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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

                             EXCLUSIVE DEVELOPMENT,
                     COMMERCIALIZATION AND LICENSE AGREEMENT

                                 BY AND BETWEEN

                                MERCK & CO., INC.

                                       AND

                       NASTECH PHARMACEUTICAL COMPANY INC.

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         EXCLUSIVE DEVELOPMENT, COMMERCIALIZATION AND LICENSE AGREEMENT

This Exclusive Development, Commercialization and License Agreement (this
"AGREEMENT") is effective as of September 24, 2004 (the "EFFECTIVE DATE"), and
is entered into by and between MERCK & CO., INC., a corporation organized and
existing under the laws of New Jersey ("MERCK"), and NASTECH PHARMACEUTICAL
COMPANY INC., a corporation organized and existing under the laws of Delaware
("NASTECH").

                                    RECITALS:

WHEREAS, Nastech has developed Nastech Know-How (as hereinafter defined) and has
rights to Nastech Patent Rights (as hereinafter defined) with respect to the
nasal formulation and administration of PYY (3-36) (as hereinafter defined);

WHEREAS, Merck and Nastech desire to enter into a collaboration to develop Nasal
Formulations (as hereinafter defined) and Product (as hereinafter defined) upon
the terms and conditions set forth herein;

WHEREAS, Merck desires to obtain from Nastech, and Nastech desires to grant to
Merck, an exclusive license under the Nastech Patent Rights and Nastech Know-How
with respect to Nasal Formulations and Product, upon the terms and conditions
set forth herein;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the receipt and sufficiency which are hereby
acknowledged, the Parties hereby agree as follows:

ARTICLE 1 DEFINITIONS.

Unless specifically set forth to the contrary herein, the following terms,
whether used in the singular or plural, shall have the respective meanings set
forth below.

1.1   "ACT" shall mean, as applicable, the United States Federal Food, Drug and
      Cosmetic Act, 21 U.S.C. Sections 301 et seq., and/or the Public Health
      Service Act, 42 U.S.C. Sections 262 et seq., as such may be amended from
      time to time.

1.2   "AFFILIATE" shall mean (i) any corporation or business entity of which
      fifty percent (50%) or more of the securities or other ownership interests
      representing the equity, the voting stock or general partnership interest
      are owned, controlled or held, directly or indirectly, by Merck or
      Nastech; or (ii) any corporation or business entity which, directly or
      indirectly, owns, controls or holds fifty percent (50%) (or the maximum
      ownership interest permitted by law) or more of the securities or other
      ownership interests representing the equity, the voting stock or, if
      applicable, the general partnership interest, of Merck or Nastech; or
      (iii) any corporation or business entity of which fifty percent (50%) or
      more of the securities or other ownership interests representing the
      equity, the voting stock or general partnership interest are owned,
      controlled or held, directly or indirectly, by a corporation or business
      entity described in (i) or (ii).

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1.3   "ALLIANCE MANAGER" shall have the meaning given such term in Section
      3.4.4.

1.4   "CALENDAR QUARTER" shall mean the respective periods of three (3)
      consecutive calendar months ending on March 31, June 30, September 30 and
      December 31.

1.5   "CALENDAR YEAR" shall mean each successive period of twelve (12) months
      commencing on January 1 and ending on December 31.

1.6   "CHANGE OF CONTROL" shall mean with respect to a Party: (1) the sale of
      all or substantially all of such Party's assets or business relating to
      this Agreement; (2) a merger, reorganization or consolidation involving
      such Party in which the voting securities of such Party outstanding
      immediately prior thereto cease to represent at least [***] of the
      combined voting power of the surviving entity immediately after such
      merger, reorganization or consolidation; or (3) a person or entity, or
      group of persons or entities, acting in concert acquire more than [***] of
      the voting equity securities or management control of such Party.

1.7   "CLINICAL SUPPLIES" shall have the meaning given such term in Section
      3.6.1.

1.8   "CLINICAL TRIAL" shall mean a Phase I Clinical Trial, Phase II Clinical
      Trial, Phase III Clinical Trial, and/or post-approval clinical trial.

1.9   "COMBINATION PRODUCT" shall mean a Product which includes one or more
      active ingredients other than PYY (3-36) in combination with PYY (3-36).

1.10  "COMPETING PHARMA" shall have the meaning given such term in Section 1.11.

1.11  "COMPETING PHARMA CHANGE OF CONTROL" shall mean a Change of Control in
      which a company or group of companies acting in concert (collectively a
      "COMPETING PHARMA") (a) for whom collective worldwide sales of ethical
      pharmaceutical products in the Calendar Year that preceded the Change of
      Control were [***], or (b) have a research, development or
      commercialization program for a [***], is the acquirer (by asset purchase,
      merger, consolidation, reorganization or otherwise) as part of such Change
      of Control.

1.12  "COMPETITIVE PRODUCT" shall mean a product for nasal administration
      containing PYY (3-36) [***], in each case other than Product.

1.13  "CONTINUED MANUFACTURING FAILURE" shall have the meaning given such term
      in the Supply Agreement.

1.14  "CONTROL", "CONTROLS" OR "CONTROLLED BY" shall mean with respect to any
      item of or right under Nastech Patent Rights or Nastech Know-How, the
      possession of (whether by ownership or license, other than pursuant to
      this Agreement) or the ability of a Party to grant access to, or a license
      or sublicense of, such items or right as provided for herein without
      violating the terms of any agreement or other arrangement with any Third
      Party existing at the time such Party would be required hereunder to grant
      the other Party such access or license or sublicense.

1.15  "CO-PROMOTION AGREEMENT" shall have the meaning given such term in Section
      3.4.3.

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COMMISSION.]

1.16  "DEVELOPMENT PLAN" shall have the meaning given such term in Section 2.1.

1.17  "DEVELOPMENT PROGRAM" shall mean the development activities undertaken by
      the Parties hereto as set forth in Article 2.

1.18  "EMEA" shall mean the European Medicines Evaluation Agency and the
      Committee for Proprietary Medicinal Product and any successor governmental
      authority having substantially the same authority.

1.19  "EU MARKET" shall mean any one of the following countries: the [***].

1.20  "FIRST COMMERCIAL SALE" shall mean, with respect to any Product, the first
      sale for end use or consumption of such Product in a country after all
      required approvals, including Marketing Authorization, have been granted
      by the Regulatory Authority of such country, excluding, however, any sale
      or other distribution for use in a Clinical Trial.

1.21  [***] shall have the meaning given such term in the Supply Agreement.

1.22  "IMPROVEMENT" shall mean any enhancement, whether or not patentable, in
      the manufacture, formulation, ingredients, preparation, presentation,
      means of delivery, dosage or packaging of Nasal Formulations or Product.

1.23  "IND" shall mean an Investigational New Drug application, Clinical Study
      Application, Clinical Trial Exemption, or similar application or
      submission for approval to conduct human clinical investigations filed
      with or submitted to a Regulatory Authority in conformance with the
      requirements of such Regulatory Authority.

1.24  "INFORMATION" shall mean any and all information and data, including
      without limitation all Merck Know-How, all Nastech Know-How, and all other
      scientific, pre-clinical, clinical, regulatory, manufacturing, marketing,
      financial and commercial information or data, whether communicated in
      writing or orally or by any other method, which is provided by one Party
      to the other Party in connection with this Agreement.

1.25  "INVENTION" means any process, method, composition of matter, article of
      manufacture, discovery or finding that is conceived and/or reduced to
      practice in the course of and arising from the Development Program.

1.26  "JOINT INFORMATION AND INVENTIONS" shall mean all discoveries,
      Improvements, processes, methods, protocols, formulas, data, Inventions,
      know-how and trade secrets, patentable or otherwise, arising from the
      Development Program developed or invented jointly by employees of Merck
      and Nastech or others acting on behalf of Merck and Nastech.

1.27  "JOINT INVENTIONS PATENT RIGHTS" shall mean any and all patents and patent
      applications in the Territory (which for the purposes of this Agreement
      shall be deemed to include certificates of invention and applications for
      certificates of invention) which during the term of this Agreement are
      Controlled by Merck which claim or cover Joint Information and Inventions;
      or are divisions, continuations, continuations-in-part, reissues,
      renewals, extensions, supplementary protection

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      certificates, and the like of any such patents and patent applications and
      foreign equivalents thereof.

1.28  "MARKETING AUTHORIZATION" shall mean all approvals necessary to market and
      sell a Product in any country (including without limitation all applicable
      pricing and governmental reimbursement approvals even if not legally
      required to sell Product in a country).

1.29  "MERCK INFORMATION AND INVENTIONS" shall mean all discoveries,
      Improvements, processes, methods, protocols, formulas, data, Inventions,
      know-how and trade secrets, patentable or otherwise, arising from the
      Development Program developed or invented solely by employees of Merck or
      other persons not employed by Nastech acting on behalf of Merck.

1.30  "MERCK KNOW-HOW" shall mean any information and materials, including but
      not limited to, discoveries, Improvements, processes, methods, protocols,
      formulas, data, inventions (including without limitation Merck's
      Information and Inventions and Merck's rights in Joint Information and
      Inventions), know-how and trade secrets, patentable or otherwise, which
      during the term of this Agreement, (i) are in Merck's possession or
      control, (ii) are not generally known and (iii) are in Merck's opinion
      necessary to Nastech in the performance of its obligations under the
      Development Program.

1.31  "[***]" shall have the meaning given such term in Section [***].

1.32  "[***]" shall have the meaning given such term in Section [***].

1.33  "NASAL FORMULATIONS" shall mean the PYY (3-36) nasally administrated
      formulations [***].

1.34  "NASTECH INFORMATION AND INVENTIONS" shall mean all discoveries,
      Improvements, processes, methods, protocols, formulas, data, Inventions,
      know-how and trade secrets, patentable or otherwise, arising from the
      Development Program developed or invented solely by employees of Nastech
      or other persons not employed by Merck acting on behalf of Nastech.

1.35  "NASTECH KNOW-HOW" shall mean all information and materials, including but
      not limited to, discoveries, Improvements, processes, methods, protocols,
      formulas, data, inventions (including without limitation Nastech
      Information and Inventions and Nastech's rights in Joint Information and
      Inventions), know-how and trade secrets, patentable or otherwise, which
      during the term of this Agreement (i) are in the possession or control of
      Nastech or its Affiliates, (ii) are not generally known and (iii) are
      necessary or useful to Merck in connection with the Development Program
      and the research, development, manufacture, marketing, use or sale of
      Nasal Formulations or Products for any and all purposes in the Territory.

1.36  "[***]" shall mean [***].

1.37  "NASTECH PATENT RIGHTS" shall mean any and all patents and patent
      applications in the Territory (which for the purposes of this Agreement
      shall be deemed to include certificates of invention and applications for
      certificates of invention) which during the term of this Agreement are
      Controlled by Nastech, including but not limited to those listed on
      Schedule 1.37 (i) one or more claims of which would be infringed by, but
      for the license granted herein, the development, use, making, offering to
      sell, sale or import of a Nasal Formulations and/or Product, including
      without

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      limitation, Improvements; or (ii) which claim or cover Nastech Information
      and Inventions; or (iii) are divisions, continuations,
      continuations-in-part, reissues, renewals, extensions, supplementary
      protection certificates, and the like of any such patents and patent
      applications, and United States and foreign equivalents thereof.

