year under all of our stock plans may not exceed $100,000. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates, unless (a) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and (b) the term of the incentive stock option does not exceed five years from the date of grant.

Restricted Stock Awards. Restricted stock awards are granted pursuant to restricted stock award agreements adopted by the plan administrator. Restricted stock awards may be granted in consideration for: (a) cash, check, bank draft or money order, (b) past or future services rendered to us or our affiliates or (c) any other form of legal consideration approved by the plan administrator. Shares of common stock acquired under a restricted stock award may, but need not, be subject to forfeiture to us in accordance with a vesting schedule to be determined by the plan administrator. Rights to acquire shares under a restricted stock award may be transferred only upon such terms and conditions as set by the plan administrator.

Restricted Stock Unit Awards. Restricted stock unit awards are granted pursuant to restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration acceptable to the Board. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect to shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participant's cessation of continuous service for any reason.

Stock Appreciation Rights. Stock appreciation rights are granted pursuant to stock appreciation rights agreements adopted by the plan administrator. The plan administrator determines the strike price for a stock appreciation right which cannot be less than 100% of the fair market value of the common stock on the date of grant. Upon the exercise of a stock appreciation right, we will pay the participant an amount equal to the product of (a) the excess of the per share fair market value of our common stock on the date of exercise over the strike price, multiplied by (b) the number of shares of common stock with respect to which the stock appreciation right is exercised. A stock appreciation right granted under the 2007 Plan vests at the rate specified in the stock appreciation right agreement.

The plan administrator determines the term of stock appreciation rights granted under the 2007 Plan up to a maximum of ten years. If a participant's service relationship with us, or any of our affiliates, ceases, then the participant, or the participant's beneficiary, may exercise any vested stock appreciation right for three months (or such longer or shorter period specified in the stock appreciation right agreement) after the date such service relationship ends. In no event, however, may a stock appreciation right be exercised beyond the expiration of its term.

Performance Stock Awards. The 2007 Plan permits the grant of performance stock awards that may qualify as performance-based compensation that is not subject to the $1.0 million limitation on the income tax deductibility of compensation paid to certain executive officers imposed by Section 162(m) of the Internal Revenue Code. To assure that the compensation attributable to one or more performance stock awards will so qualify, our compensation committee can structure one or more such awards so that stock will be issued or paid pursuant to such award only upon the achievement of certain pre-established performance goals during a designated performance period. The maximum benefit to be received by a participant in any calendar year attributable to performance stock awards may not exceed 666,666 shares of common stock.

Other Stock Awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the award and all other terms and conditions of such awards.

Changes to Capital Structure. In the event that there is a specified type of change in our capital structure, such as a stock split, appropriate adjustments will be made to (a) the number of shares reserved under the 2007 Plan, (b) the maximum number of shares that may be issued pursuant to the exercise of incentive stock options, (c) the maximum number of stock options, stock appreciation rights

and performance stock awards for which any one person may be granted per calendar year and (d) the number of shares and exercise price or strike price, if applicable, of all outstanding stock awards.

Corporate Transactions. In the event of certain significant corporate transactions as set forth in the 2007 Plan, outstanding stock awards under the 2007 Plan may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such stock awards, then (a) with respect to any such stock awards that are held by individuals whose service with us or our affiliates has not terminated prior to the effective date of the corporate transaction, the vesting and exercisability provisions of such stock awards will be accelerated in full and such awards will be terminated if not exercised prior to the effective date of the corporate transaction and (b) all other outstanding stock awards will terminate if not exercised prior to the effective date of the corporate transaction. The Board may also provide that the holder of an outstanding stock award not assumed in the corporate transaction will surrender such stock award in exchange for a payment equal to the excess of (a) the value of the property that the stock award would have received upon exercise of the stock award, over (b) the exercise price otherwise payable in connection with the stock award.

Changes in Control. Our Board has the discretion to provide that a stock award under the 2007 Plan will immediately vest as to all or any portion of the shares subject to the stock award (a) immediately upon the occurrence of certain specified change in control transactions, whether or not such stock award is assumed, continued or substituted by a surviving or acquiring entity in the transaction or (b) in the event a participant's service with us or a successor entity is terminated actually or constructively within a designated period following the occurrence of certain specified change in control transactions. Stock awards held by participants under the 2007 Plan will not vest on such an accelerated basis unless specifically provided by the participant's applicable award agreement.

