NASTECH PHARMACEUTICAL CO INC, S-2, 2000-09-06

NASTECH PHARMACEUTICAL CO INC
S-2, 2000-09-06
PHARMACEUTICAL PREPARATIONS

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As filed with the Securities and Exchange Commission on September 6, 2000
Registration No. 333-[ ]

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

NASTECH PHARMACEUTICAL COMPANY INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 11-2658569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

45 DAVIDS DRIVE
HAUPPAUGE, NEW YORK 11788
(631) 273-0101
ATTN: STEVEN C. QUAY, M.D., PH.D.
(Address, including zip code, and
telephone number, including area code, of
Registrant's principal executive offices)

COPIES TO:

L. Kevin Sheridan, Jr., Esq. Sidney Todres, Esq.
Roberts, Sheridan & Kotel Epstein, Becker & Green
a Professional Corporation 250 Park Avenue
12 East 49th Street, 30th Floor New York, NY 10177
New York, NY 10017

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |XX|

If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
(11)(a)(1) of this Form, check the following box. |XX|

If the registrant elects to deliver its latest quarterly report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
(11)(a)(2)(ii) of this Form, check the following box. |XX|

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|

<PAGE>

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Title of Each Class of Amount to Proposed Maximum Proposed Maximum Amount of
Securities to Be Registered Be Registered Offering Price Per Share Aggregate Offering Price Registration Fee
--------------------------- ------------- ------------------------ ------------------------ ----------------
<S> <C> <C> <C> <C>
up to
Common Stock, $.006 par value 1,200,000(1) $5.93(4) $7,116,000 $ 1,879

Common Stock, $.006 par value 49,500(2) $5.93(5) $ 293,535 $ 77

up to
Common Stock, $.006 par value 49,500(3) $5.93(4) $ 293,535 $ 77
---------- ----- ---------- ----------

up to
Total ....................... 1,299,000 $5.93 $7,703,070 $ 2,033
========== ===== ========== ==========
</TABLE>

(1) Represents the 1,200,000 shares issuable to Castlebar Enterprises Limited
under equity line of credit and shares issuable upon the exercise of warrants
under the equity line of credit.

(2) Represents 49,500 shares issuable upon the exercise of warrants granted to
Castlebar Enterprises Limited under equity line of credit and to Jesup & Lamont
Securities Corporation as a placement fee.

(3) Represents 49,500 shares issuable upon the exercise of warrants that may be
granted in the future to Castlebar Enterprises Limited and to Jesup & Lamont
Securities Corporation.

(4) The proposed maximum offering price is estimated solely for the purposes of
calculating the registration fee pursuant to Rule 457(c) and 457(g)(3) of the
Securities Act of 1933. It is based upon a price of $5.93 per share, which was
the average of the high and low reported prices of the registrant's common stock
as reported on the Nasdaq National Market System on August 31, 2000.

(5) The proposed maximum offering price is estimated solely for the purposes of
calculating the registration fee pursuant to Rule 457(g) of the Securities Act
of 1933. It is based upon the higher of the price at which the warrants may be
exercised ($5.53) and the price of shares of common stock as determined in
accordance with Rule 457(c) ($5.93).

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

<PAGE>

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 6, 2000

PROSPECTUS

[LOGO]

1,299,000 Shares
Common Stock

This prospectus may be used only in connection with resales of our common
stock by Castlebar Enterprises Limited, a British Virgin Islands corporation,
and Jesup & Lamont Securities Corporation (the "selling stockholders").
Castlebar will receive shares of our common stock pursuant to the equity line of
credit agreement described in this prospectus and upon the exercise of warrants.
Jesup & Lamont will receive shares of our common stock upon the exercise of
warrants granted to it as a placement fee. The shares of common stock being sold
constitute 19.1% of our issued and outstanding common stock as of August 31,
2000.

We will not receive any proceeds from the sale of shares by the selling
stockholders. However, we will receive the sale price of any common stock that
we sell to Castlebar under the equity line of credit agreement and the exercise
price payable upon the exercise for cash of the warrants held by Castlebar and
Jesup & Lamont.

The selling stockholders may sell shares of our common stock from time to
time on the Nasdaq National Market at the prevailing market price or in private,
negotiated transactions. The shares will be sold at prices determined by the
selling stockholders. The selling stockholders may sell the shares through
broker-dealers who may receive compensation from the selling stockholders in the
form of discounts or commissions. Castlebar is an "underwriter" within the
meaning of the Securities Act of 1933 in connection with its sales of our
shares. We will pay the costs of registering the shares under this prospectus,
including legal fees.

Our common stock is quoted on the Nasdaq National Market under the symbol
"NSTK." The last reported sale price of our common stock on the Nasdaq National
Market on August 31 was $6.25 per share.

Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 6.

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.

Prospectus dated _________________, 2000

<PAGE>

TABLE OF CONTENTS

Page
----

Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 6
Special Note Regarding Forward-Looking Statements ......................... 10
Use of Proceeds ........................................................... 11
Price Range of Common Stock ............................................... 11
Dividend Policy ........................................................... 12
Capitalization ............................................................ 12
Dilution .................................................................. 13
Equity Line of Credit Agreement ........................................... 14
Selling Stockholders ...................................................... 19
Plan of Distribution ...................................................... 19
Description of Capital Stock .............................................. 22
Where You Can Find More Information ....................................... 25
Incorporation of Information by Reference ................................. 26
Material Changes .......................................................... 27
Legal Matters ............................................................. 27
Experts ................................................................... 28

--------------------------------

You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information provided
by this prospectus is accurate as of any date other than the date on the front
of this prospectus.

References in this prospectus, and the documents incorporated by reference in
this prospectus, to "Nastech," "we," "our," and "us" refer to Nastech
Pharmaceutical Company Inc., a Delaware corporation. We maintain a web site at
www.nastech.com. Information contained in our website does not constitute part
of this prospectus.

Nastech Pharmaceutical Company Inc. and some of the names of our products are
tradenames or trademarks of Nastech. This prospectus and the information
incorporated by reference also contains trademarks and tradenames of other
companies.

<PAGE>

--------------------------------------------------------------------------------

PROSPECTUS SUMMARY

This summary highlights information contained or incorporated by reference
elsewhere in this prospectus. For a more complete understanding of this
offering, you should read the entire prospectus carefully, especially the "Risk
Factors" section, and our financial statements and notes to those statements
incorporated by reference in this prospectus, before making your investment
decision.

Nastech Pharmaceutical Company Inc.

Nastech Pharmaceutical Company Inc. researches, develops and manufactures
nasally-administered prescription pharmaceuticals. We investigate the commercial
weaknesses of prescription and over-the-counter pharmaceutical products
currently available in oral, injectable or other dosage forms, and we determine
the advantages a nasal delivery system would have for the same drug in the
market place. For example, while the oral route of drug delivery is the most
popular and least expensive method of delivery, an oral drug's effectiveness can
be reduced by gastrointestinal and liver metabolism. Generally, a nasal delivery
system would provide faster absorption into the blood stream than an oral
product thereby resulting in faster onset of action. Other advantages of this
therapy may include possible lower drug doses, fewer side effects, greater
safety and efficacy, convenience to the patient, better patient compliance of
prescribed drug therapy, and a possible reduction in overall health care costs
for the patient.

We have a commercial interest in two drugs -- both of which are approved for
sale in the U.S. -- that are marketed by our licensees: Stadol NS(TM)
(Butorphanol Tartrate) marketed by Bristol-Myers Squibb Company ("BMS"), and
Nascobal(R) (Cyanocobalamin, USP) marketed by Schwarz Pharma Inc. To our
knowledge, Stadol NS(TM) is the only intranasal opioid analgesic marketed for
the treatment of moderate to severe pain and the acute pain of migraine. It
provides painless therapy and convenient, patient self-administration as
compared to the competitive injectable product. Similarly, our nasal vitamin
B-12 product, Nascobal(R), provides patient benefits over the injectable therapy
for chronic B-12 deficiency anemia. In addition to these two drugs, we have six
additional drugs in various stages of drug development, one of which we have
licensed to another pharmaceutical company so that they may develop the drug and
eventually sell it in the United States.

Our current business strategy is to expand the applications of nasal drug
delivery in the prescription and over-the-counter markets. To accomplish this
objective, we plan to do the following:

o Focus initial efforts on approved drugs

o Internally fund development through later stages

o Leverage strategic alliances

o Protect and expand intellectual property

The Equity Line of Credit Agreement

This prospectus covers up to 1,299,000 shares of our common stock to be sold by
the selling stockholders. The number of shares subject to this prospectus
represents 19.1% of our issued and outstanding common stock as of August 31,
2000.

In order to provide a possible source of funding for our current activities and
for the development of our current and planned products, we have entered into an
equity line of credit agreement with Castlebar Enterprises Limited, a British
Virgin Islands corporation. The equity line of credit agreement establishes what
is sometimes referred to as an equity drawdown facility.

Pursuant to the equity line of credit agreement, Castlebar has agreed to
purchase up to 1,200,000 shares of our common stock during the 36 month period
following the effective date of the registration statement to which this
prospectus relates. During this 36 month period, we may request a drawdown under
the equity line of credit by selling ("putting") shares of our common stock to
Castlebar, and Castlebar will be obligated to purchase the shares we put to
them. The minimum amount we can draw down at any one time is $250,000 worth of
common stock. The maximum amount we can draw down at any one time will be
determined at the time of the drawdown request pursuant to a formula contained
in the equity line of credit agreement. We may request a drawdown once every 22
trading days, although we are under no obligation to request any drawdowns under
the equity line of credit.

--------------------------------------------------------------------------------

<PAGE>

--------------------------------------------------------------------------------

During the 22 trading days following a drawdown request, we will calculate the
amount of shares we will sell to Castlebar and the price per share. The purchase
price per share of common stock will be at a discount to the daily volume
weighted average price of our common stock during each of the 22 trading days
immediately following the drawdown date. On each of the 22 trading days during
the calculation period, the number of shares to be purchased by Castlebar will
be determined by dividing 1/22nd of the drawdown amount by the purchase price on
each trading day. In our drawdown request, we may set a minimum threshold price
for our common stock. If the daily volume weighted average price for our common
stock on any trading day during the 22 trading day calculation period is below
the minimum threshold price, and Castlebar elects not to purchase shares at the
minimum threshold price, then the drawdown amount will be reduced by 1/22nd.

Castlebar will pay for half of the shares on the 13th trading day following the
drawdown request, and will pay the remainder on the 24th trading day following
the drawdown request. We will receive the purchase price less a brokerage fee
payable to Jesup & Lamont equal to 4% of the aggregate purchase price for each
put. Jesup & Lamont is the placement agent which introduced Castlebar to us and
is a registered broker-dealer. For more details on the calculation of the
purchase price and the number of shares we will issue, see "Equity Line of
Credit Agreement--The Drawdown Procedure and the Stock Purchases--Calculation of
Purchase Price" beginning on page 14.

The equity line of credit agreement prevents us from drawing down funds and
issuing the corresponding shares of common stock to Castlebar if such issuance
would result in Castlebar beneficially owning more than 9.9% of our then
outstanding shares of common stock. In addition, the listing requirements of The
Nasdaq National Market prohibit us from issuing 20% or more of our issued and
outstanding shares of common stock in a single transaction at a price less than
the greater of market value or book value, unless we get stockholder approval.

At the closing of each drawdown, we will grant warrants to each of Castlebar and
Jesup & Lamont to purchase an additional 1,000 shares of common stock for each
$100,000 we draw down under the equity line of credit, up to a maximum of 33,000
additional warrants for Castlebar and 16,500 additional warrants for Jesup &
Lamont. These additional warrants will be exercisable for three years from the
grant date at a price equal 120% of the average of the closing bid prices of our
common stock on the 15 trading days prior closing of each drawdown.

At the closing of each drawdown, we will also grant Castlebar warrants to
purchase a number of shares of common stock equal to 25% of the number of shares
purchased by Castlebar at the closing of each drawdown. These warrants will
expire one day after they are granted and will have an exercise price equal to
the weighted average of the purchase prices of the common stock purchased at the
closing of each drawdown. If Castlebar exercises these short term warrants, the
1,200,000 shares available under the equity line of credit will be reduced by
the number of shares issued pursuant to such short term warrants.

