NSTK Nastech Pharmaceutical Company (MM)

Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-148771

PROSPECTUS SUPPLEMENT
(to Prospectus dated February 4, 2008)

Nastech Pharmaceutical Company Inc.

4,590,277 Shares of Common Stock
and
Warrants to Purchase 5,967,361 Shares of Common Stock

We are offering directly to selected investors 4,590,277 shares of our common stock and warrants to purchase 5,967,361 shares of our common stock pursuant to this prospectus supplement and the accompanying prospectus. The common stock is being offered at a per share purchase price of $1.728. The shares of common stock and warrants will be issued separately but can only be purchased together in this offering.

Our common stock is listed on the NASDAQ Global Market under the symbol “NSTK.” On April 24, 2008, the last reported sale price for our common stock on the NASDAQ Global Market was $2.18 per share. The closing bid price was $2.16 per share.

We have retained Maxim Group, LLC as our placement agent to use its reasonable best efforts to solicit offers to purchase our common stock and warrants in this offering. The placement agent has no obligation to buy any of the shares of our common stock or warrants from us or to arrange for the purchase or sale of any specific number or dollar amount of the shares of common stock and the warrants. See “Plan of Distribution” beginning on page S-13 of this prospectus supplement for more information regarding these arrangements.

Investing in our securities involves a high degree of risk. See “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, beginning on page 24 thereof, to read about factors you should consider before buying shares of the common stock.

		Per
		Share				Total 1
Public offering price		$	1.728			$	7,932,000
Placement Agent’s fees		$	0.1209			$	555,240
Proceeds, before expenses, to us		$	1.607			$	7,376,760

Of the warrants being offered by this prospectus supplement, 4,590,277 have an exercise price of $2.376 per share and are exercisable during the seven year period beginning on October 25, 2008, and 1,377,084 have an exercise price of $2.17 per share and are exercisable during the 90-day period beginning on October 25, 2008.

We expect the total offering expenses, excluding the placement agency fee, to be approximately $135,500 for all sales pursuant to this prospectus supplement and accompanying prospectus. Because there is no minimum offering amount required as a condition to closing in this offering, the actual offering amount, placement agent’s fees and net proceeds to us, if any, in this offering are not presently determinable and may be substantially less than the total maximum offering amount set forth above.

Delivery of the securities will be made to purchasers on or about April 29, 2008. The shares of common stock will be delivered in book-entry form through The Depository Trust Company, New York, New York or by the issuance of physical certificates. Purchaser funds will be deposited into an escrow account and held until jointly released by us and the placement agent on the date the securities are to be delivered to the purchasers. All funds received will be held in a non-interest bearing account. The warrants sold in this offering will be delivered directly to investors.

You should carefully read this prospectus supplement and the accompanying prospectus, together with the documents we incorporate by reference, before you invest in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Maxim Group, LLC

The date of this prospectus supplement is April 30, 2008

TABLE OF CONTENTS

Prospectus Supplement

		Page
About this Prospectus Supplement		ii
Forward-Looking Statements		S-1
Prospectus Supplement Summary		S-3
The Offering		S-6
Risk Factors		S-7
Use of Proceeds		S-8
Capitalization		S-9
Dilution		S-10
Description of Securities		S-11
Plan of Distribution		S-14
Where You Can Find More Information		S-16
Incorporation of Certain Information by Reference		S-16
Legal Matters		S-17
Experts		S-17

Prospectus dated February 4, 2008

		Page
About This Prospectus		1
Forward-Looking Statements		1
Information About The Company		3
Risk Factors		5
Use of Proceeds		16
Ratio of Earnings to Fixed Charges		16
Plan of Distribution		16
Description of Capital Stock		18
Description of Debt Securities		19
Description of Warrants		27
Description of Units		28
Legal Matters		29
Experts		30
Where You Can Find More Information		30
Incorporation of Certain Information by Reference		30

ABOUT THIS PROSPECTUS SUPPLEMENT

     A registration statement on Form S-3 (File no. 333-148771) utilizing a shelf registration process relating to the securities described in this prospectus supplement was filed with the Securities and Exchange Commission, or the SEC, on January 22, 2008 and was declared effective on February 4, 2008. Under this shelf registration process, of which this offering is a part, we may, from time to time, sell up to an aggregate of $50.0 million of our securities.

     This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of our common stock and warrants and also adds, updates and changes information contained in the accompanying prospectus and the documents incorporated by reference. The second part is the accompanying prospectus, which gives more general information, some of which may not apply to this offering of our common stock and warrants. To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or any document filed prior to the date of this prospectus supplement and incorporated by reference, the information in this prospectus supplement will control.

     You should rely only on the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus. We have not, and the placement agent has not, authorized anyone to provide you with information that is different. This prospectus supplement is not an offer to sell or solicitation of an offer to buy these shares of our common stock or warrants in any circumstances under which the offer or solicitation is unlawful. You should not assume that the information we have included in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date of this prospectus supplement or the accompanying prospectus, respectively, or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference, regardless of the time of delivery of this prospectus supplement or of any shares of our common stock or warrants.

     This prospectus supplement and the accompanying prospectus include product names, trade names, trademarks and service marks of us and other companies. All such product names, trade names, trademarks and service marks are the property of their respective holders.

ii

FORWARD-LOOKING STATEMENTS

     Some of the statements contained in this prospectus supplement and the documents incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements reflect our current views with respect to future events or our financial performance, and involve certain known and unknown risks, uncertainties and other factors, including those identified below, which may cause our or our industry’s actual or future results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements or from historical results. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include information concerning our possible or assumed future results of operations and statements preceded by, followed by, or that include the words “may,” “will,” “could,” “would,” “should,” “believe,” “expect,” “plan,” “anticipate,” “intend,” “estimate,” “predict,” “potential” or similar expressions.

     Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We have no duty to update or revise any forward-looking statements after the date of this prospectus supplement or to conform them to actual results, new information, future events or otherwise.

     The following factors, among others, could cause our or our industry’s future results to differ materially from historical results or those anticipated:

	•		our ability to obtain additional funding for our company and for our subsidiaries;
	•		our efforts to establish and maintain collaboration partnerships for the development of PYY(3-36) nasal spray, PTH(1-34) nasal spray, insulin nasal spray, exenatide nasal spray, carbetocin nasal spray, generic calcitonin-salmon nasal spray, RNA interference or other programs;
	•		the success or failure of our research and development programs or the programs of our partners;
	•		the advantages and disadvantages of pharmaceuticals delivered intranasally;
	•		the need for improved and alternative drug delivery methods;
	•		our efforts to collaborate with pharmaceutical and biotechnology companies that have products under development;
	•		our ability to successfully complete product research and development, including pre-clinical and clinical trials and commercialization;
	•		our ability to obtain governmental approvals, including product and patent approvals;
	•		our ability to successfully manufacture the products of our research and development programs and our marketed products to meet current good manufacturing practices and to manufacture these products at a financially acceptable cost;
	•		our ability to attract and retain our key officers and employees and manufacturing, sales, distribution and marketing partners;

	•		costs associated with any product liability claims, patent prosecution, patent infringement lawsuits and other lawsuits;
	•		our ability to develop and commercialize our products before our competitors; and
	•		the projected size of the drug delivery market.

     These factors and the risk factors incorporated by reference into this prospectus supplement, including, without limitation, those contained in “Item 1A. Risk factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, are all of the important factors of which we are currently aware that could cause actual results, performance or achievements to differ materially from those expressed in any of our forward-looking statements. We operate in a continually changing business environment, and new risk factors emerge from time to time. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that projected results or events will be achieved or will occur.

PROSPECTUS SUPPLEMENT SUMMARY

      This summary highlights selected information appearing elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus and may not contain all of the information that is important to you. This prospectus supplement and the accompanying prospectus include information about the shares of our common stock and warrants we are offering as well as information regarding our business and detailed financial data. You should read this prospectus supplement and the accompanying prospectus in their entirety, including the information incorporated by reference in this prospectus supplement and the accompanying prospectus.

      Unless the context requires otherwise, the words “Nastech,” “we,” “company,” “us” and “our” refer to Nastech Pharmaceutical Company Inc. and its subsidiaries.

Overview

     We are a clinical-stage biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products based on our proprietary ribonucleic acid interference (“RNAi”) technology and our proprietary molecular biology-based nasal drug delivery technology. Our history has been based on nasal delivery; however, our future plans focus on our RNAi programs, and we have proposed that our stockholders approve a name change to “MDRNA, Inc.” at our annual meeting to be held on June 10, 2008.

     In connection with our change in focus, we have recently taken steps to restructure certain aspects of our business, including significantly reducing our workforce and reducing certain operating costs. In November 2007, we terminated 72 employees across all areas of our operations and at all of our principal locations, thus reducing our workforce to approximately 160 full-time employees. In connection with this restructuring, we incurred approximately $0.8 million of employee severance and related costs, of which approximately $0.6 million was paid in the fourth quarter of 2007, $0.1 million was paid in the first quarter of 2008 and the remainder will be paid in the second quarter of 2008. In February 2008, we terminated approximately 70 additional employees across all areas of our operations, thus reducing our workforce to approximately 85 employees. In connection with the second reduction in force, we expect to incur approximately $1.6 million of employee severance and related costs, of which $0.6 million was paid in the first quarter of 2008 and the remainder of which we expect to pay in the second quarter of 2008. In addition, we also incurred approximately $0.3 million in net clinical trial termination fees related to our decision in the first quarter 2008 to place our Phase 2 PTH (1-34) clinical trial on hold until further funding has been obtained. Our goal is to successfully partner this program in 2008, which partner will then fund and manage the remaining development and commercialization of PTH(1-34).

     We cannot currently estimate the amount of non-cash impairment charges which shall be recorded related to the impairment of long-lived assets, including certain fixed assets and leasehold improvements. We are also currently contemplating various options that may result in the consolidation of our Bothell, Washington headquarters into a single facility. Because we have not yet finalized the course of action for implementation of our facilities consolidation plan, assuming such plan is implemented at all, we cannot currently estimate the costs that will be associated with each type of major cost associated with the plan, the total amount to be incurred in connection with the plan, or the charges associated with the plan that will result in future cash expenditures.

     Our business model now centers on continuation of research and development activities focused on RNAi, completion and partnering of our Phase 2 clinical programs and our funded partnerships. We will also continue to manufacture Nascobal ^® spray under our agreement with QOL Medical, LLC (“QOL”). There can be no assurance that our focus on these programs will produce acceptable results. If we are not successful in implementing or operating under this new business model, our stock price could suffer. Moreover, any other future changes to our business may not prove successful in the short or long term due to a variety of factors, including competition, success of research efforts or our ability to partner our product candidates, and may have a material impact on our financial results.

     In addition, we have in the past and may in the future find it advisable to restructure operations and reduce expenses, including, without limitation, such measures as reductions in the workforce, discretionary spending, and/or capital expenditures, as well as other steps to reduce expenses. We have streamlined operations and reduced

expenses as a result of the reductions in workforce. Effecting any restructuring places significant strains on management, our employees and our operational, financial and other resources. Furthermore, restructurings take time to fully implement and involve certain additional costs, including severance payments to terminated employees, and we may also incur liabilities from early termination or assignment of contracts, potential litigation or other effects from such restructuring. There can be no assurance that we will be successful in implementing our restructuring program, or that following the completion of our restructuring program, we will have sufficient cash reserves to allow us to fund our business plan until such time as we achieve profitability. Such effects from our restructuring program could have a material adverse affect on our ability to execute on our business plan.

     Our goal is to become a leader in both the development and commercialization of RNAi therapeutics, as well as in innovative nasal drug delivery products and technologies. We will seek to establish strategic collaborations with pharmaceutical and biotechnology companies. We will continue to focus our research and development efforts on therapeutic siRNA, especially in the pre-clinical area, and we have been acquiring and developing our RNAi technologies and IP estate, and eventually expanding our RNAi pipeline to additional therapeutic areas. As of April 25, 2008, we had, either through ownership of or access to, through exclusive licenses, 59 patents issued and 613 pending patent applications to protect our proprietary technologies.

RNAi programs

     We believe that we are at the forefront of small interfering RNA (“siRNA”) therapeutic research and development. Our RNAi programs are targeted at developing and delivering novel therapeutics using siRNA to down-regulate the expression of certain disease-causing proteins that are over-expressed in inflammation, viral respiratory infections, cancer and other diseases. Our lead siRNA program has demonstrated efficacy in animals against multiple influenza strains, including avian flu strains (H5N1). The development of siRNA targeting sequences that are highly conserved across all flu genomes, including avian and other types having pandemic potential, provide one solution to the influenza virus’ ability to develop drug resistance. We believe our lead candidate represents a viable approach to fighting influenza and is one of the most advanced anti-influenza compounds based on RNAi. Our lead candidate can be administered by inhalation to maximize delivery to the lung tissue and has the potential to be delivered to the nasal cavity to prevent or abate early viral infections. The product is being designed for ease of use by patients and for long-term stability, both essential for stockpiling the product for rapid mobilization during a flu epidemic. We have formed MDRNA Research, Inc. (formerly MDRNA, Inc.), a wholly-owned subsidiary incorporated under the laws of the State of Delaware, and assigned and/or licensed certain intellectual property to it, as a key first step toward realizing the potential value from our RNAi assets.

Nasal delivery programs

     Using our nasal drug delivery technology, we create and utilize novel formulation components or excipients that can reversibly open “tight junctions” between cells in various tissues and thereby deliver therapeutic drugs to the blood stream. Tight junctions are cell-to-cell connections in various tissues of the body, including the epithelial layer of the nasal mucosa, the gastrointestinal tract and the blood-brain barrier, which function to regulate the transport and passage of molecules across these natural boundaries.

     Through our expertise in tight junction biology, we are developing clinical product candidates in multiple therapeutic areas. Our rapid-acting nasal insulin product has entered a Phase 2 clinical trial in patients with type 2 diabetes. Results from the trial will be presented at the American Diabetes Association meeting in June 2008. Previous clinical data suggests that our nasal insulin may improve efficacy and avoid pulmonary side effects associated with the inhalation of insulin.

     Peptide YY(3-36), or PYY (3-36),our nasal version of a naturally occurring human hormone, is being studied in a fully enrolled Phase 2 clinical trial involving obese patients and we expect results in the third quarter of 2008. PYY(3-36) is produced naturally by specialized endocrine cells (L-cells) in the gut in proportion to the calorie content of a meal. Research has indicated a role for PYY(3-36) in regulating appetite control and thus its potential relevance in obesity.

     PTH(1-34), a fragment of human parathyroid hormone that helps regulate calcium and phosphorus metabolism and may cause bone growth, is a nasal version of the active ingredient that is being marketed as an injectable

product by Eli Lilly & Company (“Lilly”), under the trade name Forteo ^® . We had planned a Phase 2B clinical trial to evaluate the effect of nasally delivered PTH(1-34) on bone density in patients with osteoporosis; however, our Phase 2 PTH(1-34) clinical trial is on hold until further funding has been obtained. Our goal is to successfully partner this program in 2008, which partner will then fund and manage the remaining development and commercialization of PTH(1-34).

     Exenatide, marketed by Amylin Pharmaceuticals, Inc. (“Amylin”) and Lilly as Byetta ^® , stimulates insulin secretion in response to elevated plasma glucose levels. In June 2006, we entered into an agreement with Amylin to develop a nasal spray formulation of the product, for the treatment of diabetes. Preclinical studies and a Phase 1 clinical trial have been completed by Amylin and additional clinical trials are being evaluated.

     Our generic calcitonin-salmon product is under review at the U.S. Food and Drug Administration, and is partnered with Par Pharmaceutical Companies, Inc.

     Carbetocin, a long-acting analog of oxytocin, is a naturally produced hormone that may benefit autistic patients. We had planned to initiate Phase 2 clinical trials for this program in the first half of 2008; however, this program is currently on hold pending further funding.