2007 Employee Stock Purchase Plan

Additional long-term equity incentives are provided through our 2007 Employee Stock Purchase Plan, or the ESPP, in which all regular employees, including executive officers, employed by us or by any of our affiliates may participate and may contribute, normally through payroll deductions, up to 15% of their earnings for the purchase of our common stock under the ESPP. As of December 31, 2008, the ESPP authorizes the issuance of 322,369 shares of common stock pursuant to purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of common stock reserved for issuance will automatically increase on January 1^st of each year through and including January 1, 2017, by the lesser of (a) 1.0% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year or (b) a lesser number of shares of common stock determined by our Board of Directors prior to the start of a year for which an increase applies. The maximum number of shares that may be issued pursuant to the exercise of purchase rights over the term of the ESPP is 1,666,666 shares. The ESPP is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code.

The ESPP is implemented through a series of offerings of purchase rights to eligible employees. Under the ESPP, we may specify offerings with a duration of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. Unless otherwise determined by the Board, common stock is purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of our common stock on the first date of an offering or (b) 85% of the fair market value of a share of our common stock on the date of purchase. The first offering period under the ESPP commenced in August 2008. As of December 31, 2008, no shares of our common stock have been purchased under the ESPP as the initial offering period under the plan has not completed its term.

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of February 10, 2009 by: (i) each director and nominee for director; (ii) each of our executive officers; (iii) all of our executive officers and directors as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock. Unless otherwise indicated, the address for each of the beneficial owners in the table below is c/o ARYx Therapeutics, Inc., 6300 Dumbarton Circle, Fremont, California 94555.

	Beneficial Ownership(1)

Beneficial Owner	Number of Shares		Percent of Total
5% Stockholders
Entities affiliated with MPM Capital(2)		5,900,885		21.2	%
Growth Equities Opportunities Fund, LLC(3)		5,810,056		20.3
Entities affiliated with OrbiMed Advisors(4)		3,704,533		13.4
Nomura Phase4 Ventures L.P.(5)		2,447,731		9.0
Jennison Associates LLC(6)		2,443,017		8.8
Executive Officers and Directors
Paul Goddard, Ph.D.(7)		575,692		2.1
Peter G. Milner, M.D.(8)		431,034		1.6
Pascal Druzgala, Ph.D.(9)		296,237		1.1
John Varian(10)		206,789		*
David Nagler(11)		110,414		*
Daniel Canafax, Pharm. D.(12)		60,902		*
David Beier(13)		3,240		*
Lars G. Ekman, M.D., Ph.D.(14)		22,870		*
Keith R. Leonard(15)		22,870		*
Herm Rosenman(16)		22,870		*
Paul J. Sekhri(17)		22,870		*
Nicholas Simon(18)		5,928,157		21.2
All executive officers and directors as a group (12 persons)(19)		7,703,945		26.6	%

*: Represents beneficial ownership of less than one percent of the outstanding shares of our common stock.
(1): This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G, if any, filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, ARYx believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 27,346,403 shares outstanding on February 10, 2009, adjusted as required by rules promulgated by the SEC.
(2): Consists of 83,805 shares held by MPM Asset Management Investors 2002 BVIII LLC, or MPM AMI BV III ("AM 2002"), 358,453 shares held by MPM BioVentures III GmbH & Co. Beteiligungs KG ("BV KG"), 128,140 shares held by MPM BioVentures III Parallel Fund, LP ("BV Parallel"), 285,204 shares held by MPM BioVentures III, LP ("MPM III"), 4,241,787 shares held by MPM BioVentures III-QP, LP ("BV III QP") and 267,183 shares held by MPM BioVentures Strategic Fund, LP ("BV SF"). Also includes shares that the entities have a right to acquire within sixty (60) days of February 10, 2009 through the exercise of outstanding warrants: 8,817 by AM 2002, 37,713 by BV KG, 13,483 by BV Parallel, 30,007 by MPM III, and 446,293 by BV III QP. MPM BioVentures III GP, L.P. and MPM BioVentures III LLC, or MPM BV III LLC,

are the direct and indirect general partners of the above mentioned funds. Luke Evnin, Ansbert Gadicke, Michael Steinmetz, Nicholas Galakatos, Dennis Henner, Kurt Wheeler and Nicholas Simon, III, one of our directors, are members of MPM BV III LLC and MPM AMI BV III and share investment and voting power over the shares held by all the above-mentioned funds. Messrs. Evnin, Gadicke, Steinmetz, Galakatos, Henner, Wheeler and Simon each disclaim beneficial ownership of the shares held by such above-mentioned funds except to the extent of their respective proportionate pecuniary interests therein. The address of MPM Capital is 200 Clarendon Street, 54th Floor, Boston, MA 02116.

