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                                                                    EXHIBIT 10.4


                       NASTECH PHARMACEUTICAL COMPANY INC.
                            2004 STOCK INCENTIVE PLAN

                    NONQUALIFIED STOCK OPTION GRANT AGREEMENT

      This Grant Agreement (the "Agreement") is entered into as of January 1,
2006 by and between Nastech Pharmaceutical Company Inc. (the "Corporation"),
a Delaware Corporation, and Philip C. Ranker ("Grantee").

                                    ARTICLE 1
                                 GRANT OF OPTION

      Section 1.1 Grant of Options. Subject to the provisions of the Agreement,
and pursuant to the provisions of the Nastech Pharmaceutical Company Inc. 2004
Stock Incentive Plan (the "Plan"), Corporation hereby grants to Grantee, as of
the Grant Date specified in Attachment A, a Nonqualified Stock Option (the
"Option") to purchase all or any part of the number and class of shares of
Common Stock set forth on Attachment A at the exercise price per share ("Option
Price") set forth on Attachment A.

      Section 1.2 Term of Options. Unless the Option granted pursuant to Section
1.1 terminates earlier pursuant to other provisions of the Agreement, including
the expiration date specified in Attachment A, the Option shall expire on the
expiration date set forth on Attachment A hereto, but in no event later than the
tenth (10th) anniversary of its Grant Date.

                                    ARTICLE 2
                                     VESTING

      Section 2.1 Vesting Schedule. Subject to the further provision of this
Agreement, and unless the Option has earlier terminated pursuant to the
provisions of the Agreement, Grantee shall become vested on the dates specified
on Attachment A in a portion of the Option with respect to a percentage or
number of the underlying shares in accordance with the vesting schedule
specified on Attachment A; provided that Grantee shall have been in the
continuous employ of or affiliation (as a director or consultant) with the
Corporation or any of the Corporation's subsidiaries from the Grant Date through
any such date.

                                    ARTICLE 3
                               EXERCISE OF OPTION

      Section 3.1 Exercisability of Option. No portion of the Option granted to
Grantee shall be exercisable by Grantee prior to the time such portion of the
Option has vested.

      Section 3.2 Manner of Exercise. The Option may be exercised, in whole or
in part, by delivering written notice to the Committee or any designee of the
Committee. Such notice shall specify the number of shares of Common Stock
subject to the Option as to which the Option is being exercised, and shall be
accompanied by full payment of

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the Option Price of the shares of Common Stock as to which the Option is being
exercised. Payment of the Option Price shall be made in cash (or cash
equivalents acceptable to the Committee in the Committee's discretion). In the
Committee's sole and absolute discretion, the Committee may authorize payment of
the Option Price to be made, in whole or in part, by such other means as the
Committee may prescribe. The Option may be exercised only in multiples of whole
shares and no partial shares shall be issued. Notwithstanding anything to the
contrary herein, the minimum number of shares that may be purchased upon an
exercise of the Option is the lesser of 100 shares or the number of shares
subject to the vested portion of the Option.

      Section 3.3 Issuance of Shares and Payment of Cash upon Exercise. Upon
exercise of the Option, in whole or in part, in accordance with the terms of the
Agreement and upon payment of the Option Price for the shares of Common Stock as
to which the Option is exercised, the Corporation shall issue to Grantee or, in
the event of Grantee's death, to Grantee's executor, personal representative or
the person to whom the Option shall have been transferred by will or the laws of
descent and distribution, as the case may be, the number of shares of Common
Stock so paid for, in the form of fully paid and nonassessable Common Stock. The
stock certificates for any shares of Common Stock issued hereunder shall, unless
such shares are registered or an exemption from registration is available under
applicable federal and state law, bear a legend restricting transferability of
such shares.

                                    ARTICLE 4
                            TERMINATION OF EMPLOYMENT

      Section 4.1 Unvested Portion. Subject to the further provision of this
Agreement, and unless the Option has earlier terminated pursuant to the
provisions of this Agreement, the unvested portion of the Option shall terminate
upon termination of Grantee's employment or affiliation (as a director or
consultant) with the Corporation and all of the Corporation's subsidiaries for
any reason. Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, if such termination occurs as a result of the Company
terminating the employment of the Grantee prior to January 2, 2009 against his
will and without Cause (as defined in the Grantee's employment agreement dated
as of January 1, 2006), or the Grantee terminating his employment prior to
January 2, 2009 for Good Reason (as defined in the Grantee's employment
agreement dated as of January 1, 2006), the Option shall be fully vested and
exercisable and shall remain exercisable for the remainder of the term set forth
in Section 1.2 hereof. Furthermore, the foregoing provisions of this Section 4.1
shall be subject to the provisions of Section 21 of the Grantee's employment
agreement dated as of January 1, 2006.

      Section 4.2 Termination of Employment or Affiliation for Good Reason,
Involuntarily by the Corporation, For Cause by the Corporation or Voluntarily by
Grantee Other Than Termination of Employment or Affiliations by Death or
Disability. Unless the Option has earlier terminated pursuant to the provisions
of this Agreement, the vested portion of the Option granted to Grantee shall
terminate in its entirety, regardless of whether the Option is vested in whole
or in part,at the end of the stated term of the Option. Grantee may exercise all
or any part of the Option that was vested as of the


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date of termination (including any part of the Option as to which vesting was
accelerated by, or in connection with, such termination) after the date of
termination but no later than the end of the stated term of the Option.