     We believe our nasal drug delivery technology offers advantages over injectable routes of administration for large molecules, such as peptides and proteins. These advantages may include improved safety, clinical efficacy and increased patient compliance, due to the elimination of injection site pain or irritation. In addition, we believe our nasal drug delivery technology can potentially offer advantages over oral administration by providing for faster absorption into the bloodstream, and improved effectiveness by avoiding problems relating to gastrointestinal side effects and first-pass liver metabolism. Although some of our product candidates use our expertise outside this area, this technology is the foundation of our nasal drug delivery platform and we use it to develop commercial products with our collaboration partners or, in select cases, to develop, manufacture and commercialize some product candidates on our own.

Our Corporate Information

     We were incorporated in Delaware on September 23, 1983. Our principal executive offices are located at 3830 Monte Villa Parkway, Bothell, Washington 98021, and our telephone number at that address is (425) 908-3600. We maintain an Internet website at www.nastech.com . We have not incorporated by reference into this prospectus supplement or the accompanying prospectus the information in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus supplement or the accompanying prospectus.

THE OFFERING

Securities we are offering:		4,590,277 shares of our common stock and warrants to purchase 5,967,361 shares of our common stock
Issue price:		$1.728 per share
Common Stock:
Number of shares outstanding before this offering:		26,713,124 shares
Number of shares to be outstanding after completion of this offering:		37,270,762 shares, assuming all shares are sold and all warrants offered hereby are fully exercised
Warrants:
Number of warrants outstanding before this offering:		None
Number of warrants to be outstanding after completion of this offering:		Warrants to purchase 5,967,361 shares
Exercise Price:		The seven-year warrants have an exercise price of $2.376 per share, and the 90-day warrants have an exercise price of $2.17 per share
Exercise period:		Warrants to purchase up to 4,590,277 shares will be exercisable for seven years beginning on October 25, 2008, and warrants to purchase up to 1,377,084 shares will be exercisable for 90 days beginning on October 25, 2008
Use of Proceeds:		For general corporate purposes. See “Use of Proceeds.”
NASDAQ Global Market symbol:		NSTK

     The number of shares of our common stock to be outstanding before and after this offering is based on 26,713,124 shares outstanding as of April 24, 2008, and excludes:

	•		warrants to purchase 144,430 shares of common stock with an exercise price of $11.09 per share outstanding at April 24, 2008, and 144,430 shares of common stock issuable upon exercise of such warrants;
	•		2,919,941 shares of common stock issuable upon the exercise of options outstanding at April 24, 2008 with a weighted average exercise price of $11.04 per share;
	•		152,572 shares of common stock reserved for future grants and awards under our equity incentive plans and 257,568 shares of common stock reserved for future issuance under our employee stock purchase plan, each as of April 24, 2008; and
	•		warrants to purchase 229,514 shares of common stock at an exercise price of $2.376 per share to be issued to the placement agent for this offering.

     Rights of Participation. For a period of 24 months following this offering, investors in this offering will have a pro rata right to participate in any future sales of our capital stock, securities convertible into our capital stock or certain forms of indebtedness up to 100% of such offering, other than shares that are issued in sales that are customarily excluded from such right.

     Restrictions on Subsequent Equity Sales. For a period of 90 days following this offering, we have agreed not to issue additional shares of our common stock or securities convertible into or exchangeable for our common stock, other than issuances that are customarily excluded from such right. We have also agreed, for a period of 12 months following this offering, not to issue, or enter into any agreement to issue, additional shares of our common stock, securities convertible into or exchangeable for our common stock or certain forms of indebtedness that are issued in a registered offering. Moreover, we agreed not to enter into any Variable Rate Transaction (as such term is defined in the Securities Purchase Agreement) until such time as the investors in this offering no longer hold any securities issued to them in this offering (including any shares of common stock issuable upon exercise of the warrants sold in this offering).

     The foregoing summary of the participation rights and restrictions on subsequent equity sales does not purport to be complete and is qualified in its entirety by reference to the Securities Purchase Agreement, which has been filed as an exhibit to a current report on Form 8-K that is incorporated herein by reference.

RISK FACTORS

     Investing in our common stock involves a high degree of risk. In addition to the other information included and incorporated by reference in this prospectus supplement and accompanying prospectus, and the risk factors set forth below, you should carefully consider the risks described under the heading “Item 1A. Risk factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on March 17, 2008, and incorporated by reference into this prospectus supplement.

Risks Related to this Offering

Management will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.

     Our management will have broad discretion as to the application of the net proceeds from this offering and could use them for purposes other than those contemplated at the time of this offering. Our stockholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. Moreover, our management may use the net proceeds for corporate purposes that may not increase our profitability or market value.

You will experience immediate dilution in the book value per share of the common stock you purchase.

     Because the price per share of our common stock being offered is substantially higher than the book value per share of our common stock, you will suffer substantial dilution in the net tangible book value of the common stock you purchase in this offering. Based on an offering price of $1.728 per share, if you purchase shares in this offering, you will suffer immediate and substantial dilution of approximately $0.25 per share in the net tangible book value of the common stock. See the section entitled “Dilution” below for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.

Our ability to utilize our net operating loss carryforwards is limited to certain annual limitations, and may be further limited by a change of control as a result of this offering.

     At December 31, 2007, we had available net operating loss carryforwards for federal and state income tax reporting purposes of approximately $176.5 million and $33.1 million, respectively, and had available tax credits of approximately $7.6 million, which are available to offset future taxable income. A portion of these carryforwards will expire in 2008, and will continue to expire through 2027 if not otherwise utilized. Our ability to use such net operating losses and tax credit carryforwards is subject to an annual limitation due to change of control provisions under Sections 382 and 383 of the Internal Revenue Code. An additional change of control could result from this offering, causing an additional limitation on the usage of our net operating losses and tax credit carryforwards.

USE OF PROCEEDS

     We estimate that the net proceeds from this offering will be approximately $7.2 million, after deducting the placement agency fees and the estimated offering expenses payable by us. We will not receive any proceeds from the sale of common stock issuable upon exercise of the warrants we are offering unless and until such warrants are exercised. If the warrants are fully exercised for cash, we will receive additional proceeds of approximately $13.9 million.

     We intend to use the net proceeds from this offering for general corporate purposes, including, without limitation, the funding of our clinical research and development programs, the clinical development of our product candidates, capital expenditures and working capital needs.

     Although we have identified some of the potential uses of the proceeds from this offering, we have and reserve broad discretion in the application of these proceeds. Accordingly, we reserve the right to use these proceeds for different purposes or uses which we have not listed above.

     Pending any ultimate use of any portion of the proceeds from this offering, we intend to invest the proceeds in short-term U.S. governmental securities.

CAPITALIZATION

     The following table sets forth our cash, cash equivalents and short-term investments and capitalization as of December 31, 2007:

	•		on an actual basis; and
	•		on an as adjusted basis to give effect to the issuance and sale by us of 4,590,277 shares of our common stock and warrants to purchase 5,967,361 shares of our common stock in this offering at a price of $1.728 per share, and after deducting the placement agency fees and estimated offering expenses payable by us.

     This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto that are incorporated by reference in this prospectus supplement and the accompanying prospectuses.

		As of December 31, 2007
		Actual				As Adjusted
		(unaudited, in thousands
		except per share amounts)
Cash, cash equivalents and short-term investments(1)		$	41,573			$	48,814
Long-term liabilities(2)			8,828				8,828
Stockholders’ equity:
Preferred stock, $0.01 par value; 100,000 authorized; no shares issued and outstanding, actual and as adjusted			—				—
Common stock and additional paid in capital, $0.006 par value; 50,000,000 shares authorized; 26,753,430 shares outstanding, actual; 31,343,707 shares outstanding, as adjusted(2)			234,065				241,306
Accumulated deficit			(194,865	)			(194,865	)
Accumulated other comprehensive loss			(20	)			(20	)
Total stockholders’ equity			39,220				46,461
Total capitalization		$	48,048			$	55,289

     The number of shares of common stock outstanding is based on the number of shares outstanding as of December 31, 2007, and excludes:

	•		warrants to purchase 144,430 shares of common stock with an exercise price of $11.09 per share outstanding at December 31, 2007, and 144,430 shares of common stock issuable upon exercise of such warrants;
	•		2,412,318 shares of common stock issuable upon the exercise of options outstanding at December 31, 2007 with a weighted average exercise price of $13.26 per share; and
	•		579,942 shares of common stock reserved for future grants and awards under our equity incentive plans and 300,000 shares of common stock reserved for future issuance under our employee stock purchase plan.

DILUTION

     If you purchase any of the shares of common stock offered by this prospectus supplement, you will experience dilution to the extent of the difference between the offering price per share of common stock you pay in this offering and the net tangible book value per share of our common stock immediately after this offering. Our unaudited net tangible book value as of December 31, 2007 was approximately $39.2 million, or $1.46 per share of common stock. Net tangible book value per share is equal to our total tangible assets minus total liabilities, all divided by the number of shares of common stock outstanding.

     After giving effect to the assumed sale of 4,590,277 shares of common stock and warrants to purchase 5,967,361 shares of common stock in this offering at a price of $1.728 share, and after deducting the placement agency fees and our estimated offering expenses, our as adjusted net tangible book value as of December 31, 2007 would have been approximately $46.5 million, or approximately $1.48 per share of common stock. This represents an immediate increase in net tangible book value of approximately $0.02 per share to existing stockholders and an immediate dilution of approximately $0.25 per share to new investors. Our net tangible book value calculation assumes no exercise of the warrants offered hereby. The following table illustrates this calculation on a per share basis:

Offering price per share						$	1.728
Net tangible book value per share as of December 31, 2007		$	1.466
Increase per share attributable to this offering			.016
As adjusted net tangible book value per share after this offering						$	1.482
Dilution per share to new investors						$	0.246

     The number of shares of common stock outstanding used for existing stockholders in the table and calculations above is based on 26,753,430 shares outstanding as of December 31, 2007, and excludes:

	•		warrants to purchase 144,430 shares of common stock with an exercise price of $11.09 per share outstanding at December 31, 2007, and 144,430 shares of common stock issuable upon exercise of such warrants;
	•		2,412,318 shares of common stock issuable upon the exercise of options outstanding at December 31, 2007 with a weighted average exercise price of $13.26 per share; and
	•		579,942 shares of common stock reserved for future grants and awards under our equity incentive plans and 300,000 shares of common stock reserved for future issuance under our employee stock purchase plan, each as of December 31, 2007.

DESCRIPTION OF SECURITIES

     Set forth below is a description of our capital stock. The following description of our capital stock is a summary and is subject to and qualified by the applicable provisions of our certificate of incorporation, our bylaws and the relevant provisions of the laws of the State of Delaware.

Description of Common Stock

     For a complete description of our common stock, see the “Description of Capital Stock” section in the accompanying prospectus dated February 4, 2008 on page 20 thereof.

Description of Warrants

     Each warrant offered by this prospectus supplement represents the right to purchase one share of common stock at an initial exercise price equal to: (i) in the case of the seven-year warrants, $2.376 per share; and (ii) in the case of the 90-day warrants, $2.17 per share, which in each case is subject to adjustment. Warrants to purchase up to 4,590,277 shares may be exercised at any time and from time to time during the seven-year period beginning on October 25, 2008, and warrants to purchase up to 1,377,084 shares may be exercised at any time and from time to time during the 90-day period beginning on October 25, 2008.

      Exercise . Holders of the warrants may exercise their warrants to purchase shares of our common stock on or before the expiration date by delivering (i) an exercise notice, appropriately completed and duly signed, and (ii) if such holder is not utilizing the cashless exercise provisions, payment of the exercise price for the number of shares with respect to which the warrant is being exercised. Warrants may be exercised in whole or in part, but only for full shares of common stock, and any portion of a warrant not exercised prior to the expiration date shall be and become void and of no value. We provide certain buy-in rights to a holder if we fail to deliver the shares of common stock underlying the warrants by the third business day after the date on which delivery of such stock certificate is required by the warrant. The buy-in rights apply if after such third business day, but prior to cure by us, the holder purchases (in an open market transaction or otherwise) shares of our common stock to deliver in satisfaction of a sale by the holder of the warrant shares that the holder anticipated receiving from us upon exercise of the warrant. In this event, at the request of and in the holder’s discretion, we will:

	•		pay cash to the holder in an amount equal to (i) the buy-in price, meaning the holder’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased minus (ii) the aggregate sale price of the shares of common stock giving rise to the buy-in purchase which the holder had attempted to obtain through exercise; and
	•		at the holder’s option, either (a) deliver to the holder a certificate or certificates representing the shares of common stock underlying the exercised warrant or (b) reinstate the portion of the warrant and equivalent number of shares of common stock underlying the warrant for which such exercise was not honored.

     In addition, the warrant holders are entitled to a “cashless exercise” option if, at any time of exercise, there is no effective registration statement registering, or no current prospectus available for, the resale of the shares underlying the warrant. This option entitles the warrant holder to elect to receive fewer shares of common stock without paying the cash exercise price. The number of shares to be issued would be determined by a formula based on the total number of shares to which the warrant holder is entitled, the volatility-weighted average price of the common stock on the trading day before the date of exercise and the applicable exercise price of the warrants.

     The shares of common stock issuable on exercise of the warrants will be, when issued in accordance with the warrants, duly and validly authorized, issued and fully paid and non-assessable. We will authorize and reserve at least that number of shares of common stock equal to the number of shares of common stock issuable upon exercise of all outstanding warrants.

      Fundamental Transaction . If, at any time while the warrant is outstanding, (1) we effect any merger or consolidation with or into another person or entity after which our shareholders as of immediately prior to the

transaction own less than a majority of the outstanding stock of the surviving entity, (2) we effect any sale of all or substantially all of our assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by us or another person or entity) is completed pursuant to which holders of common stock are permitted to tender or exchange their shares for other securities, cash or property, or (4) we effect any reclassification of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then the holder shall have the right thereafter to receive, upon exercise of the warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of warrant shares then issuable upon exercise of the warrant (the “Alternate Consideration”). We shall not effect any such Fundamental Transaction unless prior to or simultaneously with the consummation thereof, any successor to us, surviving entity or the corporation purchasing or otherwise acquiring such assets shall assume the obligation to deliver to the holder such Alternate Consideration as the Holder may be entitled to purchase, and the other obligations under the warrant.

      Delivery of Certificates . Upon the holder’s exercise of a warrant, we will promptly, but in no event later than three business days after the exercise date, issue and deliver, or cause to be issued and delivered, a certificate for the shares of common stock issuable upon exercise of the warrant or deliver the shares electronically through The Depository Trust Corporation through its Deposit Withdrawal Agent Commission System or another established clearing corporation performing similar functions.

     If we have not obtained shareholder approval that may be required under applicable law, rules or regulations, then we may not issue upon exercise of the warrant a number of shares of common stock, which, when aggregated with any shares of common stock issued upon prior exercise of the warrant or any other warrant issued pursuant to the subscription agreements, would exceed 4.99% of the total number of issued and outstanding shares of common stock. However, by written notice to us, which notice will not be effective until the 61 ^st day after such notice is delivered to us, the holder of the warrant may change the beneficial ownership limitation to 9.99%.

     If we at any time on or after the issue date of the warrant subdivide (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of our outstanding shares of common stock into a greater number of shares, the exercise price in effect immediately prior to such subdivision will be the same thereafter and the number of warrant shares will be increased in proportion to the total outstanding shares immediately prior to such subdivision divided by the total outstanding shares immediately after the subdivision. If we at any time on or after the issue date of the warrant combine (by combination, reverse stock split or otherwise) one or more classes of our outstanding shares of common stock into a smaller number of shares, the exercise price in effect immediately prior to such combination will be the same thereafter and the number of warrant shares will be decreased in proportion to the total outstanding shares immediately prior to such combination divided by the total outstanding shares immediately after the combination.

