Nastech Announces Third Quarter 2007 Financial Results

BOTHELL, Wash., Oct. 29 /PRNewswire-FirstCall/ -- Nastech Pharmaceutical Company Inc. (NASDAQ:NSTK) today reported financial results for the three- and nine-month periods ended September 30, 2007.

Revenue for the quarter ended September 30, 2007 was $1.9 million, compared to $5.5 million for the quarter ended September 30, 2006. The 2006 period included revenue of $4.8 million related to our Parathyroid Hormone (PTH1-34) nasal spray collaboration with Procter & Gamble Pharmaceuticals, Inc. ("P&G"). Revenue for the nine months ended September 30, 2007 was $11.7 million, compared to $23.7 million for the nine months ended September 30, 2006. The 2007 period included receipt and recognition of a $2.0 million payment from QOL Medical LLC related to the June 2007 issuance of a patent by the U.S. Patent and Trademark Office for Nascobal(R) nasal spray, and revenue recognized related to our collaboration agreement with P&G, revenue from our other agreements including Novo Nordisk A/S and Amylin Pharmaceuticals, Inc. and approximately $0.2 million in Nascobal(R) product revenue. The prior year nine month period included recognition of approximately $3.7 million in previously deferred revenue from Merck & Co., Inc. related to our PYY(3-36) obesity program, a $7.0 million milestone payment and reimbursement revenue related to our development agreement with P&G, revenue from other agreements and approximately $0.6 million in Nascobal(R) product revenue.

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

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

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

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

    Recent Corporate Highlights
     * Initiated a Phase 2 clinical trial for PYY(3-36) Nasal Spray for
       obesity
     * Initiated a Phase 2 clinical trial for Insulin Nasal Spray for diabetes
     * Announced promotion of Henry "Rick" Costantino to Chief Scientific
       Officer of Delivery

Conference Call and Webcast Information

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

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

About Nastech

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

Nastech Forward-Looking Statements

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

     Contacts:

     Nastech
     Ed Bell
     Director, Investor Relations
     (425) 908-3639
     ir@nastech.com

     Russo Partners, LLC
     David Schull (Media)
     (212) 845-4271



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

                                      Three Months Ended     Nine Months Ended
                                        September 30,          September 30,
                                       2006       2007       2006     2007
                                                   (Unaudited)
    Revenue
      License and research fees       $ 5,130   $  1,792  $ 22,667  $ 11,197
      Government grants                   383        105       383       307
      Product revenue                      32        --        624       245
    Total revenue                       5,545      1,897    23,674    11,749
    Operating expenses:
      Cost of product revenue              13        --        314        68
      Research and development         10,483     13,774    31,050    39,412
      Selling, general and
       administrative                   3,447      5,090    10,529    14,490
         Total operating expenses      13,943     18,864    41,893    53,970
    Loss from operations               (8,398)   (16,967)  (18,219)  (42,221)
    Other income (expense):
       Interest income                    751        817     2,107     2,722
       Interest and other expense        (161)      (300)     (394)     (858)
    Loss before cumulative effect of   (7,808)   (16,450)  (16,506)  (40,357)
     change in accounting principle
    Cumulative effect of change in
     accounting principle                 --         --        291      --
    Net Loss                          $(7,808)  $(16,450) $(16,215) $(40,357)
    Basic and diluted net loss per
     share:
       Prior to cumulative effect of
        change in accounting
        principle                     $ (0.36)  $  (0.66) $  (0.78) $  (1.62)
       Cumulative effect of change in
        accounting principle              --         --       0.01       --
       Net loss per common share -
        basic and diluted             $ (0.36)  $  (0.66) $  (0.77) $  (1.62)
    Shares used in computing net
     loss per share - basic and
     diluted                           21,408     25,067    21,115    24,844


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

Source: Nastech Pharmaceutical Company Inc.

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