1.38  "NDA" shall mean a New Drug Application, Biologics License Application,
      Worldwide Marketing Application, Marketing Application Authorization,
      filing pursuant to Section 510(k) the Act or similar application or
      submission for Marketing Authorization of a Product filed with a
      Regulatory Authority to obtain marketing approval for a biological,
      pharmaceutical or diagnostic product in that country or in that group of
      countries.

1.39  "NET SALES" shall mean the gross invoice price of Product sold by Merck or
      its Related Parties to the first Third Party after deducting, if not
      previously deducted, from the amount invoiced or received:

      1.39.1 trade and quantity discounts other than early pay cash discounts;

      1.39.2 returns, rebates, chargebacks and other allowances;

      1.39.3 retroactive price reductions that are actually allowed or granted;

      1.39.4 sales commissions paid to Third Party distributors and/or selling
             agents (which shall not include contract sales organizations);

      1.39.5 a fixed amount equal to [***] of the amount invoiced to cover bad
             debt, sales or excise taxes, early payment cash discounts,
             transportation and insurance, custom duties, and other governmental
             charges; and

      1.39.6 [***].

             With respect to sales of Combination Products, Net Sales shall be
             calculated [***]. In the event that Product is sold only as a
             Combination Product, Net Sales shall be calculated [***] shall be
             determined in accordance with Merck's regular accounting methods,
             consistently applied. The deductions set forth in subsections
             1.39.1 through 1.39.6 above will be applied using the same
             proportional allocation stated above in calculating Net Sales for a
             Combination Product. In the event that Product is sold only as a
             Combination Product and either Party reasonably believes that the
             calculation set forth in this paragraph does not fairly reflect the
             value of the Product relative to the other active ingredients in
             the Combination Product, the Parties shall negotiate, in good
             faith, other means of calculating Net Sales with respect to
             Combination Products.

1.40  "[***]" shall have the meaning given such term in Section [***].

1.41  "[***]" shall have the meaning given such term in Section [***].

1.42  "PARTY" shall mean Merck or Nastech, and "PARTIES" shall mean Merck and
      Nastech.

1.43  "PATENT RIGHTS" shall mean Nastech Patent Rights and Joint Inventions
      Patent Rights.

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1.44  "PHASE I CLINICAL TRIAL" shall mean a human clinical trial in any country
      that is intended to initially evaluate the safety and/or pharmacological
      or antigenic effect of a Product in human subjects or that would otherwise
      satisfy the requirements of 21 CFR 312.21(a) and shall also include the
      [***].

1.45  "PHASE II CLINICAL TRIAL" shall mean a human clinical trial in any country
      that is intended to initially evaluate the effectiveness of a Product for
      a particular indication or indications in human subjects with the disease
      or indication under study or that would otherwise satisfy the requirements
      of 21 CFR 312.21(b). Notwithstanding anything else to the contrary in this
      Agreement, "Phase II Clinical Trial" shall not include the [***].

1.46  "PHASE III CLINICAL TRIAL" shall mean a pivotal human clinical trial in
      any country the results of which could be used to establish safety and
      efficacy of a Product as a basis for a Marketing Application or that would
      otherwise satisfy the requirements of 21 CFR 312.21(c). Notwithstanding
      anything else to the contrary in this Agreement, "Phase III Clinical
      Trial" shall not include the [***].

1.47  [***].

1.48  "PRODUCT" shall mean any pharmaceutical preparation in final form
      containing a Nasal Formulation (i) for sale by prescription,
      over-the-counter or any other method, or (ii) for administration to human
      patients in a Clinical Trial, for any and all purposes.

1.49  "PRODUCT DEVELOPMENT TEAM" or "PDT" shall have the meaning given such term
      in Section 2.2.

1.50  "PYY (3-36)" shall mean [***]

1.51  "REGULATORY AUTHORITY" shall mean any applicable government regulatory
      authority involved in granting approvals for the manufacturing, marketing,
      reimbursement and/or pricing of a Product in the Territory, including, in
      the United States, the United States Food and Drug Administration and any
      successor governmental authority having substantially the same function
      and, in the EU Markets, without limitation the EMEA as permitted under
      applicable law.

1.52  "RELATED PARTY" shall mean each of Merck, its Affiliates, and permitted
      sublicensees (which term does not include distributors). Nastech shall be
      a "Related Party" for purposes of calculating royalties owing on net sales
      under Section 5.4 only to the extent that Nastech co-promotes Product in
      the US in accordance with Section 3.4.3.

1.53  "REVERTED PRODUCTS" shall have the meaning given such term in Section 8.2.

1.54  "SUPPLY AGREEMENT" shall mean that certain Supply Agreement by and between
      Merck and Nastech dated as of the Effective Date, as amended from time to
      time in accordance with its terms.

1.55  "TERRITORY" shall mean all of the countries in the world, and their
      territories and possessions.

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COMMISSION.]

1.56  "THIRD PARTY" shall mean an entity other than Merck and its Related
      Parties, and Nastech and its Affiliates.

1.57  [***].

1.58  "UNITED STATES" or "US" shall mean the fifty states of the United States
      of America and the District of Columbia, and shall exclude all other
      territories, protectorates and possessions of the United States of America
      (other than the District of Columbia).

1.59  "VALID PATENT CLAIM" shall mean a claim of an issued and unexpired patent
      included within the Patent Rights which has not been revoked or held
      unenforceable or invalid by a decision of a court or other governmental
      agency of competent jurisdiction, and which is not appealable or has not
      been appealed within the time allowed for appeal, and which has not been
      disclaimed, denied or admitted to be invalid or unenforceable through
      reissue, re-examination or disclaimer or otherwise.

ARTICLE 2 DEVELOPMENT PROGRAM

2.1   GENERAL. Merck shall have responsibility for the development of Nasal
      Formulations and Products in the Territory within the scope of the rights
      granted to it hereunder and upon the terms and conditions set forth in
      this Agreement, and subject to Nastech's performance of its development
      obligations as set forth in this Article 2 and other obligations set forth
      in this Agreement. Development Program activities shall be conducted in
      accordance with a development plan which shall be established, and amended
      or otherwise modified from time to time, by the PDT in accordance with
      Section 2.2 (the "DEVELOPMENT PLAN"). Without limiting the foregoing, the
      Development Plan, may outline the major activities, goals and timelines
      for Product development which may include, without limitation, [***].

2.2   PRODUCT DEVELOPMENT TEAM. The working group responsible for the
      Development Program activities for the Product shall be Merck's Product
      Development Team (referred to herein as the "PRODUCT DEVELOPMENT TEAM" or
      "PDT") or its equivalent successor working group.

      2.2.1 Conduct. The PDT will operate in accordance with Merck procedures as
            they would apply to an internal Merck program at an equivalent stage
            of development having a similar commercial value. The PDT for the
            Product will be chartered by Merck through its usual process, within
            [***] days following the Effective Date. The functional composition
            of the PDT shall change from time to time as appropriate to the
            stage of development in conformance with Merck's established
            standards.

      2.2.2 Nastech Representation on PDT. Nastech may designate [***] (or such
            other reasonable number of Nastech employees as requested by Merck
            based upon the expertise then required for development activities)
            to participate on the PDT, which members shall have the appropriate
            expertise necessary to fulfill the then required PDT
            responsibilities. Nastech's designated members shall be incorporated
            to the team no later than [***] days following its charter or within
            [***] days of being designated, whichever is later.

      2.2.3 Responsibilities. The PDT is responsible for the design and
            implementation of all aspects of development activities for the
            Product and the Development Plan. The PDT shall also

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            be responsible for establishing and forecasting requirements for
            Clinical Supplies. The Development Plan, including the establishment
            of the development budget, shall be subject to ongoing revision
            through the normal activity of the PDT, all in accordance with Merck
            procedures as they would apply to an internal Merck program at an
            equivalent stage of development.

      2.2.4 Meetings of PDT. Merck shall be responsible for scheduling PDT
            meetings, preparing agendas and sending out notices of PDT meetings
            and agendas therefor. The PDT meetings may be held telephonically,
            by video-conference or in person at the appropriate Merck facility
            or such other location established by the PDT or agreed to by the
            Parties. Nastech shall receive regular updates on development
            activities through its direct participation of its members of the
            PDT and circulation of PDT meeting minutes.

      2.2.5 Strategic Oversight of PDT. All strategic and operational activities
            of the PDT, including without limitation, approval of the
            Development Plan and development budget, shall be subject to
            oversight and approval of Merck's existing product lifecycle
            committees applicable to an internal Merck program at an equivalent
            stage of development. The final decision on all strategic matters
            determined through Merck's product lifecycle committees shall reside
            with Merck.

2.3   CONDUCT OF DEVELOPMENT. Nastech and Merck shall each conduct its
      responsibilities under the Development Program in good scientific manner,
      and in compliance in all material respects with all requirements of
      applicable laws, rules and regulations and all applicable good laboratory
      practices to attempt to achieve their objectives efficiently and
      expeditiously. Nastech and Merck each shall proceed diligently with the
      work set out in the Development Plan by using their respective good faith
      efforts to allocate sufficient time, effort, equipment and facilities to
      the Development Program and to use personnel with sufficient skills and
      experience as are required to accomplish the Development Program in
      accordance with the terms of this Agreement and this Article 2. In
      addition, if animals are used in research hereunder, each of the Parties
      will comply with the Animal Welfare Act or any other applicable local,
      state, national and international laws or regulations relating to the care
      and use of laboratory animals. Merck encourages Nastech to use the highest
      standards, such as those set forth in the Guide for the Care and Use of
      Laboratory Animals (NRC, 1996), for the humane handling, care and
      treatment of such research animals. Any animals which are used in the
      course of the Research, or products derived from those animals, such as
      eggs or milk, will not be used for food purposes, nor will these animals
      be used for commercial breeding purposes. Nastech shall notify Merck in
      writing of any deviations from applicable regulatory or legal
      requirements. Nastech hereby certifies that it will not and has not
      employed or otherwise used in any capacity the services of any person
      debarred under Section 21 USC 335a in performing any services hereunder.

      Merck shall be entitled to, and only with Merck's prior written consent
      Nastech may, utilize the services of Third Parties to perform their
      respective Development Program activities. Notwithstanding any such
      consent, both Parties shall remain at all times fully liable for its
      respective responsibilities under the Development Program. Without
      limiting the foregoing, Nastech shall ensure that its PDT representatives,
      its Alliance Managers, and any other Nastech employees or agents working
      on the Development Program on Nastech's behalf shall be subject to a
      written agreement to comply with the requirements of Section 2.8 and
      Section 4.1.

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2.4   DEVELOPMENT BUDGET. The development budget for Product shall be set forth
      in the Development Plan. [***].

2.5   NASTECH DEVELOPMENT PROGRAM RESPONSIBILITIES; MERCK FUNDING FOR NASTECH
      DEVELOPMENT ACTIVITIES.

      2.5.1 Responsibilities. Nastech shall provide Merck with reasonable
            assistance in the Development Program and Nastech shall, at the
            request of the PDT or Merck, perform activities under the
            Development Program in accordance with the Development Plan and the
            terms and conditions of this Agreement. At a minimum and without
            limiting the foregoing, Nastech shall, to the extent requested by
            Merck or the PDT: [***].