(3): Consists of 4,469,274 shares directly held by Growth Equity Opportunities Fund, LLC ("GEO") and indirectly held by New Enterprises Associates 12, Limited Partnership ("NEA 12"), the sole member of GEO, NEA Partners 12, Limited Partnership ("NEA Partners 12"), the sole general partner of NEA 12, NEA 12 GP, LLC ("NEA 12 GP"), the sole general partner of NEA Partners 12. and the individual managers of NEA 12 GP (NEA 12, NEA Partners 12, NEA GP 12 and the individual managers of NEA 12 GP together, the "Indirect Reporting Persons"). The individual managers of NEA 12 GP are M. James Barrett, Peter J. Barris, Forest Baskett, Ryan D. Drant, Patrick J. Kerins, C. Richard Kramlich, Krishna "Kittu" Kolluri, Charles M. Linehan, Charles W. Newhall III, Mark W. Perry, Scott D. Sandell and Eugene A. Trainor III. Also, includes 1,340,782 shares that GEO and the Indirect Reporting Persons have a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding warrants. The Indirect Reporting Persons disclaim beneficial ownership of such portion of the securities held by GEO in which the Indirect Reporting Persons have no pecuniary interest. The address of GEO is c/o New Enterprise Associates, 1119 St. Paul Street, Baltimore, MD 21202.
(4): Consists of 2,237,773 shares held by Caduceus Private Investments, LP ("Caduceus"); 46,580 shares held by OrbiMed Associates, LLC ("Associates"); and 1,055,786 shares held by UBS Juniper Crossover Fund, L.L.C. ("Juniper") Also includes shares that the entities have a right to acquire within sixty (60) days of February 10, 2009 through the exercise of outstanding warrants: 244,131 by Caduceus, 5,082 by Associates and 115,181 by Juniper. OrbiMed Capital GP I, LLC is the general partner of Caduceus. OrbiMed Advisors, LLC is a managing member of Associates and acts as investment advisor to certain collective investment funds which hold shares of the Issuer. Samuel D. Isaly owns controlling interests in OrbiMed Capital GP I, LLC and OrbiMed Associates, LLC and has investment and voting control over the shares held by the above mentioned funds. Mr. Isaly disclaims beneficial ownership of these shares except to the extent of his pecuniary interest therein. Robert Adelman, M.D., a former member of our Board, is an affiliate of the above mentioned funds. The address of OrbiMed Advisors LLC is 767 Third Avenue, 30th Floor, New York, NY 10017.
(5): Nomura Phase4 Ventures Limited, as manager of Nomura Phase4 Ventures LP, has voting and investment power over all the shares held by such fund. Nomura Phase4 Ventures Limited is a subsidiary of Nomura International plc which is a subsidiary of Nomura Europe Holdings plc, which in turn is a subsidiary of Nomura Holdings Inc., a publicly traded company. Mr. Hiromichi Aoki, the Head of Merchant Banking, Nomura International plc, and Dr. Denise Pollard-Knight, the Head of Nomura Phase4 Ventures, are the only two members of the board of directors of Nomura Phase4 Ventures Limited and both of them, acting together, exercise the voting and investment power of Nomura Phase4 Ventures Limited. Dr. Pollard-Knight disclaims beneficial ownership over any of the shares held by Nomura Phase4 Ventures LP except to the extent of her pecuniary interest therein. The address of Nomura Phase4 Ventures LP is Nomura House, 1 St Martin's-le-Grand, London EC1A 4NP, United Kingdom.
(6): Consists of 231,282 hares held by IFTCO as nominee for Pacific Select Fund Health Services Portfolio ("IFTCO") and 1,809,500 shares held by Hare & Co. ("Hare"). Also includes 44,635 shares and 357,600 shares that IFTCO and Hare respectively may acquire within 60 days of February 10, 2009 through the exercise of outstanding warrants. The address of these entities is c/o Jennison Associates LLC, 466 Lexington Avenue, New York, NY 10017.