      Other Adjustments . The exercise price and the number of shares of common stock purchasable upon the exercise of the warrants are subject to adjustment upon the occurrence of specific events, including stock dividends, stock splits, and combinations of our common stock. If we at any time on or after the issue date of the warrant issue any shares of common stock at a price per share less than the exercise price of the warrant, the number of shares of common stock issuable under the warrant will be proportionately increased and the exercise price of the warrant will be reduced to the issuance price such that the aggregate exercise price of the entire warrant will remain the same as the aggregate exercise price immediately prior to the issuance. In addition, if we at any time on or after the issue date of the warrant issue any rights, options, warrants, indebtedness or assets (including cash and dividends) to all holders of common stock to the exclusion of the holders of the warrants, the exercise price will be subject to further adjustment.

     We will provide notice to holders of the warrants to provide such holders with a practical opportunity to exercise their warrants and hold common stock in order to participate in or vote on the following corporate events:

•

if we declare a dividend or distribution of cash, securities or other property in respect of our common stock;

	•		if we authorize, approve, or enter into any agreement contemplating or soliciting approval for a merger, sale or similar transaction pursuant to which common stock is converted or exchanged for cash, securities or property; or
	•		if we authorize a voluntary dissolution, liquidation or winding up of our affairs.

      Additional Provisions . The above summary of certain terms and provisions of the warrants is qualified in its entirety by reference to the detailed provisions of the warrants, the form of which has been filed as an exhibit to a current report on Form 8-K that is incorporated herein by reference. We are not required to issue fractional shares upon the exercise of the warrants. No holders of the warrants will possess any rights as a shareholder under those warrants until the holder exercises those warrants. The warrants may be transferred independent of the common stock they were issued with, on a form of assignment, subject to all applicable laws.

PLAN OF DISTRIBUTION

     Maxim Group, LLC, which we refer to as the placement agent, has entered into a placement agency agreement with us in which the placement agent has agreed, on a reasonable best efforts basis, to introduce us to investors who will purchase our common stock and warrants in this offering. The placement agent has no obligation to buy any of the shares of common stock or warrants from us or to arrange the purchase or sale of any specific number or dollar amount of the shares of common stock or warrants. We have entered into a securities purchase agreement directly with investors in connection with this offering.

     Certain investor funds may be deposited into an escrow account set up at American Stock Transfer & Trust Company, as escrow agent. Before the closing date, the escrow agent will notify the placement agent when funds to pay for the shares have been received. Unless the investors have requested physical delivery, we will deposit the shares of common stock with The Depository Trust Company upon receiving notice from the placement agent. At the closing, The Depository Trust Company will credit the shares of common stock to the respective accounts of the investors. The warrants will be delivered directly to the investors. If the conditions to this offering are not satisfied or waived, then all investor funds that were deposited into escrow will be returned to investors and this offering will terminate.

     We have agreed to pay the placement agent a fee equal to 7% of the aggregate gross proceeds raised in this offering, plus warrants to purchase that number of shares of common stock as is equal to 5% of the aggregate number of shares of common stock sold in the offering. The warrants to be issued to the placement agent will be exercisable during the seven year period beginning on October 25, 2008. The following table shows the per share and total fees we will pay to the placement agent assuming all of the shares of common stock and warrants offered by this prospectus supplement are issued and sold by us.

Placement Fees		Per Share				Total
Maxim Group, LLC		$	0.1209			$	555,240

     We estimate that our total expenses of this offering, excluding the placement agent’s fees, will be approximately $135,500. Included in such amount are the fees and disbursements of counsel to the placement agent in connection with the Financial Institutions Regulatory Authority’s review and approval of the placement agent’s participation in this offering, which we estimate to be $5,500. We have also agreed to reimburse the placement agent for the actual and accountable fees and expenses of counsel to the placement agent in an amount up to $20,000, which is also included in the total expenses listed herein.

     In compliance with the guidelines of FINRA, the maximum consideration or discount to be received by any FINRA member or any independent broker-dealer may not exceed 8.0% of the aggregate amount of the securities offered pursuant to this prospectus supplement.

     We have agreed to indemnify the placement agent against liabilities relating to the offering, including liabilities under the Securities Act, or to contribute to payments that the placement agent may be required to make in this respect.

     This is a brief summary of the material provisions of the placement agency agreement and does not purport to be a complete statement of its terms and conditions. A copy of the placement agency agreement will be on file with the SEC as an exhibit to a Form 8-K to be filed by us.

     We have agreed, subject to customary exceptions, not to sell, contract to sell, grant options to purchase, or otherwise dispose of any shares of our common stock or securities exchangeable for or convertible into our common stock for a period of 90 days after the date of this prospectus supplement without the prior written consent of the placement agent.

     From time to time, the placement agent and its affiliates have provided, and may from time to time in the future provide, investment banking and other services to us for which they receive customary fees and commissions.

     The placement agent has informed us that it does not intend to engage in overallotment, stabilizing transactions or syndicate covering transactions in connection with this offering.

     A prospectus supplement and the accompanying prospectus in electronic format may be made available on the web site maintained by the placement agent and the placement agent may distribute the prospectus supplement and the accompanying prospectus electronically.

WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at http://www.sec.gov. The SEC’s website contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its Public Reference Room. We maintain a website at www.nastech.com. We have not incorporated by reference into this prospectus supplement or the accompanying prospectus the information in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus supplement or the accompanying prospectus.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The SEC allows us to “incorporate by reference” into this prospectus supplement the information we have filed with the SEC. The information we incorporate by reference into this prospectus supplement is an important part of this prospectus supplement. Any statement in a document we have filed with the SEC prior to the date of this prospectus supplement and which is incorporated by reference into this prospectus supplement will be considered to be modified or superseded to the extent a statement contained in this prospectus supplement or any other subsequently filed document that is incorporated by reference into this prospectus supplement modifies or supersedes that statement. The modified or superseded statement will not be considered to be a part of this prospectus supplement, except as modified or superseded.

     We incorporate by reference into this prospectus supplement the information contained in the documents listed below, which is considered to be a part of this prospectus supplement:

(1)		our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC on March 17, 2008;
(2)		our current reports on Form 8-K, as filed with the SEC on January 7, 2008, January 22, 2008, February 13, 2008, February 19, 2008, February 29, 2008, March 4, 2008, March 10, 2008, March 17, 2008 and April 30, 2008;
(3)		our preliminary proxy statement on Schedule 14A, and our definitive proxy statement on Schedule 14A, each relating to the annual meeting of stockholders to be held on June 10, 2008, as filed with the SEC on April 18, 2008 and April 29, 2008, respectively;
(4)		the description of our common stock and the description of certain provisions of Delaware Law contained or incorporated by reference in:

	•		our registration statement on Form 8-A, filed with the SEC on August 12, 1985 (file no. 000-13789), including any amendments or reports filed for the purposes of updating this description;
	•		our Restated Certificate of Incorporation dated July 20, 2005 and filed as Exhibit 3.1 to our current report on Form 8-K, as filed with the SEC on July 25, 2005 (file no. 000-13789); and
	•		our Amended and Restated Bylaws dated September 19, 2007 and filed as Exhibit 3.1 to our current report on Form 8-K, as filed with the SEC on September 25, 2007 (file no. 000-13789);

(5)

the description of our preferred stock purchase rights contained in our registration statement on Form 8-A, filed with the SEC on March 16, 2000 (file no. 000-13789), including any amendment or reports filed for the purposes of updating this description; and

(6)		future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus supplement but prior to the termination of the offering of the securities covered by this prospectus supplement.
		You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:

Nastech Pharmaceutical Company Inc.
3830 Monte Villa Parkway
Bothell, WA 98021
(425) 908-3600

LEGAL MATTERS

     The validity of the issuance of the shares of our common stock and warrants offered by this prospectus supplement is being passed upon for us by Pryor Cashman LLP, New York, New York. Feldman Weinstein & Smith LLP is counsel for the placement agent in connection with this offering.

EXPERTS

     Our consolidated financial statements as of December 31, 2007 and 2006, and for each of the years in the three-year period ended December 31, 2007, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2007 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein and in the registration statement of which this prospectus supplement is a part, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2007 financial statements refers to a change in the method of accounting for all stock-based awards made to employees and directors effective January 1, 2006.

Nastech Pharmaceutical Company Inc.

$50,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units

     We may, from time to time, offer and sell any combination of shares of common stock and/or preferred stock, various series of debt securities, and/or warrants to purchase any of such securities, either individually or in units comprised of any of such securities.

     The maximum aggregate offering price for these securities will not exceed $50,000,000. We will describe the terms of any such offering in a supplement to this prospectus. Any prospectus supplement may also add, update, or change information contained in this prospectus. Such prospectus supplement will contain the following information about the offered securities:

	•		title and amount;
	•		offering price, underwriting discounts and commissions, and our net proceeds;
	•		any market listing and trading symbol;
	•		names of lead or managing underwriters and description of underwriting arrangements; and
	•		the specific terms of the offered securities.

     Our shares of common stock trade on the Nasdaq Global Market under the symbol “NSTK.” On January 18, 2008, the last sale price of the shares as reported on the Nasdaq Global Market was $3.05 per share. You are urged to obtain current market quotations for our common stock.

      You should carefully read and consider the risk factors appearing throughout this prospectus, including, without limitation, those appearing under the heading “Risk Factors” beginning on page 5 of this prospectus.

Our mailing address and telephone number are:
3830 Monte Villa Parkway
Bothell, Washington 98021
(425) 908-3600

      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is February 4, 2008

TABLE OF CONTENTS

About This Prospectus			1
Forward-Looking Statements			1
Information About The Company			3
Risk Factors			5
Use of Proceeds			16
Ratio of Earnings to Fixed Charges			16
Plan of Distribution			16
Description of Capital Stock			18
Description of Debt Securities			19
Description of Warrants			27
Description of Units			28
Legal Matters			29
Experts			30
Where You Can Find More Information			30
Incorporation of Certain Information by Reference			30

     You should rely only on the information contained in or incorporated by reference into this prospectus or any prospectus supplement. We have not authorized any person to give any information or to make any representations other than those contained or incorporated by reference in this prospectus, and, if given or made, you must not rely upon such information or representations as having been authorized. This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than our shares of common stock and/or preferred stock, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units, each as described in this prospectus or an offer to sell or the solicitation to buy such securities in any circumstances in which such offer or solicitation is unlawful. You should not assume that the information we have included in this prospectus is accurate as of any date other than the date of this prospectus or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference regardless of the time of delivery of this prospectus or of any securities registered hereunder.

     This document includes product names, trade names and trademarks of other companies. All such product names and trademarks appearing in this document are the property of their respective holders.

      Unless the context otherwise requires, all references in this prospectus to “Nastech,” “Company,” “registrant,” “we,” “us” or “our” include Nastech Pharmaceutical Company Inc., a Delaware corporation, and any subsidiaries or other entities controlled by us.

ABOUT THIS PROSPECTUS

     This prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or SEC, utilizing a shelf registration process. Under this shelf registration statement, we may, from time to time, sell any combination of common stock and/or preferred stock, various series of debt securities and/or warrants to purchase any of such securities, either individually or in units comprised of any of such securities, in one or more offerings, for a total maximum offering price not to exceed $50,000,000. This prospectus provides you with a general description of the securities we may offer.

     If required, each time we sell securities, we will provide a prospectus supplement that will contain specific information about the terms of the securities being offered. The prospectus supplement may add, update or change information contained in this prospectus and may include a discussion of any risk factors or other special considerations that apply to the offered securities. If there is any inconsistency between the information in this prospectus and a prospectus supplement, you should rely on the information in that prospectus supplement. Before making an investment decision, it is important for you to read and consider the information contained in this prospectus and any prospectus supplement, together with the additional information described under the heading “Where You Can Find More Information.”

FORWARD-LOOKING STATEMENTS

     Some of the statements in this prospectus and in documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements reflect our current views with respect to future events or our financial performance, and involve certain known and unknown risks, uncertainties and other factors, including those identified below, which may cause our or our industry’s actual or future results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements or from historical results. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include information concerning our possible or assumed future results of operations and statements preceded by, followed by, or that include the words “may,” “will,” “could,” “would,” “should,” “believe,” “expect,” “plan,” “anticipate,” “intend,” “estimate,” “predict,” “potential” or similar expressions.

     Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We have no duty to update or revise any forward-looking statements after the date of this prospectus or to conform them to actual results, new information, future events or otherwise.

     The following factors, among others, could cause our or our industry’s future results to differ materially from historical results or those anticipated:

	•		our ability to obtain additional funding;
	•		our efforts to establish and maintain collaboration partnerships for the development of PTH(1-34) nasal spray, PYY nasal spray, generic calcitonin-salmon nasal spray, exenatide nasal spray, insulin nasal spray, carbetocin nasal spray, RNA interference or other programs;
	•		the success or failure of our research and development programs or the programs of our partners;
	•		the advantages and disadvantages of pharmaceuticals delivered intranasally;
	•		the need for improved and alternative drug delivery methods;

	•		our efforts to collaborate with other pharmaceutical and biotechnology companies that have products under development;
	•		our ability to successfully complete product research and development, including pre-clinical and clinical trials and commercialization;
	•		our ability to obtain governmental approvals, including product and patent approvals;
	•		our ability to successfully manufacture the products of our research and development programs and our marketed products to meet current good manufacturing practices and to manufacture these products at a financially acceptable cost;
	•		our ability to attract and retain our key officers and employees and manufacturing, sales, distribution and marketing partners;
	•		costs associated with any product liability claims, patent prosecution, patent infringement lawsuits and other lawsuits;
	•		our ability to develop and commercialize our products before our competitors; and
	•		the projected size of the drug delivery market.

     We assume no obligation to update and supplement forward-looking statements that become untrue because of subsequent events. These factors and the factors disclosed under the heading “Risk Factors” below are all of the important factors of which we are currently aware that could cause actual results, performance or achievements to differ materially from those expressed in any of our forward-looking statements. We operate in a continually changing business environment, and new risk factors emerge from time to time. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that projected results or events will be achieved or will occur.

INFORMATION ABOUT THE COMPANY

Business Overview

     We are a biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products based on our proprietary molecular biology-based drug delivery technology. Using our technology, we create and utilize novel formulation components or excipients that can reversibly open the “tight junctions” between cells in various tissues and thereby deliver therapeutic drugs to the blood stream. Tight junctions are cell-to-cell connections in various tissues of the body, including the epithelial layer of the nasal mucosa, the gastrointestinal tract and the blood brain barrier, which function to provide barrier integrity and to regulate the transport and passage of molecules across these natural boundaries.

     We believe our nasal drug delivery technology offers advantages over injectable routes of administration for large molecules, such as peptides and proteins. These advantages may include improved safety, clinical efficacy and increased patient compliance, due to the avoidance of injection site pain or irritation. In addition, we believe our nasal drug delivery technology can potentially offer advantages over oral administration by providing for faster absorption into the bloodstream and improved effectiveness by avoiding problems relating to gastrointestinal side effects and first-pass liver metabolism. Although some of our product candidates use our expertise outside this area, this technology is the foundation of our nasal drug delivery platform and we use it to develop commercial products with our collaboration partners or, in select cases, we may choose to develop, manufacture and commercialize some product candidates on our own.

     We believe we are also at the forefront of small interfering RNA, or siRNA, therapeutic research and development. Our RNA interference, or RNAi, therapeutic programs are targeted at both developing and delivering novel therapeutics using siRNA to down-regulate the expression of certain disease causing proteins that are over-expressed in inflammation, viral respiratory infections and other diseases. As more fully described under the heading “Establishment of MDRNA” below, we have formed MDRNA, Inc., a wholly-owned subsidiary incorporated under the laws of the State of Delaware referred to in this prospectus as MDRNA, as a key first step toward realizing the potential value from our RNAi assets.

