FORM 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 22, 2005

AVI BioPharma, Inc.

(Exact name of registrant as specified in its charter)

One S.W. Columbia, Suite 1105

Portland, OR 97258

(Address of principal executive offices)

(503) 227-0554

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.           Entry into a Material Definitive Agreement

On February 22, 2005, after consideration of presentations and recommendations of management and the Compensation Committee and such other matters and information as deemed appropriate, the Board of Directors of AVI BioPharma, Inc. (“Company”) accepted and ratified the conclusions and recommendations of the Company’s Compensation Committee (the “Committee”) with respect to the following actions:

Fiscal 2005 Base Salaries. The base salary levels, effective January 1, 2005, of the persons who are anticipated to constitute the Company’s named executive officers for 2005 were set as follows:

(1) Hired effective March 29, 2004.

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 2005 Cash Bonus. The following bonuses for the Company's named executive officers were approved as follows:

(2) Dr. O’Hanley joined the Company effective March 29, 2004.

Stock Option Awards. Incentive stock option for the purchase of the Company’s common stock were granted to the persons who are anticipated to constitute the named executive officers of the Company for 2005, pursuant to the Company’s 2002 Equity Incentive Plan (the “2002 Plan”) as follows:

The stock options granted become exercisable starting twelve months after the grant date, with one-third of the options becoming exercisable at that time and an additional one-third of the options becoming exercisable on the second and third anniversary dates of the option grant, respectively. The options are subject to the terms of the 2002 Plan and the individual award agreements, the form of which is attached hereto as Exhibit 99.1.  The exercise price per share of the shares subject to the option grants is $2.53, the reported closing price on the Nasdaq Stock Market on February 22, 2005 (the grant date).

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Item 7.01  Regulation FD Disclosure

The information set forth above is incorporated by reference herein.

Item 8.01  Other Events

The information set forth above is incorporated by reference herein.

Item 9.01  Financial Statements and Exhibits

(b)                                 Exhibits

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Portland, State of Oregon, on February 28, 2005.

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EXHIBIT INDEX

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EXHIBIT 99.1

AVI BIOPHARMA, INC.

STOCK OPTION AGREEMENT

Incentive Stock Option

This STOCK OPTION AGREEMENT is made between AVI BIOPHARMA, INC., an Oregon corporation (the “Company”), and                                   (the “Optionee”), pursuant to the Company’s 2002 Equity Incentive Plan (the “Plan”).  The Company and the Optionee agree as follows:

1.                                       Option Grant.  The Company hereby grants to the Optionee on the terms and conditions of this Agreement the right and the option (the “Option”) to purchase all or any part of                  shares of the Company’s Common Stock at a purchase price of $                 per share.  The terms and conditions of the Option grant set forth in attached Exhibit A are hereby incorporated into and made a part of this Agreement.  The Option is intended to be an Incentive Stock Option, as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”).

2.                                       Time of Exercise of Option.   The Vesting Reference Date for this Option is                         ,             .  Until it expires or is terminated as provided in Sections 1 or 5 of Exhibit A, the Option may be exercised to purchase shares from time to time to purchase shares up to the following limits:

3.                                       Grant Date.  The Grant Date for this Option is                         ,             .  The Option shall continue in effect until the date             years after the Grant Date (the “Expiration Date”) unless earlier terminated as provided in Sections 1 or 5 of Exhibit A.

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EXHIBIT 99.2

AVI BIOPHARMA, INC.

STOCK OPTION AGREEMENT

Non-Qualified Stock Option

This STOCK OPTION AGREEMENT is made between AVI BIOPHARMA, INC., an Oregon corporation (the “Company”), and                                 (the “Optionee”), pursuant to the Company’s 2002 Equity Incentive Plan (the “Plan”).  The Company and the Optionee agree as follows:

1.                                       Option Grant.  The Company hereby grants to the Optionee on the terms and conditions of this Agreement the right and the option (the “Option”) to purchase all or any part of shares                 of the Company’s Common Stock at a purchase price of $                per share.  The terms and conditions of the Option grant set forth in attached Exhibit A are hereby incorporated into and made a part of this Agreement.  The Option is not intended to be an Incentive Stock Option, as defined in Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”) and therefore is a Non-Qualified Stock Option.

2.                                       Time of Exercise of Option.   The Vesting Reference Date for this Option is                            ,             .  Until it expires or is terminated as provided in Sections 1 or 5 of Exhibit A, the Option may be exercised to purchase the Remaining Shares from time to time up to the following limits:

3.                                       Grant Date.  The Grant Date for this Option is                             ,               .  The Option shall continue in effect until the date              years after the Grant Date (the “Expiration Date”) unless earlier terminated as provided in Sections 1 or 5 of Exhibit A.

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