Nastech Pharmaceutical Company Inc., a leader in developing therapeutics using advanced molecular biology based drug delivery technologies, has reacquired its rights to PYY3-36 (PYY) nasal spray for treatment of obesity from its collaboration partner, Merck & Co. Inc.

Nastech's agreement with Merck has terminated with receipt of Merck's notice effective March 1, 2006. Merck's conclusion, based on the "preliminary proof of concept study" it has conducted, is that Nastech's intra-nasal formulation of PYY did not demonstrate efficacy.

Nastech's review of the data received from Merck to date indicates that Nastech's formulation is capable of delivering PYY, via nasal administration to the blood stream, with an acceptable nasal safety profile. Although there can be no assurance, Nastech believes that with dose-ranging studies they will be able to identify an appropriate dose or dosage regimen for intra-nasal PYY, claims the company release.

"Based on our review, Nastech believes that clinical trial results to date support the continued development of this important investigational product for the treatment of obesity, and we remain committed to the further advancement of the PYY clinical program this year," stated Steven C. Quay, chairman, president and CEO of Nastech.

Nastech will undertake a phase II clinical trial programme, after which Nastech intends to seek a new commercial partnership for PYY with a major pharmaceutical company that has a strong presence in metabolic diseases and that is capable of conducting late-stage clinical development and worldwide commercialisation in the obesity space.

"Nastech intends to cooperate with Merck in the production of a manuscript to be submitted for publication concerning the clinical trials performed by Merck," said Quay.

Nastech expects to recognise approximately $3.7 million in revenue in the first quarter due to such termination.

Nastech is a pharmaceutical company developing innovative products based on proprietary molecular biology-based drug delivery technologies. The company develops products for multiple therapeutic areas including respiratory disease, inflammatory conditions, obesity and osteoporosis.