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                                                                    EXHIBIT 10.3

                                                                         ANNEX B
                       NASTECH PHARMACEUTICAL COMPANY INC.
                            2004 STOCK INCENTIVE PLAN

                        RESTRICTED STOCK GRANT AGREEMENT

            This Restricted Stock Grant Agreement (the "Agreement") is entered
into this 21st day of January 2005, by and between Nastech Pharmaceutical
Company Inc. (the "Company"), a Delaware Corporation, and Mr. Paul H. Johnson,
Ph.D. ("Grantee").

                                   ARTICLE I
                            GRANT OF RESTRICTED STOCK

            1.1   Grant of Restricted Stock. Pursuant to, and subject to, the
terms and conditions set forth herein and in the Nastech Pharmaceutical Company
Inc. 2004 Stock Incentive Plan (the "Plan"), the Company hereby grants to the
Grantee 4000 restricted shares (the "Restricted Stock") of common stock of the
Company ("Common Stock").

            1.2   Grant Date. The Grant Date of the Restricted Stock is January
21st, 2005

            1.3   Incorporation of Plan. All terms, conditions and restrictions
of the Plan are incorporated herein and made part hereof as if stated herein. If
there is any conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan, as interpreted by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"), shall govern. Except as otherwise provided herein, all capitalized
terms used herein shall have the meaning given to such terms in the Plan.

                                   ARTICLE II
                                     VESTING

            2.1   Vesting. Subject to the further provision of this Agreement,
the Restricted Stock shall vest with respect to a number of whole shares as
close as possible to the following percentage of the total number of shares of
Restricted Stock granted hereunder on the following dates (each, a "Vesting
Date"):

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL SHARES          VESTING DATE
<S>                         <C>
--------------------------  ------------------------------
         33.33%             1st  anniversary of Grant Date
--------------------------  ------------------------------
         33.33%             2nd  anniversary of Grant Date
--------------------------  ------------------------------
         33.33%             3rd  anniversary of Grant Date
--------------------------  ------------------------------
</TABLE>

                                  ARTICLE III
                            TERMINATION OF EMPLOYMENT

            3.1   Termination of Employment. In the event that the Grantee's
employment (which for purposes of this Agreement shall include service as a
director or consultant) with the Company or one of the Company's subsidiaries
terminates for any reason, all unvested shares of Restricted Stock, together
with any property in respect of such shares held by the custodian pursuant to
Section 4.3 hereof, shall be forfeited as of the date of such termination of
employment and the Grantee promptly shall return to the Company any certificates
evidencing such shares. For purposes of this Agreement, the Grantee shall be
deemed to have terminated employment or incurred a termination of employment
upon (i) the date the Grantee ceases to be employed by, or to provide consulting
services for, the Company or any Company subsidiary; or (ii) the date the
Grantee ceases to be a Board member, provided, however, that if the Grantee (x)
at the time of reference is both an employee or consultant and a Board member,
or (y) ceases to be engaged as an employee, consultant or Board member and
immediately is engaged in another of such relationships with the Company or any
Company subsidiary, the Grantee shall not be


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deemed to have a "termination of employment" until the last of the dates
determined pursuant to subparagraphs (i) and (ii) above. The Committee, in its
discretion, may determine whether any leave of absence constitutes a termination
of employment for purposes of this Agreement.

                                   ARTICLE IV
                                  RESTRICTIONS

            4.1   Restrictions on Transferability. Until a share of Restricted
Stock vests, such share may not be sold, assigned, transferred, alienated,
commuted, anticipated, or otherwise disposed of (except by will or the laws of
descent and distribution), or pledged or hypothecated as collateral for a loan
or as security for the performance of any obligation, or be otherwise
encumbered, and are not subject to attachment, garnishment, execution or other
legal or equitable process, and any attempt to do so shall be null and void. If
the Grantee attempts to dispose of or encumber the Grantee's unvested shares of
Restricted Stock, such shares of Restricted Stock, together with any property in
respect of such shares held by the custodian pursuant to Section 4.3 hereof,
shall be forfeited as of the date of such attempted transfer and the Grantee
promptly shall return to the Company any certificates evidencing such shares.