Business Strategy

     Our goal is to become a leader in both the development and commercialization of innovative, nasal drug delivery products and technologies, as well as in RNAi therapeutics. Key elements of our strategy include:

	•		Applying Our Tight Junction Technology and Other Drug Delivery Methods to Product Candidates. We focus our research and development efforts on product candidates, including peptides, large and small molecules and therapeutic siRNA, for which our proprietary technologies may offer clinical advantages, such as improved safety and clinical efficacy, or increased patient compliance. We also will continue to search for applications of our tight junction technology to improve other forms of drug delivery, including oral, pulmonary and intravenous delivery.
	•		Pursuing Collaborations with Pharmaceutical and Biotechnology Companies. We will continue to establish strategic collaborations with pharmaceutical and biotechnology companies. Typically, we collaborate with partners to commercialize our internal product candidates by utilizing their late stage clinical development, regulatory, marketing and sales capabilities. We also assist our collaboration partners in developing more effective drug delivery methods for their product candidates that have already completed early stage clinical trials or are currently marketed. We generally structure our collaborative arrangements to receive research and development funding and milestone payments during the development phase, revenue from manufacturing upon commercialization and patent-based royalties on future sales of products.
	•		Developing and Commercializing Our Own Product Candidates. In select cases where we deem it to be strategically advantageous to us, we plan to internally develop, manufacture and commercialize our products.
	•		Leveraging Our Manufacturing Expertise and Capabilities. We have invested substantial time, money and intellectual capital in developing our manufacturing facilities and know-how, which we believe would be difficult for our collaborators and competitors to replicate in the near term. These capabilities give us competitive advantages, including the ability to prepare the chemistry, manufacturing and controls, or CMC, section of new drug application, or NDA, filings with the U.S. Food and Drug Administration, or FDA, and to maintain a high-level of quality control in manufacturing product candidates for clinical trials and FDA-approved products for commercialization. We believe our manufacturing capabilities will meet our projected capacity needs for the foreseeable future.

     We are engaged in a variety of preclinical research and clinical development efforts. We and our collaboration partners have been developing a diverse portfolio of clinical-stage product candidates for multiple therapeutic areas utilizing our molecular biology-based drug delivery technology. In addition, we have been expanding our RNAi research and development efforts. As of January 15, 2008, we had 48 patents issued and 491 pending patent applications to protect our proprietary technologies.

Recent Developments

Establishment of MDRNA

     We are engaged in developing therapeutic products based upon ribonucleic acid interference, or RNAi, which has the potential to effectively treat a broad array of diseases by interfering with the expression of targeted disease-associated genes. In order to fully realize the potential value of our RNAi technologies, on December 12, 2007, we assigned and/or transferred to MDRNA certain intellectual property assets relating to our RNAi therapeutics program in consideration for the issuance to us by MDRNA of 1,839,080 shares of MDRNA Series A Participating Preferred Stock, par value $0.001 per share. The assigned intellectual property consisted primarily of a portfolio of patent applications, as well as licenses to us from the Massachusetts Institute of Technology, the Carnegie Institute of Washington and City of Hope. It is contemplated that, following the closing of one or more transactions, or series of related transactions, in which MDRNA issues and sells shares of its common stock and/or other securities convertible or exchangeable into common stock so as to result in the receipt by MDRNA of aggregate gross proceeds which equal or exceed $30.0 million, in each case on terms and conditions approved by us, we will sell and/or transfer to MDRNA all of the remaining assets and properties related exclusively to our RNAi therapeutics program.

     As a result of these transactions, we own, as of the date of this prospectus, all of the issued and outstanding equity securities of MDRNA. MDRNA’s therapeutic programs are targeted at both developing and delivering novel therapeutics using siRNA to down-regulate the expression of certain disease causing proteins that are expressed in inflammation, viral respiratory infections and other diseases. If prevailing market conditions are favorable, we anticipate seeking independent financing for MDRNA through the sale of the equity securities of MDRNA to third party investors in a public or private transaction, and possibly converting a portion of our MDRNA Series A Stock and distributing the common stock received on conversion of such MDRNA Series A Stock as a dividend to our stockholders. There can be no assurance as to whether any such financing will be available to us on terms that are acceptable to us or at all, or as to the timing or amount of such dividend or distribution. Any proposed dividend to our stockholders of MDRNA shares would be subject to approval of our board of directors and compliance with applicable SEC rules and the requirements of the Delaware General Corporation Law. Any such dividend may be taxable to us, although any applicable taxes due may be off-set by our net operating loss carryforwards; however there is no assurance that our current net operating loss carryforwards will be sufficient to cover any such taxable event, and if they are not, then we might be required to pay income tax.

Reduction in Force

     In November 2007, we implemented a plan to reduce our operating costs and appropriately align our operations with our business priorities following the termination by Procter & Gamble Pharmaceuticals, Inc. of its collaboration partnership with us with respect to PTH(1-34) nasal spray for the treatment of osteoporosis. As part of this plan, we terminated an aggregate of 72 employees across all areas of our operations and at all of our principal locations, thus reducing our workforce to approximately 160 full-time employees. In connection with this restructuring, we incurred approximately $0.8 million of employee severance and related costs, of which $0.6 million was paid in the fourth quarter of 2007. The remaining $0.2 million in employee severance costs will be paid in the first half of 2008. Our resources are now focused on our Phase 2 clinical programs for PYY(3-36) nasal spray for obesity, insulin nasal spray for type 2 diabetes, and PTH(1-34) nasal spray for osteoporosis, as well as our partnership with Amylin Pharmaceuticals, Inc.

Our Corporate Information

     We were incorporated in Delaware on September 23, 1983. Our principal executive offices are located at 3830 Monte Villa Parkway, Bothell, Washington 98021, and our telephone number is (425) 908-3600. We maintain an Internet website at www.nastech.com . We have not incorporated by reference into this prospectus the information in, or that can be accessed through, our website, and you should not consider it to be a part of this prospectus.

RISK FACTORS

     Following are some specific factors that should be considered for a better understanding of our operations and financial condition. These factors and the other matters discussed herein are important factors that could cause actual results or outcomes for us to differ materially from those discussed in the forward-looking statements included elsewhere in this document. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

     
Risks Related to our Financial Position and Need for Additional Capital

      We do not generate operating income and will require additional financing in the future. If additional capital is not available, we may have to curtail or cease operations.

     Our business currently does not generate the cash that is necessary to finance our operations. We incurred net losses of approximately $32.2 million in 2005 and $26.9 million in 2006. Net losses were $16.2 million in the nine months ended September 30, 2006 and $40.4 million in the nine months ended September 30, 2007. Subject to the success of our development programs and potential licensing transactions, we will need to raise additional capital to:

	•		conduct research and development;
	•		develop and commercialize our product candidates;
	•		enhance existing services;
	•		respond to competitive pressures; and
	•		acquire complementary businesses or technologies.

     Our future capital needs depend on many factors, including:

	•		the scope, duration and expenditures associated with our research and development programs;
	•		continued scientific progress in these programs;
	•		the outcome of potential licensing transactions, if any;
	•		competing technological developments;
	•		our proprietary patent position, if any, in our products; and
	•		the regulatory approval process for our products.

     We may seek to raise necessary funds through public or private equity offerings, debt financings or additional strategic alliances and licensing arrangements. We may not be able to obtain additional financing on terms favorable to us, if at all. General market conditions may make it very difficult for us to seek financing from the capital markets. We may be required to relinquish rights to our technologies or drug candidates, or grant licenses on terms that are not favorable to us, in order to raise additional funds through alliance, joint venture or licensing arrangements. If adequate funds are not available, we may have to delay, reduce or eliminate one or more of our research or development programs and reduce overall overhead expenses. These actions would likely reduce the market price of our common stock.

      We may not be able to obtain independent financing for MDRNA, in which case we will have to continue to satisfy all of the financial obligations associated with our RNA interference business.

     If prevailing market conditions are favorable, we anticipate seeking independent financing for MDRNA, our wholly-owned subsidiary focused on RNA interference therapeutic research and development, through the sale of the equity securities of MDRNA to

third party investors in a public or private transaction. There can be no assurance as to whether any such financing will be available to us on terms that are acceptable to us or at all. If we cannot obtain independent financing for MDRNA, we will have to continue to satisfy all of the financial obligations of MDRNA using our own resources, including the proceeds obtained through the sale of securities under this prospectus. The use of such funds for the MDRNA business will reduce the aggregate funds available to implement that portion of our business plan that does not relate to RNA interference, and could lead to us delaying or otherwise limiting the implementation of such business plan. It may also cause us to seek raise additional funds sooner than we would otherwise anticipate.

      We have not been profitable on an annual basis for ten years, and we may never become profitable.

     We have incurred net losses in each of the past ten years. As of September 30, 2007, we had an accumulated deficit of approximately $182.9 million and expect additional losses in the future as we continue our research and development activities.

     The process of developing our products requires significant research and development efforts, including basic research, pre-clinical and clinical development, and FDA regulatory approval. These activities, together with our sales, marketing, general and administrative expenses, have resulted in operating losses in the past, and there can be no assurance that we can achieve profitability in the future. Our ability to achieve profitability depends on our ability, alone or with our collaborators, to develop our drug candidates, conduct clinical trials, obtain necessary regulatory approvals, and manufacture, distribute, market and sell our drug products. We cannot assure you that we will be successful at any of these activities or predict when we will ever become profitable.

      We have restructured our business to focus on our Phase 2 clinical programs for PYY(3-36) nasal spray for obesity, insulin nasal spray for type 2 diabetes, and PTH(1-34) nasal spray for osteoporosis, as well as our partnership with Amylin. Even after giving effect to this restructuring, we may not have sufficient cash to execute our current business plan and any restructuring may impact our ability to execute on our business plan.

     We have taken steps to restructure certain aspects of our business, including significantly reducing our workforce and reducing certain operating costs. However, restructurings take time to fully implement and involve certain additional costs, including severance payments to terminated employees. There can be no assurance that we will be successful in implementing our restructuring program or that, following the completion of our restructuring program, we will have sufficient cash reserves to allow us to fund our business plan until such time as we achieve profitability. Furthermore, our restructuring program could have material adverse affect on our ability to execute on our business plan.

Risks Related to the Development and Regulatory Approval of our Drug Candidates

      Clinical trials of our product candidates are expensive and time-consuming, and the results of these trials are uncertain.

     Many of our research and development programs are at an early stage. Clinical trials in patients are long, expensive and uncertain processes. The length of time generally varies substantially according to the type of drug, complexity of clinical trial design, regulatory compliance requirements, intended use of the drug candidate and rate of patient enrollment for the clinical trials. Clinical trials may not be commenced or completed on schedule, and the FDA may not ultimately approve our product candidates for commercial sale. Further, even if the results of our pre-clinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer term treatment. Drugs in late stages of clinical development may fail to show the desired safety and efficacy traits despite having progressed through initial clinical testing. For example, positive results in early Phase 1 or Phase 2 clinical trials may not be repeated in larger Phase 2 or Phase 3 clinical trials. All of our potential drug candidates are prone to the risks of failure inherent in drug development. The clinical trials of any or all of our drugs or drug candidates, including PYY(3-36) nasal spray, PTH(1-34), generic calcitonin-salmon nasal spray and insulin could be unsuccessful, which would prevent us from commercializing these drugs. The FDA conducts its own independent analysis of some or all of the pre-clinical and clinical trial data submitted in a regulatory filing and often comes to different and potentially more negative conclusions than the analysis performed by the drug sponsor. Our failure to develop safe, commercially viable drugs approved by the FDA would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business and adversely affect our stock price. In addition, significant delays in clinical trials will impede our ability to seek regulatory approvals, commercialize our drug candidates and generate revenue, as well as substantially increase our development costs.

      We are subject to extensive government regulation, including the requirement of approval before our products may be manufactured or marketed.

     We, our collaboration partners and our product candidates are subject to extensive regulation by governmental authorities in the U.S. and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions: warning letters; fines and other civil penalties; unanticipated expenditures; delays in approving or refusal to approve a product candidate; product recall or seizure; interruption of manufacturing or clinical trials; operating restrictions; injunctions; and criminal prosecution.

     Our product candidates cannot be marketed in the U.S. without FDA approval or clearance. The FDA has approved only two of our product candidates, our Nascobal® nasal gel and our Nascobal® nasal spray, and cleared only one, our MASCT device, for sale in the U.S. Our other product candidates are in development, and will have to be approved by the FDA before they can be marketed in the U.S. Obtaining FDA approval requires substantial time, effort, and financial resources, and may be subject to both expected and unforeseen delays, including without limitation citizen’s petitions or other filings with the FDA, and there can be no assurance that any approval will be granted on a timely basis, if at all, or that delays will be resolved favorably or in a timely manner. If the FDA does not approve our product candidates in a timely fashion, or does not approve them at all, our business and financial condition may be adversely affected. We, our collaboration partners or the FDA may suspend or terminate human clinical trials at any time on various grounds, including a finding that the patients are being exposed to an unacceptable health risk.

     In addition, both before and after regulatory approval, we, our collaboration partners and our product candidates are subject to numerous FDA requirements covering, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, distribution and export. The FDA’s requirements may change and additional government regulations may be promulgated that could affect us, our collaboration partners or our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the U.S. or abroad. There can be no assurance that we will not be required to incur significant costs to comply with such laws and regulations in the future or that such laws or regulations will not have a material adverse effect upon our business.

      Our ability to commercialize our products after FDA approval is subject to exclusivity periods provided by law.

     Under U.S. law, the FDA awards 180 days of market exclusivity to the first generic manufacturer who challenges the patent of a branded product. However, amendments to the Drug Price Competition and Patent Term Restoration Act of 1984 (also known as the “Hatch-Waxman Act”) will affect the future availability of this market exclusivity in many cases. These amendments now require generic applicants to launch their products within certain time frames or risk losing the marketing exclusivity that they had gained through being a first-to-file applicant. Apotex has filed a generic application for its intranasal calcitonin-salmon product with a filing date that has priority over our ANDA for our generic calcitonin-salmon nasal spray. The amendments to the Hatch-Waxman Act do not apply to the Apotex intranasal calcitonin-salmon product, which preceded the adoption of such amendments.

      We use hazardous chemicals and radioactive and biological materials in our business. Any disputes relating to improper use, handling, storage or disposal of these materials could be time-consuming and costly.

     Our research and development operations involve the use of hazardous, radioactive and biological, potentially infectious, materials. We are subject to the risk of accidental contamination or discharge or any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of these materials. We could be subject to damages, fines or penalties in the event of an improper or unauthorized release of, or exposure of individuals to, these hazardous materials, and our liability could exceed our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our business.

      Failure to comply with foreign regulatory requirements governing human clinical trials and marketing approval for drugs could prevent us from selling our drug candidates in foreign markets, which may adversely affect our operating results and financial condition.

     The requirements governing the conduct of clinical trials, product licensing, pricing, and reimbursement for marketing our drug candidates outside the U.S. vary greatly from country to country. We have limited experience in obtaining foreign regulatory approvals. The time required to obtain approvals outside the U.S. may differ from that required to obtain FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA. Failure to comply with these regulatory requirements or obtain required approvals could impair our

ability to develop foreign markets for our drug candidates and may have a material adverse effect on our consolidated financial condition or results of operations.

Risks Related to our Dependence on Third Parties

      We depend on a limited number of customers for a significant percentage of our revenue. These customers may be able to terminate their contracts with us on short notice, with or without cause. The loss of, or delay in receiving payment from, one or a small number of customers could have a significant impact on our revenues, operating results and cash flows.

     A small number of customers account for a significant percentage of our revenue. For example, Procter & Gamble Pharmaceuticals, Inc., or P&G, represented 49% of our revenue in the nine months ended September 30, 2007 and 75% of our revenue in the nine months ended September 30, 2006. Novo Nordisk A/S, or Novo, represented 2% and 24% of our revenue in the nine months ended September 30, 2006 and 2007, respectively. We believe that a small number of customers may continue to account for a significant percentage of our revenue for the foreseeable future. As a result, the termination by one of our significant customers of its relationship with us, combined with our inability to replace the revenue that we anticipated to generate from such relationship, could have a material adverse impact on our revenue, operating results and cash flows. For instance, P&G terminated their Product Development and License Agreement for PTH(1-34) nasal spray for the treatment of osteoporosis with us in November 2007, and on January 16, 2008 Novo advised us that they intend to cease development under their feasibility study agreement with us. Our inability to obtain new collaboration partners for our current Phase 2 programs for PTH(1-34) to replace the revenue we would have expected to generate during 2008 from our relationship with P&G or new feasibility study partners could have a material adverse impact on our revenue, operating results and cash flows.