(7): Includes 450,172 shares that Dr. Goddard has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options; 13,538 shares subject to our unvested share repurchase right as of February 10, 2009 and 57,187 shares held by Paul & Jaqueline Goddard Family Living Trust for which Dr. Goddard and his spouse are trustees.
(8): Includes 4,052 shares held by Naomi Milner; 31,903 shares held by Diarmuid Investments Ltd.; 8,982 shares held by Peter G. Milner 2007-1 Grantor Retained Annuity Trust (the "Milner Trust") for which Pascal Druzgala is trustee; 8,982 shares held by Susan C. Price Grantor Retained Annuity Trust (the "Price Trust") for which Pascal Druzgala is trustee; 7,684 held by Susan C. Price and 74,130 shares that Dr. Milner has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options. Dr. Milner is deemed to have shared voting and investment power over the shares held by Naomi Milner, Dr. Milner's sister, and Diarmuid Investments, Ltd. Dr. Milner spouse is the beneficiary of the Price Trust and Dr. Milner is the beneficiary of the Milner Trust.
(9): Includes 15,257 shares held in the Pascal Druzgala Grantor Retained Annuity Trust for which Dr. Druzgala is the trustee and beneficiary; 8,982 shares held in the Price Trust for which Dr. Druzgala is trustee; 8,982 shares held in the Milner Trust for which Dr. Druzgala is trustee and 106,318 shares that Dr. Druzgala has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options. Dr. Druzgala disclaims beneficial ownership of the shares held in the Price Trust and the Milner Trust.
(10): Consists of 206,789 shares that Mr. Varian has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(11): Consists of 110,414 shares that Mr. Nagler has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(12): Consists of 60,902 shares that Dr. Canafax has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(13): Consists of 3,240 shares that Mr. Beier has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(14): Consists of 22,870 shares that Dr. Ekman has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(15): Consists of 22,870 shares that Mr. Leonard has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(16): Consists of 22,870 shares that Mr. Rosenman has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.
(17): Consists of 22,870 shares that Mr. Sekhri has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options. Mr. Sekhri, one of our directors, is a venture partner at MPM Capital but has no voting or investment power over any shares held by the entities affiliated with MPM Capital.
(18): Includes the shares described in Note (2) above and 22,870 shares that Mr. Simon has a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options. Mr. Simon disclaims beneficial ownership of the shares described in Note (2), except to the extent of his pecuniary interest therein.
(19): Includes 5,900,885 shares held by entities affiliated with certain of our directors and 1,126,315 shares that certain of our executive officers and directors have a right to acquire within 60 days of February 10, 2009 through the exercise of outstanding stock options.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Our officers, directors and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the year ended December 31, 2008, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED-PERSON TRANSACTIONS POLICY AND PROCEDURES

Pursuant to our Code of Conduct, our executive officers and directors, including their immediate family members and affiliates, are not permitted to enter into any transactions with us without the prior consent of our Audit Committee, or the Board or any independent committee thereof in case it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. In approving or rejecting such proposed transactions, our Audit Committee or the Board, as applicable, shall consider the relevant facts and circumstances available and deemed relevant to the Audit Committee or the Board, as applicable, including but not limited to the risks, costs, benefits to us, the terms of the transactions, the availability of other sources for comparable services or products and, if applicable, the impact on a director's independence. Our Audit committee and/or Board shall approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our Audit Committee or Board determines in the good faith exercise of its discretion. We have designated a compliance officer to generally oversee compliance with our Code of Conduct. All of the transactions described below were entered into prior to the adoption of our Code of Conduct.

CERTAIN RELATED-PERSON TRANSACTIONS

2008 Private Placement

In November 2008, we entered into a securities purchase agreement with certain institutional and other accredited investors pursuant to which we sold and issued, in a private placement, an aggregate of 9,649,545 shares of our common stock and warrants to purchase an aggregate of 2,894,864 shares of our common stock. Under the terms of the securities purchase agreement, the price for each share of common stock purchased was $2.20. The total number of shares of common stock underlying each purchaser's warrant was equal to 30% of the total number of shares purchased by such investor in the private placement with a purchase price per underlying share of common stock of $0.125. The combined purchase price of each share of common stock and each warrant to purchase 0.30 of a share of common stock issued in the private placement was $2.2375. The warrants are exercisable for a term of five years from November 14, 2008 and have an exercise price of $2.64 per share.

