EQUITY LINE OF CREDIT AGREEMENT



                                     Between



                       Nastech Pharmaceutical Company Inc.



                                       And



                          Castlebar Enterprises Limited



      EQUITY LINE OF CREDIT AGREEMENT dated as of July 11, 2000 (the

"Agreement"), between Castlebar Enterprises Limited, a British Virgin Islands

corporation (the "Investor") and Nastech Pharmaceutical Company Inc., a

corporation organized and existing under the laws of the State of Delaware (the

"Company").



      WHEREAS, the parties desire that, upon the terms and subject to the

conditions contained herein, the Company shall issue and sell to Investor from

time to time as provided herein, and Investor shall purchase, up to 1,200,000

shares (the "Aggregate Purchase Price") of the Common Stock (as defined below);

and



      WHEREAS, such investments will be made by the Investor as statutory

underwriter of a registered indirect primary offering of such Common Stock by

the Company.



      NOW, THEREFORE, the parties hereto agree as follows:



                                   ARTICLE I



                               Certain Definitions



      Section 1.1 "Bid Price" shall mean the closing bid price (as reported by

Bloomberg L.P.) of the Common Stock on the Principal Market on the date in

question.



      Section 1.2 "Capital Shares" shall mean the Common Stock and any shares of

any other class of common stock whether now or hereafter authorized, having the

right to participate in the distribution of earnings and assets of the Company.



      Section 1.3 "Capital Shares Equivalents" shall mean any securities,

rights, or obligations that are convertible into or exchangeable for or give any

right to subscribe for any Capital Shares of the Company or any warrants,

options or other rights to subscribe for or purchase Capital Shares or any such

convertible or exchangeable securities.



      Section 1.4 "Commitment Amount" shall mean the dollar amount necessary

which the Investor has agreed to provide to the Company in order to purchase up

to 1,200,000 Put Shares pursuant to the terms and conditions of this Agreement.



      Section 1.5 "Commitment Period" shall mean the period commencing on the

Effective Date and expiring on the earliest to occur of (x) the date on which

the Investor shall have purchased 1,200,000 Put Shares pursuant to this

Agreement, (y) the date this Agreement is terminated pursuant to Section 2.3,





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(z) the date occurring thirty-six (36) months from the date of commencement of

the Commitment Period.



      Section 1.6 "Common Stock" shall mean the Company's common stock, par

value $0.006 per share.



      Section 1.7 "Condition Satisfaction Date" shall have the meaning set forth

in Section 7.2.



      Section 1.8 "Effective Date" shall mean the date on which the SEC first

declares effective a Registration Statement registering the sale by the Company

and resale by the Investor of the Registrable Securities as set forth in Section

7.2(f).



      Section 1.9 "Escrow Agent" shall mean the escrow agent designated in the

Escrow Agreement.



      Section 1.10 "Escrow Agreement" shall mean the escrow agreement in the

form attached hereto as Exhibit A.



      Section 1.11 "Exchange Act" shall mean the Securities Exchange Act of

1934, as amended, and the rules and regulations promulgated thereunder.



      Section 1.12 "Initial Closing" shall mean the closing as contemplated by

Article I of the Escrow Agreement.



      Section 1.13 "Investment Amount" shall mean the dollar amount to be

invested by the Investor to purchase Put Shares with respect to any Put as

notified by the Company to the Investor in the Put Notice, all in accordance

with Section 2.2 hereof.



      Section 1.14 "Material Adverse Effect" shall mean any effect on the

business, Bid Price, operations, properties or financial condition of the

Company that is material and adverse to the Company and its subsidiaries and

affiliates, taken as a whole, and/or any condition, circumstance, or situation

that would prohibit or otherwise interfere with the ability of the Company to

enter into and perform any of its obligations under this Agreement, the

Registration Rights Agreement or the Escrow Agreement in any material respect.



      Section 1.15 "Maximum Put Amount" shall mean, as of the date of any Put

Notice, 4.5% of the weighted average price for the three (3) month period

immediately prior to the date of the Put Notice multiplied by the total trading

volume in respect of the Common Stock for the three (3) month period immediately

prior to the date of the Put Notice.



      Section 1.16 "NASD" shall mean the National Association of Securities

Dealers, Inc.



      Section 1.17 "Outstanding" when used with reference to shares of Common

Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as

of which the number of such Shares is to be determined, all issued and

outstanding Shares, and shall include all such Shares issuable in respect of

outstanding scrip or any certificates representing fractional interests in such

Shares; provided, however, that "Outstanding" shall not mean any such Shares

then directly or indirectly owned or held by or for the account of the Company.