Neither Castlebar, nor Jesup & Lamont will be obligated to exercise their
warrants and purchase any shares of common stock pursuant to such warrants.

We are registering the 1,200,000 shares of our common stock issuable to
Castlebar under the equity line of credit, the 49,500 shares underlying the
warrants that have been granted to Castlebar and Jesup & Lamont, and the 49,500
shares underlying the warrants that may be granted in the future to Castlebar
and Jesup & Lamont. All 1,299,000 shares are covered by this prospectus and may
be offered for sale from time to time during the period the registration
statement remains effective, by or for the accounts of Castlebar and Jesup &
Lamont. The number of shares subject to this prospectus represents 19.1% of our
issued and outstanding common stock as of August 31, 2000. We will prepare and
file amendments and supplements to the registration statement as may be
necessary in order to keep the registration statement effective as long as
Castlebar holds shares of our stock or until such shares can be sold pursuant to
an appropriate exemption from registration. We have agreed to bear the expenses
of registering the shares, including Castlebar's legal fees of $20,000, but not
the expenses associated with selling the shares, such as broker discounts and
commissions.

----------

Nastech Pharmaceutical Company Inc. is incorporated under the laws of the state
of Delaware. Our principal executive offices are located at 45 Davids Drive,
Hauppauge, New York 11788, and our telephone number is (631) 273-0101. Our
principal manufacturing and administrative facility is located in the same
Hauppauge, New York facility.

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4
<PAGE>

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THE OFFERING

Shares of Common Stock Offered by the
Selling Stockholders .................... 1,299,000

Offering Price .......................... To be determined at the time of sale
by the selling stockholders

Common Stock Outstanding

Before the Offering................. 6,800,485 (1)

After the Offering ................. 8,099,485 (1) (2)

Use of Proceeds ......................... We will not receive any proceeds from
sales by the selling stockholders.
However, we will receive the proceeds
from any sale of common stock to
Castlebar under the equity line of
credit agreement and upon the
exercise of warrants held by
Castlebar and Jesup & Lamont when,
and if, they pay the exercise price
in cash. We expect to use
substantially all the net proceeds
for general corporate purposes,
including working capital, research
and development and expansion of
sales and marketing activities.

Risk Factors ............................ Investing in our common stock
involves a high degree of risk and
immediate dilution. You should not
purchase the common stock unless you
can afford the complete loss of your
investment. Before purchasing our
common stock, you should review
carefully and consider all
information contained in this
prospectus, particularly the items
under the section entitled "Risk
Factors."

Nasdaq National Market symbol ........... NSTK

----------

(1) Excludes:

o 1,177,800 shares of common stock subject to outstanding stock
options previously granted under our stock option plan as of June
30, 2000.

o 322,200 shares of common stock available for future grants under our
stock option plan.

o 600,000 shares of common stock subject to outstanding stock options
granted on August 8, 2000 to Steven C. Quay, our new President,
Chief Executive Officer and Chairman of the Board.

o 34,500 shares of common stock issuable upon exercise of the warrants
granted to Wheat, First Securities, Inc., as underwriters in
connection with an offering of our shares in 1997.

o 34,500 shares of common stock issuable upon exercise of the warrants
granted to Volpe, Welty & Company, as underwriters in connection
with an offering of our shares in 1997.

(2) Assumes 1,200,000 shares of common stock are issued under the equity line
of credit agreement and all 99,000 warrants granted to Castlebar and Jesup
& Lamont are exercised.

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5
<PAGE>

RISK FACTORS

A purchase of our common stock is speculative and involves a high degree of
risk. You should carefully consider the risks described below together with all
of the other information included or incorporated by reference in this
prospectus before making an investment decision. The risks and uncertainties
described below are not the only ones facing our company. If any of the
following risks actually occur, our business, financial condition or operating
results could be harmed. In such case, the trading price of our common stock
could decline, and you could lose all or part of your investment.

We Have a History of Losses and May Incur Future Losses

We have incurred losses in each of the last three years, and we cannot be
certain that we will ever achieve and sustain profitability. The process of
developing our products requires significant research and development, including
basic research, pre-clinical and clinical development, as well as regulatory
approval by the Food and Drug Administration ("FDA"). We expect these
activities, together with our sales, marketing, general and administrative
expenses, to result in operating losses for the foreseeable future. Our ability
to achieve profitability is dependent, in part, on our ability to successfully
complete development of our projects, obtain regulatory approvals, and
manufacture and market our products directly or through licensing partners. As a
result of these factors, the market price of our common stock could be adversely
affected.

Our Operating Results Are Subject To Significant Fluctuations and Uncertainties

A number of factors influence our operating results including, among others:

o the timing and achievement of licensing transactions, including
milestones and other performance factors associated with these
contracts

o the time and costs involved in patent research and development of
our proprietary position

o continued scientific progress and level of expenditures in our
research and development programs

o the cost of manufacturing scale-up and production batches, including
vendor provider activities and costs

o the time and costs involved in obtaining regulatory approvals

o changes in general economic conditions and drug delivery
technologies

o introduction of new products and product enhancements by us or our
competitors

Due to these factors and others, our revenues and operating results,
particularly those reported on a quarterly basis, are difficult to forecast.
Therefore, we believe that quarterly comparisons of our operating results will
not be meaningful, and you should not rely on them as an indication of our
future performance. Also, the market price of our common stock could be
adversely affected by analysts should actual results differ from their
projections or expectations.

There May Be Impairment of Our Proprietary Position and Technology Base

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 nasal product competition. Although we believe that we exercise the
necessary due diligence in our patent filings, our proprietary position is not
established until actual patent issuance, which may take up to two or three
years after initial filing, by the appropriate regulatory authorities. In
addition, alternative drug delivery technologies may provide more effective
therapeutic benefit to patients thereby creating potential obsolescence of our
products, technology and/or proprietary position.

Moreover, patent positions of pharmaceutical companies are generally uncertain
and involve complex legal and factual issues. Therefore, although we believe our
patents are valid, we cannot predict with any precision the scope or
enforceability of our claims or that our issued patents would withstand review
and be held valid by a court of competent jurisdiction. Furthermore, there can
be no assurance that any issued patents will not be infringed or otherwise
circumvented by others or that we will be able to fund the cost of litigation
against such parties.

6
<PAGE>

The Commercial Opportunity for Nasally-Administered Products May Be Limited,
Which Could Impact Our Anticipated Future Revenue Growth

We rely on our understanding of the physical and chemical properties of a drug
and the effect of these properties on the development of a formulation applied
intranasally. Although we continue to explore the feasibility of delivering
drugs that are large molecules nasally, our expertise historically has been
focused in small molecules. The universe of nasal products that qualify as small
molecules and are available for commercialization may be limited. Accordingly,
we may be subject to intense competition in these potential products, which
could affect our anticipated future revenue growth. Although we need to
accelerate our research of larger molecules, we cannot assure you that we will
be successful in these areas. If we are not successful in these areas, our
future revenue will not grow as quickly as anticipated.

We May Require Additional Financing in the Future, and Additional Financing May
Not Be Available

Subject to the success of our development programs and potential licensing
transactions, we may require an additional infusion of capital to complete our
research and development activities currently contemplated and to commercialize
our proposed products. We may need to raise additional capital to fund more
rapid expansion, to develop new and to enhance existing services to respond to
competitive pressures, and to acquire complementary businesses or technologies.
Our future capital needs depend on many factors, including:

o the scope, duration and expenditures associated with our current
research and development programs

o continued scientific progress in these programs

o the outcome of potential licensing transactions, if any

o competing technological developments

o our proprietary patent position, if any, in our products

o the regulatory approval process for our products

o other factors which may not be within our control

We may not be able to obtain additional financing at such times on terms
favorable to us, if at all. For example, a decline in the trading volume or
price of our common stock may reduce the amount we may wish to draw down under
the equity line of credit agreement. In addition, our equity line of credit
agreement limits our ability to raise money by selling our securities to third
parties at a discount to the market price during the term of the equity line of
credit agreement. See "Equity Line of Credit Agreement--Restrictions on Future
Financings". If we need capital, but are unable to drawdown under the equity
line of credit agreement for any reason, we will need to negotiate with
Castlebar whether those restrictions can be lifted so we can obtain the capital
from other sources.

Without additional funding, we may be required to delay, reduce or eliminate one
or more research or development programs and reduce overall overhead expenses.
Such action may have an adverse effect on the market price of our common stock.

Our Products Are Subject To Regulatory Approvals Which Could Substantially Delay
or Prevent Us From Marketing Our Products

We embark on specific research or development projects that address unmet
medical needs and incur significant project costs in anticipation of filing a
New Drug Application (NDA). These projects are subject to significant regulation
by numerous governmental authorities in the United States and other countries.
The process of completing clinical testing and obtaining FDA approval for a new
drug product requires the expenditure of substantial resources over a number of
years. If we do not receive the necessary regulatory approvals along the way, we
will not be able to progress clinically in our projects and may be forced to
abandon projects after incurring substantial costs. Furthermore, we will not be
able to generate revenues and become profitable. Finally, we may encounter
significant delays or excessive costs in our efforts, even if we are eventually
successful in achieving regulatory approval.

7
<PAGE>

We Have No Experience in Marketing or Selling Our Products

Even if we are able to develop our products and obtain necessary regulatory
approvals, we have no experience in marketing or commercializing any of our
proposed products. We are dependent on our ability to find collaborative
marketing partners for commercial sale of our 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. In addition, a licensing transaction with a marketing partner does not
assure a product's success, which is dependent upon market acceptance by
patients, physicians or third party payors.

Our products may prove to be unsuccessful as a result of lack of acceptance by
government health administration authorities, private health care insurers and
other health care payers, such as health maintenance organizations and
self-insured employee plans, that determine reimbursement to the consumer. We
cannot assure you that such 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 would be adversely
affected.

We Expect That We Will Face Intense Competition That May Limit Our Ability To
Achieve Profitability

Our competitors are numerous and include, among others, major pharmaceutical
companies, biotechnology firms, universities and other research institutions. We
cannot assure you that our competitors will not succeed in developing
technologies and products that are more effective than the nasal technology
being developed by us or which would cause our technology or products to become
obsolete or noncompetitive.

Many of our competitors have substantially greater financial and technical
resources and production and marketing capabilities than we have. They also may
have greater experience in conducting preclinical testing and clinical trials of
pharmaceutical products and obtaining FDA and other regulatory approvals.
Therefore, our competitors may succeed in obtaining FDA approval for products
faster than we could. Even if we commence commercial sales of our products, we
will also be competing against their manufacturing efficiency and marketing
capabilities, areas in which we have limited or no experience.

Although we believe that our ownership of patents for our nasal delivery
products will limit direct competition with such products, we must also compete
with other promising technologies such as controlled release, target organ or
site release, pumps, polymers, microemulsion, monoclonal antibodies, inhalation,
ocular, liposomal, implants, transdermal passive and transdermal
electrotransport. Other products using these or other delivery alternatives may
be developed that may be as or more effective than our products and proposed
products. There can be no assurance that we will be able to compete effectively
with other commercially available products or drug delivery technologies.

We May Not Be Able To Manufacture Our Products or Perform Our Clinical Studies

All of our products for clinical and commercial use are manufactured at our
principal manufacturing facility located in Hauppauge, New York. All of these
products must be produced in compliance with federal and state regulations. Our
facilities are also subject to inspection by these authorities. In addition,
certain key suppliers are also subject to regulatory compliance. If we have a
problem at our manufacturing facility, or if we or our suppliers fail to comply
with federal and state regulations or otherwise fail to perform our respective
obligations in a timely fashion, such problems or failure by us or any supplier
could cause a delay in clinical trials or the supply of product to market. Any
significant delay could also jeopardize our performance contracts with
collaborative partners and result in material penalties to us.