            4.2   Issuance of Certificates.

            (a)   Reasonably promptly after the Grant Date, the Company shall
issue and deliver to the Grantee stock certificates, registered in the name of
the Grantee, evidencing the shares of Restricted Stock. Each such certificate
may bear the following legend:

      "THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION ENCUMBRANCE OR
      OTHER DISPOSAL OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
      SUBJECT TO THE TERMS OF THE NASTECH PHARMACEUTICAL COMPANY INC. 2004 STOCK
      INCENTIVE PLAN AND A RESTRICTED STOCK GRANT AGREEMENT BETWEEN NASTECH
      PHARMACEUTICAL COMPANY INC. AND THE HOLDER OF RECORD OF THE SECURITIES
      REPRESENTED BY THIS CERTIFICATE. NO TRANSFER OF THE SECURITIES REPRESENTED
      BY THIS CERTIFICATE IN CONTRAVENTION OF SUCH PLAN AND RESTRICTED STOCK
      GRANT AGREEMENT SHALL BE VALID OR EFFECTIVE. COPIES OF SUCH AGREEMENT MAY
      BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THE
      CERTIFICATE TO THE SECRETARY OF NASTECH PHARMACEUTICAL COMPANY INC."

Such legend shall not be removed from such certificates until such shares of
Restricted Stock vest.

            (b)   Reasonably promptly after any such shares of Restricted Stock
vest pursuant to Section 2.1 hereof, in exchange for the surrender to the
Company of the certificates evidencing such shares of Restricted Stock delivered
to the Grantee under Section 4.2(a) hereof, the Company shall issue and deliver
to the Grantee (or the Grantee's legal representative, beneficiary or heir)
certificates evidencing such shares of Restricted Stock, free of the legend
provided in Section 4.2(a) hereof, together with any property in respect of such
shares held by the custodian pursuant to Section 4.3 hereof.

            (c)   The Company may require as a condition of the delivery of
stock certificates pursuant to Section 4.2(b) hereof that the Grantee remit to
the Company an amount sufficient in the opinion of the Company to satisfy any
federal, state and other governmental tax withholding requirements related to
the vesting of the shares represented by such certificate.

            (d)   The Grantee shall not be deemed for any purpose to be, or have
rights as, a shareholder of the Company by virtue of the grant of Restricted
Stock, except to the extent a stock certificate is issued therefor pursuant to
Section 4.2(a) hereof, and then only from the date such certificate is issued.
Upon the issuance of a stock certificate, the Grantee shall have the rights of a
shareholder with respect to the Restricted Stock, including the right to vote
the shares, subject to the restrictions on

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transferability, the forfeiture provisions and the requirement that dividends be
held in escrow until the shares vest, as set forth in this Agreement.

            4.3   Dividends, etc. Unless the Committee otherwise determines, any
property, including cash dividends, received by a Grantee with respect to a
share of Restricted Stock as a result of any dividend, recapitalization, merger,
consolidation, combination, exchange of shares or otherwise and for which the
Grant Date occurs prior to such event but which has not vested as of the date of
such event, will not vest until such share of Restricted Stock vests, and shall
be promptly deposited with the Company or a custodian designated by the Company.
The Company shall or shall cause such custodian to issue to the Grantee a
receipt evidencing the property held by it in respect of the Restricted Stock.

                                   ARTICLE V
                                  MISCELLANEOUS

            5.1   Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any party hereto upon any breach or default
of any party under this Agreement, shall impair any such right, power or remedy
of such party, nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party of any breach or default under this Agreement, or any
waiver on the part of any party or any provisions or conditions of this
Agreement, must be in a writing signed by such party and shall be effective only
to the extent specifically set forth in such writing.

            5.2   Right of Discharge Preserved. Nothing in this Agreement shall
confer upon the Grantee the right to continue in the employ or other service of
the Company or one of the Company's subsidiaries, or affect any right which the
Company may have to terminate such employment or service.

            5.3   Integration. This Agreement contains the entire understanding
of the parties with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein. This Agreement, including, without limitation, the Plan, supersedes all
prior agreements and understandings between the parties with respect to its
subject matter.

            5.4   Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

            5.5   Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the provisions governing conflict of laws.

            5.6   Grantee Acknowledgment. The Grantee hereby acknowledges
receipt of a copy of the Plan. The Grantee hereby acknowledges that all
decisions, determinations and interpretations of the Committee in respect of the
Plan, this Agreement and the Restricted Stock shall be final and conclusive.

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            IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its duly authorized officer, and the Grantee has hereunto signed
this Agreement on his own behalf, thereby representing that he has carefully
read and understands this Agreement and the Plan as of the day and year first
written above.

                                      NASTECH PHARMACEUTICAL COMPANY INC.

                                      By: /s/ Gregory L. Weaver
                                          --------------------------------------
                                      Name: Gregory L. Weaver,
                                      Title: Chief Financial Officer & Secretary

                                      /s/ Paul H. Johnson, Ph.D.
                                      ------------------------------------------
                                      Mr. Paul H. Johnson, Ph.D.

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