UNITED STATES DISTRICT COURTDISTRICT OF MARYLAN D

REED BLACK,Individually and On Behalf of All OthersSimilarly Situated

Plaintiff,

V .

MARTEK BIOSCIENCES CORPORATION,HENRY LINSERT, JR ., and PETER L. BUZY

Defendants .

CIVIL ACTION NO. 04-2147

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED

Plaintiff, Reed Black ("Plaintiff'), individually and on behalf of all other persons

similarly situated, by his undersigned attorneys, for his complaint against defendants, alleges the

following based upon personal knowledge as to himself and his own acts, and information and

belief as to all other matters, based upon, inter alia, the investigation conducted by and through

his attorneys, which included, among other things, a review of the defendants' public documents,

conference calls and announcements made by defendants, United States Securities and Exchange

Commission ("SEC") filings, wire and press releases published by and regarding Martek

Biosciences Corporation ("Martek" or the "Company") securities analysts' reports and advisories

about the Company, and information readily obtainable on the Internet . Plaintiff believes that

substantial evidentiary support will exist for the allegations set forth herein after a reasonable

opportunity for discovery .

NATURE OF THE ACTION

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1 . This is a federal class action on behalf of purchasers of the publicly trade d

securities of Martek between December 9, 2004 and April 27, 2005 (the "Class Period"), seekin g

to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act") .

JURISDICTION AND VENUE

2. The claims asse rted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, (15 U .S.C. §§ 78j(b) and 78t(a)), and Rule lOb-5 promulgated thereunder (1 7

C.F .R. §240.10b-5) .

3 . This Court has jurisdiction over the subject matter of this action pursuant to §2 7

of the Exchange Act (15 U.S.C. §78aa) and 28 U .S.C. § 1331 .

4 . Venue is proper in this Judicial District pursuant to §27 of the Exchange Act, 1 5

U.S .C. § 78aa and 28 U.S .C. § 1391(b). Many of the acts and transactions alleged herein,

including the preparation and dissemination of materially false and misleading information,

occurred in substantial part in this Judicial District . Additionally, the Company maintains a

principal executive office in this Judicial District .

5. In connection with the acts, conduct and other wrongs alleged in this complaint ,

defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

including but not limited to, the United States mails, interstate telephone communications an d

the facilities of the national securities exchange .

PARTIES

6. Plaintiff, Reed Black, as set forth in the accompanying certification, incorporate d

by reference herein, purchased Martek securities at artificially inflated prices during the Clas s

Period and has been damaged thereby .

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7. Defendant Martek is a Delaware corporation that maintains its principal place of

business at 6480 Dobbin Road, Columbia, MD 21045 .

8. Defendant Henry Linsert, Jr . ("Linsert") was, at all relevant times, the Company's

Chairman and Chief Executive Officer .

9. Defendant Peter L. Buzy (`Suzy") was, at all relevant times, the Company's

Chief Financial Officer and Treasurer.

10. Defendants Linsert and Buzy are collectively referred to hereinafter as the

"Individual Defendants ." The Individual Defendants, because of their positions with the

Company, possessed the power and authority to control the contents of Martek's quarterly

reports, press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i .e ., the market. Each defendant was provided with copies of the

Company's reports and press releases alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them but not to the public, each of these defendants knew that the adverse facts specified herein

had not been disclosed to and were being concealed from the public and that the positive

representations which were being made were then materially false and misleading. The

Individual Defendants are liable for the false statements pleaded herein, as those statements were

each "group-published" information, the result of the collective actions of the Individual

Defendants .

PLAINTIFF'S CLASS ACTION ALLEGATIONS

11 . Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased th e

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securities of Martek between December 9, 2004 and April 27, 2005, inclusive (the "Class

Period") and who were damaged thereby . Excluded from the Class are defendants, the officers

and directors of the Company, at all relevant times, members of their immediate families and

their legal representatives, heirs, successors or assigns and any entity in which defendants have

or had a controlling interest .

12. The members of the Class are so numerous that joinder of all members i s

impracticable . Throughout the Class Period, Martek's securities were actively traded on th e

NASDAQ. While the exact number of Cl ass members is unknown to Plaintiff at this time and

can only be ascertained through appropriate discovery, Plaintiff believes that there are hundred s

or thousands of members in the proposed Class . Record owners and other members of the Class

may be identified from records maintained by Martek or its transfer agent and may be notified of

the pendency of this action by mail, using the form of notice similar to that customarily used in

securities class actions .

13 . Plaintiff's claims are typical of the claims of the members of the Class as al l

members of the Class are similarly affected by defendants' wrongful conduct in violation o f

federal law that is complained of herein .

14. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation .

15 . Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class . Among the

questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by defendants' acts as

alleged herein ;

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(b) whether statements made by defendants to the investing public during the

Class Period misrepresented material facts about the business, operations and management o f

Martek; and

(c) to what extent the members of the Class have sustained damages and the

proper measure of damages .

16. A class action is superior to all other available methods for the fair and efficien t

adjudication of this controversy since joinder of all members is impracticable . Furthermore, a s

the damages suffered by individual Class members may be relatively small, the expense an d

burden of individual litigation make it impossible for members of the Class to individuall y

redress the wrongs done to them . There will be no difficulty in the management of this action as

a class action.

SUBSTANTIVE ALLEGATIONS

Background

17. Martek is an innovator in the research and development of products derived from

rnicroalgae . Martek has developed and patented two fermentable s trains of microalgae which

produce oils rich in docosahexaenoic acid, DHA. In like manner, another patented process was

developed for a fungus that produces an oil rich in arachidonic acid, ARA. Both DHA and ARA

are found in breast milk and are important nutrients in infant development . Thus, the two oils

are used in infant formulas , while the DHA-rich oil can also be used in supplements and

functional foods for older children and adults . Martek also makes and sells a se ri es of

proprietary and nonproprietary fluorescent markers . These products have applications in dru g

discovery (high-throughput screening), DNA microarray detection and flow cytometry .

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Materially False And MisleadingStatements Issued During The Class Period

18. The Class Period starts on December 9, 2004 . At that time, Martek issued a press

release with headline "Martek Announces Record Fourth Quarter and FY 2004 Financia l

Results ." Therein, the Company stated :

Martek Biosciences Corporation (Nasdaq : MATK) todayannounced its financial results for the fourth quarter and yearended October 31, 2004. For the fourth quarter of 2004 (4th Qtr04), revenues of $59 .7 million were achieved, up from $38.6million for the fourth quarter of 2003 (4th Qtr 03), and for yearended October 31, 2004 (FY 04), revenues of $184 .5 million wereachieved, up from $114 .7 million for the year ended October 31,2003 (FY 03). For the 4th Qtr 04, Martek generated income beforeincome taxes of $10 .1 million compared to income before incometaxes of $6.2 million in the 4th Qtr 03 . For FY 04, Martekgenerated income before income taxes of $21 .9 million comparedto income before income taxes of $16 .0 million for FY 03 . Netincome was $35 .3 million, or $1 .16 per diluted share, for the 4thQtr 04 compared to net income of $6 .2 million, or $0 .21 perdiluted share, for the 4th Qtr 03 and net income was $47 .0 million,or $1 .55 per diluted share, for FY 04 compared to net income of$16.0 million, or $0 .58 per diluted share, for FY 03 . Both the 4thQtr 04 and FY 04 net income amounts reflect a one-time, non-cashincome tax benefit of $25 .2 million. See below for additionaldiscussion .

"Martek continued its robust growth in earnings and revenue in thefourth quarter . This growth is expected to continue throughout2005 as the Kingstree facility expands production and demandgrows from existing and new products," stated Henry "Pete"Linsert, Jr., Chief Executive Officer of Martek .

4th Qtr Consolidated Financial Results

Total revenues for the 4th Qtr 04 were $59.7 million, an increaseof $21 .0 million or 54% over the 4th Qtr 03 . A significant portionof this increase is due to higher sales of nutritional products to theCompany's infant formula licensees (For a history of theCompany's nutritional product sales by quarter see the chart athttp ://www.martekbio.com/images/corporatePages/VAM143 .gif) .Approximately 90% of Martek's 4th Qtr 04 nutritional productsales were generated from sales of docosahexaenoic acid (DHA)

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and arachidonic acid (ARA) oils to four of the Company's infantformula licensees : Mead Johnson, Wyeth, Abbott Laboratories andNestle. Supplemented term infant formulas manufactured by threeof these companies were introduced in the U .S. in 2002, and thefourth, Nestle, launched a supplemented formula in the U.S. in2003. Also included in Martek's 4th Qtr 04 revenues were theCompany's initial sales of DHA oil for the pregnancy and lactationmarket as well as $3 .6 million related to contract manufacturingrevenues generated by the former FermPro business in Kingstree,SC, which was acquired in September 2003 . To prepare theCompany for future growth, the Company has expanded both theresearch and development and selling, general and administrativeefforts during fiscal 2004 . See below for additional discussion .

Gross profit margin on total revenues was 39% for both the 4th Qtr04 and the 4th Qtr 03 . The gross profit margin for the currentquarter was negatively impacted by an increase in the Company'soverall cost of ARA due to the continued decline in the U .S. dollaragainst the euro and the continued use of air freight in connectionwith ARA shipments from Europe; however, such impacts wereoffset by the benefits of certain DHA production improvementsrecently developed and significant growth in the ARA volumereceived from DSM's Belvidere, New Jersey manufacturing plant .The Company expects its gross profit margins to improve in fiscal2005 as the newly implemented production methods furtherimprove production yields, economies of scale are achieved at therecently expanded Kingstree, South Carolina manufacturingfacility and DSM's Belvidere plant continues to increase its ARAproduction volumes.