We Are Subject To Factors of Changes in Our Industry That Are Beyond Our Control

The health care industry is changing rapidly as the public, government, medical
professionals and the pharmaceutical industry examine ways to broaden medical
coverage while controlling the increase in health care costs. Potential changes
could put pressure on the prices of prescription pharmaceutical products and
adversely affect our business or prospects. We cannot predict when, if any,
proposed health care reforms will be implemented, and such changes are beyond
our control.

8
<PAGE>

Unforeseen, Unknown Liabilities in Connection with the Operation of a
Newly-Acquired Business May Adversely Affect our Working Capital and Liquidity
and Reduce our Profitability

On August 8, 2000, we acquired Atossa HealthCare Inc., a development stage
company based in Washington state which is developing a proprietary platform of
diagnostics and treatments related to breast cancer risk assessment and
therapeutics and other women's health care products. The acquisition was
effected via a merger of Atossa Acquisition Corporation Inc., a wholly-owned
subsidiary of Nastech, with and into Atossa, pursuant to which Atossa became a
wholly-owned subsidiary of Nastech. Unforeseen, unknown liabilities may arise in
connection with the ownership and operation of Attosa. Although we believe that
the risk of pre-existing claims being successfully asserted against Nastech has
been minimized by the acquisition structures we have employed, we cannot assure
you that no such claims will be asserted or, if asserted, that such claims will
not result in material liabilities to us. The occurrence of any such liability
could have a material adverse effect on our working capital and liquidity and
reduce our profitability.

The Value of a Newly-Acquired Business May Not Be Commensurate with The Purchase
Price

The valuation of Atossa was not established by independent appraisal, but was
determined through purchase price negotiations among the parties. The
consideration paid for Atossa was based exclusively on these negotiations. A
variety of factors played a role in these negotiations, including its products
under development and its management. The consideration paid does not bear any
relationship to the net book value of the acquired company and may not
necessarily bear any relationship to any other recognized measure of value. We
cannot assure you that an independent valuation of Atossa would not have been
less than the consideration paid.

Our Failure to Integrate Our New Chief Executive Officer and the Newly-Acquired
Business Could Have a Material Adverse Effect on Our Business

On August 8, 2000, we hired Steven C. Quay, M.D., Ph.D. to replace Vincent D.
Romeo, Ph.D., who died on May 1, 2000, as our President, Chief Executive Officer
and Chairman of the Board. Dr. Quay is currently being integrated into our
management team, and we cannot assure you that this team will perform well
together. Because we depend upon the knowledge, experience and skills of our
management and research and development personnel, our inability to successfully
integrate him into the management team could have a material adverse effect on
our business. Our inability to successfully integrate and develop the
operations, technologies and other personnel of Atossa could also reduce our
profitability and inhibit future growth.

In addition, losing Dr. Quay, or any of our other key executives or research and
development personnel could also seriously harm our business. We cannot assure
you that we will be able to retain our key executives and research and
development personnel or that we would be able to replace any of them if we were
to lose their services for any reason. Competition for these executives is
intense. In addition, the location of our facilities may limit the pool of
technical talent available to us. Many of our key executives and R&D personnel
have been employed by our company for several years. If we had to replace any of
these individuals, we would not be able to replace the significant amount of
knowledge that they have about our operations. We do not maintain "key man"
insurance policies on any of our executives.

The Future Sale of Shares of Our Common Stock (Including Pursuant to the Equity
Line of Credit) May Dilute the Interests of Other Security Holders and Could
Depress the Price of Our Common Stock

As of August 31, 2000, there were 6,800,485 shares of common stock issued and
outstanding. As of June 30, 2000, there were outstanding options, warrants and
rights to purchase approximately 1,247,000 shares of our common stock. There are
also 600,000 shares of common stock subject to outstanding stock options granted
on August 8, 2000 to Steven C. Quay, our new President, Chief Executive Officer
and Chairman of the Board, and 1,299,000 the shares of common stock covered by
this prospectus which are issuable under the equity line of credit and under the
warrants granted to Castlebar and Jesup & Lamont. We may also issue additional
shares in acquisitions and may grant additional stock options to our employees,
officers, directors and consultants under our stock option plan. Lastly, subject
to some restrictions in the equity line of credit agreement, we may issue up to
300,000 shares of our common stock to investors at a discount to market price
without the consent of Castlebar.

The issuance of shares under the equity line of credit, to obtain additional
financing, and upon exercise of warrants, options or rights (or even the
potential of such issuance) will have a dilutive impact on other stockholders
and could have a negative effect on the market price of our common stock. In
addition, the shares issuable to Castlebar pursuant to the equity line of

9
<PAGE>

credit will be issued at a discount to the daily volume weighted average prices
of our common stock during the 22 trading days prior to the issuance to
Castlebar. This will further dilute our outstanding shares of common stock.

As we sell shares of our common stock to Castlebar pursuant to the equity line
of credit, and then Castlebar sells the common stock to third parties, our
common stock price may decrease due to the additional shares in the market. If
we decide to draw down on the equity line of credit as the price of our common
stock decreases, we will be required to issue more shares of our common stock
for any given dollar amount invested by Castlebar, subject to a designated
minimum put price specified by us. The more shares that are issued pursuant to
the equity line of credit, the more our shares will be diluted and the more our
stock price may decrease. This may encourage short sales, which could place
further downward pressure on the price of our common stock.

The Anti-Takeover Provisions of Our Stockholder Rights Plan May Limit
Stockholder Value

We have a stockholder rights plan designed to protect our stockholders from
coercive or unfair takeover tactics. 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.

Under the plan, we declared a dividend of one preferred stock purchase right
("Right") for each share of common stock outstanding on March 17, 2000. Each
Right entitles the holder to purchase from Nastech one one-thousandth (1/1,000)
of a share of Series A Junior Participating Preferred Stock for $50. 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 Right (other
than the acquiring entity) will have the right to receive, upon exercise of the
Right, shares of Nastech common stock or shares in the acquiring entity having a
value equal to two times the exercise price of the Right.

Our stockholder rights plan could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our shareholders. These
provisions could adversely affect the price of our common stock.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this prospectus and in the documents
that are incorporated by reference in this prospectus, all of which are subject
to risks and uncertainties. Forward-looking statements include information
concerning our possible or assumed future results of operations. Also, when we
use words such as "believe," "expect," "anticipate" or similar expressions, we
are making forward-looking statements. You should note that an investment in our
common stock involves certain risks and uncertainties that could affect our
future financial results. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in "Risk Factors" and elsewhere in this prospectus.

We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors described in the
preceding pages, as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results to
differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could materially and adversely affect our business, operating results
and financial condition.

10
<PAGE>

USE OF PROCEEDS

We will not receive any proceeds from the sale of shares by the selling
stockholders. However, we will receive the proceeds from any sale of common
stock to Castlebar under the equity line of credit agreement described in this
prospectus and upon the exercise of warrants held by Castlebar and Jesup &
Lamont when, and if, they exercise such warrants. If the entire equity line of
credit is fulfilled, and if all of the warrants are exercised, based upon the
market price of our common stock on August 31, 2000 ($6.25), we would realize
proceeds of approximately $6,853,000. The amount of proceeds takes into account
the discount to market price that will be paid by Castlebar and the $20,000 we
paid to Castlebar's legal counsel, Epstein Becker & Green P.C., to cover its
legal and administrative expenses. It also reflects the four percent (4%)
brokerage fee payable to Jesup & Lamont, which, based on the prior example,
would equal $259,500. In addition, a portion of the proceeds from the initial
drawdown under the equity line of credit, if and when made, may be used to pay
the expenses of this offering -- which are estimated at $170,000.

We expect to use substantially all the net proceeds for general corporate
purposes, including working capital, research and development and expansion of
sales and marketing activities. The amounts we actually expend for such working
capital and other purposes may vary significantly and will depend on a number of
factors including, but not limited to, the actual net proceeds received, the
amount of our future revenues and other factors described under "Risk Factors."
Accordingly, our management will retain broad discretion in the allocation of
the net proceeds. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses, technologies, product lines or products. We
have no current plans, agreements or commitments with respect to any such
transaction, and we are not currently engaged in any negotiations with respect
to any such transaction. Pending such uses, the net proceeds of this offering
will be invested in short-term, interest-bearing, investment grade securities or
guaranteed obligations of the U.S. government.

PRICE RANGE OF COMMON STOCK

Our common stock is quoted on The Nasdaq National Market under the symbol
"NSTK". The following table sets forth the range of high and low bid prices per
share of our common stock as reported on the Nasdaq National Market for the last
two and one-half years. These quotations represent prices between dealers and do
not reflect retail markups, markdowns or commissions and may not necessarily
represent actual transactions.

Low High
--- ----

2000

First Quarter .......................... $ 2.53 $ 8.38
Second Quarter ......................... $ 3.25 $ 5.88

1999

First Quarter .......................... $ 3.00 $ 6.25
Second Quarter ......................... 2.56 3.63
Third Quarter .......................... 2.75 4.44
Fourth Quarter ......................... 1.56 3.63

1998

First Quarter .......................... $ 10.38 $ 15.38
Second Quarter ......................... 7.63 12.50
Third Quarter .......................... 3.75 8.25
Fourth Quarter ......................... 3.00 5.50

Based on information supplied by our transfer agent, as of August 31, 2000, we
believe that there were approximately 5,000 record holders of our common stock,
including several brokerage firms holding shares in street name for beneficial
owners. On August 31, 2000, the closing bid price of our common stock as quoted
on The Nasdaq National Market was $6.25.

The shares sold by the selling stockholders will be made on The Nasdaq National
Market, on the over-the-counter market or otherwise at prices related to the
then current market price, or in negotiated private transactions, or in a
combination of

11
<PAGE>

these methods. The selling stockholders will act independently of us in making
decisions with respect to the form, timing, manner and size of each sale.

DIVIDEND POLICY

Since our inception, we have never paid or declared any cash dividends on our
shares of common stock. However, in February 2000, we declared a dividend of one
preferred stock purchase right for each share of common stock held of record on
March 17, 2000, under a stockholder rights plan designed to protect stockholders
from coercive or unfair takeover tactics. The preferred stock purchase rights
are exercisable only when a person or group of affiliated persons accumulate or
initiate a tender offer to purchase 15% or more of our common stock. Upon
exercise, each preferred stock purchase right will entitle its holder, other
than the acquirer and its affiliates, to purchase one one-thousandth of a share
of our Series A Junior Participating Preferred Stock at a price of $50 per one
one-thousandth of a preferred share. The terms of the rights plan and the
dividend paid on March 17, 2000, are more fully set out in the rights plan
incorporated by reference as an exhibit to the registration statement to which
this prospectus pertains.

We have no current plans to pay any further dividends on our common stock and
intend to retain earnings, if any, for working capital purposes. Any future
decision to pay dividends on the common stock will depend upon our results of
operations, capital requirements, the financial condition and other factors that
the board of directors deems relevant.

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2000 on an
actual basis. The following table does not give effect to our sale and issuance
of shares of common stock pursuant to the equity line of credit or pursuant to
the exercise of any stock purchase warrants held by Castlebar and Jesup &
Lamont. This table also does not give effect to our issuance of 600,000 shares
of common stock in connection with our acquisition of Atossa HealthCare Inc. on
August 8, 2000. This table should be read in conjunction with financial
statements and the notes thereto included or incorporated by reference in this
prospectus.

As of June 30, 2000
(unaudited)
(dollars in thousands)
----------------------

Stockholders' equity:
Common Stock, par value $.006 per share;
authorized: 25,000,000; issued: 6,277,485 ....... 38

Preferred Stock, par value $.01 per share;
authorized: 100,000; issued: none ............... 0

Additional paid-in capital ............................ 37,042

Accumulated earnings (deficit) ........................ (24,738)

Treasury stock, at cost, 77,000 shares ................ (151)
--------

Total capitalization .................................. $ 12,191
========

12
<PAGE>

DILUTION

The issuance of further shares and the eligibility of issued shares for resale
will dilute our common stock and may lower the price of our common stock. If you
invest in our common stock, your interest will be diluted to the extent of the
difference between the price per share you pay for the common stock and the pro
forma as adjusted net tangible book value per share of our common stock at the
time of sale. We calculate net tangible book value per share by calculating the
total assets less intangible assets and total liabilities, and dividing it by
the number of outstanding shares of common stock.