      We are dependent on our collaborative arrangements with third parties for a substantial portion of our revenue, and our development and commercialization activities may be delayed or reduced if we fail to negotiate or maintain successful collaborative arrangements.

     We are dependent on our current and any other possible future collaborators to commercialize many of our product candidates and to provide the regulatory compliance, sales, marketing and distribution capabilities required for the success of our business. If we fail to secure or maintain successful collaborative arrangements, our development and commercialization activities will be delayed or reduced and our revenues could be materially and adversely impacted.

     We entered into collaborative partnerships with Merck & Co., Inc., or Merck, in September 2004, Par Pharmaceutical Companies, Inc. in October 2004, Amylin Pharmaceuticals, Inc. in November 2004, P&G in January 2006 and Novo in March 2006. The strategic collaboration that we entered into with Merck in September 2004 for PYY(3-36) was terminated in March 2006, the collaboration with P&G was terminated in November 2007, and Novo advised us in January 2008 that they intend to cease development under their feasibility study agreement with us. Over the next several years, we will depend on these types of collaboration partnerships for a significant portion of our revenue. The expected future milestone payments and cost reimbursements from collaboration agreements will provide an important source of financing for our research and development programs, thereby facilitating the application of our technology to the development and commercialization of our products. These collaborative agreements can be terminated either by us or by our partners at their discretion upon the satisfaction of certain notice requirements. Our partners may not be precluded from independently pursuing competing products and drug delivery approaches or technologies. Even if our partners continue their contributions to our collaborative arrangements, they may nevertheless determine not to actively pursue the development or commercialization of any resulting products. Our partners may fail to perform their obligations under the collaborative arrangements or may be slow in performing their obligations. In addition, our partners may experience financial difficulties at any time that could prevent them from having available funds to contribute to these collaborations. If our collaboration partners fail to conduct their commercialization, regulatory compliance, sales and marketing or distribution activities successfully and in a timely manner, we will earn little or no revenue from those products and we will not be able to achieve our objectives or build a sustainable or profitable business.

     We are also dependent on contracts with government agencies to fund certain product development candidates. There is currently work being performed and reimbursed by governmental agencies for the development of one of our drug candidates. Any contracts with governmental agencies may not be completed on terms favorable to us, or at all, and any revenues under such contracts may not cover the development costs of our programs. These grants are subject to review and audit by the federal government and any such audit could lead to requests for reimbursement for any expenditure disallowed under the terms of the grant. Additionally, any noncompliance with the terms of these grants could lead to loss of current or future awards.

      Our success depends to a significant degree upon the commercial success of products manufactured by us pursuant to supply agreements or marketed by our collaboration partners.

     Even if we are able to develop products and obtain the necessary regulatory approvals, our success depends to a significant degree on the commercial success of products manufactured by us pursuant to supply agreements or marketed by our collaboration partners. If these products fail to achieve or subsequently maintain market acceptance or commercial viability, our business could be significantly harmed because our future revenue is dependent upon sales of these products.

      An interruption in the supply of our raw and bulk materials needed to make our products could cause our product development and commercialization to be slowed or stopped.

     We currently obtain supplies of critical raw and bulk materials used in our research and development and manufacturing efforts from several suppliers. However, we do not have long-term contracts with any of these suppliers. While our existing arrangements supply sufficient quantities of raw and bulk materials needed to accomplish the clinical development of our product candidates, there can be no assurance that we would have the capability to manufacture sufficient quantities of our product candidates to meet our needs if our suppliers are unable or unwilling to supply such materials. Any delay or disruption in the availability of raw or bulk materials could slow or stop product development and commercialization of the relevant product. Our dependence upon third parties for the manufacture of our bottles, pumps and cap components of our nasal products and the related supply chain may adversely affect our cost of goods, our ability to develop and commercialize products on a timely and competitive basis, and the production volume of our nasal products.

      We rely on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet established deadlines for the completion of such clinical trials.

     We are dependent on contract research organizations, third-party vendors and investigators for pre-clinical testing and clinical trials related to our drug discovery and development efforts and we will likely continue to depend on them to assist in our future discovery and development efforts. These parties are not our employees and we cannot control the amount or timing of resources that they devote to our programs. If they fail to devote sufficient time and resources to our drug development programs or if their performance is substandard, it will delay the development and commercialization of our product candidates. The parties with which we contract for execution of our clinical trials play a significant role in the conduct of the trials and the subsequent collection and analysis of data. Their failure to meet their obligations could adversely affect clinical development of our product candidates. Moreover, these parties also may have relationships with other commercial entities, some of which may compete with us. If they assist our competitors, it could harm our competitive position.

     If we lose our relationship with any one or more of these parties, we could experience a significant delay in both identifying another comparable provider and then contracting for its services. We may then be unable to retain an alternative provider on reasonable terms, if at all. Even if we locate an alternative provider, is it likely that this provider may need additional time to respond to our needs and may not provide the same type or level of service as the original provider. In addition, any provider that we retain will be subject to Good Laboratory Practices, or cGLP, and similar foreign standards and we do not have control over compliance with these regulations by these providers. Consequently, if these practices and standards are not adhered to by these providers, the development and commercialization of our product candidates could be delayed.

      We have limited experience in marketing or selling our products, and we may need to rely on marketing partners or contract sales companies.

     Even if we are able to develop our products and obtain necessary regulatory approvals, we have limited experience or capabilities in marketing or commercializing our products. We currently have a limited sales, marketing and distribution infrastructure. Accordingly, we are dependent on our ability to build this capability ourselves or to find collaborative marketing partners or contract sales companies for commercial sale of our internally-developed products. Even if we find a potential marketing partner, we may not be able to negotiate a licensing contract on favorable terms to justify our investment or achieve adequate revenues.

Risks Related to our Intellectual Property and Other Legal Matters

      If we are unable to adequately protect our proprietary technology from legal challenges, infringement or alternative technologies, our competitive position may be hurt and our operating results may be negatively impacted.

     We specialize in the nasal delivery of pharmaceutical products and rely on the issuance of patents, both in the U.S. and internationally, for protection against competitive drug delivery technologies. Although we believe we exercise the necessary due

diligence in our patent filings, our proprietary position is not established until the appropriate regulatory authorities actually issue a patent, which may take several years from initial filing or may never occur.

     Moreover, even the established patent positions of pharmaceutical companies are generally uncertain and involve complex legal and factual issues. Although we believe our issued patents are valid, third parties may infringe our patents or may initiate proceedings challenging the validity or enforceability of our patents. The issuance of a patent is not conclusive as to its claim scope, validity or enforceability. Challenges raised in patent infringement litigation we initiate or in proceedings initiated by third parties may result in determinations that our patents have not been infringed or that they are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in our patents without paying us licensing fees or royalties, which could significantly diminish the value of these discoveries or technologies. As a result of such determinations, we may be enjoined from pursuing research, development or commercialization of potential products or may be required to obtain licenses, if available, to the third party patents or to develop or obtain alternative technology. Responding to challenges initiated by third parties may require significant expenditures and divert the attention of our management and key personnel from other business concerns.

     Furthermore, it is possible others will infringe or otherwise circumvent our issued patents and that we will be unable to fund the cost of litigation against them or that we would elect not to pursue litigation. In addition, enforcing our patents against third parties may require significant expenditures regardless of the outcome of such efforts. We also cannot assure you that others have not filed patent applications for technology covered by our pending applications or that we were the first to invent the technology. There may also exist third party patents or patent applications relevant to our potential products that may block or compete with the technologies covered by our patent applications and third parties may independently develop IP similar to our patented IP, which could result in, among other things, interference proceedings in the PTO to determine priority of invention.

     In addition, we may not be able to protect our established and pending patent positions from competitive drug delivery technologies, which may provide more effective therapeutic benefit to patients and which may therefore make our products, technology and proprietary position obsolete.

     If we are unable to adequately protect our proprietary technology from legal challenges, infringement or alternative technologies, we will not be able to compete effectively in the pharmaceutical delivery business.

      Because intellectual property rights are of limited duration, expiration of intellectual property rights and licenses will negatively impact our operating results.

     Intellectual property rights, such as patents and license agreements based on those patents, generally are of limited duration. Our operating results depend on our patents and IP licenses. Therefore, the expiration or other loss of rights associated with IP and IP licenses can negatively impact our business.

      Our patent applications may be inadequate in terms of priority, scope or commercial value.

     We apply for patents covering our discoveries and technologies as we deem appropriate. However, we may fail to apply for patents on important discoveries or technologies in a timely fashion or at all. Also, our pending patent applications may not result in the issuance of any patents. These applications may not be sufficient to meet the statutory requirements for patentability, and therefore we may be unable to obtain enforceable patents covering the related discoveries or technologies we may want to commercialize. In addition, because patent applications are maintained in secrecy for approximately 18 months after filing, other parties may have filed patent applications relating to inventions before our applications covering the same or similar inventions. In addition, foreign patent applications are often published initially in local languages, and until an English language translation is available it can be impossible to determine the significance of a third party invention. Any patent applications filed by third parties may prevail over our patent applications or may result in patents that issue alongside patents issued to us, leading to uncertainty over the scope of the patents or the freedom to practice the claimed inventions.

     Although we have a number of issued patents, the discoveries or technologies covered by these patents may not have any therapeutic or commercial value. Also, issued patents may not provide commercially meaningful protection against competitors. Other parties may be able to design around our issued patents or independently develop products having effects similar or identical to our patented product candidates. In addition, the scope of our patents is subject to considerable uncertainty and competitors or other parties may obtain similar patents of uncertain scope.

      We may be required to defend lawsuits or pay damages for product liability claims.

     Our business inherently exposes us to potential product liability claims. We face substantial product liability exposure in human clinical trials and for products that we sell, or manufacture for others to sell, after regulatory approval. The risk exists even with respect to those drugs that are approved by regulatory agencies for commercial distribution and sale and are manufactured in facilities licensed and regulated by regulatory agencies. Any product liability claims, regardless of their merits, could be costly, divert management’s attention and adversely affect our reputation and the demand for our products.

     We currently have product liability insurance coverage in the amount of $20.0 million per occurrence and a $20.0 million aggregate limitation, subject to a deductible of $10,000 per occurrence. From time to time, participants in the pharmaceutical industry have experienced difficulty in obtaining product liability insurance coverage for certain products or coverage in the desired amounts or with the desired deductibles. We cannot assure you that we will be able to obtain the levels or types of insurance we would otherwise have obtained prior to these market changes or that the insurance coverage we do obtain will not contain large deductibles or fail to cover certain liabilities or that it will otherwise cover all potential losses.

Risks Related to the Commercialization of our Drug Candidates

      Our product development efforts may not result in commercial products.

     Our future results of operations depend, to a significant degree, upon our and our collaboration partners’ ability to successfully commercialize additional pharmaceutical products. The development and commercialization process, particularly with respect to innovative products, is both time consuming and costly and involves a high degree of business risk. Successful product development in the pharmaceutical industry is highly uncertain, and very few research and development projects result in a commercial product. Product candidates that appear promising in the early phases of development, such as in early human clinical trials, may fail to reach the market for a number of reasons, such as:

	•		a product candidate may not perform as expected in later or broader trials in humans and limit marketability of such product candidate;
	•		necessary regulatory approvals may not be obtained in a timely manner, if at all;
	•		a product candidate may not be able to be successfully and profitably produced and marketed;
	•		third parties may have proprietary rights to a product candidate, and do not allow sale on reasonable terms;
	•		a product candidate may not be financially successful because of existing therapeutics that offer equivalent or better treatments; or
	•		suppliers of product pumps or actuators required to atomize our formulations may increase their price or cease to manufacture them without prior notice.

     To date, except for our Nascobal® nasal gel and our Nascobal® nasal spray (the NDAs for which have been transferred to QOL), none of our other product candidates utilizing our current nasal drug delivery technology have been approved by the FDA. Accordingly, there can be no assurance that any of our product candidates currently in development will ever be successfully commercialized, and delays in any part of the process or our inability to obtain regulatory approval could adversely affect our operating results by restricting introduction of new products by us or our collaboration partners.

      Even if we are successful in commercializing a product candidate, it is possible that the commercial opportunity for nasally-administered products will be limited.

     None of our product candidates utilizing our nasal drug delivery technology have been brought to market except for our Nascobal® nasal gel and our Nascobal® nasal spray. Accordingly, while we believe there is a commercial market for our nasal drug delivery technology, there can be no assurance that our nasal drug delivery technology will become a viable commercial alternative to other drug delivery methods. Many factors may affect the market acceptance and commercial success of any potential products, including:

•

establishment and demonstration of the effectiveness and safety of the drugs;

	•		timing of market entry as compared to competitive products;
	•		the benefits of our drugs relative to their prices and the comparative price of competing products;
	•		actual and perceived benefits and detriments of nasal drug delivery, which may be affected by press and academic literature;
	•		marketing and distribution support of our products; and
	•		any restrictions on labeled indications.

      Our revenues and profits from any particular generic pharmaceutical products decline as our competitors introduce their own generic equivalents.

     In October 2004, we entered into a license and supply agreement granting Par Pharmaceutical the exclusive U.S. distribution and marketing rights to our generic calcitonin-salmon nasal spray. Under the terms of our agreement with Par Pharmaceutical, we will seek to obtain FDA approval, manufacture and supply finished generic calcitonin-salmon nasal spray to Par Pharmaceutical, and Par Pharmaceutical will distribute the product in the U.S. Novartis, the supplier of a branded calcitonin-salmon nasal spray, may introduce a generic version through Sandoz US, its wholly-owned subsidiary, and Apotex has filed with the FDA a generic application of nasal salmon-calcitonin with a filing date that has priority over our ANDA. Selling prices of generic drugs typically decline, sometimes both rapidly and dramatically, as additional companies receive approvals for a given product and competition intensifies. To the extent that our collaboration partner and we succeed in being the first to market a generic version of a significant product, our initial sales and profitability following the introduction of such product will be subject to material reduction upon a competitor’s introduction of the equivalent product. Our ability to sustain our sales and profitability on any product over time is dependent on both the number of new competitors for such product and the timing of their approvals.

      If we have a problem with our manufacturing facilities, we may not be able to market our products or conduct clinical trials.

     A substantial portion of our products for both clinical and commercial use is, or will be, manufactured at our facilities in Hauppauge, New York, and in Bothell, Washington. The manufacturing capacity of our Hauppauge facility is approximately six million product units per year, and the manufacturing capacity of our Bothell facility will be approximately 54 million product units per year. Any problems we experience at either of our manufacturing facilities could cause a delay in our clinical trials or our supply of product to market. Any significant delay or failure to manufacture could jeopardize our performance contracts with collaboration partners, resulting in material penalties to us and jeopardizing the commercial viability of our products.

     Our facilities are subject to risks of natural disasters, including earthquakes and floods. Although we believe we have adequate insurance against such risks, there can be no assurance that any business disruption caused by a natural disaster would be fully reimbursed or that it would not delay our product development processes. Our current facilities are leased and there can be no assurance that we will be able to negotiate future lease extensions at reasonable rates.

Risks Related to our Industry

      Reforms in the healthcare industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.

     Increasing expenditures for healthcare have been the subject of considerable public attention in the U.S. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system have been introduced or proposed in Congress and in some state legislatures, including reductions in the cost of prescription products and changes in the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products. For example, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 and the proposed rules thereunder impose new requirements for the distribution and pricing of prescription drugs, which could reduce reimbursement of prescription drugs for healthcare providers and insurers. Although we cannot predict the full effect on our business of the implementation of this legislation, we believe that legislation that reduces reimbursement for our products could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely impact our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market

our products. In addition, we believe the increasing emphasis on managed care in the U.S. has and will continue to put pressure on the price and usage of our products, which may adversely impact product sales.