      2.5.2 Funding of Development.

            (a)   Merck shall fund the costs of the Development Program as
                  specified in the development budget under Section 2.4. Nastech
                  shall apply any development funding it receives from Merck
                  under this Agreement solely to carry out its development
                  activities in accordance with the Development Plan, the
                  development budget and the terms and conditions of this
                  Agreement. Merck shall have no obligation to reimburse Nastech
                  for any development activities conducted by Nastech prior to
                  the Effective Date. Notwithstanding anything to the contrary
                  in the foregoing, Nastech shall be compensated for its
                  responsibilities and obligations under Section 3.6 and the
                  Supply Agreement in accordance with the terms and conditions
                  of such Section 3.6 and the Supply Agreement and not under
                  this Section 2.5.

            (b)   To assist the PDT and Merck in establishing and revising the
                  development budget, upon the request of the PDT from time to
                  time, Nastech shall provide estimates of costs Nastech expects
                  to incur, and proposed work plans, for activities assigned to
                  Nastech under the Development Program for the subsequent
                  Calendar Year, or as otherwise requested by Merck.

            (c)   [***].

            (d)   No later than [***] days following the conclusion of each
                  Calendar Quarter, in which Nastech has performed work under
                  the Development Plan, Nastech shall provide Merck with a
                  report showing satisfactory performance of Nastech's
                  obligations under the Development Program for such Calendar
                  Quarter, and a reconciliation of the amounts actually incurred
                  by Nastech for such work and the Development Cost Advance for
                  such Calendar Quarter. [***].

2.6   EXCHANGE OF INFORMATION. Upon execution of this Agreement, and on an
      ongoing basis during the term of the Development Program, Nastech shall
      disclose to Merck in English and in writing all Nastech Know-How not
      previously disclosed. Merck shall promptly disclose to Nastech during the
      term of the Development Program all Merck Know-How.

2.7   RECORDS AND REPORTS.

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      2.7.1 RECORDS. Each of Merck and Nastech shall maintain records, in
            sufficient detail and in good scientific manner appropriate for
            patent and regulatory purposes, which shall fully and properly
            reflect all work done and results achieved in the performance of the
            Development Program by such Party.

      2.7.2 COPIES AND INSPECTION OF RECORDS. Merck shall have the right, during
            normal business hours and upon reasonable notice, to inspect and
            copy all such records of Nastech referred to in subsection 2.7.1.
            Merck shall maintain such records and the information disclosed
            therein in confidence in accordance with Section 4.1. Merck shall
            have the right to arrange for its employees and/or consultants
            involved in the activities contemplated hereunder to visit the
            offices and laboratories of Nastech and any of its Third Party
            contractors of Nastech as permitted under Section 2.3 during normal
            business hours and upon reasonable notice, and to discuss the
            Development Program work and its results in detail with the
            technical personnel and consultants of Nastech. Upon request,
            Nastech shall provide copies of the records described in subsection
            2.7.1 above.

2.8   RESEARCH INFORMATION AND INVENTIONS. The entire right, title and interest
      in:

      2.8.1 Nastech Information and Inventions shall be owned solely by Nastech;

      2.8.2 Merck Information and Inventions shall be owned solely by Merck; and

      2.8.3 Joint Information and Inventions shall be owned solely by Merck.
            Nastech hereby assigns to Merck all right, title and interest it may
            have in any Joint Information and Inventions.

            Nastech shall promptly disclose to Merck the development, making
            conception or reduction to practice of Nastech Information and
            Inventions and Joint Information and Inventions.

2.9   MATERIALS. In order to facilitate the Development Program, each Party
      shall provide the other Party with sufficient quantities of material as
      set forth in the Development Plan ("MATERIALS"). Each Party shall use the
      Materials supplied by the other Party solely for the purposes of carrying
      out its respective activities under the Development Program in accordance
      with the terms of this Agreement and, consistent with the licenses granted
      to either party in this Agreement. Neither Party shall transfer, deliver
      or disclose any such Materials of the other Party, or any derivatives,
      analogs, modifications or components thereof, to any Third Party without
      the prior written approval of the providing Party, except that Merck may
      transfer Materials provided by Nastech without Nastech's prior written
      consent to Merck's Related Parties, agents and subcontractors for the
      purpose of carrying out the development and commercialization of Nasal
      Formulations and Products. The Materials are not to be used in humans,
      except as contemplated by this Agreement or the Development Plan and
      permitted by applicable law. Any unused Materials supplied by Merck to
      Nastech shall be, at Merck's option, either returned to Merck, or
      destroyed in accordance with instructions by Merck. Notwithstanding
      anything else to the contrary in this Section 2.9, Nastech's supply of
      Nasal Formulations or Product for Clinical Supplies or commercial supply
      shall be subject to Section 3.6.1, in the case of Clinical Supplies and
      Section 3.6.2 and the Supply Agreement in the case of commercial supply.

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DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]

2.10  NASTECH EXCLUSIVE PYY (3-36) EFFORTS. During the [***] Nastech will not
      [***] (a) any product containing [***]; or (b) any product that [***]. If
      Nastech develops a product described in the foregoing that is not a Nasal
      Formulation or Product or otherwise covered by the license grants set
      forth in Section 3.1, then, at Merck's option, Merck and Nastech shall
      [***]. In the event that (1) Merck and/or its Affiliates develop, other
      than in the course of the Development Program, any product [***] (a
      "NON-DEVELOPMENT PROGRAM PRODUCT") and (2) the making, having made, use,
      offer for sale, sale or import of such Non-Development Program Compound by
      Merck, its Affiliate or their respective licensees, would infringe during
      the term of this Agreement a claim of issued letters patent which Nastech
      owns or has the rights to license and which patents are not covered by the
      grant in Section 3.1, upon Merck's option, Nastech agrees to, [***].

2.11  USE OF HUMAN MATERIALS. If any human cell lines, tissue, human clinical
      isolates or similar human-derived materials ("HUMAN MATERIALS") have been
      or are to be collected and/or used in the Development Program, Nastech
      represents and warrants (i) that it has complied, or shall comply, with
      all applicable laws, guidelines and regulations relating to the collection
      and/or use of the Human Materials and (ii) that it has obtained, or shall
      obtain, all necessary approvals and appropriate informed consents, in
      writing, for the collection and/or use of such Human Materials. Nastech
      shall provide documentation of such approvals and consents upon Merck's
      request. Nastech further represents and warrants that such Human Materials
      may be used as contemplated in this Agreement without any obligations to
      the individuals or entities ("PROVIDERS") who contributed the Human
      Materials, including, without limitation, any obligations of compensation
      to such Providers or any other Third Party for the intellectual property
      associated with, or commercial use of, the Human Materials for any
      purposes.

ARTICLE 3 LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION.

3.1   LICENSE GRANT.

      3.1.1 Development and Commercialization. Subject to the terms and
            conditions of this Agreement, Nastech hereby grants to Merck an
            exclusive license (even as to Nastech) in the Territory, with a
            right to sublicense, under Nastech Patent Rights, Nastech
            Information and Inventions and Nastech Know-How to develop, use,
            offer to sell, sell or import Nasal Formulations and Products for
            any and all purposes.

      3.1.2 Manufacturing. Subject to the terms and conditions of this
            Agreement, Nastech hereby grants to Merck (a) a non-exclusive
            license in the Territory, with a right to sublicense, under Nastech
            Patent Rights, Nastech Information and Inventions and Nastech
            Know-How, to make and have made Nasal Formulations and Products
            solely for the purpose of [***]; and (b) automatically effective
            upon Merck's exercise of its right to manufacture Product upon the
            occurrence of a Continued Manufacturing Failure, [***], an exclusive
            license (even as to Nastech) in the Territory, with a right to
            sublicense, under Nastech Patent Rights, Nastech Information and
            Inventions and Nastech Know-How, to make and have made Nasal
            Formulations and Products for any and all purposes; provided that,
            [***].

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DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]

      3.1.3 Grant to Nastech. Subject to the terms and conditions of this
            Agreement, Merck hereby grants to Nastech a non-exclusive,
            royalty-free license, without the right to sublicense, under Merck
            Information and Inventions, Merck Know-How, Joint Inventions Patent
            Rights and Joint Information and Inventions solely to perform (a)
            Nastech's obligations under the Development Program in accordance
            with Article 2, (b) Nastech's co-promotion obligations in the United
            States in accordance with Section 3.4.3; and (c) Nastech's
            obligations to manufacture and supply Nasal Formulations and Product
            in accordance with Section 3.6.

      3.1.4 Nastech Retained Rights. Subject to the terms and conditions of this
            Agreement, (a) Nastech shall retain the rights under Nastech Patent
            Rights, Nastech Information and Inventions and Nastech Know-How as
            necessary with respect to Nasal Formulation and Products solely to
            perform (i) Nastech's obligations under the Development Program in
            accordance with Article 2, and (ii) Nastech's co-promotions
            obligations in the United States in accordance with Section 3.4.3;
            and (b) for the purposes of clarity, the Parties acknowledge that
            Nastech is not granting under Sections 3.1.1 or 3.1.2, and that
            Nastech retains the right to itself practice, Nastech Patent Rights,
            Nastech Information and Inventions and Nastech Know-How, for
            purposes other than with respect to Nasal Formulations or Product.
            Nastech covenants that it shall not use or permit its Affiliates or
            Third Parties to use (directly or indirectly whether through a
            license or otherwise) any of its retained rights to develop, use,
            make, have made, offer to sell, sell or import Nasal Formulations or
            Products other than with Merck under this Agreement.

      3.1.5 Grant to Nastech in Joint Information and Inventions. Subject to the
            terms and conditions of this Agreement, Merck hereby grants to
            Nastech a non-exclusive, royalty free, perpetual license in the
            Territory under Joint Inventions Patent Rights and Joint Information
            and Inventions for any and all purposes other than with respect to
            Nasal Formulations and Products. Nastech covenants that it shall not
            use or permit its Affiliates or Third Parties to use (directly or
            indirectly whether through a license or otherwise) Joint Inventions
            Patent Rights or Joint Information and Inventions to develop, use,
            make, have made, offer to sell, sell or import Nasal Formulations or
            Products other than in accordance with Section 3.1.3 under this
            Agreement.

      3.1.6 Merck Rights in Development Program Intellectual Property for Other
            Purposes. Subject to the terms and conditions of this Agreement,
            Nastech hereby grants to Merck a royalty free, perpetual
            non-exclusive license in the Territory under Nastech Information and
            Inventions, with a right to sublicense, for any and all uses,
            including but not limited to, to develop, make, have made, use,
            offer to sell, sell or import any compound or product other than a
            Nasal Formulation or Product.

3.2   NON-EXCLUSIVE LICENSE GRANT. In the event the making, having made, use,
      offer for sale, sale or import by Merck, or Merck's Related Parties of
      Nasal Formulations or Product(s) would infringe during the term of this
      Agreement a claim of issued letters patent which Nastech owns or has the
      rights to license and which patents are not covered by the grant in
      Section 3.1, Nastech hereby grants to Merck, to the extent Nastech is
      legally able to do so, a non-exclusive, sublicensable, royalty-free
      license in the Territory under such issued letters patent solely for Merck
      to develop, make, have made, use, sell, offer for sale or import Nasal
      Formulations and Products in the Territory.