The shares of common stock and warrants to purchase common stock set forth in the table below were issued to certain of our existing stockholders in the private placement, including entities affiliated with MPM Capital and OrbiMed Advisors LLC, two of our principal stockholders. We believe the terms obtained or consideration that we received in connection with the private placement were

comparable to terms available or the amounts that would be received by us in arm's-length transactions.

Investor					Aggregate Purchase Price ($)

Entities Affiliated with MPM Capital	1,787,710	(1)	536,313	(2)	$	4,000,001
Entities affiliated with OrbiMed Advisors	1,214,646	(3)	364,394	(4)		2,717,770

(1): Consists of (i) 1,487,643 shares purchased by MPM BioVentures III-QP, L.P. ("BV III QP"), (ii) 100,022 shares purchased by MPM BioVentures III, L.P. ("BV III"), (iii) 29,391 shares purchased by MPM Asset Management Investors 2002 BVIII LLC ("AM 2002"), (iv) 44,943 shares purchased by MPM BioVentures III Parallel Fund, L.P. ("BV Parallel") and (v) 125,711 shares purchased by MPM BioVentures III GmbH & Co. Beteiligungs KG ("BV KG"). MPM BioVentures III GP, L.P. ("MPM III GP") and MPM BioVentures III LLC ("MPM III LLC") are the direct and indirect general partners of BV III QP, BV III, BV Parallel and BV KG and MPM BioVentures Strategic Fund, L.P. ("BV SF").
(2): Consists of warrants to purchase (i) 446,293 shares purchased by BV III QP, (ii) 30,007 shares purchased by BV III, (iii) 8,817 shares purchased by AM 2002, (iv) 13,483 shares purchased by BV Parallel and (v) 37,713 shares purchased by BV KG.
(3): Consists of (i) 2,237,773 shares purchased by Caduceus Private Investments, LP ("Caduceus"), (ii) 46,580 shares purchased by OrbiMed Associates, LLC ("Associates"), and (iii) 1,055,786 shares purchased by UBS Juniper Crossover Fund, L.L.C. ("Juniper"). OrbiMed Advisors, LLC is a managing member of OrbiMed Associates, LLC and acts as investment advisor to certain collective investment funds which hold shares of the Issuer.
(4): Consists of warrants to purchase (i) 244,131 shares purchased by Caduceus, (ii) 5,082 shares purchased by Associates, and (iii) 115,181 shares purchased by Juniper.

Upon closing of the private placement, we received gross proceeds of approximately $21.6 million. The net proceeds, after deducting placement agent fees and other expenses of approximately $1.2 million in the aggregate, were approximately $20.4 million. No expenses were paid directly or indirectly to our directors, officers or their associates, or to persons owning 10% or more of any of our equity securities.

Registration Rights Agreement

In connection with our November 2008 private placement as described above, we have entered into an amended and restated investor rights agreement with the investors in the private placement, including certain entities that our principal stockholders and/or affiliated with certain of our directors. As of December 31, 2008, the holders of an aggregate of 9,649,545 shares of our common stock and warrants to purchase an aggregate of 2,894,864 shares of our common stock are entitled to certain rights with respect to the registration of their shares pursuant to the terms and conditions of such agreement.

Investor Rights Agreement

We have entered into an amended and restated investor rights agreement with the prior holders of our convertible preferred stock and certain holders of warrants to purchase convertible preferred stock, including entities with which certain of our directors are affiliated. As of December 31, 2008, the holders of 7,550,086 shares of our common stock, including 189,647 shares of common stock issuable

upon the exercise of warrants outstanding, are entitled to certain rights with respect to the registration of their shares pursuant to the terms and conditions of such agreement.

Employment Agreements

We have entered into employment agreements with our executive officers. See "Executive Compensation—Employment Agreements."

Stock Option and Stock Award Grants to Executive Officers and Directors

We have granted stock options and/or stock awards to our executive officers and our non-employee directors. See "Executive Compensation."

Severance and Change of Control Arrangements

Some of our executive officers are entitled to certain severance and change of control benefits. For information regarding these arrangements, see "Executive Compensation—Severance and Change of Control Benefits."

Indemnification Agreements with Executive Officers and Directors

We have entered into an indemnification agreement with each of our directors and executive officers. These indemnification agreements require us, among other things, to indemnify, under the circumstances and to the extent provided in such agreements, our directors and executive officers for some expenses, including attorney's fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as our director, officer, employee or other agent or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. We also intend to enter into these indemnification agreements with our future executive officers and directors.