The net tangible book value of our common stock as of June 30, 2000, was
$12,191,000, or approximately $1.97 per share. Assuming that:

o on June 30, 2000, we issued a total of 1,200,000 shares to Castlebar
under the equity line of credit agreement at $3.92 per share, which
is 86.5% of the volume weighted average price for our common stock
on June 30, 2000, and reflects Castlebar's 13.5% discount; and

o on June 30, 2000, you purchased shares under this prospectus for
$4.50 per share, which was the closing price for our common stock on
June 30, 2000,

our pro forma net tangible book value as of June 30, 2000 would have been
$16,703,000, or $2.26 per share. This represents an immediate increase in the
net tangible book value of $0.29 per share to existing stockholders on June 30,
2000. This also represents an immediate dilution in net tangible book value of
approximately $2.24 per share to all purchasers of common stock in this
offering. The actual dilution to you may be greater or less than in this
example, depending on the actual price you pay for shares, the actual prices at
which we issue shares to Castlebar under the equity line of credit agreement and
how many of the vested options and warrants outstanding have been exercised at
the time of your investment. Furthermore, this example does not take into
account the 600,000 shares of common stock issued in connection with our
acquisition of Atossa HealthCare Inc., or the 600,000 options granted to Steven
C. Quay, our new President, Chief Executive Officer and Chairman of the Board,
both of which occurred on August 8, 2000.

13
<PAGE>

EQUITY LINE OF CREDIT AGREEMENT

Overview

On July 11, 2000, we entered into an equity line of credit agreement with
Castlebar Enterprises Limited, a British Virgin Islands corporation, in order to
establish a possible source of funding for the development of our current and
planned products. The equity line of credit agreement establishes what is
sometimes also referred to as an equity drawdown facility.

Upon the exercise of each drawdown, we will receive the amount of the drawdown
less a brokerage fee payable to Jesup & Lamont equal to 4% of the aggregate
purchase price for each put. Jesup & Lamont is the placement agent which
introduced Castlebar to us and is a registered broker-dealer.

The Drawdown Procedure and the Stock Purchases

We may request a drawdown once every 22 trading days, although we are under no
obligation to do so, by faxing a drawdown notice to Castlebar, stating the
amount of the drawdown we wish to exercise and the lowest daily volume weighted
average price, if any, at which we are willing to sell the shares. The threshold
price will be set by our President and Chief Executive Officer in his sole and
absolute discretion.

Amount of the Drawdown

The minimum amount we can draw down at any one time is $250,000 worth of common
stock. The maximum amount we can draw down at any one time will be determined at
the time of the drawdown request according to the following formula:

o 4.5% of the weighted average price of our common stock for the
three month period prior to the date of the put request

o multiplied by the total trading volume of the common stock for
the three month period prior to the date of the put request.

Calculation of Purchase Price

On the day following the delivery of the drawdown notice, a valuation period of
22 trading days will start. The price per share of common stock sold to
Castlebar will be determined on each of the 22 trading days following the
delivery of the drawdown notice as follows:

o On each trading day during the valuation period where the
daily volume weighted average price ("VWAP") of our common
stock on the Nasdaq National Market exceeds the threshold
price, if any, set forth in the drawdown notice, the purchase
price will equal to 86.5% of the VWAP on such day.

o If the VWAP on a given trading day is less than the threshold
price, then Castlebar will have the option to purchase the
common stock for such day at a price equal to 86.5% of the
threshold price.

o If Castlebar elects not to purchase shares when the VWAP is
below the threshold price, then the amount of the drawdown
will be reduced by 1/22.

Number of Shares Issued

On each of the 22 trading days during the valuation period, the number of shares
to be issued to Castlebar will be determined by dividing 1/22nd of the drawdown
amount by the purchase price on each trading day. If the VWAP for our common
stock on any trading day during the 22 trading day calculation period is below
the minimum threshold price, and Castlebar elects not to purchase shares when
the VWAP is below the threshold price, then we will not issue any shares on that
day, and the drawdown amount will be reduced by 1/22nd.

14
<PAGE>

If we set a threshold price too high and our stock price does not consistently
meet that level during the 22 trading days after our drawdown request, the
amount we can draw and the number of shares we sell to Castlebar will be
reduced. On the other hand, if we set a threshold price too low and our stock
price falls significantly but stays above the threshold price, we will have to
issue a greater number of shares to Castlebar at the reduced price.

Payment for Shares Issued

The shares purchased on the first 11 trading days will be issued and paid for on
the 13th trading day following the drawdown request. The shares purchased on the
12th through the 22nd trading days will be issued and paid for on the 24th
trading day following the drawdown request. We will receive the purchase price
less a brokerage fee payable to Jesup & Lamont equal to 4% of the aggregate
purchase price for each put.

Short Term Warrants

On the 13th and 24th trading day following the drawdown request, we will grant
Castlebar warrants to purchase a number of shares of common stock equal to 25%
of the number of shares purchased by Castlebar on each such date. These warrants
will expire one day after they are granted and will have an exercise price equal
to the weighted average of the purchase prices of the common stock purchased at
the closing of each drawdown. If Castlebar exercises these short term warrants,
the 1,200,000 shares available under the equity line of credit will be reduced
by the number of shares issued pursuant to such short term warrants.

Drawdown Warrants

On the 24th trading day following the drawdown request, we will also grant
Castlebar warrants to purchase an additional 1,000 shares of common stock for
each $100,000 we draw down under the equity line of credit. See "--The Grant of
Warrants and Costs of Closing Each Drawdown" below.

Sample drawdown calculation

The following is an example of the number of shares we would issue to Castlebar
if we had given a drawdown notice on May 21, 2000, indicating a drawdown amount
of $500,000 and a minimum threshold price of $4.00 per share:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Greater of Purchase
VWAP or Price Optional Purchase
Threshold Threshold (after (assumed for # of Shares
Trading Date VWAP Price Price discount) purpose of example) Principal Purchased
=========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1. 5/22/00 $ 4.662 $ 4.000 $ 4.662 $ 4.033 $ 22,727.27 5,636
-------------------------------------------------------------------------------------------------------------------------
2. 5/23/00 $ 4.431 $ 4.000 $ 4.431 $ 3.833 $ 22,727.27 5,930
-------------------------------------------------------------------------------------------------------------------------
3. 5/24/00 $ 4.693 $ 4.000 $ 4.693 $ 4.060 $ 22,727.27 5,598
-------------------------------------------------------------------------------------------------------------------------
4. 5/25/00 $ 4.605 $ 4.000 $ 4.605 $ 3.983 $ 22,727.27 5,706
-------------------------------------------------------------------------------------------------------------------------
5. 5/26/00 $ 4.486 $ 4.000 $ 4.486 $ 3.880 $ 22,727.27 5,857
-------------------------------------------------------------------------------------------------------------------------
6. 5/30/00 $ 3.898 $ 4.000 $ 4.000 $ 3.460 Option exercised $ 22,727.27 6,569
-------------------------------------------------------------------------------------------------------------------------
7. 5/31/00 $ 3.944 $ 4.000 $ 4.000 $ 3.460 Option exercised $ 22,727.27 6,569
-------------------------------------------------------------------------------------------------------------------------
8. 6/1/00 $ 3.864 $ 4.000 $ 4.000 $ 3.460 Not exercised N/A N/A
-------------------------------------------------------------------------------------------------------------------------
9. 6/2/00 $ 4.220 $ 4.000 $ 4.220 $ 3.651 $ 22,727.27 6,226
-------------------------------------------------------------------------------------------------------------------------
10. 6/5/00 $ 4.762 $ 4.000 $ 4.762 $ 4.119 $ 22,727.27 5,518
-------------------------------------------------------------------------------------------------------------------------
11. 6/6/00 $ 4.925 $ 4.000 $ 4.925 $ 4.260 $ 22,727.27 5,335
-------------------------------------------------------------------------------------------------------------------------
Settlement on Day 13 $ 3.856 $227,272.73 58,942
---------------------------------------------------------========--------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------
12. 6/7/00 $ 4.565 $ 4.000 $ 4.565 $ 3.949 $ 22,727.27 5,755
-------------------------------------------------------------------------------------------------------------------------
13. 6/8/00 $ 4.848 $ 4.000 $ 4.848 $ 4.193 $ 22,727.27 5,420
-------------------------------------------------------------------------------------------------------------------------
14. 6/9/00 $ 5.069 $ 4.000 $ 5.069 $ 4.385 $ 22,727.27 5,183
-------------------------------------------------------------------------------------------------------------------------
15. 6/12/00 $ 5.003 $ 4.000 $ 5.003 $ 4.327 $ 22,727.27 5,252
-------------------------------------------------------------------------------------------------------------------------
16. 6/13/00 $ 4.913 $ 4.000 $ 4.913 $ 4.250 $ 22,727.27 5,348
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

15
<PAGE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------
17. 6/14/00 $ 4.874 $ 4.000 $ 4.874 $ 4.216 $ 22,727.27 5,391
-------------------------------------------------------------------------------------------------------------------------
18. 6/15/00 $ 4.926 $ 4.000 $ 4.926 $ 4.261 $ 22,727.27 5,334
-------------------------------------------------------------------------------------------------------------------------
19. 6/16/00 $ 4.920 $ 4.000 $ 4.920 $ 4.255 $ 22,727.27 5,341
-------------------------------------------------------------------------------------------------------------------------
20. 6/19/00 $ 4.726 $ 4.000 $ 4.726 $ 4.088 $ 22,727.27 5,560
-------------------------------------------------------------------------------------------------------------------------
21. 6/20/00 $ 4.647 $ 4.000 $ 4.647 $ 4.020 $ 22,727.27 5,654
-------------------------------------------------------------------------------------------------------------------------
22. 6/21/00 $ 4.717 $ 4.000 $ 4.717 $ 4.080 $ 22,727.27 5,570
-------------------------------------------------------------------------------------------------------------------------
Settlement on Day 24 $ 4.180 $250,000.00 59,808
---------------------------------------------------------========--------------------------------------------------------

-------- ---------------------------
Totals $ 4.019 $477,272.73 118,751
======== ===========================
Less broker's (Jesup & Lamont) commission of 4% $(19,090.91)
-------- ---------------------------
Net proceeds to Nastech $ 3.858 $458,181.82 118,751
======== ===========================
</TABLE>

On trading day 13, we will grant Castlebar a short term warrant to purchase an
additional 14,735 of shares (25% of 1st settlement amount) with an exercise
price of $3.856 per share. This warrant will expire on the 14th trading day. On
trading day 24, we will grant Castlebar a short term warrant to purchase an
additional 14,952 of shares (25% of 2nd settlement amount) with an exercise
price $4.18 per share. This warrant will expire on the 25th trading day. If
Castlebar exercises either of these short term warrants, the number of shares
issued will reduce the 1,200,000 shares available under the equity line of
credit.

The Grant of Warrants and Costs of Closing Each Drawdown

At the closing of the equity line of credit on July 11, 2000, we paid $20,000 to
Castlebar's legal counsel, Epstein Becker & Green P.C., to cover its legal and
administrative expenses.

As consideration for the opening of the equity line of credit, we granted
Castlebar warrants to purchase 33,000 shares of common stock. As consideration
for the services rendered by Jesup & Lamont as placement agent in connection
with this offering, we granted Jesup & Lamont warrants to purchase 16,500 shares
of common stock. These warrants will be exercisable at any time prior to July
10, 2003, for $5.53 per share of common stock. However, if Castlebar ever fails
to honor a drawdown notice, Castlebar will forfeit and will return to us for
cancellation a pro-rata portion of the 33,000 warrants granted to them (not
including any warrants already exercised), based upon the portion of the
1,200,000 share commitment that has not been previously honored by Castlebar,
provided that Castlebar will be able to keep a minimum of 1,650 warrants upon
such forfeiture. Upon such forfeiture, we will maintain the registration
statement in effect for a reasonable period, but not more than 20 trading days,
so that Castlebar may dispose of any remaining shares of common stock held by
them.