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COMMISSION.]

3.3   NO IMPLIED LICENSE. Except as specifically set forth in this Agreement,
      neither Party shall acquire any license or other intellectual property
      interest, by implication or otherwise, in any Information disclosed to it
      under this Agreement or under any patents or patent applications owned or
      controlled by the other Party or its Affiliates.

3.4   DEVELOPMENT AND COMMERCIALIZATION.

      3.4.1 Merck Diligence Obligations. Merck shall use reasonable efforts,
            consistent with the usual practice followed by Merck in pursuing the
            commercialization and marketing of its other pharmaceutical products
            of a similar commercial value, at its own expense, to develop and
            commercialize a Product on a commercially reasonable basis in such
            countries in the Territory where in Merck's opinion it is
            commercially viable to do so.

      3.4.2 Development and Commercialization Responsibilities.

            (a)   Generally. Subject to the terms and conditions of this
                  Agreement, Merck shall have responsibility for development,
                  regulatory filings (subject to Section 3.4.2(b)), marketing
                  and commercialization of Product in the Territory, subject to
                  Nastech obligations under the Development Program in
                  accordance with Article 2 and Nastech's rights and obligations
                  to co-promote Product in the United States in accordance with
                  Section 3.4.3).

            (b)   Regulatory. Within [***], or an appropriate time later than
                  such time as reasonably determined by Merck, Nastech shall
                  [***], provide Merck with a [***], and/or take such other
                  steps with respect to [***] Merck may reasonably determine
                  necessary. Merck shall be solely responsible (subject to
                  Nastech's fulfillment of its obligations as set forth in this
                  Section 3.4.2(b) and Article 2) for all regulatory filings and
                  regulatory compliance activities, and shall maintain the NDA
                  and the IND [***] all regulatory filings will be held in the
                  name of Merck, and Merck shall own all submissions in
                  connection therewith. Merck shall have sole discretion as to
                  the regulatory strategy and regulatory decision making for any
                  Nasal Formulation or Product.

      3.4.3 Nastech Co-Promotion Right in United States. Nastech shall have the
            option to participate in the co-promotion of Product with Merck
            [***] in the United States only as described in, and subject to the
            terms and conditions set forth in Schedule 3.4; provided that
            Nastech notifies Merck of its intent to exercise its option to
            co-promote in accordance with this Section 3.4.3 no less than [***]
            months prior to [***] in the United States. If the foregoing
            conditions are satisfied, Nastech and Merck shall negotiate and
            enter into a mutually acceptable definitive written agreement (a
            "CO-PROMOTION AGREEMENT") regarding Nastech's Detailing (as
            described in Schedule 3.4) no later than [***] months prior to [***]
            in the United States which, unless otherwise mutually agreed, shall
            be subject to and include the terms and conditions specified in
            Schedule 3.4.

      3.4.4 Nastech Right to Appoint Alliance Manager. In the event that Nastech
            exercises its option to co-promote Product in the United States in
            accordance with Section 3.4.3, Nastech may nominate a Nastech
            employee (the "ALLIANCE MANAGER") who may attend

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COMMISSION.]

            and represent Nastech during Merck's [***] with respect to the
            marketing of Products in the United States to be held in accordance
            with the [***] of Merck. The Alliance Manager may offer advice at
            such [***] and may engage in ongoing discussions with Merck's
            designated marketing representative leading up to such [***]. The
            Alliance Manager shall be responsible for communicating [***]
            subject of [***] to Nastech sales representatives. Notwithstanding
            anything to the contrary in the foregoing, the Parties acknowledge
            and agree that Merck shall have sole control over all marketing and
            commercialization of Product in the Territory.

3.5   EXCUSED PERFORMANCE. In addition to the provisions of Article 6, the
      obligations of Merck with respect to any Product under Section 3.4 are
      expressly conditioned upon the continuing absence of any adverse condition
      or event relating to the safety or efficacy of the Product, and the
      obligation of Merck to develop or market any such Product shall be delayed
      or suspended so long as in Merck's opinion any such condition or event
      exists.

3.6   SUPPLY OF PRODUCT AND NASAL FORMULATION; MANUFACTURING TECHNOLOGY
      TRANSFER.

      3.6.1 Clinical Supply.

            (a)   Nastech agrees to manufacture and supply Merck and its Related
                  Parties requirements for clinical quantities of Nasal
                  Formulation and Products in the Territory for use in Clinical
                  Trials and the Development Program by Merck, its Related
                  Parties and Nastech, as the case may be ("CLINICAL SUPPLIES").
                  Merck will reimburse Nastech [***]. The PDT shall provide
                  Nastech with a forecast of such requirements via the
                  Development Plan or as may otherwise be communicated to
                  Nastech. For the purposes of this Section 3.6.1,
                  "manufacturing" shall include all operations involved in the
                  receipt, incoming inspections, storage and handling of
                  materials and the manufacturing (including formulation and
                  filling), packaging, labeling, warehousing, quality control
                  testing (including in-process, release and stability testing),
                  releasing, and shipping of Nasal Formulations and Product.

            (b)   Nastech represents, warrants and covenants that Clinical
                  Supplies supplied hereunder shall (i) meet the specifications
                  established by the PDT for such Nasal Formulations and/or
                  Product; and (ii) be manufactured in accordance with all
                  applicable laws, rules and regulations, including, without
                  limitation, all current governmental regulatory requirements
                  concerning cGMP (including, without limitation, the
                  requirements of 21 CFR Parts 210 and 211 and cGMP requirements
                  concerning documentation, reports and record keeping) and the
                  Animal Welfare Act (as applicable).

            (c)   Nastech shall notify Merck in writing of any deviations from
                  applicable regulatory or legal requirements relating to
                  Clinical Supplies. Nastech hereby represents, warrants and
                  covenants that that it will not, and has not, employed or
                  otherwise used in any capacity the services of any person
                  debarred under Section 21 USC 335a in performing any portion
                  of the manufacture of Clinical Supplies.

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COMMISSION.]

            (d)   Nastech shall maintain complete and accurate records of all
                  relevant data and information relating to the performance by
                  Nastech of its obligations under this Section 3.6.1. At
                  Merck's request, Nastech shall provide to Merck copies of all
                  documentation and data relating to the manufacture of Clinical
                  Supplies or shall permit Merck to inspect and copy such
                  documentation and data. Nastech shall maintain original batch
                  records for [***] years and, at such time thereafter as
                  Nastech intends to dispose of such batch records, Nastech
                  shall notify Merck in advance, and will permit Merck, at its
                  discretion, to take possession of such batch records.

      3.6.2 Commercial Supply. Nastech agrees to manufacture and supply Merck
            and its Related Parties requirements for commercial quantities of
            Product in the Territory for sale by Merck and its Related Parties
            (including Nastech in the United States to the extent Nastech
            co-promotes Product in accordance with Section 3.4.3). Merck will
            reimburse Nastech for such supply as set forth in the Supply
            Agreement. Notwithstanding anything to the contrary herein, such
            supply obligations shall be subject to the terms and conditions of
            the Supply Agreement. Upon completion of the validation of the
            manufacturing process for Nasal Formulations and Products, Nastech
            shall, [***], deliver to Merck a complete technical package
            containing the Nastech Know-How necessary or useful for the
            manufacture of the Nasal Formulations and Products. [***].

3.7   TERMS OF LOAN TO NASTECH FOR MANUFACTURING [***]. Upon the occurrence of
      [***] and Merck delivery of the Expansion Notice (as defined in the Supply
      Agreement) to Nastech, all in accordance with Section 2.4 of the Supply
      Agreement, Merck agrees to loan Nastech up to [***] (the "MAXIMUM LOAN
      AMOUNT") which shall be subject to the following terms and conditions:

      3.7.1 [***];

      3.7.2 [***];

      3.7.3 [***];

      3.7.4 [***];

      3.7.5 [***];

      3.7.6 [***];

      3.7.7 Merck shall be entitled to fully set off and credit any amounts past
            due from Nastech under the loan against any amounts payable by Merck
            to Nastech; and

      3.7.8 The Parties shall in good faith negotiate appropriate agreements and
            other documentation to reflect the foregoing terms (which may
            include but shall not be limited to, appropriate and customary
            promissory note(s), security agreement(s), UCC-1 and/or mortgages)
            to include other appropriate and customary terms for similar loan
            transactions.

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COMMISSION.]

ARTICLE 4 CONFIDENTIALITY AND PUBLICATION.

4.1   NONDISCLOSURE OBLIGATION. All Information disclosed by one Party to the
      other Party hereunder shall be maintained in confidence by the receiving
      Party and shall not be disclosed to non-Party or used for any purpose
      except as set forth herein without the prior written consent of the
      disclosing Party, except to the extent that such Information:

      4.1.1 is known by receiving Party at the time of its receipt, and not
            through a prior disclosure by the disclosing Party, as documented by
            the receiving Party's business records;

      4.1.2 is in the public domain by use and/or publication before its receipt
            from the disclosing Party, or thereafter enters the public domain
            through no fault of the receiving Party;

      4.1.3 is subsequently disclosed to the receiving Party by a Third Party
            who may lawfully do so and is not under an obligation of
            confidentiality to the disclosing Party;

      4.1.4 is developed by the receiving Party independently of Information
            received from the disclosing Party, as documented by the receiving
            Party's business records;

      4.1.5 is disclosed to governmental or other regulatory agencies in order
            to obtain patents or to gain or maintain approval to conduct
            clinical trials or to market Product, but such disclosure may be
            only to the extent reasonably necessary to obtain patents or
            authorizations;

      4.1.6 is deemed necessary by Merck to be disclosed to Related Parties,
            agents, consultants, and/or other Third Parties for any and all
            purposes Merck and its Affiliates deem necessary or advisable in the
            ordinary course of business in accordance with this Agreement on the
            condition that such Third Parties agree to be bound by
            confidentiality and non-use obligations that are substantially no
            less stringent than those confidentiality and non-uses provisions
            contained in this Agreement; provided the term of confidentiality
            for such Third Parties shall be no less than [***].

      Any combination of features or disclosures shall not be deemed to fall
      within the foregoing exclusions merely because individual features are
      published or available to the general public or in the rightful possession
      of the receiving Party unless the combination itself and principle of
      operation are published or available to the general public or in the
      rightful possession of the receiving Party.

      If a Party is required by judicial or administrative process to disclose
      Information that is subject to the non-disclosure provisions of this
      Section 4.1 or Section 4.2, such Party shall promptly inform the other
      Party of the disclosure that is being sought in order to provide the other
      Party an opportunity to challenge or limit the disclosure obligations.
      Information that is disclosed by judicial or administrative process shall
      remain otherwise subject to the confidentiality and non-use provisions of
      this Section 4.1 and Section 4.2, and the Party disclosing Information
      pursuant to law or court order shall take all steps reasonably necessary,
      including without limitation obtaining an order of confidentiality, to
      ensure the continued confidential treatment of such Information.

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COMMISSION.]

