SecProbe.io

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Via Facsimile, U.S. Mail
  and EDGAR

September 27, 2005

Mr. Jim B. Rosenberg
Senior Assistant Chief Accountant
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

RE:   NASTECH PHARMACEUTICAL COMPANY INC. (THE "COMPANY")
      AMENDMENT #1 TO FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2004 (THE
      "FORM 10-K/A")
      FILED APRIL 29, 2005
      FILE NO. 000-13789

Dear Mr. Rosenberg:

We are in receipt of your September 14, 2005 letter of comment relating to the
Form 10-K/A. Following are the Company's responses to questions raised therein:

1.    QUESTION: PLEASE TELL US WHY IT WAS APPROPRIATE TO RECOGNIZE THE AMOUNT
      PAID TO SCHWARZ PHARMA UNDER THE ACQUISITION AGREEMENT AS AN ASSET AND HOW
      THAT COMPLIES WITH SFAS 142. IN SO DOING, PLEASE DESCRIBE THE RIGHTS,
      TITLE AND INTERESTS THAT WERE INITIALLY GRANTED TO SCHWARZ PHARMA UNDER
      THE LICENSE AND SUPPLY AGREEMENT AND THAT YOU LATER PURCHASED.

      RESPONSE: In September 2002, the Company purchased all of Schwarz Pharma's
rights, title and interests under or by virtue of the July 15, 1997 License and
Supply Agreement (the "1997 License Agreement") between the Company and Schwarz
Pharma, Inc. (filed as Exhibit 10-J to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997). In determining the accounting for the
transaction, the Company first identified what the Company had acquired and
whether what had been acquired met the definition of an asset in Concept
Statement 6. Paragraphs 25 and 26 of Concept Statement 6 read as follows:

      25. Assets are probable future economic benefits obtained or controlled by
      a particular entity as a result of past transactions or events.

      26. An asset has three essential characteristics: (a) it embodies a
      probable future benefit that involves a capacity, singly or in combination
      with other assets, to contribute directly or indirectly to future net cash
      inflows, (b) a particular entity can obtain the benefit and control
      others' access to it, and (c) the transaction or other event giving rise
      to the entity's right to or control of the benefit has already occurred.

        In this case, the assets acquired included the FDA approved New Drug
Application (NDA) for the pharmaceutical product, Nascobal, which Schwarz was
selling at the time of the acquisition.  At the time of the acquisition it
embodied a probable future benefit to Nastech to contribute to future net cash
flow.  Because the FDA controls interstate commerce of pharmaceuticals, the
ownership of the NDA provided Nastech with the legal right to obtain the
benefit of the sales of Nascobal and to also control others' access to the
right to sell Nascobal. Finally, the purchase agreement was the transaction
that gave rise to Nastech's rights in the NDA.

      As all of the characteristics above have been met, the Company then
considered the assets acquired in the transaction and the appropriate accounting
guidance. Given that the Company believed that the assets acquired were
intangible (Assets (not including financial assets) that lack physical
substance) in nature, the Company looked to paragraph 4 of SFAS 142 which
states: "The initial recognition and measurement provisions of this Statement
apply to intangible assets acquired individually or with a group of other assets
(but not those acquired in a business combination)."
<PAGE>
      Under SFAS 142, the Company also considered whether there was any
In-process R&D which would be expensed immediately in the statement of
operations. Based on the Company's analysis of the assets acquired and their
stage of development, the Company determined it was inappropriate to allocate
any amounts to In-process R&D.  In part, this analysis included the fact that
the NDA for Nascobal had been earlier approved by the FDA and the product was
in commerce under Schwarz' control, making further R&D for that product
unnecessary.

      Therefore, based on the above analysis, the Company allocated the purchase
price to the intangible assets and began amortization over the estimated useful
life.

      Additionally, the Company's approach is supported by a subsequent
accounting release, EITF 04-01, which describes the accounting for a preexisting
relationship between the parties to a business combination. While not a business
combination, Issue 3 of that consensus indicates "that the acquisition of a
right that the acquirer had previously granted to the acquired entity to use the
acquirer's recognized or unrecognized intangible assets (for example, rights to
the acquirer's trade name under a franchise agreement or rights to the
acquirer's technology under a technology licensing agreement, hereinafter
referred to as a "reacquired right") should be included as part of the business
combination." Issue 4 states that a reacquired right should be recognized as an
intangible asset apart from goodwill.