      Coverage and reimbursement status of newly-approved drugs is uncertain and the failure to obtain adequate reimbursement coverage could limit our ability to generate revenue.

     Our products may prove to be unsuccessful if various parties, including government health administration authorities, private healthcare insurers and other healthcare payers, such as health maintenance organizations and self-insured employee plans that determine reimbursement to the consumer, do not accept our products for reimbursement. Sales of therapeutic and other pharmaceutical products depend in significant part on the availability of reimbursement to the consumer from these third-party payers. Third-party payers are increasingly challenging the prices charged for medical products and services. We cannot assure you that reimbursement will be available at all or at levels sufficient to allow our marketing partners to achieve profitable price levels for our products. If we fail to achieve adequate reimbursement levels, patients may not purchase our products and sales of these products will be absent or reduced.

      We may be unable to compete successfully against our current and future competitors.

     Competition in the drug industry is intense. Although we are not aware of any other companies that have the scope of proprietary technologies and processes that we have developed, there are a number of competitors who possess capabilities relevant to the drug delivery field.

     Many of our competitors have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and marketing resources, and established collaborating relationships with pharmaceutical companies. Our competitors, either alone or with their collaboration partners, may succeed in developing drug delivery technologies that are similar or preferable in effectiveness, safety, cost and ease of commercialization, and our competitors may obtain IP protection or commercialize such products sooner than we do. Developments by others may render our product candidates or our technologies obsolete or, if developed earlier than our products, may achieve market acceptance which could negatively impact the opportunities for our products regardless of the merits of our technology.

Risks Related to Employee Matters and Managing Growth

      If we lose our key personnel, or if we are unable to attract and retain additional personnel, then we may be unable to successfully develop our business.

     If we are unable to retain one or more of our corporate officers, including Dr. Steven C. Quay, Chairman of the Board and Chief Executive Officer (“CEO”), Dr. Gordon C. Brandt, President, Bruce R. York, Secretary and Interim Chief Financial Officer (“CFO”), Timothy M. Duffy, Executive Vice President, Marketing and Business Development, Dr. Henry R. Costantino, Chief Scientific Officer, Delivery, or any of our other key managers or key technical personnel, our business could be seriously harmed. Except for the employment agreements with Dr. Quay, Dr. Costantino, Mr. Duffy and Dr. Brandt, we generally do not execute employment agreements with members of our management team. Whether or not a member of management has executed an employment agreement, there can be no assurance that we will be able to retain our key managers or key technical personnel or replace any of them if we lose their services for any reason. Although we make a significant effort and allocate substantial resources to recruit candidates to our Bothell and Hauppauge facilities, competition for competent managers and technical personnel is intense. Failure to retain our key personnel may compromise our ability to negotiate and enter into additional collaborative arrangements, delay our ongoing discovery research efforts, delay pre-clinical or clinical testing of our product candidates, delay the regulatory approval process or prevent us from successfully commercializing our product candidates. In addition, if we have to replace any of these individuals, we may not be able to replace knowledge that they have about our operations.

      If we make strategic acquisitions, we will incur a variety of costs and might never realize the anticipated benefits.

     We have very limited experience in independently identifying acquisition candidates and integrating the operations of acquisition candidates with our company. Currently, we are not a party to any acquisition agreements, nor do we have any understanding or commitment with respect to any such acquisition. If appropriate opportunities become available, however, we might attempt to acquire approved products, additional drug candidates or businesses that we believe are a strategic fit with our business. If we pursue any transaction of that sort, the process of negotiating the acquisition and integrating an acquired product, drug candidate or business might result in operating difficulties and expenditures and might require significant management attention that would otherwise be

available for ongoing development of our business, whether or not any such transaction is ever consummated. Moreover, we might never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities, or impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible assets, which could harm our financial condition.

      Failure of our internal control over financial reporting could harm our business and financial results.

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the U.S. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of the financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Our rapid growth and entry into new products and markets will place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.

Risks Related to our Common Stock

      We cannot assure you that our stock price will not decline.

     The market price of our common stock could be subject to significant fluctuations. Among the factors that could affect our stock price are:

	•		negative results from our clinical or pre-clinical trials or adverse FDA decisions related to our product candidates or third party products that are in the same drug class as our products;
	•		changes in revenue estimates or publication of research reports related to our company by analysts;
	•		failure to meet analysts’ revenue estimates;
	•		speculation in the press or investment community;
	•		strategic actions by our company or our competitors, such as acquisitions or restructurings;
	•		actions by institutional stockholders and other significant stockholders;
	•		low average daily trading volumes due to relatively small number of shares outstanding;
	•		general market conditions; and
	•		domestic and international economic factors unrelated to our performance.

     Additionally, numerous factors relating to our business may cause fluctuations or declines in our stock price.

     The stock markets in general, and the markets for pharmaceutical stocks in particular, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. This may in part be related to the increasing influence of hedge funds, which can use stock shorting and other techniques that increase volatility. These broad market fluctuations may adversely affect the trading price of our common stock.

      We have never paid cash or stock dividends on our common stock and we do not anticipate paying dividends in the foreseeable future.

     We have paid no cash or stock dividends on our common stock to date, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. The terms of any future debt or credit facility may preclude us from paying any dividends. As a result, capital appreciation, if any, of our common stock may be the sole source of potential gain for the foreseeable future.

      The anti-takeover provisions of our stockholder rights plan may entrench management, may delay or prevent beneficial takeover bids by third parties and may prevent or frustrate any stockholder attempt to replace or remove the current management even if the stockholders consider it beneficial to do so.

     We have a stockholder rights plan designed to protect our stockholders from coercive or unfair takeover tactics. Under the plan, we declared a dividend of one preferred stock purchase right for each share of common stock outstanding on March 17, 2000. Each preferred stock purchase right entitles the holder to purchase from us 1/1000 of a share of Series A Junior Participating Preferred Stock for $50.00. In the event any acquiring entity or group accumulates or initiates a tender offer to purchase 15% or more of our common stock, then each holder of a preferred stock purchase right, other than the acquiring entity and its affiliates, will have the right to receive, upon exercise of the preferred stock purchase right, shares of our common stock or shares in the acquiring entity having a value equal to two times the exercise price of the preferred stock purchase right.

     The intent of the stockholder rights plan is to protect our stockholders’ interests by encouraging anyone seeking control of our company to negotiate with our board of directors. However, our stockholder rights plan could make it more difficult for a third party to acquire us without the consent of our board of directors, even if doing so may be beneficial to our stockholders. This plan may discourage, delay or prevent a tender offer or takeover attempt, including offers or attempts that could result in a premium over the market price of our common stock. This plan could reduce the price that investors might be willing to pay for shares of our common stock in the future. Furthermore, the anti-takeover provisions of our stockholder rights plan may entrench management and make it more difficult for stockholders to replace management even if the stockholders consider it beneficial to do so.

      Our operating results are subject to significant fluctuations and uncertainties, and our failure to meet expectations of public market analysts or investors regarding operating results may cause our stock price to decline.

     Our operating results are subject to significant fluctuations and uncertainties due to a number of factors including, among others:

	•		timing and achievement of licensing transactions, including milestones and other performance factors associated with these contracts;
	•		time and costs involved in patent prosecution and development of our proprietary position;
	•		continued scientific progress and level of expenditures in our research and development programs;
	•		cost of manufacturing scale-up and production batches, including vendor provided activities and costs;
	•		time and costs involved in obtaining regulatory approvals;
	•		changes in general economic conditions and drug delivery technologies;
	•		expiration of existing patents and related revenues; and
	•		new products and product enhancements that we or our competitors introduce.

     As a result of these factors and other uncertainties, our operating results have fluctuated significantly in recent years, resulting in net losses of approximately $32.2 million in 2005 and $26.9 million in 2006. Net losses were approximately $16.2 million in the nine months ended September 30, 2006 and approximately $40.4 million in the nine months ended September 30, 2007.

     Our revenues and operating results, particularly those reported on a quarterly basis, will continue to fluctuate significantly. This fluctuation makes it difficult to forecast our operating results. Therefore, we believe that quarterly comparisons of our operating results may not be meaningful, and you should not rely on them as an indication of our future performance. In addition, our operating results in a future quarter or quarters may fall below the expectations of public market analysts or investors. If this were to occur, the price of our stock could decline.

      A significant number of shares of our common stock are subject to options and warrants, and we expect to sell additional shares of our common stock in the future. Sales of these shares will dilute the interests of other security holders and may depress the price of our common stock.

     As of September 30, 2007, there were 25,792,519 shares of common stock outstanding. As of September 30, 2007, there were vested outstanding options to purchase 1,909,124 shares of common stock, unvested outstanding options to purchase 506,194 shares of common stock and outstanding warrants to purchase 660,814 shares of common stock. At September 30, 2007, there were 843,539 shares of common stock available for future issuance under our stock compensation plans. In addition, we may issue additional common stock and warrants from time to time to finance our operations. We may also issue additional shares to fund potential acquisitions or in connection with additional stock options or restricted stock granted to our employees, officers, directors and consultants under our stock option plans. The issuance, perception that issuance may occur, or exercise of warrants or options will have a dilutive impact on other stockholders and could have a material negative effect on the market price of our common stock.

USE OF PROCEEDS

     Unless otherwise specified in the applicable prospectus supplement, we intend to use the net proceeds from the sale of our securities offered by this prospectus for general corporate purposes, including, without limitation, the funding of our clinical research and development programs, the clinical development of our product candidates, capital expenditures and working capital needs. Pending the application of the net proceeds, we expect to invest the proceeds in investment grade, interest bearing securities. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we will have upon completion of this offering. Accordingly, our management will have broad discretion in the application of net proceeds, if any.

RATIO OF EARNINGS TO FIXED CHARGES

     The ratio of earnings to fixed charges for each of the periods indicated is as follows:

		Years ended December 31,																				Nine (9) months ended
(in thousands)		2002				2003				2004				2005				2006				September 30, 2007
Ratio of earnings to fixed charges (1)			—				—				—				—				—				—

PLAN OF DISTRIBUTION

     We may sell the securities registered under this prospectus:

	•		through underwriting syndicates represented by one or more managing underwriters;
	•		to or through underwriters or dealers;
	•		through agents;
	•		directly to one or more purchasers, including upon the exercise of rights to acquire shares of our common or preferred stock;
	•		equity lines of credit;
	•		through a block trade in which the broker or dealer engaged to handle the block trade will attempt to sell the securities as agent, but may position and resell a portion of the block as principal to facilitate the transaction; or

•

through a combination of any of these methods of sale.

     We may, from time to time, authorize underwriters acting as our agents to offer and sell the securities upon the terms and conditions as are set forth in the applicable prospectus supplement. We will describe the name or names of any underwriters and the purchase price of the securities in a prospectus supplement relating to the securities. Any underwritten offering may be on a best efforts or a firm commitment basis. The obligations, if any, of the underwriters to purchase any securities will be subject to certain conditions.

     If a dealer is used in an offering of securities, we may sell the securities to the dealer as principal. We will describe the name or names of any dealers and the purchase price of the securities in a prospectus supplement relating to the securities. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the time of sale. Any public offering price and any discounts or concessions allowed, re-allowed, or paid to dealers may be changed from time to time and will be described in a prospectus supplement relating to the securities.

     We, or any underwriter, dealer or agent, may distribute the securities from time to time in one or more transactions at:

	•		a fixed price or prices, which may be changed;
	•		at market prices prevailing at the time of sale;
	•		at prices related to prevailing market prices; or
	•		at negotiated prices.

     Any of these prices may represent a discount from the prevailing market prices.

     To the extent permitted by and in accordance with Regulation M under the Exchange Act, in connection with an offering an underwriter may engage in over-allotments, stabilizing transactions, short covering transactions and penalty bids. Over-allotments involve sales in excess of the offering size, which creates a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the distribution is completed to cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. Those activities may cause the price of the securities to be higher than it would be otherwise. If commenced, the underwriters may discontinue any of these activities at any time. We will describe any of these activities in the prospectus supplement.

     We may authorize underwriters, dealers or agents to solicit offers by certain institutions to purchase our securities at the public offering price under delayed delivery contracts. If we use delayed delivery contracts, we will disclose that we are using them in the prospectus supplement and will tell you when we will demand payment and delivery of the securities under the delayed delivery contracts. These delayed delivery contracts will be subject only to the conditions that we set forth in the prospectus supplement. We will indicate in our prospectus supplement the commission that underwriters and agents soliciting purchases of our securities under delayed delivery contracts will be entitled to receive.

     In connection with the sale of the securities and as further set forth in an applicable prospectus supplement, underwriters may receive compensation from us or from purchasers of the securities for whom they may act as agents, in the form of discounts, concessions or commissions. Underwriters may sell the securities to or through dealers, and these dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers and agents that participate in the distribution of the securities may be deemed to be underwriters, and any discounts or commissions they receive from us, and any profit on the resale of the securities they realize, may be deemed to be underwriting discounts and commissions under the Securities Act. The prospectus supplement will identify any underwriter or agent and will describe any compensation they receive from us.

     Unless otherwise specified in the prospectus supplement, each series of the securities will be a new issue with no established trading market, other than our common stock, which is currently listed on the Nasdaq Global Market. We will apply to the Nasdaq Global Market to list any additional shares of common stock that we offer and sell pursuant to a prospectus supplement. To the extent permitted by and in accordance with Regulation M under the Exchange Act, any underwriters who are qualified market makers on the Nasdaq Global Market may engage in passive market making transactions in the securities on the Nasdaq Global Market during the business day prior to the pricing of an offering, before the commencement of offers or sales of the securities. Passive market makers

must comply with applicable volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. It is possible that one or more underwriters may make a market in our securities, but underwriters will not be obligated to do so and may discontinue any market making at any time without notice. Therefore, we can give no assurance about the liquidity of our securities that may be sold pursuant to this prospectus.

     Under agreements we may enter into, we may indemnify underwriters, dealers and agents who participate in the distribution of the securities against certain liabilities, including liabilities under the Securities Act.

     Certain of the underwriters, dealers and agents and their affiliates may be customers of, engage in transactions with, and perform services for us and our subsidiaries from time to time in the ordinary course of business. Any such relationships will be disclosed in an applicable prospectus supplement.

     If indicated in the prospectus supplement, we will authorize underwriters or other persons acting as our agents to solicit offers by institutions to purchase securities from us pursuant to contracts providing for payment and delivery on a future date. Institutions with which we may make these contracts include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others. The obligations of any purchaser under any such contract will be subject to the condition that the purchase of the securities shall not at the time of delivery be prohibited under the laws of the jurisdiction to which the purchaser is subject. The underwriters and other agents will not have any responsibility with regard to the validity or performance of these contracts.

DESCRIPTION OF CAPITAL STOCK

     Set forth below is a description of our capital stock. The following description of our capital stock is a summary and is subject to and qualified by the applicable provisions of our certificate of incorporation, our bylaws and the relevant provisions of the laws of the State of Delaware. The particular terms of any offering of our securities will be described in a prospectus supplement relating to such offering. The prospects supplement may provide that our capital stock will be issuable upon the exercise of warrants to purchase our capital stock.

Common Stock

     We are currently authorized to issue up to 50,000,000 shares of common stock, par value $.006 per share. As of September 30, 2007, 25,792,519 shares of our common stock were issued and outstanding, 843,539 unissued shares of common stock were reserved for future issuance under our equity compensation plans, and 660,814 unissued shares of common stock were reserved for issuance upon the exercise of outstanding warrants, leaving approximately 22,703,128 shares of common stock unissued and unreserved.