At the closing of each drawdown, we will also grant warrants to each of
Castlebar and Jesup & Lamont to purchase an additional 1,000 shares of common
stock for each $100,000 we draw down under the equity line of credit, up to a
maximum of 33,000 additional warrants for Castlebar and 16,500 additional
warrants for Jesup & Lamont. These additional warrants will be exercisable for
three years from the grant date, and will have an exercise price equal 120% of
the average closing bid prices of our common stock on the 15 trading days prior
closing of each drawdown.

Neither Castlebar nor Jesup & Lamont will be obligated to exercise the warrants
and to purchase any shares of common stock pursuant to such warrants.

Lastly, upon the receipt of each drawdown amount from Castlebar, we will pay a
brokerage fee to Jesup & Lamont Securities Corporation equal to 4% of the
aggregate purchase price for each put. Jesup & Lamont is the placement agent
which introduced Castlebar to us and is a registered broker-dealer.

Necessary Conditions Before Castlebar is Obligated to Purchase our Shares

The following conditions must be satisfied before Castlebar is obligated to
purchase the common stock pursuant to a drawdown notice:

o A registration statement for the shares must be effective and
available on each drawdown settlement date so that Castlebar may
freely sell the shares of shares of common stock it purchases;

16
<PAGE>

o All our representations and warranties to Castlebar set forth in the
equity line of credit agreement must be true and correct in all
material respects;

o We will have made reasonable efforts to obtain all permits and
qualifications required by any state blue sky laws in the states
reasonably requested by Castlebar;

o We have delivered into escrow or to the Depository Trust Company
("DTC") the shares of common stock being purchased;

o We have delivered to our transfer agent instructions reasonably
satisfactory to Castlebar;

o We have satisfied all laws and regulations pertaining to the sale
and issuance of the shares of common stock to Castlebar;

o We have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the
private equity line of credit agreement, registration rights
agreement and escrow agreement, to be performed, satisfied or
complied with by us.

o No statute, rule, regulation, executive order, decree, ruling or
injunction may be in effect which prohibits consummation of the
transactions contemplated by the equity line of credit agreement;

o No litigation or proceeding nor any investigation by any
governmental authority can be pending which prohibits or adversely
affects the consummation of the transactions contemplated by the
equity line of credit agreement;

o There have not been any material adverse changes in our business,
operations, properties, or financial condition, except as disclosed
in our filings with the SEC;

o Trading in our common stock must not have been suspended by the SEC
or The Nasdaq National Market, and our common stock continues to be
listed on The Nasdaq National Market;

o We will have delivered an opinion of our counsel described in the
equity line of credit agreement regarding the validity of shares and
the matters listed above;

o Twenty-two (22) trading days have elapsed since the last drawdown
request; and

o Castlebar has received and is reasonably satisfied with other
documents as they may reasonably request.

In addition, we may not issue any shares of common stock under the equity line
of credit if such issuance results in Castlebar beneficially owning more than
9.9% of our then outstanding common stock. Of course, any resales of shares by
Castlebar would reduce the number of shares beneficially owned by Castlebar, and
would enable us to issue additional shares to Castlebar without violating this
condition.

The listing requirements of The Nasdaq National Market also prohibit us from
issuing 20% or more of our issued and outstanding shares of common stock at a
price less than the greater of market value or book value, unless we obtain
stockholder approval.

Restrictions on Future Financings

The equity line of credit agreement limits our ability to raise money by selling
our securities to third parties at a discount to the market price during the
term of the equity line of credit agreement. There are exceptions to this
limitation for securities sold in the following situations:

o pursuant to any presently existing or future employee benefit plan,
which plan has been or may be approved by our stockholders;

o pursuant to any compensatory plan for a full-time employee or key
consultant;

o in an underwritten registered public offering;

o in connection with a strategic partnership or other business
transaction, the principal purpose of which is not to raise money;

o in connection with a private placement for no more than 300,000
shares of common stock (or securities convertible into 300,000
shares of common stock) where the purchasers have registration
rights;

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o in connection with any bridge financing arrangement which includes,
as consideration for the lender to enter into such agreement, either
the issuance of no more than 300,000 shares of common stock (or
securities convertible into 300,000 shares of common stock) or an
option to purchase no more than 300,000 shares of common stock (or
securities convertible into 300,000 shares of common stock); and

o a transaction to which Castlebar gives its written approval.

Termination of the Equity Line of Credit Agreement

Castlebar may terminate the equity line of credit if any of the following events
occur:

o Any stop order or suspension of the effectiveness of this
registration statement issues for an aggregate of thirty (30)
trading days during the 36 month term of the equity line of credit
agreement, with some exceptions;

o Our shares of common stock are delisted from The Nasdaq National
Market unless such delisting is in connection with the listing of
such shares on a comparable stock exchange in the United States;

o Our common stock is no longer registered under Section 12(g) or
12(b) of the Exchange Act of 1934; or

o We cease to continue our corporate existence.

We may terminate the equity line of credit if Castlebar ever fails to honor a
drawdown notice.

Indemnification of Castlebar

Castlebar is entitled to customary indemnification from us for any losses or
liabilities suffered by it based upon material misstatements or omissions from
the registration statement and this prospectus, except as they relate to
information supplied by Castlebar to us for inclusion in the registration
statement and prospectus.

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SELLING STOCKHOLDERS

Overview

The 1,299,000 shares of common stock registered for resale under this prospectus
constitute 19.1% of our issued and outstanding shares of common stock as of
August 31, 2000. Because we do not know for certain how or when the selling
stockholders will choose to sell their shares of common stock, we cannot
estimate the amount of securities that will actually be offered for sale by the
selling stockholders. There can be no assurance that they will sell any or all
of the securities covered by this prospectus.

Castlebar Enterprises Limited

Castlebar Enterprises Limited is a British Virgin Island corporation engaged in
the business of investing in publicly traded equity securities for its own
account. Castlebar's principal offices are located at Aeulestrasse 74, FL-9490
Vaduz, Liechtenstein. Investment decisions for Castlebar are made by its board
of directors. Other than the 33,000 warrants we granted to Castlebar in
connection with closing the equity line of credit agreement, Castlebar does not
currently own any of our securities. Other than its obligation to purchase
shares of common stock under the equity line of credit agreement, it has no
other commitments or arrangements to purchase or sell any of our securities.
There are no business relationships between Castlebar and us other than the
equity line of credit agreement.

Jesup & Lamont Securities Corporation

Jesup & Lamont Securities Corporation has acted as placement agent in connection
with the equity line of credit agreement. Jesup & Lamont introduced us to
Castlebar and assisted us with structuring the equity line of credit with
Castlebar. Jesup & Lamont's duties as placement agent were undertaken on a
reasonable best efforts basis only. It made no commitment to purchase shares
from us and did not ensure us of the successful placement of any securities.

Other than the warrants granted to Jesup & Lamont as a placement fee, Jesup &
Lamont does not currently own any of our securities. The decision to exercise
any warrants granted to Jesup & Lamont, and the decision to sell the common
stock issued pursuant to the warrants, will be made by Jesup & Lamont's officers
and board of directors.

The selling stockholders have not held any positions or offices or had material
relationships with us or any of our affiliates within the past three years other
than as a result of the ownership of our common stock. If, in the future, the
selling stockholders' relationship with us changes, we will amend or supplement
this prospectus to update this disclosure.

PLAN OF DISTRIBUTION

General

Castlebar and Jesup & Lamont may offer for sale up to 1,299,000 shares of our
common stock which they will originally acquire pursuant to the terms of the
equity line of credit agreement and the warrants we issued to them as more fully
described under "Recent Events--Equity Line of Credit Agreement." Castlebar and
Jesup & Lamont will be offering such shares for their own account. We do not
know for certain how or when the selling stockholders will choose to sell their
shares of common stock. We will not receive any proceeds from the sale of shares
of common stock by the selling stockholders.

To permit Castlebar and Jesup & Lamont to resell the shares of common stock
issued to them, we agreed to file a registration statement and all necessary
amendments and supplements with the SEC for the purpose of registering and
maintaining the registration of the shares. We will bear all costs relating to
the registration of the common stock offered by the prospectus. We will keep the
registration statement effective until the earliest of any of the following
dates:

o the date after which none of the shares of common stock held by
Castlebar that are covered by the registration statement are or may
become issued and outstanding;

o the date after which all of the shares of common stock held by
Castlebar have been transferred to persons who may trade such shares
without restriction under the Securities Act of 1933 and we have
delivered new certificates or other evidences of ownership of such
shares without any restrictive legend;

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o the date after which all of the shares of common stock held by
Castlebar that are covered by the registration statement have been
sold by Castlebar pursuant to such registration statement;

o the date that Castlebar or its transferees receive an opinion of our
counsel that their shares of common stock may be sold under the
provisions of Rule 144 promulgated under the Securities Act without
any applicable volume limitations;

o the date after which all of the shares of common stock held by
Castlebar may be sold, in the opinion of our counsel, without any
time, volume or manner limitations under Rule 144(k) under the
Securities Act of 1933; or

o if Castlebar ever fails to honor a drawdown under the equity line of
credit, we will maintain the registration statement in effect only
for so long as Castlebar may request in order to dispose of any
remaining shares of common stock held by them, not to exceed 20
trading days.

The selling stockholders will offer our common stock into the public market
using this prospectus or under Rule 144 instead of under this prospectus, if
they qualify. Shares of common stock offered through this prospectus or under
Rule 144 may be sold from time to time by Castlebar and Jesup & Lamont, although
there can be no assurance that they will in fact sell any or all of the
securities covered by this prospectus. Such sales may be made on The Nasdaq
National Market, on the over-the-counter market or otherwise at prices related
to the then current market price, or in negotiated private transactions, or in a
combination of these methods. The selling stockholders will act independently of
us in making decisions with respect to the form, timing, manner and size of each
sale. We have been informed by the selling stockholders that there are no
existing arrangements between them and any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of shares of common
stock which may be sold by them through this prospectus.

The shares of common stock may be sold in one or more of the following manners:

o block trades in which the broker or dealer so engaged will attempt
to sell the shares as agent, but may position and resell a portion
of the block as principal to facilitate the transaction;

o purchases by a broker or dealer for its account under this
prospectus; or

o ordinary brokerage transactions and transactions in which the broker
solicits purchases.

The selling stockholders will pay all commissions and their own expenses, if
any, associated with the sale of the shares of common stock. Sales by the
selling stockholders will be without the payment of any underwriting discounts
or commissions, except for usual and customary selling commissions paid to
brokers or dealers. However, in effecting sales, brokers or dealers engaged by
the selling stockholders may arrange for other brokers or dealers to
participate. Except as disclosed in a supplement to this prospectus, no
broker-dealer will be paid more than a customary brokerage commission in
connection with any sale of the shares of common stock by the selling
stockholders. Brokers or dealers may receive commissions, discounts or other
concessions from the selling stockholders in amounts to be negotiated
immediately prior to the sale. The compensation to a particular broker-dealer
may be in excess of customary commissions. Profits on any resale of the shares
of common stock as a principal by such broker-dealers and any commissions
received by such broker-dealers may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Any broker-dealer participating in
such transactions as agent may receive commissions from the selling stockholders
(and, if they act as agent for the purchaser of such shares of common stock,
from such purchaser).

Broker-dealers may agree with the selling stockholders to sell a specified
number of shares of common stock at a stipulated price per share and, to the
extent a broker-dealer is unable to do so acting as agent for the selling
stockholders, to purchase as principal any unsold shares of common stock at a
price required to fulfill the broker-dealer commitment to the selling
stockholders. Broker-dealers who acquire shares of common stock as principal may
thereafter resell such shares of common stock from time to time in transactions
(which may involve crosses and block transactions and which may involve sales to
and through other broker-dealers, including transactions of the nature described
above) in the over-the-counter market, in negotiated transactions or otherwise
at market prices prevailing at the time of sale or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
shares of common stock commissions computed as described above. Brokers or
dealers who acquire shares of common stock as principal and any other
participating brokers or dealers may be deemed to be underwriters in connection
with resales of the shares of common stock.