4.2   NASTECH KNOW-HOW. Nastech agrees to keep all Nastech Know-How confidential
      subject to those exceptions stated in Section 4.1 above; provided that
      Nastech shall be permitted to disclose Nastech Know-How as necessary to
      exercise rights Nastech has retained in the Nastech Know-How other than
      for Nasal Formulations or Product in accordance with Sections 3.1.1 and
      3.1.4.

4.3   PUBLICATION. Nastech shall have no right to publish results of the
      Development Program. Merck shall have the right to publish results of the
      Development Program. For any Merck publication relating to Nasal
      Formulations and Product Merck shall conform to standard academic
      practices regarding authorship of scientific publications and recognition
      of contributions of Nastech. Merck and Nastech also recognize the mutual
      interest in obtaining valid patent protection and in protecting business
      interests and trade secret information. Consequently, except for
      disclosures permitted pursuant to Section 4.1, Merck shall provide Nastech
      with an opportunity to review its proposed publications that disclose
      Nastech Patent Rights or Nastech Know-How at least [***] prior to
      submission for publication or presentation. Nastech shall have the right
      (a) to propose modifications to the publication or presentation for patent
      reasons or trade secret reasons or (b) to request a reasonable delay in
      publication or presentation in order to protect patentable information. If
      Nastech reasonably requests a delay for such reasons, Merck shall delay
      submission or presentation for a period of [***] to enable patent
      applications protecting each Party's rights in such information to be
      filed in accordance with Article 7. Upon expiration of such [***], Merck
      shall be free to proceed with the publication or presentation. If Nastech
      requests modifications to the publication or presentation for the
      foregoing reasons, Merck shall edit such publication to prevent disclosure
      of trade secret or proprietary business information prior to submission of
      the publication or presentation.

4.4   PUBLICITY/USE OF NAMES. No disclosure of the existence of, or the terms
      of, this Agreement may be made by either Party, and no Party shall use the
      name, trademark, trade name or logo of the other Party or its employees in
      any publicity, news release or disclosure relating to this Agreement or
      its subject matter, without the prior express written permission of the
      other Party, except as may be required by law. The Parties acknowledge and
      agree that, upon and following the Effective Date, one or both of the
      Parties intends to issue a press release announcing the execution of this
      Agreement. The Parties agree to consult with each other reasonably and in
      good faith with respect to the text and timing of such press releases
      prior to the issuance thereof; provided, however, that neither Party shall
      issue any such press releases without the other Party's consent, which may
      not be unreasonably withheld. Either Party may issue such press releases
      or otherwise make such public statements or disclosures (such as in annual
      reports to stockholders or filings with the Securities and Exchange
      Commission) as it determines, based on advice of counsel, are reasonably
      necessary to comply with applicable laws and regulations; provided,
      however, that a Party shall not issue any such press releases or make such
      statements or disclosures without the other Party's prior review and
      comment. In addition, following any initial press release(s) announcing
      this Agreement or other public disclosure approved by both Parties, either
      Party shall be free to disclose, without the other Party's prior written
      consent, the existence of this Agreement, the identity of the other Party
      and those terms of the Agreement which have already been publicly
      disclosed in accordance herewith.

ARTICLE 5 PAYMENTS; ROYALTIES AND REPORTS

5.1   UPFRONT CONSIDERATION FOR LICENSE. Merck shall make a one-time payment to
      Nastech equal to five million dollars ($5,000,000) within [***] of the
      Effective Date.

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COMMISSION.]

5.2   DEVELOPMENT PROGRAM FUNDING. In consideration for Nastech's performance of
      its obligations under the Development Program (which shall not include
      Nastech's obligations under the Supply Agreement or Nastech's obligations
      to supply Clinical Supplies in accordance with Section 3.6), upon the
      terms and conditions contained herein, Merck shall reimburse Nastech for
      expenses it has actually incurred in the performance of such activities
      and as previously approved by the PDT or Merck in accordance with Section
      2.5, but only to the extent such amounts are set forth in the development
      budget as determined in accordance with Section 2.4. Reimbursements by
      Merck under the foregoing shall be payable as stated in Section 2.5.2.

5.3   MILESTONE PAYMENTS. Subject to the terms and conditions of this Agreement,
      upon the achievement of each milestone event identified in the following
      table, Merck shall pay to Nastech the corresponding milestone fee
      identified in the table below [***].

                                      [***]

      Merck shall notify Nastech in writing within [***] after the achievement
      of each of the foregoing milestones, and shall make the appropriate
      milestone payment within [***] thereafter for the first Product to reach
      such milestone event. The milestone payment shall be payable only upon the
      initial achievement of such milestone and no amounts shall be due
      hereunder for subsequent or repeated achievement of such milestone.

5.4   ROYALTIES.

      5.4.1 Royalties Payable by Merck. Subject to the terms and conditions of
            this Agreement, Merck shall pay to Nastech royalties on Net Sates of
            Product on a country-by-country basis in the following amounts:

            (a)   so long as the [***] of the Product subject to such Net Sales
                  would, but for the rights granted to Merck by Nastech in this
                  Agreement, infringe a Valid Patent Claim [***]:

                                      [***]

            ; or

            (b)   for Net Sales of Product other than those covered in
                  subsection 5.4.1(a) above Merck shall pay Nastech a royalty
                  equal to [***] of such Net Sales.

            Royalties on each Product at the rate set forth above shall be
            effective as of the date of First Commercial Sale of Products in a
            country and shall continue until either (i) the expiration of the
            last Valid Patent Claim which claims such Product or the Nasal
            Formulation contained in such Product [***], but for the rights
            granted to Merck by Nastech under this Agreement, the [***] of such
            Product would infringe, in the case of sales under subsection
            5.4.1(a); or (ii) until the [***] of the First Commercial Sale in
            such country in the case of sales of Product under subsection
            5.4.1(b), subject to the following conditions:

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COMMISSION.]

            (w)   that only one royalty shall be due with respect to the same
                  unit of Product;

            (x)   that no royalties shall be due upon the sale or other transfer
            among Merck or its Related Parties, but in such cases the royalty
            shall be due and calculated upon Merck's or its Related Party's Net
            Sales to the first independent Third Party;

            (y)   no royalties shall accrue on the sale or other disposition of
            Product by Merck or its related Parties for use in a Clinical Trial;
            and

            (z)   no royalties shall accrue on the disposition of Product in
            reasonable quantities by Merck or its Related Parties as samples
            (promotion or otherwise) or as donations (for example, to non-profit
            institutions or government agencies for a non-commercial purpose).

      5.4.2 CHANGE IN SALES PRACTICES. The Parties acknowledge that during the
            term of this Agreement, Merck's sales practices for the marketing
            and distribution of Product may change to the extent to which the
            calculation of the payment for royalties on Net Sales may become
            impractical or even impossible. In such event the Parties agree to
            meet and discuss in good faith new ways of compensating Nastech to
            the extent currently contemplated under Section 5.4.1.

      5.4.3 ROYALTIES FOR [***]. In those cases where Merck sells a Nasal
            Formulation contained in Product [***] to an independent Third
            Party, the royalty obligations of this Section 5.4 shall be
            applicable to the sale of [***].

      5.4.4 COMPULSORY LICENSES. If a compulsory license is granted to a Third
            Party with respect to Product in any country in the Territory with a
            royalty rate lower than the royalty rate provided by subsection
            5.4.1, then the royalty rate to be paid by Merck on Net Sales in
            that country under subsection 5.4.1 shall be reduced to [***].

      5.4.5 THIRD PARTY LICENSES. [***]

            (a)   [***]; and

            (b)   (i) [***]; or

                  (ii) [***].

      5.4.6 [***] Notwithstanding anything else to the contrary in this Section
            5.4, Merck shall not be required to make any royalty payments to
            Nastech on Net Sales in a country once a [***] sold by a party other
            than Merck or its Related Parties has or attains on a Calendar Year
            basis a market share of [***] or more of units of Product sold in
            such country of sale as measured by prescriptions or other similar
            information in the country of sale.

      5.4.7 [***]

5.5   REPORTS; PAYMENT OF ROYALTY. During the term of this Agreement following
      the First Commercial Sale of a Product, Merck shall furnish to Nastech a
      quarterly written report for the

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COMMISSION.]

      Calendar Quarter showing the Net Sales of all Products subject to royalty
      payments sold by Merck and its Related Parties in the Territory during the
      reporting period and the royalties payable under this Agreement. Reports
      shall be due on the [***] day following the close of each Calendar
      Quarter. Royalties shown to have accrued by each royalty report shall be
      due and payable on the date such royalty report is due. Merck shall keep
      complete and accurate records in sufficient detail to enable the royalties
      payable hereunder to be determined.

5.6   AUDITS.

      5.6.1 Upon the written request of Nastech and not more than once in each
            Calendar Year, Merck shall permit an independent certified public
            accounting firm of nationally recognized standing selected by
            Nastech and reasonably acceptable to Merck, at the Nastech's
            expense, to have access during normal business hours to such of the
            records of Merck as may be reasonably necessary to verify the
            accuracy of the royalty reports hereunder for any year ending not
            more than [***] months prior to the date of such request. The
            accounting firm shall disclose to Nastech only whether the royalty
            reports are correct or incorrect and the specific details concerning
            any discrepancies. No other information shall be provided to
            Nastech.

      5.6.2 If such accounting firm correctly identifies a discrepancy made
            during such period, the appropriate Party shall pay the other Party
            the amount of the discrepancy within [***] of the date Nastech
            delivers to Merck such accounting firm's written report so correctly
            concluding, or as otherwise agreed upon by the Parties. The fees
            charged by such accounting firm shall be paid by Nastech; provided,
            however, that if an audit uncovers an underpayment of royalties by
            Merck [***], then the fees of such accounting firm shall be paid by
            Merck.

      5.6.3 Merck shall include in each sublicense granted by it pursuant to
            this Agreement a provision requiring the sublicensee to make reports
            to Merck, to keep and maintain records of sales made pursuant to
            such sublicense and to grant access to such records by Nastech's
            independent accountant to the same extent required of Merck under
            this Agreement.

      5.6.4 Upon the expiration of [***] following the end of any year, the
            calculation of royalties payable with respect to such year shall be
            binding and conclusive upon Nastech, and Merck and its Related
            Parties shall be released from any liability or accountability with
            respect to royalties for such year.

      5.6.5 Nastech shall treat all financial information subject to review
            under this Section 5.6 or under any sublicense agreement in
            accordance with the confidentiality and non-use provisions of this
            Agreement, and shall cause its accounting firm to enter into an
            acceptable confidentiality agreement with Merck and/or its Related
            Parties obligating it to retain all such information in confidence
            pursuant to such confidentiality agreement.

5.7   PAYMENT EXCHANGE RATE. All payments to be made by Merck to Nastech under
      this Agreement shall be made in United States dollars and may be paid by
      check made to the order of Nastech or bank wire transfer in immediately
      available funds to such bank account in the United States designated in
      writing by Nastech from time to time. In the case of sales outside the
      United States,

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      the rate of exchange to be used in computing the amount of currency
      equivalent in United States dollars due Nastech shall be made at the rate
      of exchange utilized by Merck in its worldwide accounting system,
      prevailing on the third to the last business day of the month prior to the
      month in which such sales are recorded by Merck.

