Nastech to Establish Subsidiary, MDRNA, Inc., as an Independent Company to Focus on the Development of RNA-Based Therapeutics

Wednesday, November 14, 2007 General News
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BOTHELL, Wash., Nov. 13 Nastech PharmaceuticalCompany Inc. ("Nastech") (Nasdaq: NSTK) announced today that the Board ofDirectors has approved the recommendation of its Special Committee to moveforward with the process of establishing Nastech's wholly-owned subsidiary,MDRNA, Inc. ("MDRNA"), as an independent company. Nastech is transferring itsintellectual property and agreements related to RNA interference ("RNAi") intoMDRNA. The new structure will give Nastech the ability to pursue independentinvestment to fund MDRNA's operations. Nastech plans to pursue such funding inthe near-term, subject to market conditions, and expects to retain significantownership in MDRNA following such financing. In addition, Nastech intends,subject to change based on market conditions or future change in strategy, tothereafter issue a dividend to Nastech's shareholders of a portion of theMDRNA equity held by Nastech, and to effect the public trading of thosesecurities through a Form 10 filing.

The planned change in corporate structure will enable Nastech to continueits focus on the development of peptide and protein drug delivery technologieswhile better positioning MDRNA for strategic alliances and direct investmentas it develops RNAi therapeutics targeting a broad range of diseases. Theestablishment of MDRNA as an independent company will also allow it to bebetter compared and valued relative to other companies in the field of RNAitherapeutics.

"The establishment of MDRNA as an independent company will better serveour shareholders by providing a structure which will help us unlock the valueof Nastech's RNAi assets as well as expedite the development of newtherapeutics based on this new technology," stated Steven C. Quay, M.D.,Ph.D., Chairman, President and CEO of Nastech. "We have developed aproprietary platform for the creation and delivery of novel RNAi therapeuticswith several candidate molecules in development. We look forward torecognizing the value of this innovative work."

The next steps with MDRNA are to complete a series of operating agreementswith Nastech, obtain external financing to fund MDRNA's operations separatefrom Nastech, and to transfer employees from Nastech to MDRNA. It isanticipated that Nastech will provide administrative and facilities support toMDRNA for the near-term.

Nastech has developed and in-licensed proprietary technologies for thedevelopment and delivery of RNAi therapeutics. Several product candidates arecurrently in development targeting influenza and rheumatoid arthritis. Nastechhas engaged in collaborations with commercial, academic and governmentalorganizations including an ongoing Cooperative Research and DevelopmentAgreement (CRADA) with the Centers for Disease Control and Prevention focusedon evaluating RNAi therapeutics for treatment of influenza.

About RNA Interference (RNAi)

RNA interference, or RNAi, is a cellular mechanism that can be used toturn off the production of a protein by using small interfering RNAs (siRNAs).siRNAs are double-stranded RNA molecules that are able to silence a gene in asequence-specific manner by degradation of the target messenger RNA. In thecase of an siRNA directed against influenza, the target is one or more genesthat encode proteins critical for viral replication. If siRNAs are successfulat turning off the production of such proteins, the spread of infection wouldbe prevented or slowed. Nastech's RNAi research and development programs seekto develop safe and effective therapeutics by identifying key protein targets,designing the siRNA that will turn off the production of the targetedproteins, and developing a formulation for the delivery of this potential newclass of therapeutics.

About Nastech

Nastech is a biopharmaceutical company developing innovative productsbased on proprietary molecular biology-based drug delivery technologies.Nastec

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