Castlebar is deemed a statutory underwriter within the meaning of Section 2(11)
of the Securities Act of 1933 with respect to any shares sold by it. Castlebar
has agreed to be named as a statutory underwriter and will be acting as an
underwriter in

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<PAGE>

its resales of the shares of common stock under this prospectus. Because
Castlebar is deemed a statutory underwriter, the discounts and concessions it
receives upon purchases of our common stock, and any profits it receives on the
resale of the shares, will be deemed to be underwriting discounts and
commissions under the Securities Act. Each time Castlebar purchases shares of
our common stock under the equity line of credit agreement, it will receive a
substantial discount to then current market price of our common stock. The price
at which we will issue shares of common stock to Castlebar will be 13.5% below
the daily volume weighted average prices of the common stock on The Nasdaq
National Market during the 22 trading days following a drawdown notice. Assuming
an average volume weighted average price of $6.25 (based on recent daily closing
bid prices of the common stock on Nasdaq National Market during August 2000),
and assuming we use the entire line of credit and issue all 1,200,000 shares
registered for issuance under the equity line of credit agreement, Castlebar
will receive "underwriting compensation" in the form of its discounted purchase
price equal to $1,012,500, or $0.84375 per share. In connection with the equity
line of credit, we granted 33,000 warrants to Castlebar, which are exercisable
for $5.53 per share of common stock at any time prior to July 10, 2003, and in
the future we may grant Castlebar up to an additional 33,000 warrants at the
time of the drawdowns under the equity line of credit, which warrants will be
exercisable for three years from the grant date, and will have an exercise price
equal to 120% of the average closing bid prices of our common stock on the 15
trading days prior the grant date. The warrants granted to Castlebar will also
be deemed to be underwriting commission under the Securities Act. Lastly, at the
closing of the equity line of credit on July 11, 2000, we paid $20,000 to
Castlebar's legal counsel, Epstein Becker & Green P.C., to cover Castlebar's
legal and administrative expenses in connection with negotiating the equity line
of credit.

Castlebar and Jesup & Lamont are also subject to applicable state and federal
securities laws, rules and regulations, including Rule 10b-5 and Regulation M
under the Exchange Act of 1934, and the rules and regulations of The Nasdaq
National Market. Pursuant to such rules, the selling stockholders may not:

(1) engage in market making activities at the same time as they are
engaged in a distribution of the shares of common stock for a period
beginning when such person becomes a distribution participant and
ending upon such person's completion of participation in a
distribution;

(2) engage in any stabilization activity in connection with our
securities;

(3) impose penalty bids or effect passive market making bids; and

(4) bid for or purchase any of our common stock or attempt to induce any
person to purchase any of our common stock other than as permitted
under the Exchange Act.

In addition, any selling stockholders who may be "affiliated purchasers" of us
as defined in Regulation M, must coordinate their sales under this prospectus
with each other and with us for purposes of Regulation M as required by
Securities Exchange Act Release 34-38067 (December 20, 1996). None of the
selling stockholders has been an officer, director or otherwise an affiliate of
our company during the last three years. In addition to the rules and
regulations applicable to it, Castlebar has also agreed not to engage in any
short sales of our common stock as long as the equity line of credit is active.
These restrictions, and the other rules and regulations applicable to the
selling stockholders, may affect the marketability of the shares of common
stock.

Limited Grant of Registration Rights

We granted registration rights to Castlebar to enable it to sell the common
stock it purchases under the equity line of credit agreement. In connection with
any such registration, we will have no obligation:

o to assist or cooperate with Castlebar in the offering or disposition
of such shares;

o to indemnify or hold harmless the holders of any such shares (other
than Castlebar) or any underwriter designated by such holders;

o to obtain a commitment from an underwriter relative to the sale of
any such shares; or

o to include such shares within any underwritten offering we do.

We will assume no obligation or responsibility whatsoever to determine a method
of disposition for such shares or to otherwise include such shares within the
confines of any registered offering other than the registration statement of
which this prospectus is a part.

We will file one or more post-effective amendments to the registration statement
of which this prospectus is a part to describe any material change to the
information in this prospectus (including with respect to the plan of

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<PAGE>

distribution) for as long as Castlebar holds shares of our stock or until such
shares can be sold pursuant to an appropriate exemption from registration. This
obligation may include, to the extent required under the Securities Act of 1933,
that a supplemental prospectus be filed, disclosing:

o the name of any broker-dealers;

o the number of shares of common stock involved;

o the price at which the shares of common stock are to be sold;

o the commissions paid or discounts or concessions allowed to
broker-dealers, where applicable;

o that broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this prospectus,
as supplemented; and

o any other facts material to the transaction.

Our registration rights agreement with Castlebar permits us to restrict the
resale of the shares Castlebar has purchased from us under the equity line of
credit agreement for a period of time sufficient to permit us to amend or
supplement this prospectus to include material information. If we restrict
Castlebar at any time within five trading days of the closing of any drawdown
and our stock price declines during the restriction period, then, in order to
compensate Castlebar for its inability to sell shares during the restriction
period, we will be required to issue to Castlebar a number of additional shares
of our common stock equal to the difference between:

o the product of

o the number of shares purchased by Castlebar pursuant to the
most recent drawdown and still held by Castlebar during the
restriction period that are not otherwise freely tradable, and

o the difference between closing bid price on the day
immediately preceding the restriction period and the closing
bid price on the day immediately after the restriction period,
minus

o the number of shares purchased by Castlebar pursuant to the most
recent drawdown and still held by Castlebar during the restriction
period that are not otherwise freely tradable.

If any such issuance would result in the issuance of a number of shares which
exceeds the number permitted under the equity line of credit agreement (see
"Equity Line of Credit Agreement--Necessary Conditions Before Castlebar is
Obligated to Purchase our Shares"), then in lieu of such issuance, we will pay
Castlebar an amount in cash equal to the closing ask price of the shares that
would have been issuable pursuant to the formula contained in the previous
sentence.

DESCRIPTION OF CAPITAL STOCK

The following summary describes the material provisions of our capital stock and
is subject to, and qualified in its entirety by, our Certificate of
Incorporation, and amendments thereto, and our By-laws, all of which are
incorporated by reference as exhibits to the registration statement of which
this prospectus is a part and by provisions of applicable law.

We are authorized to issue up to 25,000,000 shares of common stock, par value
$0.006, and 100,000 shares of preferred stock, par value $0.01. As of August 31,
2000, 6,800,485 shares of common stock were issued and outstanding, and no
shares of preferred stock were outstanding. According to our transfer agent, as
of August 31, 2000, there were approximately 5,000 record holders of our common
stock, including several brokerage firms holding shares in street name for
beneficial owners.

Common Stock

All of our issued and outstanding shares of common stock are validly issued,
fully paid and non-assessable. All shares of our common stock to be outstanding
after this offering, when paid for and issued, will be validly issued, fully
paid and non-assessable. On March 2, 2000, in connection with the adoption of a
shareholder rights plan, our board of directors created and designated 10,000
shares of Series A Junior Participating Preferred Stock. The rights of holders
of our common stock are subject to the rights of the holders of our Series A
Junior Participating Preferred Stock and will be subject to the rights of any
preferred stock that we may create and issue in the future. The rights of
preferred stockholders may adversely affect the rights of the common
stockholders.

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Voting Rights. Holders of our common stock are entitled to one vote per share on
all matters requiring a vote of the stockholders. Common stockholders have no
right to cumulative voting in the election of directors. Accordingly, each of
our directors can be elected by a simple majority of votes (51%).

Liquidation Rights. In the event of liquidation of our company, all holders of
our common stock will participate on an equal basis in the net assets available
for distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock, if there are any.

Dividend Rights. Holders of our common stock are entitled to receive dividends
in cash or property on an equal basis, if and when dividends are declared by the
board of directors on the common stock, subject to any preference in favor of
outstanding shares of preferred stock, if there are any. It is our present
intention to retain our earnings, if any, for use in our business. Dividends
are, therefore, unlikely in the foreseeable future.

Preemptive Rights and Redemption. The holders of our common stock have no
preemptive rights to maintain their respective percentage ownership interest in
our other securities. Our common stock is not redeemable or subject to further
calls or assessments, although we have in the past effected a 1:100 reverse
split of our common stock followed immediately by a 100:1 forward split to
enable us to redeem odd-lot shares which were creating excessive administrative
costs for us. As of December 31, 1999, we redeemed and then retired 110,736
odd-lot shares. We also acquired 77,000 shares of our common stock in 1999, and
are holding these shares as treasury stock.

Preferred Stock

We are authorized to issue up to 100,000 shares of preferred stock, without
stockholder approval.

Pursuant to the authority granted to and vested in our board of directors, in
March 2000, the board of directors created a series of preferred stock and fixed
the relative rights, preferences and limitations thereof. The series was
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Junior Preferred Stock"), and consisted of 10,000 shares. The dividend and
distribution rights of the holders of the Series A Junior Preferred Stock are
superior to the dividend and distribution rights of the holders of our common
stock, but are junior to all series of any other class of our preferred stock
with respect to the payment of dividends and the distribution of assets. The
Series A Junior Preferred Stock is not redeemable.

Each share of Series A Junior Preferred Stock entitles the holder thereof to
1,000 votes on all matters submitted to a vote of our stockholders, and vote
together as one class with the holders of our common stock. However, the holders
of the Series A Junior Preferred Stock are entitled to vote together as a single
class on any amendment to our Certificate of Incorporation which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Preferred Stock.

Upon our liquidation, dissolution or winding up, the holders of Series A Junior
Preferred Stock are entitled to receive $1,000 (plus the amount of any accrued
and unpaid dividends) for each share of Series A Junior Preferred Stock held,
subject to adjustment. Additionally, upon any consolidation or merger of our
company in which the shares of our common stock are exchanged for other stock,
securities, cash or any other property, then each share of Series A Junior
Preferred Stock shall be similarly exchanged, at the same time, into an amount
per share equal to 1,000 times the aggregate amount of stock, securities, cash
or any other property in which the common stock was exchanged. The relative
rights, preferences and limitations of the Series A Junior Preferred Stock are
more fully set forth in the Designations of Rights, Terms and Preferences of
Series A Junior Participating Preferred Stock included as an exhibit to our
Current Report on Form 8-K dated February 22, 2000, incorporated by reference
into this prospectus.

Our board of directors has the express authority, without any vote or action by
the stockholders, to create additional series of preferred stock and to fix the
rights, preferences, privileges and restrictions of such preferred stock,
including dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, and liquidation preferences, and to set the
number of shares constituting any series of preferred stock.

It is impossible for us to state the actual effect on common stockholders if the
board of directors designates a new series of preferred stock. The effects of
such a designation will not be determinable until the rights accompanying the
series have been designated. The issuance of preferred stock could adversely
affect the voting power, liquidation rights or other rights held by owners of
common stock or other series' of preferred stock. We have no present plans to
issue any additional shares of preferred stock.

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Stockholder Rights Plan

In February 2000, we implemented a stockholder rights plan designed to protect
our stockholders from coercive or unfair takeover tactics by causing shares of
our preferred stock with voting or conversion rights to be issued to holders who
might side with our board of directors in opposing a takeover bid. In addition,
our issuance of such shares of preferred stock with voting or conversion rights
could dilute the stock ownership of such person or entity. Under the stockholder
rights plan, we declared a dividend of one preferred stock purchase right for
each share of common stock held of record on March 17, 2000. The preferred stock
purchase rights are exercisable only when a person or group of affiliated
persons accumulate or initiate a tender offer to purchase 15% or more of our
common stock. Upon exercise, each preferred stock purchase right will entitle
its holder, other than the acquirer and its affiliates, to purchase one
one-thousandth of a share of our Series A Junior Participating Preferred Stock
at a price of $50 per one one-thousandth of a preferred share. The holder of
each right will receive upon exercise, common shares having a value equal to two
times the exercise price of the right. For example, at an exercise price of $50
per right, each right not owned by the acquiror would be entitled to purchase
$100 worth of common stock for $50. Assuming a value of $25 per common share at
the time, the holder of each right would be entitled to purchase four common
shares for $50. The terms of the rights plan and the dividend paid on March 17,
2000, are more fully set out in the rights plan included as an exhibit to our
Current Report on Form 8-K dated February 22, 2000, incorporated by reference
into this prospectus.