      As requested, included below are the rights, title and interests that were
initially granted to Schwarz Pharma, and those that were later purchased.

      Rights, title and interests that were initially granted to Schwarz Pharma
were set forth in Section 2 of the 1997 License Agreement, as follows:

      2.1   Grant of Marketing and Sales Licenses. Nastech hereby grants to
            Schwarz an exclusive, even as to Nastech (except as set forth in
            Section 2.4), license under the following assets solely for the
            purpose of promoting, marketing, selling and distributing Nascobal
            in the Territory (such assets are referred to herein collectively as
            the "Licensed Assets"):

            (a) all of Nastech's rights under the approved New Drug Applications
            filed by Nastech with the FDA for Nascobal, and all subsequent
            submissions thereof (collectively, the "NDA"), which NDA is
            described in Schedule 2.1(a);

            (b) the Intellectual Property; and

            (c) the Marketing and Research Data.

      2.2   Grant of Technology Licenses. Nastech hereby grants to Schwarz an
            exclusive, even as to Nastech (except as set forth in Section 2.4 of
            this Agreement), license to the Patents and Technology solely for
            the purposes of promoting, marketing, selling and distributing
            Nascobal within the Territory, and, subject to Section 4.8, for the
            purposes of manufacturing and having manufactured Nascobal for sale
            within the Territory.

      2.3   Sublicenses. The licenses granted herein shall not be sublicensed by
            Schwarz without the prior written consent of Nastech, which consent
            shall not be unreasonably withheld.

      2.5   Marketing. Schwarz agrees to the marketing plan set forth on
            Schedule 2.5.

      2.6   Option. Nastech grants Schwarz the exclusive option (the "Option")
            (i) to license the Licensed Asset, the Patents and the Technology
            and (ii) to be supplied with its requirements for Nascobal Units by
            Nastech, in each case in any or all countries outside the Territory
            (other than England and Ireland) where Schwarz, in its sole
            discretion, determines it is commercially reasonably to pursue such
            licenses and supply arrangements, with the terms and conditions of
            such licenses and supply arrangements to be mutually agreed. The
            Option shall terminate on August 1, 1997.
<PAGE>
      Rights, title and interests that the Company purchased were set forth in
Section 2.1 of the September 30, 2002 Asset Purchase Agreement (the "2002
Purchase Agreement") between the Company and Schwarz Pharma, Inc. (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K dated September 30,
2002) as follows:

      2.1   Purchased Assets. Upon the terms and subject to the conditions of
            this Agreement and in reliance on the representations and warranties
            contained herein, on the Closing Date, Seller shall grant, bargain,
            sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
            purchase, acquire, and accept from Seller, all of Seller's right,
            title and interest in, to and under the Purchased Assets. For
            purposes of this Agreement, "Purchased Assets" shall mean all the
            assets, properties and rights set forth or described in this Section
            2.1 (except in each case for the Excluded Assets), whether or not
            any of such assets, properties or rights have any value for
            accounting purposes or are carried or reflected on or specifically
            referred to in Seller's books or financial statements:

            (a) all rights of Seller arising under or by virtue of the License
            Agreement (previously defined as "the July 25, 1997 License and
            Supply Agreement");

            (b) any existing mailing lists, customer lists and sales reports
            related exclusively to the Business (previously defined as "the
            development, manufacture, marketing, sale and distribution of
            Nascobal in the Territory");

            (c) all Inventory; and

            (d) all advertising, marketing and promotional material of Seller
            that is related exclusively to the Business.

2.    QUESTION: PLEASE TELL US WHY IT WAS APPROPRIATE TO ALLOCATE $5 MILLION TO
      DEFERRED REVENUE AND $5 MILLION TO (OR $20 PER SHARE) EQUITY. AS THE
      MARKET VALUE OF YOUR COMMON STOCK DURING THAT MONTH APPEARS TO HAVE BEEN
      SIGNIFICANTLY LESS THAN $20 PER SHARE, IT IS UNCLEAR HOW THAT ALLOCATION
      WAS APPROPRIATE. PLEASE ALSO CITE THE LITERATURE SUPPORTING YOUR
      ALLOCATION.

