NASTECH PHARMACEUTICAL COMPANY INC. (Form: 8-K)

Bothell, Wash., October 29, 2007 — Nastech Pharmaceutical Company Inc. (Nasdaq: NSTK) today reported financial results for the three- and nine-month periods ended September 30, 2007.

Revenue for the quarter ended September 30, 2007 was $1.9 million, compared to $5.5 million for the quarter ended September 30, 2006. The 2006 period included revenue of $4.8 million related to our Parathyroid Hormone (PTH_1-34) nasal spray collaboration with Procter & Gamble Pharmaceuticals, Inc. (“P&G”). Revenue for the nine months ended September 30, 2007 was $11.7 million, compared to $23.7 million for the nine months ended September 30, 2006. The 2007 period included receipt and recognition of a $2.0 million payment from QOL Medical LLC related to the June 2007 issuance of a patent by the U.S. Patent and Trademark Office for Nascobal^® nasal spray, and revenue recognized related to our collaboration agreement with P&G, revenue from our other agreements including Novo Nordisk A/S and Amylin Pharmaceuticals, Inc. and approximately $0.2 million in Nascobal^® product revenue. The prior year nine month period included recognition of approximately $3.7 million in previously deferred revenue from Merck & Co., Inc. related to our PYY(3-36) obesity program, a $7.0 million milestone payment and reimbursement revenue related to our development agreement with P&G, revenue from other agreements and approximately $0.6 million in Nascobal^® product revenue.

Net loss for the current quarter was $16.5 million, or $0.66 per share, as compared to a net loss of $7.8 million, or $0.36 per share for the prior year period. The net loss for the nine months ended September 30, 2007 was $40.4 million or $1.62 per share, as compared to $16.2 million, or $0.77 per share, for the prior year period. The increase in the net loss from the prior year periods is due to a combination of lower revenue and higher spending due to increased clinical activities, headcount growth, and expenses related to research and development projects. The net loss for the prior year nine month period includes a cumulative benefit from the accounting change of adopting SFAS123(R) in January 2006 of approximately $0.3 million reflecting the net cumulative impact of estimating future forfeitures in the determination of period expense for restricted stock awards, rather than recording forfeitures when they occur as permitted prior to 2006.

Research and development expenses for the current quarter increased $3.3 million to approximately $13.8 million as compared to the prior year period and increased $8.4 million to $39.4 million for the nine months ended September 30, 2007 from the prior year period. This year-to-date net increase reflects an actual increase of approximately $12.5 million in R&D expenditures, primarily due to increases in clinical activities, the number of research and development employees and related infrastructure costs. The prior year nine month period included a $4.1 million charge due to in-process R&D expenses related to our acquisition of RNAi intellectual property from Galenea Corp. in the first quarter 2006.

Selling, general and administrative expenses increased $1.6 million to approximately $5.1 million for the current quarter compared to the prior year quarter and increased $4.0 million to approximately $14.5 million for the nine months ended September 30, 2007 from the prior year period, primarily due to increases in patent and legal costs necessary to support our business model as well as our growth.

We ended the third quarter of 2007 with approximately $58.1 million in cash, cash equivalents and investments compared to $51.0 million at December 31, 2006, including $2.2 million in restricted cash at each date. The increase in our cash balance was driven by the January 2007 offering of common stock which raised net proceeds of approximately $40.9 million.

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Announced promotion of Henry “Rick” Costantino to Chief Scientific Officer of Delivery

Management will host a conference call to review our financial results for the period ended September 30, 2007 and recent business developments. The call is scheduled for today, October 29, 2007, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). To participate in the live conference call, U.S. residents should dial (866) 831-6243 and international callers should dial (617) 213-8855. The access code for the live conference call is 60453924. To access the 24-hour telephone replay, U.S. residents should dial (888) 286-8010 and international callers should dial (617) 801-6888. The access code for the replay is 53042322.

