Exhibit 10.27  AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT  THIS
AMENDMENT NO. 1(this Amendment)
to the Employment Agreement by and between John Varian (Executive)
and ARYX THERAPEUTICS, INC., a Delaware
corporation (the Company) dated November 18,
2003 (the Prior Agreement), is entered
into and effective as of December 19, 2008 (the Effective
Date).  Capitalized terms
not herein defined shall have the meanings ascribed to them in the Prior
Agreement.  WHEREAS, the Company
and the Executive previously entered into the Prior Agreement; and  WHEREAS, the Company
and the Executive wish to amend the Prior Agreement by entering into this
Amendment to comply with the parties intent that the Prior Agreement be
interpreted, construed and administered in a manner that satisfies Section 409A
of the Internal Revenue Code of 1986, as amended from time to time, among other
things.  NOW,
THEREFORE, in
consideration of the mutual promises and covenants contained herein, the
Company and the Executive, intending to be legally bound, hereby amend the
Prior Agreement effective as of the Effective Date and agree as follows:  SECTION 1.AMENDMENT TO
THE PRIOR AGREEMENT  Effective as of the Effective Date, the sections of
the Prior Agreement entitled Termination of Employment, Change of Control
and Definitions are hereby amended and restated in their entirety to read as
follows:  Termination of Employment  You may terminate your employment with ARYx at any
time, with or without Good Reason (as defined below), simply by notifying
us.  Likewise, ARYx may terminate your
employment at any time and for any reason whatsoever, with or without Cause (as
defined below), or advance notice.  As
required by law, this offer is subject to satisfactory proof of your right to
work in the United States.  If the Company terminates your employment at any time
for Cause, or if you resign from ARYx without Good Reason, your salary shall
cease on the date of termination, and you will not be entitled to severance
pay, pay in lieu of notice or any other such compensation, other than payment
of accrued salary and such other benefits as expressly required by applicable
law or the terms of any applicable Company benefit plans.  The Option and any other stock awards you
hold shall cease vesting as of the date of termination and those options which
are already vested shall be exercisable only pursuant to the terms of the ARYx
stock option plans and agreements.  However, if the Company terminates your employment at
any time without Cause, or you resign from ARYx for Good Reason (as long as you
provide the Company with written notice specifying the occurrence of the event
that forms the basis of the resignation for Good Reason within ninety (90) days
following its initial existence and provide the Company forty-five (45)  1


days to cure such condition, your resignation occurs
within thirty days following the end of the cure period if the condition is not
cured), and such termination is a separation from service under Treasury
Regulation Section 1.409A-1(h), (i) the Company shall make a lump sum
severance payment to you in an amount equal to six (6) months of your
then-current base salary, subject to withholdings and deductions within ten (10) days
after the effective date of the release agreement described below, (ii) if
you timely elect COBRA health insurance coverage, the Company will reimburse
your COBRA premiums for a maximum of either six (6) months following the
date your employment terminates or until you secure health insurance coverage
from another source, whichever occurs sooner (but in no event after you cease
to be eligible for COBRA), and (iii) the vesting of the Option shall
immediately accelerate with respect to the number of shares that would
otherwise vest if you were to remain employed by ARYx over the six (6) month
period following the date of such termination.  Change of Control  In the event your employment with the Company is
involuntarily terminated without Cause by the Company or its successor, or you
resign for Good Reason, and such termination or resignation occurs within
thirteen (13) months following a Change of Control (as defined below) and such
termination is a separation from service under Treasury Regulation Section 1.409A-1(h),
the vesting of the Option shall be accelerated such that the Option shall
become fully vested.  Your receipt of the
accelerated vesting of the Option provided in this paragraph, or the receipt of
the severance pay described above, shall be conditioned on your execution of a
release agreement in the form attached to this letter as Attachment II, such
executed release must be delivered to the Company within twenty-one (21) days
after the termination of your employment with the Company and become effective
within seven (7) days thereafter in order for any of such benefits be
provided to you.  Definitions  For purposes of this letter agreement:  ·              Cause
shall mean that you have committed, or there has occurred, one or more of the
following: (a) conviction of, a guilty plea with respect to, or a plea of nolo contendere to a charge that you have committed a felony
under the laws of the United States or of any state of a crime involving moral
turpitude, including, but not limited to, fraud, theft, embezzlement or any
crime that results in or is intended to result in personal enrichment at the
expense of the Company; (b) material breach of any agreement entered into
between you and the Company that impairs the Companys interest therein; (c) willful
misconduct, or gross neglect by you of your duties, if such conduct is not
cured within seven (7) days of your receipt of written notice (provided
that such conduct can reasonably be cured); (d) an unauthorized use or
disclosure of the Companys confidential information or trade secrets; or (e) engagement
in any activity that constitutes a material conflict of interest with the
Company.  Your death or physical or
mental disability shall also constitute Cause for termination under this letter
agreement.  Cause to terminate your
employment based on your physical or mental disability shall exist if any
illness, disability or other incapacity renders you physically or mentally
unable to regularly perform your duties hereunder for a period in excess of
sixty (60) consecutive days or more than ninety (90) days in any consecutive
twelve (12) month period.  The Board of
Directors shall make a good  2