                                       2

{PAGE}



      Section 1.18 "Person" shall mean an individual, a corporation, a

partnership, a limited liability company, an association, a trust or other

entity or organization, including a government or political subdivision or an

agency or instrumentality thereof.



      Section 1.19 "Principal Market" shall mean the NASDAQ National Market, the

NASDAQ SmallCap Market, the American Stock Exchange or the New York Stock

Exchange, whichever is at the time the principal trading exchange or market for

the Common Stock. Principal Market shall not include the OTC Bulletin Board

without the express written consent of the Investor.



      Section 1.20 "Purchase Price" shall mean with respect to Put Shares,

eighty-six and one half percent (86.5%) (the "Purchase Price Percentage") of the

VWAP on each Trading Day during the Valuation Period related to a Put (or such

other date on which the Purchase Price is calculated in accordance with the

terms and conditions of this Agreement).



      Section 1.21 "Put" shall mean each occasion the Company elects to exercise

its right to tender a Put Notice requiring the Investor to purchase shares of

the Company's Common Stock, subject to the terms of this Agreement.



      Section 1.22 "Put Notice" shall mean a written notice to the Investor

setting forth the Investment Amount that the Company intends to sell to the

Investor in the form attached hereto as Exhibit B.



      Section 1.23 "Put Shares" shall mean all shares of Common Stock or other

securities issued or issuable pursuant to a Put that has occurred or may occur

in accordance with the terms and conditions of this Agreement.



      Section 1.24 "Registrable Securities" shall mean the Put Shares and the

Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of

pursuant to the Registration Statement, (ii) all Put Shares and Warrant Shares

have been sold under circumstances under which all of the applicable conditions

of Rule 144 (or any similar provision then in force) under the Securities Act

("Rule 144") are met, (iii) all Put Shares and Warrant Shares have been

otherwise transferred to persons who may trade such shares without restriction

under the Securities Act, and the Company has delivered a new certificate or

other evidence of ownership for such securities not bearing a restrictive legend

or (iv) such time as, in the opinion of counsel to the Company, all Put Shares

and Warrant Shares may be sold without any time, volume or manner limitations

pursuant to Rule 144(k) (or any similar provision then in effect) under the

Securities Act.



      Section 1.25 "Registration Rights Agreement" shall mean the agreement

regarding the filing of the Registration Statement for the sale and resale of

the Registrable Securities annexed hereto as Exhibit C.



      Section 1.26 "Registration Statement" shall mean a registration statement

on Form S-3 (if use of such form is then available to the Company pursuant to

the rules of the SEC and, if not, on such other form promulgated by the SEC,

such as Form S-1 or SB-2, for which the Company then qualifies and which counsel

for the Company shall deem appropriate, and which form shall be available for

the resale by the Investor of the Registrable Securities to be registered

thereunder in accordance with the provisions of this Agreement, the Registration

Rights Agreement, and in accordance with the intended method of distribution of

such securities), for the registration of the resale by the Investor of the

Registrable Securities under the Securities Act.





                                       3

{PAGE}



      Section 1.27 "SEC" shall mean the Securities and Exchange Commission.



      Section 1.28 "Securities Act" shall mean the Securities Act of 1933, as

amended.



      Section 1.29 "SEC Documents" shall mean the Company's latest Form 10-K or

10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed

thereafter, and the Proxy Statement for its latest fiscal year as of the time in

question until such time as the Company no longer has an obligation to maintain

the effectiveness of a Registration Statement as set forth in the Registration

Rights Agreement.



      Section 1.30 "Threshold Price" is the lowest VWAP at which the Company

will sell its Common Stock with respect to any Trading Day within a Valuation

Period determined in its sole and absolute discretion in any Put Notice.



      Section 1.31 "Trading Day" shall mean any day during which the Principal

Market shall be open for business.