     All shares of common stock issued will be duly authorized, fully paid and non-assessable. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the holders of our common stock. Under Delaware law, stockholders generally are not liable for our debts or obligations. Our certificate of incorporation does not authorize cumulative voting for the election of directors. Subject to the rights of the holders of any class of our capital stock having any preference or priority over our common stock, the holders of shares of our common stock are entitled to receive dividends that are declared by the board of directors out of legally available funds. In the event of our liquidation, dissolution or winding-up, the holders of common stock are entitled to share ratably in our net assets remaining after payment of liabilities, subject to prior rights of preferred stock, if any, then outstanding. Our common stock has no preemptive rights, conversion rights, redemption rights or sinking fund provisions, and there are no dividends in arrears or default. All shares of our common stock have equal distribution, liquidation and voting rights, and have no preferences or exchange rights.

     Our common stock currently is trading on the Nasdaq Global Market. We will apply to the Nasdaq Global Market to list any additional shares of common stock that we offer and sell pursuant to a prospectus supplement.

Stockholder Rights Plan

     On February 22, 2000, our board of directors adopted a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of common stock. Each right entitles the holder, once the right becomes exercisable, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $.01 per share. We

issued these rights on March 17, 2000 to each stockholder of record on such date, and these rights attach to shares of common stock subsequently issued. The rights will cause substantial dilution to a person or group that attempts to acquire us on terms not approved by our board of directors and could, therefore, have the effect of delaying or preventing someone from taking control of us, even if a change of control were in the best interest of our stockholders.

     Holders of our preferred share purchase rights are generally entitled to purchase from us one one-thousandth of a share of Series A preferred stock at a price of $50.00, subject to adjustment as provided in the Stockholder Rights Agreement. These preferred share purchase rights will generally be exercisable only if a person or group becomes the beneficial owner of 15 percent or more of our outstanding common stock or announces a tender offer for 15 percent or more of our outstanding common stock. Each holder of a preferred share purchase right, excluding an acquiring entity or any of its affiliates, will have the right to receive, upon exercise, shares of our common stock, or shares of stock of the acquiring entity, having a market value equal to two times the purchase price paid for one one-thousandth of a share of Series A preferred stock. The preferred share purchase rights expire on March 17, 2010, unless we extend the expiration date or in certain limited circumstances, we redeem or exchange such rights prior to such date.

Transfer Agent

     American Stock Transfer & Trust Company is the transfer agent and registrar for our common stock.

Preferred Stock

     We are currently authorized to issue 100,000 shares of preferred stock, par value $.01 per share, with 90,000 shares undesignated and 10,000 shares of previously undesignated preferred stock designated as Series A Junior Participating Preferred Stock.

     We may issue shares of our authorized but unissued preferred stock in one or more series having the rights, privileges, and limitations, including voting rights, conversion rights, liquidation preferences, dividend rights and redemption rights, as may, from time to time, be determined by our board of directors. Preferred stock may be issued in the future in connection with acquisitions, financings, or other matters, as our board of directors deems appropriate. In the event that we determine to issue any shares of our authorized but unissued preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that our board of directors alone, subject to Federal securities laws, applicable blue sky laws, and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control without further action by our stockholders, and may adversely affect the voting and other rights of the holders of our common stock.

DESCRIPTION OF DEBT SECURITIES

     Any debt securities which we offer by this prospectus will be issued under an indenture between us and a trustee to be identified in the prospectus supplement. The terms of the debt securities will include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act, as in effect on the date of the indenture. The following description summarizes only the material provisions of the indenture. Accordingly, you should read the form of indenture, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part, because it, and not this description, defines your rights as holders of our debt securities. You should also read the applicable prospectus supplement for additional information and the specific terms of the debt securities.

General

     We may, at our option, issue debt securities in one or more series from time to time. “Debt securities” may include senior debt, senior subordinated debt or subordinated debt. The particular terms of the debt securities offered by any prospectus supplement, and the extent, if any, to which such general provisions do not apply to the debt securities, will be described in the prospectus supplement relating to such debt securities. The following sets forth certain general terms and provisions of the indenture and the debt securities. The prospectus supplement relating to a series of debt securities being offered will contain the following terms, if applicable:

	•		the title and ranking;
	•		the aggregate principal amount and any limit on such amount;

	•		the price at which such debt securities will be issued;
	•		the date on which the debt securities mature;
	•		the fixed or variable rate at which the debt securities will bear interest, or the method by which such rate shall be determined;
	•		the timing, place and manner of making principal, interest and any premium payments on the debt securities, and, if applicable, where such debt securities may be surrendered for registration of transfer or exchange;
	•		the date or dates, if any, after which the debt securities may be converted or exchanged into or for shares of our common stock or another company’s securities or properties or cash and the terms of any such conversion or exchange;
	•		any redemption or early repayment provisions;
	•		any sinking fund or similar provisions;
	•		the authorized denominations;
	•		any applicable subordination provisions;
	•		any guarantees of such securities by our subsidiaries or others;
	•		the currency in which we will pay the principal, interest and any premium payments on such debt securities;
	•		whether the amount of payments of principal of (and premium, if any) or interest, if any, on the debt securities may be determined with reference to an index, formula or other method and the manner in which such amounts shall be determined;
	•		the time period within which, the manner in which and the terms and conditions upon which the purchaser of the securities can select the payment currency;
	•		the provisions, if any, granting special rights to the holders of debt securities upon certain events;
	•		any additions to or changes in the events of default or covenants of Nastech with respect to the debt securities and any change in the right of the trustee or the holders to declare the principal, premium and interest with respect to such securities to be due and payable;
	•		whether and under what circumstances we will pay any additional amounts on such debt securities for any tax, assessment or governmental charge and, if so, whether we will have the option to redeem such debt securities instead of paying such amounts;
	•		the form (registered and/or bearer securities), any restrictions applicable to the offer, sale or delivery of bearer securities and the terms, if any, upon which bearer securities may be exchanged for registered securities and vice versa;
	•		the date of any bearer securities or any global security, if other than the date of original issuance of the first security of the series to be issued;
	•		the person to whom and manner in which any interest shall be payable;
	•		whether such securities will be issued in whole or in part in the form of one or more global securities;

	•		the identity of the depositary for global securities;
	•		whether a temporary security is to be issued with respect to such series and whether any interest payable prior to the issuance of definitive securities of the series will be credited to the account of the persons entitled thereto;
	•		the terms upon which beneficial interests in a temporary global security may be exchanged in whole or in part for beneficial interests in a definitive global security or for individual definitive securities and the terms upon which such exchanges may be made;
	•		the securities exchange(s), if any, on which the securities will be listed;
	•		whether any underwriter(s) will act as market maker(s) for the securities;
	•		the form (certificated or book-entry);
	•		the form and/or terms of certificates, documents or conditions which may be necessary, if any, for the debt securities to be issuable in final form; and
	•		additional terms not inconsistent with the provisions of the indenture.

     One or more series of debt securities may be sold at a substantial discount below their stated principal amount bearing no interest or interest at a rate below the market rate at the time of issuance. One or more series of debt securities may be variable rate debt securities that may be exchanged for fixed rate debt securities. In such cases, all material United States federal income tax and other considerations applicable to any such series will be described in the applicable prospectus supplement.

     We will comply with Section 14(e) under the Exchange Act, to the extent applicable, and any other tender offer rules under the Exchange Act, which may then be applicable, in connection with any obligation of Nastech to purchase debt securities at the option of the holders thereof. Any such obligation applicable to a series of debt securities will be described in the applicable prospectus supplement.

Exchange, Registration, Transfer and Payment

     We expect payment of principal, premium, if any, and any interest on the debt securities to be payable, and the exchange and the transfer of debt securities will be registerable, at the office of the trustee or at any other office or agency we maintain for such purpose. We expect to issue debt securities in denominations of U.S. $1,000 or integral multiples thereof. No service charge will be made for any registration of transfer or exchange of the debt securities, but we may require a payment to cover any tax or other governmental charges payable in connection therewith.

Global Debt Securities

     Unless we indicate otherwise in the applicable prospectus supplement, the following provisions will apply to all debt securities.

     The debt securities of a series may be issued in whole or in part in the form of one or more global securities that will be deposited with a depositary that we will identify in a prospectus supplement. Each global security will be deposited with the depositary and will bear a legend regarding any related restrictions or other matters as may be provided for pursuant to the applicable indenture.

     Unless a prospectus supplement states otherwise, no global security may be transferred to, or registered or exchanged for debt securities registered in the name of, any person or entity other than the depositary, unless:

	•		the depositary has notified us that it is unwilling or unable or is no longer qualified to continue as depositary;
	•		we order the trustee that such global security shall be so transferable, registrable and exchangeable, and such transfers shall be registrable; or

•

other circumstances, if any, as may be described in the applicable prospectus supplement.

     All debt securities issued in exchange for a global security or any portion thereof will be registered in such names as the depositary may direct. The specific terms of the depositary arrangement with respect to any portion of a series of debt securities to be represented by a global security will be described in the applicable prospectus supplement.

     Debt securities which are to be represented by a global security to be deposited with or on behalf of a depositary will be represented by a global security registered in the name of such depositary or its nominee. Upon the issuance of such global security, and the deposit of such global security with the depositary, the depositary will credit, on its book-entry registration and transfer system, the respective principal amounts of the debt securities represented by such global security to the accounts of institutions that have accounts with such depositary or its nominee (the “Participants”). The accounts to be credited will be designated by the underwriters or agents of such debt securities or by us, if such debt securities are offered and sold directly by us.

     Ownership of beneficial interests in such global security will be limited to Participants or persons that may hold interests through Participants. Ownership of beneficial interests in such global security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the depositary or its nominee for such global security or by Participants or persons that hold through Participants.

     The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in certificated form. The foregoing limitations and such laws may impair the ability to transfer beneficial interests in such global securities.

     So long as the depositary, or its nominee, is the registered owner of such global security, such depositary or such nominee, as the case may be, will be considered the sole owner or holder of the debt securities represented by such global security for all purposes under the indenture. Payment of principal of, and premium and interest, if any, on debt securities will be made to the depositary or its nominee as the registered owner or bearer as the case may be of the global security representing such debt securities. Each person owning a beneficial interest in such global security must rely on the procedures of the depositary and, if such person is not a Participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a holder under the indenture. If we request any action of holders or if an owner of a beneficial interest in such global security desires to give any notice or take any action a holder is entitled to give or take under the indenture, the depositary will authorize the Participants to give such notice or take such action, and Participants would authorize beneficial owners owning through such Participants to give such notice or take such action or would otherwise act upon the instructions of beneficial owners owning through them.

     The rights of any holder of a debt security to receive payment of principal and premium, if any, and interest on such debt security, on or after the respective due dates expressed or provided for in such debt security, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the holders.

     Neither we, the trustee, any paying agent nor the security registrar for such debt securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of the global security for such debt securities or for maintaining, supervising or receiving any records relating to such beneficial ownership interests.

     We expect that the depositary or its nominee, upon receipt of any payment of principal, premium or interest, will credit immediately Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global security for such debt securities as shown on the records of such depositary or its nominee. We also expect that payments by Participants to owners of beneficial interests in such global security held through such Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participants.

     If the depositary for a global security representing debt securities of a particular series is at any time unwilling or unable to continue as depositary and we do not appoint a successor depositary within 90 days, we will issue debt securities of such series in definitive form in exchange for such global security. In addition, we may at any time and in our sole discretion determine not to have the debt securities of a particular series represented by one or more global securities and, in such event, will issue debt securities of such series in definitive form in exchange for all of the global securities representing debt securities of such series.

Covenants

     Except as permitted under the heading “Consolidation, Merger and Sale of Assets,” the indenture will require us to do or cause to be done all things necessary to preserve and keep in full force and effect our existence, rights (declaration and statutory) and franchises; provided , however , that we shall not be required to preserve any right or franchise if we determine that the preservation thereof is no longer desirable in the conduct of our business and that the loss thereof is not disadvantageous in any material respect to the holders of the debt securities.

     The indenture will require us to pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon us except any tax, assessment, charge or claim whose amount or applicability is being contested in good faith.

     Reference is made to the indenture and applicable prospectus supplement for information with respect to any additional covenants specific to a particular series of debt securities.

Consolidation, Merger and Sale of Assets

     Except as set forth in the applicable prospectus supplement, the indenture will provide that we shall not consolidate with, or sell, assign, transfer, lease or convey all or substantially all of our assets to, or merge into, any person unless:

•

we are the surviving entity or, in the event that we are not the surviving entity, the person formed by the transaction (in a consolidation) or the entity which received the transfer of assets:

	•		is a corporation organized under the laws of any state of the United States of America or the District of Columbia; and
	•		assumes all of our obligations under the debt securities and the indenture; and

•

immediately after giving effect to the transaction, no event of default, as defined in the indenture, shall have occurred and be continuing.

     Notwithstanding the foregoing, we may merge with another person or acquire by purchase or otherwise all or any part of the property or assets of any other corporation or person in a transaction in which we are the surviving entity.

Events of Default

     Unless otherwise specified in the applicable prospectus supplement, the following are events of default with respect to any series of debt securities issued under the indenture:

	•		failure to pay principal of any debt security of that series when due and payable at maturity, upon acceleration, redemption or otherwise;
	•		failure to pay any interest on any debt security of that series when due, and the default continues for 30 days;
	•		failure to comply with any covenant or warranty contained in the indenture, other than covenants or warranties contained in the indenture solely for the benefit of other series of debt securities, and the default continues for 30 days after notice from the trustee or the holders of at least 25% in principal amount of the then outstanding debt securities of that series;
	•		certain events of bankruptcy, insolvency or reorganization; and
	•		any other event of default provided with respect to that particular series of debt securities.

     If an event of default occurs and continues, then upon written notice to us the trustee or the holders of at least 25% in principal amount of the outstanding debt securities of that series may declare the unpaid principal amount of, and any accrued and unpaid

interest on, all debt securities of that series to be due and payable immediately. However, at any time after a declaration of acceleration with respect to debt securities of any series has been made, the holders of a majority in principal amount of the outstanding debt securities of that series may rescind and annul such acceleration:

	•		if all events of default other than the nonpayment of principal of or interest on the debt securities of that series which have become due solely because of the acceleration have been waived or cured; and
	•		the rescission would not conflict with any judgment or decree of a court of competent jurisdiction. For information as to waiver of defaults, see “Amendment, Supplement and Waiver” below.

     The indenture will provide that, subject to the duty of the trustee during an event of default to act with the required standard of care, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request or direction of any of the holders, unless such holders shall have offered to the trustee reasonable security or indemnity. Subject to certain provisions, including those requiring security or indemnification of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the debt securities of that series.

     We will be required to furnish to the trustee under the indenture annually a statement as to the performance by us of our obligations under that indenture and as to any default in such performance.

Discharge of Indenture and Defeasance

     Except as otherwise set forth in the applicable prospectus supplement, we may terminate our obligations under the debt securities of any series, and the corresponding obligations under the indenture when:

	•		we have paid or deposited with the trustee funds or United States government obligations in an amount sufficient to pay at maturity all outstanding debt securities of such series, including interest other than destroyed, lost or stolen debt securities of such series which have not been replaced or paid;
	•		all outstanding debt securities of such series have been delivered (other than destroyed, lost or stolen debt securities of such series which have not been replaced or paid) to the trustee for cancellation; or
	•		all outstanding debt securities of any series have become due and payable; and
	•		we have paid all other sums payable under the indenture.

     In addition, we may terminate substantially all our obligations under the debt securities of any series and the corresponding obligations under the indenture if:

	•		we have paid or deposited with the trustee, in trust an amount of cash or United States government obligations sufficient to pay all outstanding principal of and interest on the then outstanding debt securities of such series at maturity or upon their redemption, as the case may be;
	•		such deposit will not result in a breach of, or constitute a default under, the indenture;
	•		no default or event of default shall have occurred and continue on the date of deposit and no event of default as a result of a bankruptcy or event which with the giving of notice or the lapse of time would become a bankruptcy event of default shall have occurred and be continuing on the 91st day after such date;
	•		we deliver to the trustee a legal opinion that we have received from, or there has been published by, the United States Internal Revenue Service a ruling, or there has been a change in tax law, in either case to the effect that the holders of the debt securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of our exercise of such option and shall be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such option had not been exercised; and

•

certain other conditions are met.