There is no pending litigation or proceeding involving any of our directors or executive officers for which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single set of proxy materials addressed to those stockholders. This process, which is commonly referred to as "householding," potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are our stockholders will be "householding" our proxy materials. A single set of proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be "householding" communications to your address, "householding" will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in "householding" and would prefer to receive a separate set of proxy materials, please notify your broker. Direct your written request to ARYx Therapeutics, Inc., Attn: Corporate Secretary, at 6300 Dumbarton Circle, Fremont, California 94555, or contact David Nagler, our Vice President, Corporate Affairs and Secretary at (510) 585-2200. Stockholders who currently receive multiple copies of the proxy materials at their addresses and would like to request "householding" of their communications should contact their brokers.

OTHER MATTERS

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.


		By Order of the Board of Directors

		David Nagler Secretary

April 22, 2009

A copy of our Annual Report on Form 10-K to the Securities and Exchange Commission for the year ended December 31, 2008 is available without charge upon written request to: Corporate Secretary, ARYx Therapeutics, Inc., 6300 Dumbarton Circle, Fremont, California 94555.

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		Electronic Voting Instructions

		You can vote by Internet or telephone!
		Available 24 hours a day, 7 days a week!
		Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on May 20, 2009.


		Vote by Internet · Log on to the Internet and go to www.envisionreports.com/ARYX · Follow the steps outlined on the secured website.

		Vote by telephone · Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call. · Follow the instructions provided by the recorded message.


Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.	x

IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

Election of Directors — The Board of Directors recommends a vote FOR all the nominees for director listed in Proposal 1 below.

Proposal 1: To elect three directors to hold office until the 2012 Annual Meeting of Stockholders, as described in the accompanying proxy statement.

For

Withhold

For

Withhold

For

Withhold

01 - Lars G. Ekman, M.D., Ph.D.

02 - Keith R. Leonard

03 - Paul J. Sekhri

Ratification of Selection of Independent Registered Public Accounting Firm — The Board of Directors recommends a vote FOR Proposal 2 below.

For

Against

Abstain

Proposal 2. To ratify the selection by the Audit Committee of
the Board of Directors of Ernst & Young LLP as
ARYx’s independent registered public accounting
firm for the year ending December 31, 2009, as
described in the accompanying proxy statement.

OTHER MATTERS: The Board of Directors knows of no other
matters that will be presented for consideration at the 2009 Annual
Meeting. If any other matters are properly brought before the 2009
Annual Meeting, it is the intention of the persons named in the proxy
card to vote on such matters in accordance with their best judgment.

	Non-Voting Items

Change of Address — Please print new address below.




		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.

Date (mm/dd/yyyy) — Please print date below.	Signature 1 — Please keep signature within the box.	Signature 2 — Please keep signature within the box.
/ /

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON MAY 20, 2009

The proxy statement and annual report to stockholders are available at www.envisionreports.com/ARYX

ELECTRONIC DELIVERY OF FUTURE STOCKHOLDER COMMUNICATIONS

If you would like to reduce the costs incurred by ARYx Therapeutics, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the internet. To sign up for electronic delivery, please follow the instructions on the reverse side to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.

IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

Proxy — ARYX THERAPEUTICS, INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2009

The stockholder(s) designated on the reverse side of this Proxy Card hereby appoint(s) Paul Goddard, Ph.D. and John Varian, or each of them, as attorneys-in-fact and proxies of the stockholder(s), each with full power of substitution, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this Proxy Card, all of the shares of common stock of ARYx Therapeutics, Inc. which the stockholder(s) may be entitled to vote at the Annual Meeting of Stockholders of ARYx Therapeutics, Inc. to be held on Wednesday, May 20, 2009 at 9:00 a.m. (local time) at 6300 Dumbarton Circle, Fremont, California 94555, and at any and all postponements, continuations and adjournments thereof, with all powers that the stockholder(s) would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.

UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.

PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.

PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY

QuickLinks

PROPOSAL 1 ELECTION OF DIRECTORS
CORPORATE GOVERNANCE AND BOARD MATTERS
DIRECTOR COMPENSATION
PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
HOUSEHOLDING OF PROXY MATERIALS
OTHER MATTERS