5.8   INCOME TAX WITHHOLDING. If laws, rules or regulations require withholding
      of income taxes or other taxes imposed upon payments set forth in this
      Article 5, Merck shall make such withholding payments as required and
      subtract such withholding payments from the payments set forth in this
      Article 5. Merck shall submit appropriate proof of payment of the
      withholding taxes to Nastech within a reasonable period of time.

ARTICLE 6 REPRESENTATIONS AND WARRANTIES

6.1   REPRESENTATIONS AND WARRANTIES.

      Nastech represents and warrants to Merck that as of the date of this
Agreement:

      6.1.1 to the best of Nastech's knowledge, the Nastech Patent Rights and
            Nastech Know-How exist and are not invalid or unenforceable, in
            whole or in part;

      6.1.2 it has the full right, power and authority to enter into this
            Agreement, to perform the Development Program and to grant the
            licenses granted under Article 3 hereof;

      6.1.3 it has not previously assigned, transferred, conveyed or otherwise
            encumbered its right, title and interest in Nastech Patent Rights or
            Nastech Know-How;

      6.1.4 to the best of Nastech's knowledge, it is the sole and exclusive
            owner of the Nastech Patent Rights and Nastech Know-How, all of
            which are (and shall be, in the case of Nastech Information and
            Invention) free and clear of any liens, charges and encumbrances,
            and no other person, corporate or other private entity, or
            governmental entity or subdivision thereof, has or shall have any
            claim of ownership whatsoever with respect to the Nastech Patent
            Rights and Nastech Know-How;

      6.1.5 to the best of Nastech's knowledge, the exercise of the license
            granted to Merck under the Nastech Patent Rights and Nastech
            Know-How, including without limitation the development, manufacture,
            use, sale and import of Products do not interfere with or infringe
            any intellectual property rights owned or possessed by any Third
            Party;

      6.1.6 there are no claims, judgments or settlements against or owed by the
            Nastech or pending or threatened claims or litigation relating to
            the Nastech Patent Rights and Nastech Know-How; and

      6.1.7 Nastech has disclosed to Merck all reasonably relevant information
            regarding the Nastech Patent Rights and Nastech Know-How licensed
            under this Agreement, including without limitation all patent
            opinions obtained by Nastech related thereto.

      6.1.8 Nastech has delivered to Merck a true and complete copy (subject to
            redaction of financial and other information not material to
            Nastech's ability to sublicense rights

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            licensed thereunder to Merck under this Agreement) of that certain
            License Agreement by and between Nastech and [***]; and that certain
            License Agreement between Nastech and [***], including any and all
            amendments, side letters, or other modifications thereto, in each
            case as it is in effect as of the Effective Date (collectively, the
            "NASTECH THIRD PARTY LICENSE AGREEMENTS"). Nastech hereby represents
            and warrants that under each Nastech Third Party License Agreement,
            it has the necessary rights to sublicense all patent rights granted
            to Nastech under such Nastech Third Party License Agreement as
            Nastech Patent Rights, to Merck consistent with the licenses granted
            to Merck by Nastech under Sections 3.1 and 3.2. Nastech further
            covenants and agrees that during the term of this Agreement (a) it
            will satisfy all of its obligations under, and take all steps
            necessary to maintain in full force and effect, each of the Nastech
            Third Party License Agreements; (b) it will not assign, amend,
            restate, amend and restate, terminate in whole or in part, or
            otherwise modify any of the Nastech Third Party License Agreements
            in a manner that would adversely affect Merck's rights or
            obligations hereunder without the prior written consent of Merck;
            and (c) it will provide Merck with prompt notice of any claim of a
            material breach under any Nastech Third Party License Agreement made
            by either Nastech or a respective counter party thereto.

ARTICLE 7 PATENT PROVISIONS.

7.1   FILING, PROSECUTION AND MAINTENANCE OF PATENTS. Nastech agrees to file,
      prosecute and maintain in the Territory, upon appropriate consultation
      with Merck, the Nastech Patent Rights licensed to Merck under this
      Agreement. With respect to Joint Information and Inventions, Merck agrees
      to file, prosecute and maintain patent applications and Nastech agrees to
      cooperate with Merck in such actions. With respect to Nastech Information
      and Inventions, Nastech may elect not to file and if so Nastech shall
      notify Merck and Merck shall have the right to file patent applications.
      In such event, Nastech shall execute such documents and perform such acts
      at Nastech's expense as may be reasonably necessary to effect an
      assignment of such Nastech Patent Rights to Merck in a timely manner to
      allow Merck to continue such prosecution or maintenance. In each case, the
      filing Party shall give the non-filing Party an opportunity to review the
      text of the application before filing, shall consult with the non-filing
      Party with respect thereto, and shall supply the non-filing Party with a
      copy of the application as filed, together with notice of its filing date
      and serial number. Nastech shall keep Merck advised of the status of the
      actual and prospective patent filings and, upon Merck's request, shall
      provide advance copies of any papers related to the filing, prosecution
      and maintenance of such patent filings. Nastech shall also inform Merck in
      a timely manner of any communications Nastech receives from the relevant
      patent office with respect to the filing, prosecution and maintenance of
      such patent filings. Nastech shall promptly give notice to Merck of the
      grant, lapse, revocation, surrender, invalidation or abandonment of any
      Nastech Patent Rights licensed to Merck for which Nastech is responsible
      for the filing, prosecution and maintenance. With respect to all filings
      hereunder, the filing Party shall be responsible for payment of all costs
      and expenses related to such filings.

7.2   OPTION OF OTHER PARTY TO PROSECUTE AND MAINTAIN PATENTS. Nastech shall
      give notice to Merck of any desire to cease prosecution and/or maintenance
      of Nastech Patent Rights on a country by country basis in the Territory
      and, in such case, shall permit Merck, in its sole discretion, to continue
      prosecution or maintenance of such Nastech Patent Rights at its own
      expense. If Merck elects to continue prosecution or maintenance or to file
      based on Nastech's election not to file pursuant to Section 7.1 above,
      Nastech shall execute such documents and perform such acts at

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      Nastech's expense as may be reasonably necessary to effect an assignment
      of such Nastech Patent Rights to Merck in a timely manner to allow Merck
      to continue such prosecution or maintenance. Any patents or patent
      applications so assigned shall not be considered Nastech Patent Rights.
      Merck may, in its discretion, elect not to file, cease prosecution and/or
      maintenance of Joint Inventions Patent Rights on a country by country
      basis in the Territory and, in such case, shall give notice to Nastech of
      any such desire and permit Nastech, in its sole discretion, to file and/or
      continue prosecution or maintenance of such Joint Inventions Patent Rights
      at its own expense. If Nastech elects to continue prosecution or
      maintenance or to file based on Merck's election not to file Joint
      Inventions Patent Rights, Merck shall execute such documents and perform
      such acts at Merck's expense as may be reasonably necessary to effect an
      assignment of such Merck Joint Inventions Patent Rights to Nastech in a
      timely manner to allow Nastech to continue such prosecution or
      maintenance.

7.3   INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE.

      7.3.1 Nastech shall, within ten (10) days of learning of such event,
            inform Merck of any request for, or filing or declaration of, any
            interference, opposition, reissue or reexamination relating to
            Nastech Patent Rights. Merck and Nastech shall thereafter consult
            and cooperate fully to determine a course of action with respect to
            any such proceeding. Merck shall have the right to review and
            approve any submission to be made in connection with such
            proceeding.

      7.3.2 Nastech shall not initiate any reexamination, interference or
            reissue proceeding relating to Patent Rights without the prior
            written consent of Merck, which consent shall not be unreasonably
            withheld.

      7.3.3 In connection with any interference, opposition, reissue, or
            reexamination proceeding relating to Patent Rights, Merck and
            Nastech will cooperate fully and will provide each other with any
            information or assistance that either may reasonably request.
            Nastech shall keep Merck informed of developments in any such action
            or proceeding, including, to the extent permissible by law,
            consultation on and approval of any settlement, the status of any
            settlement negotiations and the terms of any offer related thereto.

      7.3.4 Nastech shall bear the expense of any interference, opposition,
            reexamination, or reissue proceeding relating to Nastech Patent
            Rights.

      7.3.5 Regardless of which Party has the right to initiate and prosecute
            such action, both Parties shall, as soon as practicable after
            receiving notice of such action, convene and consult with each other
            regarding the appropriate course of conduct for such action. The
            non-initiating Party shall have the right to be kept fully informed
            and participate in decisions regarding the appropriate course of
            conduct for such action, and the right to join and participate in
            such action.

      7.3.6 [***].

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7.4   ENFORCEMENT AND DEFENSE.

      7.4.1 Nastech shall give Merck notice of either (i) any infringement of
            Nastech Patent Rights, or (ii) any misappropriation or misuse of
            Nastech Know-How, that may come to Nastech's attention. Merck and
            Nastech shall thereafter consult and cooperate fully to determine a
            course of action, including but not limited to the commencement of
            legal action by either or both Merck and Nastech, to terminate any
            infringement of Nastech Patent Rights or any misappropriation or
            misuse of Nastech Know-How. [***].

      7.4.2 [***].

      7.4.3 [***].

      7.4.4 [***]:

            (a)   [***];

            (b)   [***]; and

            (c)   [***].

      7.4.5 Nastech shall inform Merck of any certification regarding any
            Nastech Patent Rights it has received pursuant to either 21
            U.S.C. Sections 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or it
            successor provisions or any similar provisions in a country in the
            Territory other than the United States and shall provide Merck with
            a copy of such certification within five (5) days of receipt.
            Nastech's and Merck's rights with respect to the initiation and
            prosecution of any legal action as a result of such certification or
            any recovery obtained as a result of such legal action shall be as
            defined in subsections 7.4.1 through 7.4.4; provided, however, that
            Nastech shall exercise its first right to initiate and prosecute any
            action and shall inform Merck of such decision within ten (10) days
            of receipt of the certification, after which time Merck shall have
            the right to initiate and prosecute such action. Regardless of which
            Party has the right to initiate and prosecute such action, both
            Parties shall, as soon as practicable after receiving notice of such
            certification, convene and consult with each other regarding the
            appropriate course of conduct for such action. The non-initiating
            Party shall have the right to be kept fully informed and participate
            in decisions regarding the appropriate course of conduct for such
            action, and the right to join and participate in such action.

7.5   PATENT TERM RESTORATION. The Parties hereto shall cooperate with each
      other, including without limitation to provide necessary information and
      assistance as the other Party may reasonably request, in obtaining patent
      term restoration or supplemental protection certificates or their
      equivalents in any country in the Territory where applicable to Patent
      Rights. In the event that elections with respect to obtaining such patent
      term restoration are to be made, Merck shall have the right to make the
      election and Nastech agrees to abide by such election.

7.6   [***].

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ARTICLE 8 TERM AND TERMINATION

8.1   TERM AND EXPIRATION. This Agreement shall be effective as of the Effective
      Date and unless terminated earlier pursuant to Sections 8.2 or 8.3 below,
      this Agreement shall continue in effect until expiration of all royalty
      obligations hereunder. Upon expiration of this Agreement, the licenses
      granted to Merck pursuant to Section 3.1 and 3.2 shall become fully
      paid-up, perpetual licenses.

