<PAGE>
                                                                   Exhibit 10.34

          STOCK OPTION AGREEMENT (this "Agreement") dated as of August 25, 2004
(the "Grant Date"), between Nastech Pharmaceutical Company Inc., a Delaware
corporation (the "Company"), and Philip C. Ranker (Grantee"), an employee of the
Company.

          SECTION 1. Grant of Option. Pursuant to the Nastech Pharmaceutical
Company Inc. 2002 Stock Option Plan (the "Plan"), the Company hereby grants to
Grantee, as of the Grant Date, an Incentive Stock Option, to purchase an
aggregate of 15,000 shares (the "Option Shares") of common stock of the Company,
par value $0.006 per share (the "Common Stock"), at an exercise price of $9.23
per share (the "Option") subject to adjustment and the other terms and
conditions set forth herein, in the Plan.

          SECTION 2. Grantee Bound by Plan. The Plan is incorporated herein by
reference and made a part hereof. The Plan shall govern all aspects of this
Agreement except as otherwise specifically stated herein. Grantee hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. Unless otherwise defined herein, capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Plan. The Plan should be carefully examined before any decision is made to
exercise this Option.

          SECTION 3. Exercise of Option.

               (a) General. Subject to the earlier termination of the Option as
provided herein and in the Plan, the Option may be exercised by written notice
to the Company at any time and from time to time after the Grant Date; provided,
however, that the Option shall not be exercisable for more than the number of
shares which are vested in accordance herewith at the time of exercise. The
exercise of this Option and the issuance of Option Shares upon such exercise
shall be subject to compliance by the Company and Grantee with all applicable
requirements of law as set forth in the Plan. The inability of the Company to
obtain approval from any regulatory body having authority deemed by the Company
to be necessary to the lawful issuance and sale of any Common Stock pursuant to
this Option shall relieve the Company of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained.

               (b) Vesting. Subject to the earlier termination of the Option as
provided herein and in the Plan, the Option shall vest as follows:

<TABLE>
<S>     <C>
5,000   Of the shares subject to the Option shall be vested on the first
        anniversary of the Grant Date.

5,000   Of the shares subject to the Option shall be vested on each succeeding
        anniversary of the Grant Date.
</TABLE>

               (c) Early Expiration of Option. (i) Upon the termination of
Grantee's employment or consulting relationship with the Company (including any
subsidiary thereof) for any reason, including death, any portion of the Option
granted hereunder that has not been exercised on the date of such termination
shall expire in accordance with subsection (ii) or (iii)of this Section 3(c) as
applicable.
<PAGE>
                    (ii) In the event that Grantee's employment or consulting
relationship with the Company (including any subsidiary thereof) is terminated
by the Company for Cause, Grantee shall automatically forfeit his right to
exercise any portion of the Option granted hereunder that has not been exercised
as of the date of such termination without regard to whether such portion of the
Option had previously vested and such unexercised portion of the Option shall
automatically be cancelled effective at the commencement of business on the date
of such termination.

                    (iii) In the event that Grantee's employment or consulting
relationship with the Company (including any subsidiary thereof) is terminated
for any reason other than for Cause, death, or Disability, any unvested portion
of the Option granted hereunder shall immediately expire and any vested portion
of the Option granted hereunder that has not been exercised as of the date of
such termination shall automatically expire, if not exercised beforehand, three
months after such termination.

                    (iv) In the event that Grantee's employment or consulting
relationship with the Company (including any subsidiary thereof) is terminated
due to Grantee's death or Disability, any unvested portion of the Option granted
hereunder shall immediately expire and any vested portion of the Option granted
hereunder that has not been exercised as of the date of such termination shall
automatically expire, if not exercised beforehand, three months after such
termination.

               (d) Normal Expiration of Option. This Option shall not be
exercisable after the tenth anniversary of the Grant Date (the "Expiration
Date").