faith determination of
whether you are physically or mentally unable to regularly perform your duties,
subject to its review and consideration of any physical and/or mental health
information provided to it by you.  ·              Good Reason
shall mean any one of the following events which occurs on or after the
commencement of your employment without your consent: (i) any material
reduction of your then current annual base salary, except to the extent that
the annual base salary of all other officers of the Company is similarly
reduced; (ii) any material diminution of your duties, responsibilities, or
authority; (iii) any requirement that you relocate to a work site that
would increase your one-way commute distance by more than sixty (60) miles; or (v) any
material breach by the Company of its obligations under letter agreement.  ·              Change of
Control shall mean the occurrence of any of the following: (i) a
sale, lease, or other disposition of all or substantially all of the assets of
the Company; (ii) a merger or consolidation in which the Company is not
the surviving corporation; (iii) a reverse merger involving the Company in
which the Company is the surviving corporation but the shares of common stock
of the Company (the Common Stock)
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise; (iv) an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the Exchange Act),
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or an affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rules) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors; or, (v) in
the event that the individuals who, as of the date hereof, are members of the
Board (the Incumbent Board), cease for any reason
to constitute at least fifty percent (50%) of the Companys Board of
Directors.  (If the election, or
nomination for election by the Companys shareholders, of any new member of the
Companys Board of Directors is approved by a vote of at least fifty percent
(50%) of the Incumbent Board, such new member of the Board of Directors shall
be considered as a member of the Incumbent Board.) Notwithstanding the
foregoing, for the purposes of this letter agreement and with respect to any
and all clauses of this paragraph, an initial public offering of the securities
of the Company (an IPO) or any
transactions or events constituting part of an IPO, or any transaction or
series of transactions principally for bona fide equity financing purposes in
which cash is received by the Company or indebtedness of the Company is
cancelled or converted or a combination thereof shall not be deemed to
constitute or in any way effect a Change of Control.  SECTION 2.ADDITIONAL PROVISIONS  2.1          ENTIRE
AGREEMENT AND MODIFICATION.  The Prior Agreement, together
with this Amendment, constitute the entire agreement among the parties with
respect to the subject matter thereof and hereof and supersede any prior
understandings, agreements, or representations by or among the parties, written
or oral, to the extent they related in any way to the subject matter hereof.  3


2.2          GOVERNING
LAW.  This Amendment shall be governed by,
construed and interpreted in accordance with the laws of the State of
California without regard to its choice of law principles.  2.3          COUNTERPARTS.  This
Amendment may be executed in counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.  2.4          HEADINGS.  The Section headings
contained in this Amendment are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Amendment.  2.5          SEVERABILITY.  Any
term or provision of this Amendment that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.  [SIGNATURE PAGE FOLLOWS]  4


IN WITNESS WHEREOF, the parties
have executed this Amendment on and effective as of the Effective Date.   ARYx THERAPEUTICS, INC.
  
  JOHN VARIANBy:
  /s/ Paul Goddard
  
  /s/ John VarianPaul GoddardChairman and Chief Executive Officer  5