Alternatively, log on to http://www.nastech.com to access a live webcast or the subsequent archive. Please connect to the Investor section of Nastech’s website several minutes prior to the start of the live conference call to ensure adequate time for any software download that may be necessary.

Nastech is a biopharmaceutical company developing innovative products based on proprietary molecular biology-based drug delivery technologies. Nastech and our collaboration partners are developing products for multiple therapeutic areas including osteoporosis, obesity, diabetes, autism, respiratory diseases and inflammatory conditions. Additional information about Nastech is available at http://www.nastech.com.

Statements made in this press release may be forward-looking statements within the meaning of Federal Securities laws that are subject to certain risks and uncertainties and involve factors that may cause actual results to differ materially from those projected or suggested. Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to: (i) the ability of Nastech to obtain additional funding; (ii) the ability of Nastech to attract and/or maintain manufacturing, research, development and commercialization partners; (iii) Nastech’s and/or a partner’s ability to successfully complete product research and development, including preclinical and clinical studies and commercialization; (iv) Nastech’s and/or a partner’s ability to obtain required governmental approvals; and (v) Nastech’s and/or a partner’s ability to develop and commercialize products that can compete favorably with those of competitors. Additional factors that could cause actual results to differ materially from those projected or suggested in any forward-looking statements are contained in Nastech’s most recent periodic reports on Form 10-K and Form 10-Q that are filed with the Securities and Exchange Commission. Nastech assumes no obligation to update and supplement forward-looking statements because of subsequent events.

NASTECH PHARMACEUTICAL COMPANY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2006			2007			2006			2007
	*(Unaudited)*
Revenue
License and research fees	$	5,130		$	1,792		$	22,667		$	11,197
Government grants		383			105			383			307
Product revenue		32			—			624			245

Total revenue		5,545			1,897			23,674			11,749

Operating expenses:
Cost of product revenue		13			—			314			68
Research and development		10,483			13,774			31,050			39,412
Selling, general and administrative		3,447			5,090			10,529			14,490

Total operating expenses		13,943			18,864			41,893			53,970

Loss from operations		(8,398	)		(16,967	)		(18,219	)		(42,221	)
Other income (expense):
Interest income		751			817			2,107			2,722
Interest and other expense		(161	)		(300	)		(394	)		(858	)

Loss before cumulative effect of change in accounting principle		(7,808	)		(16,450	)		(16,506	)		(40,357	)
Cumulative effect of change in accounting principle		—			—			291			—

Net Loss	$	(7,808	)	$	(16,450	)	$	(16,215	)	$	(40,357	)

Basic and diluted net loss per share:
Prior to cumulative effect of change in accounting principle	$	(0.36	)	$	(0.66	)	$	(0.78	)	$	(1.62	)
Cumulative effect of change in accounting principle		—			—			0.01			—

Net loss per common share — basic and diluted	$	(0.36	)	$	(0.66	)	$	(0.77	)	$	(1.62	)

Shares used in computing net loss per share - basic and diluted		21,408			25,067			21,115			24,844


	December 31,			September 30,
Selected Balance Sheet Data *(In Thousands)*	2006			2007
				*(Unaudited)*
Cash, cash equivalents and investments (includes restricted cash of approximately $2,155)	$	50,993		$	58,139
Accounts receivable, net		2,798			124
Property and equipment, inventories and other assets		20,041			20,156
Total assets		73,832			78,419
Working capital		42,833			43,777
Accumulated deficit		(142,493	)		(182,850	)
Stockholders’ equity		43,336			49,743


Delaware	0-13789	11-2658569
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

3830 Monte Villa Parkway, Bothell, Washington		98021
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	NASTECH PHARMACEUTICAL COMPANY INC.

October 29, 2007	By:	Philip C. Ranker

		Name: Philip C. Ranker
		Title: Chief Financial Officer


Exhibit No.		Description

99.1		Press Release of Nastech Pharmaceutical Company Inc. dated October 29, 2007.


Date of Report (Date of Earliest Event Reported):		October 29, 2007


Registrant’s telephone number, including area code:		425-908-3600