          SECTION 4. Exercise of Option and Conditions to Exercise. This Option
may not be exercised by Grantee unless the following conditions are met:

               (a) Notice. This Option shall be exercised by delivering written
notice, substantially in the form attached hereto as Exhibit I, to the Company
at its principal office addressed to the attention of its Secretary. Such notice
shall specify the number of Option Shares with respect to which the Option is
being exercised and shall be signed by Grantee. This Option may not be exercised
for a fraction of a share of Common Stock;

               (b) Securities Requirements. Legal counsel for the Company must
be satisfied at the time of exercise that the issuance of Option Shares upon
exercise will be in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and applicable United States federal, state, local and
foreign laws; and

               (c) Payment of Exercise Price. Grantee must pay at the time of
exercise the full purchase price for the shares of Common Stock being acquired
hereunder (i) in cash or its equivalent or (ii) pursuant to such other method as
the Committee may approve from time to time. Please refer to the Plan for a
complete description of the methods for exercise, payment and delivery of Option
Shares, including requirements for the payment of withholding taxes applicable
thereto.


                                        2
<PAGE>
          SECTION 5. Transferability. This Option may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by Grantee, except
by will or the laws of descent and distribution (in which case, the transferee
shall succeed to the rights and obligations of Grantee hereunder) and is
exercisable during Grantee's lifetime only by Grantee or his guardian or legal
representative. If Grantee or anyone claiming under or through Grantee attempts
to violate this Section 5, such attempted violation shall be null and void and
without effect, and the Company's obligation hereunder shall terminate. If at
the time of Grantee's death this Option has not been fully exercised, Grantee's
estate or any person who acquires the right to exercise this Option by bequest
or inheritance or by reason of Grantee's death may exercise this Option in
accordance with and with respect to the number of shares set forth in Section 3
above. The applicable requirements of Section 4 above must be satisfied in full
at the time of any exercise.

          SECTION 6. Administration. Any action taken or decision made by the
Company, the Board or the Committee or its delegates arising out of or in
connection with the construction, administration, interpretation or effect of
the Plan or this Agreement shall lie within its sole and absolute discretion, as
the case may be, and shall be final, conclusive and binding on Grantee and all
persons claiming under or through Grantee. By accepting this grant or other
benefit under the Plan, Grantee and each person claiming under or through
Grantee shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken under the Plan by the Company,
the Board or the Committee or its delegates.

          SECTION 7. No Rights as Stockholder. Unless and until a certificate or
certificates representing shares of Common Stock shall have been issued to
Grantee (or any person acting under Section 5 above) pursuant to an exercise
hereunder, Grantee shall not be or have any of the rights or privileges of a
stockholder of the Company with respect to shares of Common Stock acquirable
upon exercise of the Option. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to the date of such due exercise
and full payment.

          SECTION 8. Investment Representation. Grantee hereby acknowledges that
the Option Shares shall be acquired for investment without a view to
distribution, within the meaning of the Securities Act, and shall not be sold,
transferred, assigned, pledged or hypothecated in the absence of an effective
registration statement for the shares of Common Stock under the Securities Act
and applicable states securities laws or an applicable exemption from the
registration requirements of the Securities Act and any applicable state
securities laws. Grantee also agrees that the Option Shares will not be sold or
otherwise disposed of in any manner which would constitute a violation of any
applicable securities laws, whether federal or state and that the certificate
representing the shares of Common Stock shall contain a legend to such effect.

          SECTION 9. Listing and Registration of Common Stock. The Company, in
its discretion, may postpone the issuance and/or delivery of shares of Common
Stock upon any exercise of this Option until completion of such stock exchange
listing, or registration, or other


                                        3
<PAGE>
qualification of such shares under any state and/or federal law, rule or
regulation as the Company may reasonably in good faith consider appropriate.

          SECTION 10. Adjustments. (a) Anti-Dilution. In the event of any change
in the number of shares of Common Stock outstanding by reason of any stock
dividend or split, reverse stock split, capitalization, merger, consolidation or
otherwise, the Committee shall make appropriate adjustment to the number of
Option Shares granted hereunder and the exercise price thereof in order to
preserve the position of Grantee and prevent any enlargement or dilution of such
position.