      Section 4.3 Upon Grantee's Death. Unless the Option has earlier terminated
pursuant to the provisions of the Agreement, upon Grantee's death, Grantee's
executor, personal representative or the person to whom the Option shall have
been transferred by will or the laws of descent and distribution, as the case
may be, may exercise all or any part of the Option that was vested as of the
date of death no later than the end of the stated term of the Option.

      Section 4.4 Termination of Employment or Affiliation by Reason of
Disability. Unless the Option has earlier terminated pursuant to the provisions
of the Agreement, in the event that Grantee ceases, by reason of Disability, to
be an employee of or affiliated (as a director or consultant) with the
Corporation, all or any part of the Option that was vested as of the date of
termination of employment or affiliation may be exercised in whole or in part at
any time until the end of the stated term of the Option. For purposes of this
Agreement, Disability shall be as defined in Code Section 22(e)(3) and shall be
determined by the Committee, with its determination on the matter being final
and binding.

                                    ARTICLE 5
                                  MISCELLANEOUS

      Section 5.1 Non-Guarantee of Employment. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Corporation
(or an affiliate) and Grantee, or as a contractual right of Grantee to continue
in the employ of the Corporation or an affiliate, or as a limitation of the
right of the Corporation or an affiliate to discharge Grantee at any time.

      Section 5.2 No Rights of Stockholder. Grantee shall not have any of the
rights of a stockholder with respect to the shares of Common Stock that may be
issued upon the exercise of the Option until such shares of Common Stock have
been issued to him upon the due exercise of the Option.

      Section 5.3 Withholding of Taxes. The Corporation or any affiliate shall
have the right to deduct from any compensation or any other payment of any kind
(including withholding the issuance of shares of Common Stock) due Grantee the
amount of any federal, state or local taxes required by law to be withheld as
the result of the exercise of the Option; provided, however, that the value of
the shares of Common Stock withheld may not exceed the statutory minimum
withholding amount required by law. In lieu of such deduction, the Committee may
require Grantee to make a cash payment to the Corporation or an affiliate equal
to the amount required to be withheld. If Grantee does not make such payment
when requested, the Corporation may refuse to issue any Common Stock certificate
under the Plan until arrangements satisfactory to the Committee for such payment
have been made.


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      Section 5.4 Nontransferability of Option. Other than by will or the laws
of descent and distribution, the Option shall be nontransferable. During any
period Grantee is under a legal disability, Grantee's guardian or legal
representative may exercise all or any portion of the vested Option on behalf of
Grantee.

      Section 5.5 Agreement Subject to Grantee's Employment Agreement and the
Corporation's Charter and Bylaws. This Agreement is subject to Grantee's
Employment Agreement and the Charter and Bylaws of the Corporation, and any
applicable Federal or state laws, rules or regulations, including without
limitation, the laws, rules, and regulations of the State of Delaware.

      Section 5.6 Gender.  As used herein, the masculine shall include the
feminine as the circumstances may require.

      Section 5.7 Headings.  The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.

      Section 5.8 Notices. All notices and other communications made or given
pursuant to the Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Corporation, or addressed to the
Committee, care of the Corporation for the attention of its Secretary at its
principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may
be available to the parties.

      Section 5.9 Entire Agreement; Modification. The Agreement and Grantee's
Employment Agreement contain the entire agreement between the parties with
respect to the subject matter contained herein and may not be modified, except
as provided in the Plan, Grantee's Employment Agreement or in a written document
signed by each of the parties hereto.

      Section 5.10 Conformity with Plan and Grantee's Employment Agreement. This
Agreement is intended to conform in all respects with, and is subject to all
applicable provisions of, the Plan, which is incorporated herein by reference
and Grantee's Employment Agreement. Unless stated otherwise herein, capitalized
terms in this Agreement shall have the same meaning as defined in the Plan.
Inconsistencies between this Agreement and the Plan or Grantee's Employment
Agreement shall be resolved in accordance with the terms of the Plan and
Grantee's Employment Agreement. In the event of any ambiguity in the Agreement
which is not clarified in Grantee's Employment Agreement or any matters as to
which the Agreement is silent, the Plan shall govern including, without
limitation, the provisions thereof pursuant to which the Committee has the
power, among others, to (i) interpret the Plan and Grant Agreements related
thereto, (ii) prescribe, amend and rescind rules and regulations relating to the
Plan, and (iii) make all other determinations deemed necessary or advisable for
the administration of the Plan. Grantee acknowledges by signing this Agreement
that he has received and reviewed a copy of the Plan.


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      IN WITNESS WHEREOF, the parties have executed the Agreement as of the date
first above written.

                        NASTECH PHARMACEUTICAL COMPANY INC.

                        By:  /s/ Steven C. Quay
                             -------------------------------------------------
                             Name: Steven C. Quay
                             Title: Chairman, President and CEO




                        GRANTEE

                        /s/ Philip C. Ranker
                        ------------------------------------------------------
                        Philip C. Ranker
                        Chief Financial Officer


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                                  ATTACHMENT A

<TABLE>
<S>                                       <C>
Grant Date:                               January 1, 2006

Number of Options:                        3,053 ("Total Shares")

Exercise Price:                           $14.72 per share
</TABLE>

The exercise price equals the fair market value of the Common Stock on date of
grant.

Vesting Schedule:

<TABLE>
Portion of Total Shares       Vesting Date
-----------------------       ------------
<S>                           <C>
3,053                         January 1, 2007

Expiration Date:              January 1, 2016
</TABLE>