Options and Warrants

Under our stock option plan, we are authorized to grant options to purchase a
maximum of 1,500,000 shares of common stock to our employees, officers, and
directors, and to other persons who provide us with services. As of June 30,
2000, a total of 1,631,798 options have been granted under our stock option plan
(of which 268,000 have been terminated, 40,000 have expired, 985,864 have vested
and 145,998 have been exercised), and 322,200 options were available for future
grants under our stock option plan. Terms of our options are determined at the
time of grant by our board of directors.

In connection with our 1997 public offering, we issued to the representatives of
the underwriters, warrants to purchase a total of 69,000 shares of common stock
at an exercise price of $16.80 per share, exercisable at any time through
January 23, 2002.

Following our acquisition of Atossa HealthCare Inc. on August 8, 2000, we hired
Dr. Steven C. Quay as our new President, Chief Executive Officer and Chairman of
the Board and granted him options to purchase a total of 600,000 shares of
common stock. The exercise price of the options varies from $4.09 per share to
$15.00 per share, with a weighted average exercise price of $8.60. All of these
options (regardless of the exercise price) will vest at the rate of 33.33% per
full year of service, and will not vest pro-rata during the interim periods.

The following table presents all the options and warrants that were outstanding
as of August 31, 2000 (including the warrants granted to Castlebar and Jesup &
Lamont):

Number of Shares Weighted Average
Purchasable Exercise Price (1)
---------------- ------------------

1,177,800(2) $ 4.90
69,000(3) $16.80
49,500(4) $ 5.53
600,000(5) $ 8.60
--------- ------
1,896,300 $ 6.52
========= ======

----------

(1) Exercise prices are rounded to the nearest cent.

(2) Shares issuable upon exercise of options granted under the stock option
plan. Does not include any options granted under the plan after June 30,
2000.

(3) Total shares issuable upon exercise of warrants granted to Wheat, First
Securities, Inc. and Volpe, Welty & Company, as underwriters in connection
with an offering of our shares in 1997.

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<PAGE>

(4) Shares issuable upon exercise of the warrants granted to Jesup & Lamont as
a placement fee, and to Castlebar in connection with closing the equity
line of credit agreement. Does not include the additional warrants that
may be issued to Castlebar and Jesup & Lamont upon each drawdown under the
equity line of credit.

(5) Shares issuable upon exercise of options granted on August 8, 2000, to Dr.
Steven C. Quay.

Holders of options and warrants do not have any of the rights or privileges of
our stockholders, including voting rights, prior to exercise of the options and
warrants. We have reserved sufficient shares of authorized common stock to cover
the issuance of common stock subject to the options and warrants.

Section 203 of the Delaware General Corporation Law

We are subject to Section 203 of the General Corporation Law of the State of
Delaware (the "DGCL"), which prevents an "interested stockholder" from engaging
in a "business combination" with a publicly-held Delaware corporation for three
years following the date such person became an interested stockholder, unless:

(1) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved
the business combination;

(2) upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced; or

(3) following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of
the outstanding voting stock of the corporation not owned by the
interested stockholder.

The DGCL defines an "interested stockholder" as a person owning 15% or more of a
corporation's outstanding voting stock. A "business combination" includes
mergers, stock or asset sales and other transactions resulting in a financial
benefit to the interested stockholder.

The provisions of Section 203 of the DGCL could have the effect of delaying,
deferring or preventing a change in control.

Indemnification and Limitation of Liability

Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law as currently or hereafter in effect.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duty as a director,
except for liability:

(1) for breach of their duty of loyalty to the corporation or its
stockholders;

(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

(3) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL; or

(4) for any transaction from which the director derives an improper
personal benefit.

Our Certificate of Incorporation provides for the mandatory indemnification of,
and advancement of expenses to, our directors, officers, employees and agents to
the maximum extent permitted by Section 145 of the DGCL, as amended from time to
time.

Transfer Agent

The transfer agent and registrar for our common stock is the American Stock
Transfer & Trust Company, 40 Wall Street, New York, New York 10005.

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WHERE YOU CAN FIND MORE INFORMATION

This prospectus is part of a registration statement on Form S-2 that we have
filed with the SEC. Parts of the registration statement have been omitted from
this prospectus as permitted by the rules and regulations of the SEC, and this
prospectus does not contain all of the information contained or incorporated by
reference in the registration statement. In particular, statements in this
prospectus concerning the terms of certain agreements and other documents are
necessarily summaries of those documents, and in each case we refer you to the
copy of the applicable document to the extent we have filed it as an exhibit to
the registration statement. For further information on us and the information in
this prospectus, we refer you to the registration statement and its exhibits.
You may obtain copies of the registration statement and its exhibits by paying a
prescribed fee, or you may examine them without charge, at the public reference
facilities maintained by the SEC at its office at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the SEC at
Seven World Trade Center, New York, New York 10048 and Citicorp Center, 300 West
Madison Street, Chicago, Illinois 60661. You may obtain information on the
operation of the public reference facilities by calling the SEC at
1-800-SEC-0330. In addition, you may obtain copies of the registration statement
and its exhibits at the SEC's website located at http://www.sec.gov.

We are a reporting company and file our annual, quarterly and current reports,
proxy material and other information with the Securities and Exchange
Commission. You may read and copy any materials that we file with the SEC at the
SEC's public reference facilities listed above, as well as on the SEC's website.

INCORPORATION OF INFORMATION BY REFERENCE

The SEC allows us to "incorporate by reference" information that we file with
them, which means that we can disclose important information to you by referring
you to the documents filed with them. The information incorporated by reference
is an important part of this prospectus. We incorporate by reference the
following documents which we have previously filed with the SEC:

1. Our Annual Report on Form 10-K for the fiscal year ended December
31, 1999;

2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000; and

3. Our Quarterly Report on Form 10-Q for the quarter ended June 30,
2000; and

4. Our Current Report on Form 8-K dated February 22, 2000; and

5. Our Current Report on Form 8-K dated July 12, 2000; and

6. Our Current Report on Form 8-K dated August 8, 2000.

A copy of our abovementioned 10-K and 10-Qs are included with this prospectus.
If you need another copy of these documents, we will provide you with a free
copy upon oral or written request. However, we will not include exhibits to
those documents unless they are specifically incorporated by reference into this
prospectus. Requests should be directed to:

Nastech Pharmaceutical Company Inc.
Attn: Steven C. Quay, M.D., Ph.D.
President & Chief Executive Officer
45 Davids Drive
Hauppauge, New York 11788
(631) 273-0101

In making a decision to buy our common stock, you should rely only on the
information incorporated by reference or contained in the prospectus. We have
not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it.

You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospectus may have changed since
that date.

26
<PAGE>

MATERIAL CHANGES

The following are the material changes in our affairs that have occurred since
the end of our last fiscal year and which were not described in our most recent
quarterly report delivered to our stockholders:

Acquisition of Atossa HealthCare Inc.

On August 8, 2000, we acquired Atossa HealthCare Inc. ("Atossa"), a development
stage company based in Washington State which is developing a proprietary
platform of diagnostics and treatments related to breast cancer risk assessment
and therapeutics and other women's health care products. The acquisition was
effected via a merger of Atossa Acquisition Corporation Inc., a wholly-owned
subsidiary of Nastech, with and into Atossa. Following the merger, Atossa became
a wholly-owned subsidiary of Nastech. The merger was accounted for as a purchase
and was intended to be a tax-free plan of reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended.

Pursuant to the merger, the shareholders of Atossa received one share of our
common stock for each 5.051 shares of Atossa common stock held at the time of
the merger. The total consideration paid for Atossa -- 600,000 shares of Nastech
common stock, with a market value of approximately $2,500,000 -- was agreed upon
between Nastech and Atossa after extensive negotiations. The consideration paid
for Atossa was based exclusively on these negotiations. The consideration paid
does not bear any relationship to the net book value of Atossa and may not
necessarily bear any relationship to any other recognized measure of value. The
terms of merger are more fully set out in the Agreement and Plan of
Reorganization included as an exhibit to the registration statement of which
this prospectus forms a part.

In the opinion of our management, a substantial portion of the approximately
$2,500,000 acquisition price will be accounted for as a charge for in-process
research & development in the third fiscal quarter of 2000. This investment in
Atossa amounted to less than 20% our total assets as indicated on our December
31, 1999 balance sheet. The assets and the income (loss) of Atossa also amounted
to significantly less than 20% of our total assets and income (loss),
respectively, as indicated on our December 31, 1999 financial statements. The
acquisition of Atossa did not involve the acquisition of any plants, equipment
or other physical property.

Hiring Dr. Steven C. Quay as our new President, Chief Executive Officer, and
Chairman of the Board

Following the merger, Steven C. Quay, M.D., Ph.D., the founder of Atossa, became
our President, Chief Executive Officer, and Chairman of the Board. In 1991, Dr.
Quay founded SONUS Pharmaceuticals, Inc. to develop ultrasound agents based on
his inventions. EchoGen(R), SONUS' first product, is approved for sale in Europe
and awaits FDA approval. In 1984, Dr. Quay founded Salutar Inc. to develop
magnetic resonance imaging (MRI) contrast agents and was awarded 24 patents
covering MRI technology. At Salutar, he launched the pharmaceuticals
OmniScan(R) and TeslaScan(R), which are approved for use in the United States,
Europe and Japan. Dr. Quay holds more than 40 patents, is a member of a broad
range of scientific and business associations and has published more than 100
papers in diagnostic imaging, oncology, protein chemistry and genetics. Dr. Quay
has served on the faculty of Stanford University School of Medicine and as the
industrial representative to the Food & Drug Administration Advisory Panel for
Radiological Products. He holds an M.D., M.A. and Ph.D. from the University of
Michigan Medical School. Dr. Quay completed post-graduate research at the
Massachusetts Institute of Technology and received his residency training at the
Massachusetts General Hospital. Dr. Quay is 49 years old.

Following the merger, Dr. Quay beneficially owns 593,939 shares of our common
stock, which equals approximately 8.7% of our outstanding shares. The terms of
Dr. Quay's employment are set out in the Employment Agreement included as an
exhibit to the registration statement of which this prospectus forms a part.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon by Roberts,
Sheridan & Kotel, a Professional Corporation.

27
<PAGE>

EXPERTS

The financial statements of Nastech Pharmaceutical Company Inc. as of December
31, 1999, and for each of the years in the three-year period ended December 31,
1999, are incorporated by reference in this prospectus and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, upon the authority of said firm
as experts in accounting and auditing.

28
<PAGE>

1,299,000 Shares

[LOGO]

Common Stock

PROSPECTUS

_____________, 2000

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The fees and expenses we incurred in connection with the offering are payable by
us and, other than registration, filing and listing fees, are estimated as
follows:

Securities and Exchange Commission Registration Fee ............. $ 2,033
Nasdaq Fee for Listing of Additional Shares ..................... $ 13,000
Legal Fees and Expenses ......................................... $130,000
Accounting Fees ................................................. $ 15,000
Miscellaneous Fees and Expenses ................................. $ 10,000
--------

Total ........................................................... $170,033
========

ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Our Certificate of Incorporation provides that the indemnification provisions of
Sections 102(b)(7) and 145 of the Delaware General Corporation Law shall be
utilized to the fullest extent possible. Further, the Certificate of
Incorporation contains provisions to eliminate the liability of our directors to
Nastech or its stockholders to the fullest extent permitted by Section 102(b)(7)
of the Delaware General Corporation Law, as amended from time to time.