               (b) Certain Transactions. In the event of the proposed
dissolution or liquidation of the Company, all Options will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Committee. The Committee may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Committee and give each Grantee the right to exercise his or
her Option as to all or any of the Shares issuable pursuant to the exercise of
the Option, including Shares which would not otherwise be then issuable pursuant
to the exercise of the Option. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Grantee shall have the right to exercise the Option in whole or in
part, including Shares which would not otherwise be then issuable pursuant to
the exercise of the Option. If the Board makes an Option exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Grantee that the Option shall be exercisable for a period of
not less than 15 days from the date of such notice, and the Option will
terminate upon the expiration of such period..

          SECTION 11. Notices. Any notice hereunder to the Company shall be
addressed to the Company at 3450 Monte Villa Parkway, Bothell, WA 98021,
Attention: Secretary, and any notice hereunder to Grantee shall be addressed to
Grantee at Grantee's last address on the records of the Company, subject to the
right of either party to designate at any time hereafter in writing some other
address. Any notice shall be deemed to have been duly given when delivered
personally, one day following dispatch if sent by reputable overnight courier,
fees prepaid, or three days following mailing if sent by registered mail, return
receipt requested, postage prepaid and addressed as set forth above.

          SECTION 12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Grantee.

          SECTION 13. Governing Law. The validity, construction, interpretation,
administration and effect of the Plan, and of its rules and regulations, and
rights relating to the Plan and to this Agreement, shall be governed by the
substantive laws, but not the choice of law rules, of the State of Delaware.


                                        4
<PAGE>
          IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement as of the date first above written.

                                        NASTECH PHARMACEUTICAL COMPANY INC.


                                        /s/ Gregory L. Weaver
                                        ----------------------------------------
                                        Gregory L. Weaver
                                        Chief Financial Officer & Secretary

GRANTEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION IS EARNED ONLY THROUGH HIS CONTINUED AND SATISFACTORY EMPLOYMENT WITH THE
COMPANY OR ITS SUBSIDIARIES AND NOT THROUGH THE GRANT OF THIS OPTION OR THE
ACQUISITION OF SHARES HEREUNDER. GRANTEE ACKNOWLEDGES AND AGREES THAT NOTHING IN
THIS AGREEMENT, NOR IN THE COMPANY'S 2002 STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON GRANTEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN
ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT AT ANY
TIME, WITH OR WITHOUT CAUSE.

Grantee acknowledges receipt of a copy of the Plan and represents that he is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions thereof except as otherwise
specifically stated in this Option Agreement. Grantee has reviewed the Plan and
this Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Agreement and fully understands all provisions
of this Agreement. Grantee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board or Committee upon any
questions arising under the Plan.

                                        GRANTEE


                                        /s/ Philip C. Ranker
                                        ----------------------------------------
                                        Name: Philip C. Ranker


                                        5
<PAGE>
                                                                       EXHIBIT I

                       NOTICE OF EXERCISE OF STOCK OPTION

          Reference is hereby made to the [Stock Option Award Agreement] (the
"Award Agreement") dated as of August 25, 2004, between Philip C. Ranker, and
Nastech Pharmaceutical Company Inc., a Delaware corporation (the "Company"). The
undersigned hereby notifies the Company that its elect to purchase _____________
shares of the Company's Common Stock (the "Purchased Shares") at the option
exercise price of $9.23 per share (the "Exercise Price") pursuant to that
certain option (the "Option") granted to the undersigned on August 25, 2004, to
purchase up to 15,000 shares of the Company's Common Stock.

          Concurrently with the delivery of this Exercise Notice to the
Secretary of the Company, the undersigned shall hereby pay to the Company the
Exercise Price for the Purchased Shares in accordance with the provisions of the
Award Agreement and shall deliver whatever additional documents may be required
by the Award Agreement as a condition for exercise.

Date:
      ------------------

                                        Name:
                                              ----------------------------------
                                        Address:
                                                 -------------------------------

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

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

Print name in exact manner
it is to appear on the
stock certificate:
                              -------------------------

Address to which certificate
is to be sent, if different
from address above:
                              -------------------------

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

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

Social Security Number
                              -------------------------


                                        6