Proceeds to conduct Phase II/III clinical trials in traumatic brain injury, Phase I/II in Schizophrenia, and to develop novel Allosteric Modulators in well-validated Central Nervous System targets.

Irvine, California - January 9, 2006 - Xytis Inc. ("Xytis") announced today that it has raised a $24.5 million Series B financing round, which will be used to develop proprietary small molecules and novel allosteric modulators in preclinical and clinical (Phase I and Phase II) stages for the treatment of Central Nervous System disorders addressing unmet medical needs within large markets. The financing was led by Sanderling Ventures, together with Atlas Venture, Ventech and CDC Entreprises Innovation.

Also announced at the close of this financing, Xytis Inc. is the result of the merger of Xytis Pharmaceuticals Ltd. (London, UK), a company created in July 2004 by Dr. Werner Tschollar with seed funding from Atlas Venture and CDC Entreprises Innovation, with Remergent Inc. (Irvine, CA, USA), a company created in February 2002 to commercialize drug discoveries licensed from the University of California with seed funding from Sanderling Ventures.

Werner Tschollar, CEO & CMO of Xytis, commented, "We are proud to announce the closing of this transaction. The combined companies are highly complementary and have the ambition to establish, from discovery to proof-of-concept and beyond, novel therapeutic paradigms in highly unmet medical needs related to CNS disorders. Our existing pre-clinical and clinical pipeline positions us well in that respect, in particular with our most advanced compound possibly entering a pivotal study by year end.”

The Xytis Inc. Clinical and Pre-Clinical Pipeline

XY 2401 is an oral, small molecule, allosteric enhancer of the NMDA receptor glycine site targeting the treatment of negative symptoms in schizophrenia. A placebo-controlled, single dose-escalation, Phase I study in 48 healthy volunteers was initiated by Xytis in Q4 2005 in Europe .  Based on preliminary data analysis XY 2401 appears to be safe and well tolerated. Therefore, its development will continue into a multiple dose Phase I study.

XY 2405 is a highly potent, small molecule antagonist of the bradykinin B2 receptor targeting the treatment of Traumatic Brain Injury (TBI). Phase I clinical trials have evaluated the safety and the pharmacokinetics of the compound in both healthy volunteers and in patients with severe TBI. The compound was shown to be well tolerated. XY 2405 has received Fast Track designation and Orphan Drug status in the EU and in the US in January 2004 and April 2005, respectively. The Company progresses rapidly towards initiation of a Phase II/III program.

In addition, Xytis has a rich portfolio of preclinical compounds that are novel, highly selective, allosteric modulators of nicotinic Acetylcholine Receptors, GABA-A and other well-validated Central Nervous System targets. These molecules hold great potential as fast-acting oral therapies for the treatment of disorders such as anxiety, schizophrenia, insomnia, epilepsy, and drug addiction, with an improved side effect profile over existing therapeutics.

Prof. Patrick Nef, CSO & CBO of Xytis, says, “The traditional approach of activating or blocking the endogenous receptor-mediated responses with partial or full agonists/antagonists has been successful but is often associated with significant side effects and with questionable specificity/ efficacy. The novel concept of developing allosteric modulators acting on a regulatory site rather than on the endogenous ligand site provides a meaningful way of enhancing the potency of the endogenous ligand and developing compounds with higher specificity and efficacy. Xytis allosteric modulator pipeline with XY2401 in Phase 1 and multiple preclinical programs is likely to become the leader in that exciting field.”

About the Company

Xytis Inc. is a biopharmaceutical company focusing on the discovery and development of innovative CNS drug candidates. The company is privately held and was created in Jan 2006 by the merger of Xytis Pharmaceuticals Ltd. (UK) and Remergent, Inc. (USA). The company received funding from Sanderling Ventures, Atlas Venture, CDC Entreprises Innovation, and Ventech. Xytis Inc. is assembling a pipeline of innovative compounds with validated mechanisms of action, addressing major unmet clinical needs in CNS fields such as Schizophrenia, Traumatic Brain Injury, Depression, Anxiety, or Insomnia. The company has two clinical stage compounds in development and operates from the USA, UK and Switzerland.

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