      Section 1.32 "Valuation Event" shall mean an event in which the Company at

any time prior to the end of the Commitment Period takes any of the following

actions:



            (a) subdivides or combines its Common Stock;



            (b) pays a dividend on its Capital Shares or makes any other

distribution of its Capital Shares;



            (c) issues any additional Capital Shares ("Additional Capital

Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)

above or (d) and (e) below, at a price per share less, or for other

consideration lower, than the Bid Price in effect immediately prior to such

issuance, or without consideration (other than pursuant to this Agreement);



            (d) issues any warrants, options or other rights (other than

pursuant to the Company's employee benefit plan) to subscribe for or purchase

any Additional Capital Shares and the price per share for which Additional

Capital Shares may at any time thereafter be issuable pursuant to such warrants,

options or other rights shall be less than the Bid Price in effect immediately

prior to the issuance of the relevant warrants, options or other rights;



            (e) issues any securities convertible into or exchangeable for

Capital Shares and the consideration per share for which Additional Capital

Shares may at any time thereafter be issuable pursuant to the terms of such

convertible or exchangeable securities shall be less than the Bid Price in

effect immediately prior to such issuance;



            (f) makes a distribution of its assets or evidences of indebtedness

to the holders of its Capital Shares as a dividend in liquidation or by way of

return of capital or other than as a dividend payable out of earnings or surplus

legally available for dividends under applicable law or any distribution to such

holders made in respect of the sale of all or substantially all of the Company's

assets (other than under the circumstances provided for in the foregoing

subsections (a) through (e)); or



            (g) takes any action affecting the number of Outstanding Capital

Shares, other than an action described in any of the foregoing Subsections (a)

through (f) hereof, inclusive, which in the opinion of the Company's Board of

Directors, determined in good faith, would have a Material Adverse Effect upon

the rights of the Investor at the time of a Put.





                                       4

{PAGE}



      Section 1.33 "Valuation Period" shall mean the period of twenty-two (22)

Trading Days beginning on the date specified in the Put Notice; provided,

however, that if a Valuation Event occurs during a Valuation Period, a new

Valuation Period shall begin on the Trading Day immediately after the occurrence

of such Valuation Event and end on the twenty-second (22nd) Trading Day

thereafter.



      Section 1.34 "VWAP" shall mean the daily volume weighted average price of

the Company's Common Stock on the Principal Market as reported by Bloomberg

Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using

the VAP function.



      Section 1.35 "Warrants" shall include (i) the 33,000 Common Stock Purchase

Warrants in the form of Exhibit D hereto to be delivered to the Investor at the

Initial Closing (the "Initial Warrants"), (ii) 1,000 Common Stock Purchase

Warrants in the form of Exhibit D hereto to be delivered to the Investor for

each $100,000 of Put Shares purchased by the Investor at each applicable

Settlement Date (the "Put Warrants) and (iii) a warrant certificate to purchase

up to a number of shares of Common Stock equal to 25% of the number of shares of

Common Stock purchased by the Investor on such Settlement Date pursuant to this

Agreement in the form attached hereto as Exhibit E (each a "Short Term

Warrant"); provided, however, in no event shall the Company issue more than

66,000 Initial Warrants and Put Warrants, in the aggregate, in connection with

this Agreement to the Investor. "Warrant Shares" shall mean the shares of Common

Stock issuable upon exercise of the Warrants.



                                   ARTICLE II



                        Purchase and Sale of Common Stock



      Section 2.1 Investments. Subject to the satisfaction of the conditions set

forth herein (including, without limitation, the provisions of Article VII

hereof), the parties agree as follows:



            (a) Put Right. At any time during the Commitment Period, subject to

the conditions set forth in Section 7.2, the Company, may, in its sole

discretion, issue and exercise a Put, which Put the Investor will be obligated

to accept; provided, however, that the Investment Amount for each Put as

designated by the Company in the applicable Put Notice shall be neither less

than $250,000 per Put nor more than the Maximum Put Amount, except that, the

Company's final Put may be less than $250,000 if the Commitment Amount is less

than $250,000. Only one Put shall be allowed in each Valuation Period.



            (b) Settlement Date. The price per share paid by the Investor shall

be the Purchase Price on each separate Trading Day during the Valuation Period.

The number of shares of Common Stock purchased by the Investor with respect to

each Put shall be determined on a daily basis during each Valuation Period and

settled on, (i) as to the 1st to the 11th Trading Days after a Valuation Period

commences, on the 13th Trading Day after a Valuation Period commences, and (ii)

as to the 12th to the 22nd Trading Days after a Valuation Period commences, the

24th Trading Day after a Valuation Period. (each, a "Settlement Date"). In

connection with each Valuation Period, the Company may set a Threshold Price, if

any, in the Put Notice. If the VWAP on any Trading Day within the Valuation

Period is less than the Threshold Price, the Company shall not sell and the

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