     We shall be released from our obligations with respect to the covenants to deliver reports required to be filed with the SEC and an annual compliance certificate, and to make timely payments of taxes (including covenants described in a prospectus supplement) and any event of default occurring because of a default with respect to such covenants as they related to any series of debt securities if:

	•		we deposit or cause to be deposited with the trustee in trust an amount of cash or United States government obligations sufficient to pay and discharge when due the entire unpaid principal of and interest on all outstanding debt securities of any series;
	•		such deposit will not result in a breach of, or constitute a default under, the indenture;
	•		no default or event of default shall have occurred and be continuing on the date of deposit and no event of default as a result of a bankruptcy or event which with the giving of notice or the lapse of time would become a bankruptcy event of default shall have occurred and be continuing on the 91st day after such date;
	•		we deliver to the trustee a legal opinion that the holders of the debt securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of our exercise of such option and shall be subject to Federal income tax on the same amounts and in the same manner and at the same times as would have been the case if such option had not been exercised; and
	•		certain other conditions are met.

     Upon satisfaction of such conditions, our obligations under the indenture with respect to the debt securities of such series, other than with respect to the covenants and events of default referred to above, shall remain in full force and effect.

     Notwithstanding the foregoing, no discharge or defeasance described above shall affect the following obligations to or rights of the holders of any series of debt securities:

	•		rights of registration of transfer and exchange of debt securities of such series;
	•		rights of substitution of mutilated, defaced, destroyed, lost or stolen debt securities of such series;
	•		rights of holders of debt securities of such series to receive payments of principal thereof and premium, if any, and interest thereon when due;
	•		rights, obligations, duties and immunities of the trustee;
	•		rights of holders of debt securities of such series as beneficiaries with respect to property deposited with the trustee and payable to all or any of them; and
	•		our obligations to maintain an office or agency in respect of the debt securities of such series.

Transfer and Exchange

     A holder of debt securities may transfer or exchange such debt securities in accordance with the indenture. The registrar for the debt securities may require a holder, among other things, to furnish appropriate endorsements and transfer documents, and to pay any taxes and fees required by law or permitted by the indenture. The registrar is not required to transfer or exchange any debt security selected for redemption or any debt security for a period of 15 days before a selection of debt security to be redeemed.

     The registered holder of a debt security may be treated as the owner of such security for all purposes.

Amendment, Supplement and Waiver

     Subject to certain exceptions, the terms of the indenture or the debt securities may be amended or supplemented by us and the trustee with the written consent of the holders of at least a majority in principal amount of the outstanding debt securities of each series affected by the amendment with each series voting as a separate class. Without the consent of any holder of the debt securities, we and the trustee may amend the terms of the indenture or the debt securities to:

	•		cure any ambiguity, defect or inconsistency;
	•		provide for the assumption of our obligations to holders of the debt securities by a successor corporation;
	•		provide for uncertificated debt securities in addition to certificated debt securities;
	•		make any change that does not adversely affect the rights of any holder of the debt securities in any material respect;
	•		add to, change or eliminate any other provisions of the indenture in respect of one or more series of debt securities if such change would not (i) apply to any security of any series created prior to the execution of a supplemental indenture and entitled to the benefit of such provision and (ii) modify the rights of the holder of any such security with respect to such provision or become effective only when there is no outstanding security of any series created prior to the execution of such supplemental indenture and entitled to such benefits;
	•		establish any additional series of debt securities; or
	•		comply with any requirement of the SEC in connection with the qualification of the indenture under the Trust Indenture Act.

     However, holders of each series of debt securities affected by a modification must consent to modifications that have the following effect:

	•		reduce the principal amount of debt securities the holders of which must consent to an amendment, supplement or waiver of any provision of the indenture;
	•		reduce the rate or change the time for payment of interest on any debt security;
	•		reduce the principal of or change the fixed maturity of any debt securities;
	•		change the date on which any debt security may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor;
	•		make any debt security payable in currency other than that stated in the debt security;
	•		waive any existing default or event of default and the consequences with respect to that series;
	•		modify the right of any holder to receive payment of principal or interest on any debt security on or after the respective due dates expressed or provided for in the debt security;
	•		impair the right of any holder to institute suit for the enforcement of any payment in or with respect to any such debt security; or
	•		make any change in the foregoing amendment provisions which require each holder’s consent.

     Any existing default may be waived with the consent of the holders of at least a majority in principal amount of the then outstanding debt securities of the series affected thereby.

     The consent of the holders of debt securities is not necessary to approve the particular form of any proposed amendment to any indenture. It is sufficient if any consent approves the substance of the proposed amendment.

Replacement Securities

     Any mutilated certificate representing a debt security or a certificate representing a debt security with a mutilated coupon will be replaced by us at the expense of the holder upon surrender of such certificate to the trustee. Certificates representing debt securities or coupons that become destroyed, stolen or lost will be replaced by us at the expense of the holder upon delivery to us and the trustee of evidence of any destruction, loss or theft satisfactory to us and the trustee, provided that neither we nor the trustee has been notified that such certificate or coupon has been acquired by a bona fide purchaser. In the case of any coupon which becomes destroyed, stolen or lost, such coupon will be replaced by issuance of a new certificate representing the debt security in exchange for the certificate representing the debt security to which such coupon appertains. In the case of a destroyed, lost or stolen certificate representing the debt security or coupon, an indemnity bond satisfactory to the trustee and us may be required at the expense of the holder of such debt security before a replacement certificate will be issued.

Regarding the Trustee

     We will identify in the prospectus supplement relating to any series of debt securities, the trustee with respect to such series. The indenture and provisions of the Trust Indenture Act incorporated by reference therein contain certain limitations on the rights of the trustee, should it become a creditor of Nastech, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim, as security or otherwise. The trustee and its affiliates may engage in, and will be permitted to continue to engage in, other transactions with us and our affiliates; provided , however , that if it acquires any conflicting interest, as defined in the Trust Indenture Act, it must eliminate such conflict or resign.

     The holders of a majority in principal amount of the then outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the trustee. The Trust Indenture Act and the indenture provide that in case an event of default shall occur, and be continuing, the trustee will be required, in the exercise of its rights and powers, to use the degree of care and skill of a prudent man in the conduct of his own affairs. Subject to such provision, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any of the holders of the debt securities issued thereunder, unless they have offered to the trustee indemnity satisfactory to it.

DESCRIPTION OF WARRANTS

     The following description of our warrants in this prospectus contains the general terms and provisions of the warrants. The particular terms of any offering of warrants will be described in a prospectus supplement relating to such offering. The statements below describing the warrants are subject to and qualified by the applicable provisions of our certificate of incorporation, bylaws and the relevant provisions of the laws of the State of Delaware.

General

     We may issue warrants for the purchase of our common stock, preferred stock or debt securities. We may issue warrants independently or together with any of our securities, and warrants also may be attached to our securities or independent of them. We may issue series of warrants under a separate warrant agreement between us and a specified warrant agent described in the prospectus supplement. The warrant agent will act solely as our agent in connection with the warrants and will not assume any obligation or relationship of agency or trust for or with any holders or beneficial owners of warrants.

     As of September 30, 2007, the only warrants issued and outstanding consist of warrants to purchase up to 660,814 shares of our common stock.

Terms

     A prospectus supplement will describe the specific terms of any warrants that we issue or offer, including:

•

the title of the warrants;

	•		the aggregate number of warrants;
	•		the price or prices at which the warrants will be issued;
	•		the currencies in which the price or prices of the warrants may be payable;
	•		the designation, amount and terms of our capital stock or debt securities purchasable upon exercise of the warrants;
	•		the designation and terms of our other securities, if any, that may be issued in connection with the warrants, and the number of warrants issued with each corresponding security;
	•		if applicable, the date that the warrants and the securities purchasable upon exercise of the warrants will be separately transferable;
	•		the prices and currencies for which the securities purchasable upon exercise of the warrants may be purchased;
	•		the date that the warrants may first be exercised;
	•		the date that the warrants expire;
	•		the minimum or maximum amount of warrants that may be exercised at any one time;
	•		information with respect to book-entry procedures, if any;
	•		a discussion of certain federal income tax considerations; and
	•		any other material terms of the warrants, including terms, procedures and limitations relating to the exchange and exercise of the warrants.

Exercise of Warrants

     Each warrant will entitle the holder to purchase for cash the principal amount of debt securities or shares of preferred stock or common stock at the applicable exercise price set forth in, or determined as described in, the applicable prospectus supplement. Warrants may be exercised at any time up to the close of business on the expiration date set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.

     Warrants may be exercised by delivering to the corporation trust office of the warrant agent or any other officer indicated in the applicable prospectus supplement (a) the warrant certificate properly completed and duly executed and (b) payment of the amount due upon exercise. As soon as practicable following exercise, we will forward the debt securities or shares of preferred stock or common stock purchasable upon exercise. If less than all of the warrants represented by a warrant certificate are exercised, a new warrant certificate will be issued for the remaining warrants.

DESCRIPTION OF UNITS

     The following description, together with the additional information we may include in any applicable prospectus supplements, summarizes the material terms and provisions of the units that we may offer under this prospectus. While the terms we have summarized below will apply generally to any units that we may offer under this prospectus, we will describe the particular terms of any series of units in more detail in the applicable prospectus supplement. The terms of any units offered under a prospectus supplement may differ from the terms described below. However, no prospectus supplement will fundamentally change the terms that are set forth in this prospectus or offer a security that is not registered and described in this prospectus at the time of its effectiveness.

     We will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from a current report on Form 8-K that we file with the SEC, the form of unit agreement that describes the terms of the series of units we are offering, and any supplemental agreements, before the issuance of the related series of units. The following summaries of material terms and provisions of the units are subject to, and qualified in their entirety by reference to, all the provisions of the unit agreement

and any supplemental agreements applicable to a particular series of units. We urge you to read the applicable prospectus supplement related to the particular series of units that we sell under this prospectus, as well as the complete unit agreement and any supplemental agreements that contain the terms of the units.

General

     We may issue units comprised of one or more debt securities, shares of common stock, shares of preferred stock and warrants in any combination. Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified date.

     We will describe in the applicable prospectus supplement the terms of the series of units, including:

	•		the designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those securities may be held or transferred separately;
	•		any provisions of the governing unit agreement that differ from those described below; and
	•		any provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units.

     The provisions described in this section, as well as those described under the headings “Description of Capital Stock,” “Description of Debt Securities” and “Description of Warrants” will apply to each unit and to any common stock, preferred stock, debt security or warrant included in each unit, respectively.

Issuance in Series

     We may issue units in such amounts and in numerous distinct series as we determine.

Enforceability of Rights by Holders of Units

     Each unit agent will act solely as our agent under the applicable unit agreement and will not assume any obligation or relationship of agency or trust with any holder of any unit. A single bank or trust company may act as unit agent for more than one series of units. A unit agent will have no duty or responsibility in case of any default by us under the applicable unit agreement or unit, including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a unit may, without the consent of the related unit agent or the holder of any other unit, enforce by appropriate legal action its rights as holder under any security included in the unit.

Title

     Nastech, the unit agent and any of their agents may treat the registered holder of any unit certificate as an absolute owner of the units evidenced by that certificate for any purposes and as the person entitled to exercise the rights attaching to the units so requested, despite any notice to the contrary.

LEGAL MATTERS

     The validity of the shares of our common stock offered by this prospectus is being passed upon for us by Pryor Cashman LLP, New York, New York.

EXPERTS

     Our consolidated financial statements as of December 31, 2006 and 2005, and for each of the years in the three-year period ended December 31, 2006, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein and in the registration statement of which this prospectus is a part, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2006 financial statements refers to a change in the method of accounting for all stock-based awards made to employees and directors effective January 1, 2006.

WHERE YOU CAN FIND MORE INFORMATION

     We are subject to the reporting requirements of the Exchange Act, and in accordance with such laws we file annual, quarterly and current reports and other information with the SEC. The SEC maintains a website that contains annual, quarterly and current reports, proxy and information statements and other information filed with the SEC. The SEC’s website address is http://www.sec.gov. You may also read and copy any document we file with the SEC at the SEC’s public reference room, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its public reference room. The information we file with the SEC and other information about us is also available on our website at http://www.nastech.com. However, the information on our website is not a part of, nor is such information to be deemed incorporated by reference into, this prospectus.

     We have filed with the SEC a registration statement on Form S-3 (of which this prospectus is a part) under the Securities Act, with respect to the securities offered by this prospectus. This prospectus does not contain all of the information set forth in the registration statement, certain portions of which have been omitted as permitted by the rules and regulations of the SEC. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete, and in each instance please see the copy of such contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. For further information regarding us and the securities offered by this prospectus, please refer to the registration statement and such exhibits and schedules which may be obtained from the SEC at its principal office in Washington, D.C. upon payment of the fees prescribed by the SEC, or from its web site.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

     The SEC allows us to “incorporate by reference” into this prospectus the information we have filed with the SEC. The information we incorporate by reference into this prospectus is an important part of this prospectus. Any statement in a document we have filed with the SEC prior to the date of this prospectus and which is incorporated by reference into this prospectus will be considered to be modified or superseded to the extent a statement contained in this prospectus or any other subsequently filed document that is incorporated by reference into this prospectus modifies or supersedes that statement. The modified or superseded statement will not be considered to be a part of this prospectus, except as modified or superseded.

     We incorporate by reference into this prospectus the information contained in the documents listed below, which is considered to be a part of this prospectus:

	•		our annual report on Form 10-K for the fiscal year ended December 31, 2006, filed with the SEC on March 7, 2007 (file no. 000-13789);
	•		our quarterly reports filed on Form 10-Q for the fiscal quarters ended March 31, 2007, June 30, 2007 and September 30, 2007, filed with the SEC on May 7, 2007, August 8, 2007 and October 29, 2007, respectively (file no. 000-13789);
	•		our current reports on Form 8-K, as filed with the SEC on January 19, 2007, February 12, 2007, March 7, 2007, April 11, 2007, May 7, 2007, August 8, 2007, September 25, 2007, October 4, 2007, October 29, 2007, November 7, 2007, November 14, 2007, November 15, 2007, November 21, 2007, December 7, 2007, December 20, 2007, January 7, 2008 and January 22, 2007 (file no. 000-13789);
	•		our definitive proxy statement on Schedule 14A, relating to the annual meeting of stockholders held on June 13, 2007, as filed with the SEC on April 30, 2007;

•

the description of our common stock and the description of certain provisions of Delaware Law contained or incorporated by reference in:

	•		our registration statement on Form 8-A, filed with the SEC on August 12, 1985 (file no. 000-13789), including any amendments or reports filed for the purposes of updating this description;
	•		our Restated Certificate of Incorporation dated July 20, 2005 and filed as Exhibit 3.1 to our current report on Form 8-K, as filed with the SEC on July 25, 2005 (file no. 000-13789); and
	•		our Amended and Restated Bylaws dated September 19, 2007 and filed as Exhibit 3.1 to our current report on Form 8-K, as filed with the SEC on September 25, 2007 (file no. 000-13789);

	•		the description of our preferred stock purchase rights contained in our registration statement on Form 8-A, filed with the SEC on March 16, 2000 (file no. 000-13789), including any amendments or reports filed for the purposes of updating this description; and
	•		future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this prospectus supplement but prior to the termination of the offering of the securities covered by this prospectus supplement.

     You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:

Nastech Pharmaceutical Company Inc.
3830 Monte Villa Parkway
Bothell, Washington 98021
(425) 908-3600

 

 

Nastech Pharmaceutical Company Inc.

4,590,277 Shares of Common Stock

and

Warrants to Purchase 5,967,361 Shares of Common Stock

PROSPECTUS SUPPLEMENT

April 30, 2008

 

 

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