Section 145 of the Delaware General Corporation Law provides that a corporation
may indemnify directors and officers as well as other employees and individuals
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
any threatened, pending or completed actions, suits or proceedings in which such
person is made a party by reason of such person being or having been a director,
officer, employee or agent of the corporation. The Delaware General Corporation
Law provides that Section 145 is not exclusive of other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.

Section 102(b)(7) of the Delaware General Corporation Law permits a corporation
to provide in its certificate of incorporation that a director of the
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. Our Certificate of Incorporation provides for such
limitation of liability.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, is permitted for our directors, officers or controlling
persons, pursuant to the above mentioned statutes or otherwise, we understand
that the Securities and Exchange Commission is of the opinion that such
indemnification may contravene federal public policy, as expressed in said Act,
and therefore, may be unenforceable. Accordingly, in the event that a claim for
such indemnification is asserted by any of our directors, officers or
controlling persons, and the Commission is still of the same opinion, we (except
insofar as such claim seeks reimbursement from us of expenses paid or incurred
by a director, officer of controlling person in successful defense of any
action, suit or proceeding) will, unless the matter has theretofore been
adjudicated by precedent deemed by our counsel to be controlling, submit to a
court of appropriate jurisdiction the question whether or not indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

At present, there is no pending litigation or proceeding involving any of our
directors, officers or employees as to which indemnification is sought, nor are
we aware of any threatened litigation or proceeding that may result in claims
for indemnification.

II-1
<PAGE>

ITEM 16. EXHIBITS.

The following exhibits are filed with this Registration Statement:

Exhibit
Number Description
------ -----------

2.1 Equity Line of Credit Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited

2.2 Registration Rights Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited

2.3 Escrow Agreement dated as of July 11, 2000, among Registrant, Castlebar
Enterprises Limited and Epstein Becker & Green, P.C.

2.4 Stock Purchase Warrant dated July 11, 2000, issued to Castlebar
Enterprises Limited

2.5 Stock Purchase Warrant dated July 11, 2000, issued to Jesup & Lamont
Securities Corporation

2.6 Agreement and Plan of Reorganization dated as of August 8, 2000, among
Registrant, Atossa Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Registrant, and Atossa HealthCare, Inc.
(Filed as Exhibit 2.1 to Registrant's Current Report on Form 8-K
(Commission File No. 0-13789) dated August 8, 2000, and incorporated
herein by reference).

4.1 Registration Rights Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited (filed as Exhibit 2.2)

4.2 Rights Agreement dated February 22, 2000 between Registrant and American
Stock Transfer & Trust Registrant as Rights Agent. (Filed as Exhibit 1
to Registrant's Current Report on Form 8-K (Commission File No. 0-13789)
dated February 22, 2000, and incorporated herein by reference). The
Rights Agreement includes the Designation of Rights, Terms and
Preferences of Series A Junior Preferred Stock as Exhibit A, the form of
Rights Certificate as Exhibit B, and the Summary of Rights as Exhibit C
thereto.

5 Opinion and consent of Roberts, Sheridan & Kotel, a Professional
Corporation

10.1 Licensing Agreement with UKRF. (Filed as Exhibit 10.4 to the
Registrant's Registration Statement on Form S-18, as amended (Commission
File No. 2-88605-NY), filed on December 23, 1983, and incorporated
herein by reference.)

10.2 Lease for facilities at 45 Davids Drive, Hauppauge, NY. (Filed as
Exhibit 10B to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and incorporated
herein by reference.)

10.3 Sublicense Agreement with Bristol-Myers Squibb Co. (Filed as Exhibit 10E
to the Registrant's Registration Statement on Form S-1, as amended
(Commission File No. 33-5717), filed on May 15, 1986, and incorporated
herein as reference.)

10.4 Agreements between Registrant, and RiboGene, Inc. (as successor in
interest to Rugby Laboratories, Inc., and Darby Pharmaceuticals, Inc.)
(Filed as Exhibit 10D to the Registrant's Registration Statement on Form
S-1, as amended (Commission File No. 33-5717), filed on May 15, 1986,
and incorporated herein by reference.)

10.5 1995 Agreement between the Registrant and RiboGene, Inc. (Filed as
Exhibit 10F to the Registrant's Annual Report on Form 10-KSB for the
year ended June 30, 1995 (Commission File No. 0-13789), and incorporated
herein by reference.)

10.6 Stock Option Agreements. (Filed as Exhibit 10M to the Registrant's
Annual Report on Form 10-KSB for the year ended June 30, 1995
(Commission File No. 0-13789), and incorporated herein by reference.)

10.7 License Agreement with The DuPont Merck Pharmaceutical Registrant.
(Filed as Exhibit 10N to the Registrant's Registration Statement on Form
SB-2, as amended (Commission File No. 33-70180), filed on October 12,
1993, and incorporated herein by reference.)

10.8 Nasal Drug Evaluation and Option Agreement. (Filed as Exhibit 10K to the
Registrant's Annual Report on Form 10-KSB for the year ended June 30,
1996 (Commission File No. 0-13789), and incorporated herein by
reference.)

10.9 Agreement with Ciba Self-Medication, Inc. (Filed as Exhibit 10J to the
Registrant's Annual Report on Form 10-KSB for the year ended June 30,
1996 (Commission File No. 0-13789), and incorporated herein by
reference.)

10.10 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.11 to
the Registrant's Registration Statement on Form S-2 (Commission File No.
333-16507), filed on November 20, 1996, and incorporated herein by
reference.)

10.11 Employment Agreement with Dr. Vincent D. Romeo. (Filed as Exhibit 10.11
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)

10.12 Employment Agreement with Robert H. Rosen. (Filed as Exhibit 10.12 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 (Commission File No. 000-13789), and incorporated herein by
reference.)

10.13 Evaluation and Option Agreement with the Consumer Health Care Division
of Pfizer Inc. (Filed as Exhibit 10.12 to the Registrant's Registration
Statement on Form S-2 (Commission File No. 333-16507), filed on November
20, 1996, and incorporated herein by reference.)

10.14 Development and License Agreement with DynaGen, Inc. (Filed as Exhibit
10.13 to the Registrant's Registration Statement on Form S-2 as amended
(Commission File No. 333-16507), filed on November 20, 1996, and
incorporated herein by reference.)

10.15 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as Exhibit
10J to the Registrant's Financial Report on Form 10Q for the Quarter
Ended June 30, 1997 (Commission File No.000-13789), filed on August 14,
1997, and incorporated herein by reference.)

II-2
<PAGE>

10.16 License and Supply Agreement with Schwarz Pharma, Inc. (Filed as Exhibit
10.12 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-13789), and incorporated
herein by reference.)

10.17 License and Supply Agreement with Meda AB. (Filed as Exhibit 10.12 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 (Commission File No. 000-13789), and incorporated herein by
reference.)

10.18 License and Supply Agreement with Tzamal Pharma Ltd. (Filed as Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998 (Commission File No. 000-13789), and incorporated
herein by reference.)

10.19 International Distribution Agreement with Cambridge Selfcare Diagnostics
Limited. (Filed as Exhibit 10.19 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998 (Commission File No.
000-13789), and incorporated herein by reference.)

10.20 Employment Agreement with Dr. Charan Behl. (Filed as Exhibit 10.20 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1998 (Commission File No. 000-13789), and incorporated herein by
reference).

10.21 Employment Agreement with Andrew P. Zinzi. (Filed as Exhibit 10.21 to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1999 (Commission File No. 000-13789), and incorporated herein by
reference).

10.22 Termination and Release Agreement with Schwarz Pharma, Inc. (Filed as
Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1999 (Commission File No. 000-13789), and
incorporated herein by reference).

10.23 Employment Agreement with Steven C. Quay, M.D., Ph.D., dated August 8,
2000. (Filed as Exhibit 10.1 to the Registrant's Current Report on Form
8-K dated August 8, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).

13.1 Annual report to security holders on Form 10-K dated December 31, 1999.
(Filed on March 30, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).

13.2 Quarterly report to security holders on Form 10-Q dated March 31, 2000.
(Filed on May 11, 2000 (Commission File No. 000-13789), and incorporated
herein by reference).

13.3 Quarterly report to security holders on Form 10-Q dated June 30, 2000.
(Filed on August 8, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).

23.1 Consent of KPMG LLP

23.2 Consent of Roberts, Sheridan & Kotel, a Professional Corporation
(included in Exhibit 5)

24 Power of Attorney (reference is made to the signature pages to the
Registration Statement)

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus frilled with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement; and

(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and

(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of this
offering.

II-3
<PAGE>

The undersigned registrant hereby undertakes to deliver or cause to be delivered
with the prospectus, to each person to whom the prospectus is sent or given, the
latest annual report to security holders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the requirements of Rule
14-a or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulations S-X
are not set forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide such
interim financial information.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hauppauge, State of New York on this 6th day of
September, 2000.

NASTECH PHARMACEUTICAL COMPANY INC.

By: /s/ Steven C. Quay
------------------------------------
Steven C. Quay, M.D., Ph.D.
President, Chief Executive Officer
and Chairman of the Board

POWER OF ATTORNEY

KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Andrew Zinzi as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
or post-effective amendments to this Registration Statement, and to file the
same, with all exhibits thereto, which amendments may make such changes in this
Registration Statement as such agent deems appropriate, and to file any new
registration statement (and any post-effective amendment thereto) which
registers additional securities of the same class and for the same offering as
this Registration Statement in accordance with Rule 462(b) under the Securities
Act (each, a "462(b) Registration Statement"), and the Registrant and each such
person hereby appoints each such Agent as attorney-in-fact to execute in the
name and on behalf of the Registrant and each such person, individually and in
each capacity stated below, any such amendments to this registration statement
and any such 462(b) Registration Statements, and other documents in connection
therewith, with the Commission.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on September 6, 2000.

Signature Title

/s/ Steven C. Quay President, Chief Executive Officer and Chairman
------------------------------ of the Board Officer (Principal Executive
Steven C. Quay, M.D., Ph.D. Officer)

/s/ Andrew Zinzi Chief Financial Officer
------------------------------ (Principal Financial and Accounting Officer)
Andrew Zinzi

/s/ Devin N. Wenig Director
------------------------------
Devin N. Wenig

/s/ Bruce R. Thaw Director
------------------------------
Bruce R. Thaw

/s/ Grant W. Denison Director
------------------------------
Grant W. Denison

/s/ Ian R. Ferrier Director
------------------------------
Dr. Ian R. Ferrier

II-5
<PAGE>

/s/ Joel Girsky Director
------------------------------
Joel Girsky

/s/ Alvin Katz Director
------------------------------
Alvin Katz

/s/ John V. Pollock Director
------------------------------
John V. Pollock

II-6
<PAGE>

EXHIBIT INDEX

Exhibit
Number Description
------ -----------

2.1 Equity Line of Credit Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited

2.2 Registration Rights Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited

2.3 Escrow Agreement dated as of July 11, 2000, among Registrant, Castlebar
Enterprises Limited and Epstein Becker & Green, P.C.

2.4 Stock Purchase Warrant dated July 11, 2000, issued to Castlebar
Enterprises Limited

2.5 Stock Purchase Warrant dated July 11, 2000, issued to Jesup & Lamont
Securities Corporation

4.1 Registration Rights Agreement dated July 11, 2000, between Registrant
and Castlebar Enterprises Limited (filed as Exhibit 2.2)

5 Opinion and consent of Roberts, Sheridan & Kotel, a Professional
Corporation

II-7
<PAGE>

13.1 Annual report to security holders on Form 10-K dated December 31, 1999.
(Filed on March 30, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).

13.2 Quarterly report to security holders on Form 10-Q dated March 31, 2000.
(Filed on May 11, 2000 (Commission File No. 000-13789), and incorporated
herein by reference).

13.3 Quarterly report to security holders on Form 10-Q dated June 30, 2000.
(Filed on August 8, 2000 (Commission File No. 000-13789), and
incorporated herein by reference).

23.1 Consent of KPMG LLP

23.2 Consent of Roberts, Sheridan & Kotel, a Professional Corporation
(included in Exhibit 5)

24 Power of Attorney (reference is made to the signature pages to the
Registration Statement)

II-8