        RESPONSE: On February 1, 2002, the Company entered into a Collaboration
and License Agreement (the "Pharmacia License Agreement") with Pharmacia &
Upjohn Company (filed as Exhibit 10.1 to the Company's Current Report on Form
8-K dated February 1, 2002), pursuant to which it received an upfront payment
of $3 million (section 8.1) and an additional payment of $2 million (section
8.3a) for transfer of an FDA development application (called an "IND"). These
payments were deferred to be amortized over the estimated development period.
Sections 8.3 and 8.4 of the Pharmacia License Agreement provide for numerous
other milestone payments. In addition,  pursuant to the terms of section 8.2 of
the Pharmacia License Agreement, the Company and Pharmacia agreed to enter into
an Investment Agreement (the "Investment Agreement") dated as of February 1,
2002 (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated
February 1, 2002) pursuant to which, the Company agreed to sell and Pharmacia
agreed to purchase 250,000 shares of the Company's common stock, par value
$0.006 per share, at a per share price of $20.

      The Company commenced negotiations with Pharmacia in the fall of 2001. The
stock sale transaction terms were negotiated separately from the upfront and
milestone payments relating to all other terms of the Pharmacia License
agreement.  It was agreed by the parties that Pharmacia would purchase equity
directly from the Company rather than purchase it in the open market and
therefore negotiations of the price and other terms between the parties was a
necessary part of the transaction.  In addition, because Pharmacia was
purchasing the Company's equity in a simultaneous partnering transaction and
because this transaction would be the largest corporate partnership in the
Company's almost 20-year history, the parties contemporaneous analysis was that
a price of $20 per share would be an appropriate value for the Company's common
stock at a point in time when this transaction was fully disclosed in the
market.

        It was on the basis of the market price of Company's common stock
during the mid-January period when contract terms were being negotiated in 2002
that the agreed upon price was determined. Market prices during the final
negotiation period were as follows:

<TABLE>
<CAPTION>
                    open          high         low        close/last     volume
<S>                <C>           <C>          <C>         <C>            <C>
      January 14   $18.40        $19.90       $18.15        $19.18       448,500
      January 15    19.26         19.64        18.54         19.29       138,700
      January 16    19.24         19.24        17.80         18.27       146,700
</TABLE>
<PAGE>
      The Company considered guidance in the literature surrounding capital
transactions which generally would indicate that unless there is evidence to the
contrary, proceeds from the issuance of common stock solely for cash are assumed
to equal the fair value of the shares issued. The Company also noted that in FTB
85-6 regarding treasury stock, if stock is issued solely for cash but the
proceeds are not consistent with the fair value of the stock (in this case, the
premium paid by Pharmacia over the publicly traded market price), the entity
should determine whether the transaction involves a stated or unstated right,
privilege, or obligation for which there should be separate accounting. After
analyzing the nature of the transaction, the facts around the negotiations with
Pharmacia and after considering the accounting by other biotechnology firms with
similar transactions, the Company believes that the substance of the transaction
appropriately accounted for the issuance of equity at the agreed upon price of
$20.

      Negotiations from November 2001 forward through contract execution on
February 1, 2002 had fixed the price at $20 (which approximated the Company's
trading price in mid-January 2002 when the deal was in final stages of
negotiations.) The transaction had always considered that Pharmacia would put in
$5,000,000 of equity, and the Company had initially identified the maximum
number of shares at 325,000 ($15.38 per share). Given the upward movement in
the Company's stock price in the late fall of 2001 and through mid-January
2002, and the parties' belief in potential positive aspects of an announcement
of this size, the $20 price was agreed upon.

      When the negotiations had concluded and were approved by each party on
February 1, 2002, the $20 price represented a $2.91 or 17% premium over the
closing price of Nastech common stock on January 31, 2002. As noted above, the
pricing was negotiated with consideration of a variety of factors in mind,
including the positive impact that may result from the transaction. The note
disclosures in the Company's financial statements include March 2002 dating
since the $5 million cash payment was received on March 18, 2002 after
completion of customary FTC Hart-Scott-Rodino reviews, which was the date when
the Company recorded the equity transaction.

      The only other rights, privileges and obligations as part of this
transaction related to the Company's licensing transaction with Pharmacia. The
Company did not believe that it was appropriate to ascribe additional dollars to
revenue when they were not related to the earnings process. The Company firmly
believed that this would inappropriately overstate revenues, and would not have
followed the substance of the transaction as it had been negotiated from the
fall of 2002.

   In accordance with the comment letter request, the Company acknowledges that:

   -  The Company is responsible for the adequacy and accuracy of the disclosure
      in the Company's filings under the Securities Exchange Act of 1934;

   -  Staff comments or changes to disclosure in response to staff comments do
      not foreclose the Commission from taking any action with respect to the
      filing; and

   -  The Compa