8.2   TERMINATION BY MERCK. Notwithstanding anything contained herein to the
      contrary, Merck shall have the right to terminate this Agreement at any
      time in its sole discretion by giving [***] advance written notice to
      Nastech; provided that if Merck terminates this Agreement under this
      Section 8.2 prior to [***] such termination shall be effective [***].
      Until the date that such termination is effective each Party will remain
      subject to its obligations under this Agreement. Not later than [***] days
      after the effective date of such termination, each Party shall return or
      cause to be returned to the other Party all Information in tangible form
      received from the other Party and all copies thereof, except that each
      Party may retain any Information reasonably necessary for such Party's
      continued practice under any license(s) which do not terminate pursuant to
      this Section, and may keep one copy of Information received from the other
      Party in its confidential files for record purposes. In the event of
      termination under this Section 8.2: (i) each Party shall pay all amounts
      then due and owing to the other Party as of the termination date; and (ii)
      except for the surviving provisions set forth in Section 8.4, the rights
      and obligations of the Parties hereunder shall terminate as of the date of
      such termination; provided, however, that the license granted to Merck in
      [***] and the license granted to Nastech in [***] shall [***]. In the
      event of termination under this Section 8.2, with respect to any Product
      that was under clinical development or commercialization by Merck under
      this Agreement at the time of such termination and only to the extent that
      such Product [***] (collectively, the "REVERTED PRODUCTS"), at the written
      request of Nastech made within thirty (30) days after the effective date
      of such termination:

      8.2.1 Merck shall grant to Nastech [***];

      8.2.2 the license granted by Merck to Nastech under this Section 8.2 shall
            [***] without the prior written consent of Merck; provided that if
            [***]; and

      8.2.3 [***].

8.3   TERMINATION FOR CAUSE.

      8.3.1 CAUSE FOR TERMINATION. This Agreement may be terminated at any time
            during the term of this Agreement:

            (a)   upon written notice by either Party if the other Party is in
                  breach of its material obligations hereunder by causes and
                  reasons within its control and has not cured such breach
                  within [***] after notice requesting cure of the breach;
                  provided, however, in the event of a good faith dispute with
                  respect to the existence of a material breach, the [***] cure
                  period shall be tolled until such time as the dispute is
                  resolved pursuant to Section 9.7 hereof; or

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            (b)   by either Party upon the filing or institution of bankruptcy,
                  reorganization, liquidation or receivership proceedings, or
                  upon an assignment of a substantial portion of the assets for
                  the benefit of creditors by the other Party; provided,
                  however, in the case of any involuntary bankruptcy proceeding
                  such right to terminate shall only become effective if the
                  Party consents to the involuntary bankruptcy or such
                  proceeding is not dismissed within [***] after the filing
                  thereof.

      8.3.2 Effect of Termination for Cause on License.

            (a)   (i)   If Merck terminates this Agreement under Section
                        8.3.1(a), Merck's rights under the licenses [***] shall
                        survive termination and become perpetual licenses,
                        [***]. Nastech shall, within [***] after the effective
                        date of such termination return or cause to be returned
                        to Merck all Nasal Formulations or Products (except to
                        the extent otherwise provided in the Supply Agreement),
                        all Information in tangible form, and all substances or
                        compositions delivered or provided by Merck, as well as
                        any other material provided by Merck in any medium.

                  (ii)  If Nastech terminates this Agreement under subsection
                        8.3.1(a), Merck's licenses [***] shall terminate as of
                        such termination date and Merck shall, within [***] days
                        after the effective date of such termination, return or
                        cause to be returned to Nastech all Information in
                        tangible form and substances or compositions delivered
                        or provided by Nastech, as well as any other material
                        provided by Nastech in any medium; provided, however,
                        that the license granted to Merck in Section 3.1.6 shall
                        continue in accordance with its terms.

            (b)   Upon termination of this Agreement by Merck pursuant to
                  Section 8.2, or by Nastech pursuant to subsection 8.3.1(a),
                  Merck and its Affiliates, sublicensees and distributors shall
                  be entitled, during the [***] month period immediately
                  following the effective date of termination, to finish any
                  work-in-progress and to sell any Nasal Formulation remaining
                  in inventory, in accordance with the terms of this Agreement
                  unless otherwise provided in the Supply Agreement.

            (c)   If this Agreement is terminated by Merck pursuant to
                  subsection 8.3.1(b) due to the rejection of this Agreement by
                  or on behalf of Nastech under Section 365 of the United States
                  Bankruptcy Code (the "CODE"), all licenses and rights to
                  licenses granted under or pursuant to this Agreement by
                  Nastech to Merck are, and shall otherwise be deemed to be, for
                  purposes of Section 365(n) of the Code, licenses of rights to
                  "intellectual property" as defined under Section 101(35A) of
                  the Code. The Parties agree that Merck, as a licensee of such
                  rights under this Agreement, shall retain and may fully
                  exercise all of its rights and elections under the Code, and
                  that upon commencement of a bankruptcy proceeding by or
                  against Nastech under the Code, Merck shall be entitled to a
                  complete duplicate of or complete access to (as Merck deems
                  appropriate), any such intellectual property and all
                  embodiments of such intellectual property. Such intellectual
                  property and all embodiments thereof shall be promptly
                  delivered to Merck (i)

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                  upon any such commencement of a bankruptcy proceeding upon
                  written request therefore by Merck, unless Nastech elects to
                  continue to perform all of its obligations under this
                  Agreement or (ii) if not delivered under (i) above, upon the
                  rejection of this Agreement by or on behalf of Nastech upon
                  written request therefore by Merck.

      The foregoing provisions of subsection 8.3.2 are without prejudice to any
      rights Merck may have arising under the Code or other applicable law.

8.4   EFFECT OF EXPIRATION OR TERMINATION; SURVIVAL. Expiration or termination
      of this Agreement shall not relieve the Parties of any obligation accruing
      prior to such expiration or termination. Any expiration or termination of
      this Agreement shall be without prejudice to the rights of either Party
      against the other accrued or accruing under this Agreement prior to
      expiration or termination, including without limitation the obligation to
      pay royalties for Product(s) sold prior to such expiration or termination.
      The provisions of Article 4 shall survive the expiration or termination of
      this Agreement and shall continue in effect for [***] years. In addition,
      the provisions of Article 1, Article 6, Article 7 (for clarity, subject to
      the provisions of [***]), Article 8 and Article 9 shall survive any
      expiration or termination of this Agreement.

ARTICLE 9 MISCELLANEOUS

9.1   FORCE MAJEURE. Neither Party shall be held liable to the other Party nor
      be deemed to have defaulted under or breached this Agreement for failure
      or delay in performing any obligation under this Agreement when such
      failure or delay is caused by or results from causes beyond the reasonable
      control of the affected Party including, but not limited to, embargoes,
      war, acts of war (whether war be declared or not), acts of terrorism,
      insurrections, riots, civil commotions, strikes, lockouts or other labor
      disturbances, fire, floods, or other acts of God, or acts, omissions or
      delays in acting by any governmental authority or the other Party. The
      affected Party shall notify the other Party of such force majeure
      circumstances as soon as reasonably practical, and shall promptly
      undertake all reasonable efforts necessary to cure such force majeure
      circumstances.

9.2   ASSIGNMENT; CHANGE OF CONTROL.

      9.2.1 Except as provided in this Section 9.2, this Agreement may not be
            assigned or otherwise transferred, nor may any right or obligation
            hereunder be assigned or transferred, by either Party without the
            consent of the other Party.

      9.2.2 Merck may, without consent of Nastech, assign this Agreement and its
            rights and obligations hereunder in whole or in part to an Affiliate
            of Merck or in connection with a Change of Control.

      9.2.3 Nastech may assign this Agreement in its entirety to the successor
            party in connection with a Change of Control; provided that [***],
            then Nastech shall provide written notice to Merck at least [***]
            days prior to the completion of [***] and Merck shall have the
            right, at Merck's election at any time after such notice to [***].

            (a)   [***];

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COMMISSION.]

            (b)   [***];

            (c)   [***];

            (d)   [***];

            (e)   [***];

            (f)   [***].

      9.2.4 Any attempted assignment not in accordance with this Section 9.2
            shall be void. Any permitted assignee shall assume all assigned
            obligations of its assignor under this Agreement.

9.3   STANDSTILL. [***]

      [***].

9.4   SEVERABILITY. If any one or more of the provisions contained in this
      Agreement is held invalid, illegal or unenforceable in any respect, the
      validity, legality and enforceability of the remaining provisions
      contained herein shall not in any way be affected or impaired thereby,
      unless the absence of the invalidated provision(s) adversely affects the
      substantive rights of the Parties. The Parties shall in such an instance
      use their best efforts to replace the invalid, illegal or unenforceable
      provision(s) with valid, legal and enforceable provision(s) which, insofar
      as practical, implement the purposes of this Agreement.

9.5   NOTICES. All notices which are required or permitted hereunder shall be in
      writing and sufficient if delivered personally, sent by facsimile (and
      promptly confirmed by personal delivery, registered or certified mail or
      overnight courier), sent by nationally-recognized overnight courier or
      sent by registered or certified mail, postage prepaid, return receipt
      requested, addressed as follows:

      if to Nastech, to:         Nastech Pharmaceutical Company Inc.
                                 3450 Monte Villa Parkway
                                 Bothell, WA 98021
                                 Attention: Office of the Chief Executive
                                            Officer and President
                                 Facsimile No.: [***]

      and:                       Pryor Cashman Sherman & Flynn LLP
                                 410 Park Avenue
                                 New York, NY  10022
                                 Attention: Lawrence Remmel
                                 Facsimile No.: (212) 326-0806

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ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]

      if to Merck, to:           Merck & Co., Inc.
                                 One Merck Drive
                                 [***]
                                 Whitehouse Station, NJ 08889-0100
                                 Attention: [***]
                                 Facsimile No.: [***]

      and                        Merck & Co., Inc.
                                 One Merck Drive
                                 Attention: [***]
                                 [***]
                                 Whitehouse Station, NJ 08889-0100
                                 Facsimile No.: [***]

      or to such other address(es) as the Party to whom notice is to be given
      may have furnished to the other Party in writing in accordance herewith.
      Any such notice shall be deemed to have been given: (a) when delivered if
      personally delivered or sent by facsimile on a business day (or if
      delivered or sent on a non-business day, then on the next business day);
      (b) on the business day after dispatch if sent by nationally-recognized
      overnight courier; or (c) on the fifth (5th) business day following the
      date of mailing if sent by mail.

9.6   APPLICABLE LAW. This Agreement shall be governed by and construed in
      accordance with the laws of the State of New Jersey and the patent laws of
      the United States without reference to any rules of conflict of laws or
      renvoi.

9.7   DISPUTE RESOLUTION.

      9.7.1 The Parties shall negotiate in good faith and use reasonable efforts
            to settle any dispute, controversy or claim arising from or related
            to this Agreement or the breach thereof. If the Parties do not fully
            settle, and a Party wishes to pursue the matter, each such dispute,
            controversy or claim that is not an "Excluded Claim" shall be
            finally resolved by binding arbitration in accordance with the
            Commercial Arbitration Rules and Supplementary Procedures for Large
            Complex Disputes of the American Arbitration Association ("AAA"),
            and judgment on the arbitration award may be entered in any court
            having jurisdiction thereof.

      9.7.2 The arbitration shall be conducted by a panel of three persons
            experienced in the pharmaceutical business: within thirty (30) days
            after initiation of arbitration, each Party shall select one person
            to act as arbitrator and the two Party-selected arbitrators shall
            select a third arbitrator within thirty (30) days of their
            appointment. If the arbitrators selected by the Parties are unable
            or fail to agree upon the third arbitrator, the third arbitrator
            shall be appointed by the AAA. The place of arbitration shall be New
            York, New York, and all proceedings and communications shall be in
            English.

      9.7.3 Either Party may apply to the arbitrators for interim injunctive
            relief until the arbitration award is rendered or the controversy is
            otherwise resolved. Either Party also may, without waiving any
            remedy under this Agreement, seek from any court having jurisdiction
            any injunctive or provisional relief necessary to protect the rights
            or property

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COMMISSION.]

            of that Party pending the arbitration award. The arbitrators shall
            have no authority to award punitive or any other type of damages not
            measured by a Party's compensatory damages. Each Party shall bear
            its own costs and expenses and attorneys' fees and an equal share of
            the arbitrators' fees and any administrative fees of arbitration.

      9.7.4 Except to the extent necessary to confirm an award or as may be
            required by law, neither a Party nor an arbitrator may disclose the
            existence, content, or results of an arbitration without the prior
            written consent of both Parties. In no event shall an arbitration be
            initiated after the date when commencement of a legal or equitable
            proceeding based on the dispute, controversy or claim would be
            barred by the applicable New York statute of limitations.

      9.7.5 The Parties agree that, in the event of a dispute over the nature or
            quality of performance under this Agreement, neither Party may
            terminate this Agreement until final resolution of the dispute
            through arbitration or other judicial determination. The Parties
            further agree that any payments made pursuant to this Agreement
            pending resolution of the dispute shall be refunded if an arbitrator
            or court determines that such payments are not due.

      9.7.6 As used in this Section, the term "EXCLUDED CLAIM" shall mean a
            dispute, controversy or claim that concerns (a) the validity or
            infringement of a patent, trademark or copyright; or (b) any
            antitrust, anti-monopoly or competition law or regulation, whether
            or not statutory.

9.8   ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Schedules
      and Exhibits hereto, contains the entire understanding of the Parties with
      respect to the subject matter hereof and supercedes and cancels all
      previous express or implied agreements and understandings, negotiations,
      writings and commitments, either oral or written, in respect to the
      subject matter hereof. The Schedules and Exhibits to this Agreement are
      incorporated herein by reference and shall be deemed a part of this
      Agreement. This Agreement may be amended, or any term hereof modified,
      only by a written instrument duly executed by authorized representatives
      of both Parties hereto.

      Notwithstanding anything to the contrary in the foregoing, those certain
      confidentiality agreements between the Parties [***] shall remain in full
      force and effect with respect to the subject matter thereof and
      information disclosed thereunder.

9.9   HEADINGS. The captions to the several Articles, Sections and subsections
      hereof are not a part of this Agreement, but are merely for convenience to
      assist in locating and reading the several Articles and Sections hereof.

9.10  INDEPENDENT CONTRACTORS. It is expressly agreed that Nastech and Merck
      shall be independent contractors and that the relationship between the two
      Parties shall not constitute a partnership, joint venture or agency.
      Neither Nastech nor Merck shall have the authority to make any statements,
      representations or commitments of any kind, or to take any action, which
      shall be binding on the other Party, without the prior written consent of
      the other Party.

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COMMISSION.]

9.11  WAIVER. The waiver by either Party hereto of any right hereunder, or of
      any failure of the other Party to perform, or of any breach by the other
      Party, shall not be deemed a waiver of any other right hereunder or of any
      other breach or failure of such other Party, whether of a similar nature
      or otherwise.

9.12  CUMULATIVE REMEDIES. No remedy referred to in this Agreement is intended
      to be exclusive, but each shall be cumulative and in addition to any other
      remedy referred to in this Agreement or otherwise available under law.

9.13  WAIVER OF RULE OF CONSTRUCTION. Each Party has had the opportunity to
      consult with counsel in connection with the review, drafting and
      negotiation of this Agreement. Accordingly, the rule of construction that
      any ambiguity in this Agreement shall be construed against the drafting
      Party shall not apply.

9.14  SUCCESSOR AND ASSIGNS. This Agreement shall be binding on the permitted
      successors and assigns of the Parties hereto.

9.15  CERTAIN CONVENTIONS. Any reference in this Agreement to an Article,
      Section, subsection, paragraph, clause, Schedule or Exhibit shall be
      deemed to be a reference to an Article, Section, subsection, paragraph,
      clause, Schedule or Exhibit, of or to, as the case may be, this Agreement,
      unless otherwise indicated. Unless the context of this Agreement otherwise
      requires, (a) words of any gender include each other gender, (b) words
      such as "herein", "hereof", and "hereunder" refer to this Agreement as a
      whole and not merely to the particular provision in which such words
      appear, (c) words using the singular shall include the plural, and vice
      versa, and (d) the words "include," "includes" and "including" shall be
      deemed to be followed by the phrase "but not limited to", "without
      limitation", "inter alia" or words of similar import.

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

                   [REMINDER OF PAGE INTENTIONAL LEFT BLANK.]

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COMMISSION.]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective
Date.

MERCK & CO., INC.                       NASTECH PHARMACEUTICAL COMPANY INC.

BY: /s/ Raymond V. Gilmartin               BY: /s/ Steven C. Quay
    ---------------------------            -------------------------------------
    Raymond V. Gilmartin                   Steven C. Quay
    Chairman, President and CEO            Chief Executive Officer and President

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COMMISSION.]

                                  SCHEDULE 1.33

                                      [***]

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COMMISSION.]

                                  SCHEDULE 1.37

                                      [***]

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COMMISSION.]

                                  SCHEDULE 1.47

                                      [***]

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COMMISSION.]

                                  SCHEDULE 3.4

                           NASTECH CO-PROMOTION RIGHTS

GENERAL. This Schedule 3.4 (this "SCHEDULE"; capitalized terms not otherwise
defined in this Schedule shall have the meaning given such terms in the
Agreement to which this Schedule is attached) sets out the terms under which
Nastech may Detail (as defined below). [***] pursuant to Section 3.4.3 of the
Agreement. As used in this Schedule, "Detail" and "Detailing" means one-on-one,
face-to-face meeting, between one or more target Specialists for a Product and a
qualified, well-trained sales representative employee of either Party, during
which Product information is communicated orally to the Specialists that is in
addition to any discussion regarding the Specialists' sample needs.

A.    CO-PROMOTION AGREEMENT. Unless otherwise agreed, the Co-Promotion
      Agreement shall include the following provisions, among other appropriate
      and customary provisions:

      a.    Recruitment and Training; Branding. Nastech sales representative
            shall be recruited by Nastech with a profile agreed to by Merck,
            [***]. All Nastech sales representatives will have been recruited
            and trained by Nastech, at Nastech's sole expense, subject to the
            remaining provisions of this paragraph. The Nastech sales
            representatives will be trained on the Product by Merck with the
            training facilities, trainers and training materials being provided
            by Merck at Merck's expense, and such training of the Nastech
            representatives related to the Product will be equivalent to
            training received by the corresponding Merck sales force. [***].

      b.    Size of Nastech Sales Force and Territories. [***].

      c.    Launch Meeting. The Nastech representatives will attend the [***].
            Merck shall keep Nastech apprised of its anticipated launch date for
            Product.

      d.    [***].

      e.    Content of Details. The form and content of all information
            communicated in all Details or other communications to health care
            professionals shall be pre-approved by Merck, and Merck shall
            specify the Target Prescribers for all Nastech Details. Nastech and
            Merck sales representatives shall not engage in any pre-marketing
            activities for Products prohibited by applicable law or regulations.
            Nastech will limit its claims of efficacy and safety for the
            Products to those which are consistent with Merck's approved
            labeling for the Products and shall provide appropriate balance in
            all communications regarding the Products. Nastech shall Detail the
            Products in strict adherence to all applicable legal, regulatory,
            professional and policy requirements, including, but not limited to,
            all applicable Merck policies, as they may exist from time to time.

      f.    Compensation for Detailing. [***].

      g.    Schedule of Payments for Detailing. [***].

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COMMISSION.]

      h.    Bonus Incentives. [***].

      i.    Performance Criteria. Merck shall establish a minimum number of
            Details to be conducted. [***].

      j.    Sampling and Promotional Materials. Merck shall provide Nastech
            sales representatives equal access to all promotional materials
            without additional cost to Nastech. Merck shall likewise provide
            samples to Nastech representatives in a manner and quantity
            consistent with its provision of samples to its own sales force.

      k.    Maintenance and Audit of Records. Under the Co-Promotion Agreement,
            Nastech will be responsible for the maintenance of accurate records
            of the activities of its sales representatives, including, without
            limitation, an accurate monthly record of the number of Details and
            its sales representatives costs. Merck shall have the right to
            review and audit all such records of Nastech.

      l.    [***] /No Assignment. [***] Nastech shall not be entitled to assign,
            sublicense, delegate or otherwise transfer all or any portion of its
            Product co-promotion right.

      m.    Remedies. A provision for remedies to Merck in the event that
            Nastech after entering into a Co-Promotion Agreement does not
            provide or ceases to provide the agreed upon level of support for a
            Product.

      n.    Miscellaneous Provisions. The Co-Promotion Agreement will include
            other customary and appropriate provisions, including, without
            limitation, provisions relating to confidentiality, adverse
            experience reporting, indemnity, arbitration, public announcements,
            etc. Merck shall control and manage trademark selection,
            registration, regulatory and all other governmental interactions,
            distribution, pricing strategy, reimbursement strategies, managed
            care and hospital contracting, promotional strategy and message,
            medical legal review of the content of promotional materials and all
            disputes and litigation, if any, with Third Parties. Nastech shall
            be obligated to comply with all laws and regulations relating to
            interactions between sales personnel and prescribers.

      o.    Term and Termination. The term of the Co-Promotion Agreement shall
            be for as long as Nastech is actively co-promoting Product(s)
            (subject to satisfaction of mutually agreed objective performance
            criteria). The Co-Promotion Agreement shall be subject to
            termination:

            (i)   by Merck in the event of [***];

            (ii)  by Merck at any time, with a [***] notice period and an
                  opportunity for Nastech to meet the expected Detail levels, if
                  it is evident that Nastech is not meeting the expected minimum
                  Detail levels;

            (iii) by Nastech at any time with a [***] notice period;

            (iv)  by either Party in the event of termination or expiration of
                  the Agreement;

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            (v)   by either Party in the event of an uncured material breach by
                  the other Party, including, but not limited to, a violation by
                  Nastech in promoting any of the Products of any applicable
                  law, regulation or Merck policy or procedure applicable to the
                  sale and promotion of such Product; or

            (vi)  by either Party in the event of other mutually agreed
                  termination events as set forth in the Co-Promotion Agreement
                  (breach, bankruptcy, etc.).

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