Research and development expenses increased by $1 .2 million or31 % in the 4th Qtr 04 compared to the 4th Qtr 03 . The increase isprimarily the result of the additional resources directed toward theCompany's continuing efforts to lower its DHA production cost byincreasing fermentation production yields and developing newdownstream processing techniques. In addition, costs wereincurred in connection with the development of DHA products forthe food and beverage industry and development activitiesassociated with Martek's internal ARA production as well as otherresearch in connection with the development of plant-based DHAunder a collaboration agreement with SemBioSys .

Selling , general and administrative expenses increased by $2 .3million or 49% during the 4th Qtr 04 over the 4th Qtr 03 . Of thisincrease , approximately $800,000 relates to the Company'sKingstree, SC plant acquired in September 2003, for which

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additional administrative infrastructure has been added to supportthe new facility and its expansion. The remaining increase isprimarily due to additional personnel and insurance costs requiredto accelerate and manage the Company's overall growth .Specifically, the Company has increased staffing in its businessdevelopment, food and beverage sales and marketing and financedepartments .

Other operating expenses totaled $1 .3 million and $600,000 in the4th Qtr 04 and 4th Qtr 03, respectively . During 4th Qtr 04, theCompany accrued an additional $500,000 associated with the 2003Winchester wastewater treatment matter . Other expendituresrelated primarily to production start-up costs associated with theexpansion at our Kingstree, SC facility and qualifications of certainthird-party manufacturers .

As of October 31, 2004, Martek, for the first time in its history,generated three years of cumulative operating profits . As a resultof this positive earnings trend and projected future operatingresults, the Company, as required by generally accepted accountingprinciples, recorded a one-time, non-cash income tax benefit . Thebenefit was created by Martek's reversal of its deferred tax assetvaluation allowance, such deferred tax asset consisting primarily ofnet operating loss carryforwards . This reversal resulted in therecognition of an income tax benefit totalling $25 .2 million as wellas a direct increase to stockholders' equity of approximately $22 .8million. Although the Company will continue to have significantnet operating loss carryforwards which are expected to mitigatesome of Martek's cash tax expenditures over the next several years,Martek will begin recording, in fiscal 2005, a provision for incometaxes based on the appropriate effective tax rate .

Net income of $35 . 3 million, or $ 1 .16 per share on a diluted basis,was realized in the 4th Qtr 04, compared to net income of $6 .2million, or $0 .21 per share on a diluted basis for the 4th Qtr 03 .

Fiscal Year 2004 Consolidated Financial Result s

Total revenues for FY 04 were $184 .5 million, an increase of $69 .8million or 61% over FY 03, due primarily to higher sales ofnutritional products to the Company's infant formula licensees .Gross profit margin decreased to 38% for FY 04, from 40% for FY03, primarily due to higher freight costs and continued unfavorableexchange rate fluctuations, both related to the Company's ARAcosts from DSM. Research and development expenses increasedby $5 .4 million or 41% in FY 04 compared to FY 03 due to the

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commencement of various development projects including bothDHA and ARA production method initiatives as well as DHA foodapplications . Selling, general and administrative expensesincreased by $9 .5 million or 58% in FY 04 over FY 03 due toincreased personnel and insurance costs required to support theCompany's growth as well as the addition of the new Kingstree,SC facility. Other operating expenses, as described above, of $4 .0million and $1 .9 million, were incurred in FY 04 and FY 03,respectively. A net benefit for income taxes, also as describedabove, totaling $25 .1 million was recognized in FY 04 . Net incomeof $47.0 million, or $1 .55 per diluted share was realized for FY 04,compared to net income of $16 .0 million, or $0.58 per dilutedshare for FY 03 .

The Company generated cash flow from operations of $10 .1million for FY 04. Positive cash flow from operations wasprimarily the result of Martek's profitability offset by a continuedbuildup of DHA inventory. Capital expenditures for FY 04 were$180.4 million, the majority of which related to the expansion ofthe Kingstree, SC facility to increase output of the Company'snutritional oils . The Company generated cash flow from financingactivities of $114 .5 million primarily due to borrowings under theCompany's revolving credit facility and proceeds from the exerciseof stock options and the issuance of common stock. At the end ofthe year, Martek had approximately $42 .7 million in cash, cashequivalents and short-term investments, a decrease of $54.3million from October 31, 2003 . In order to meet its capital needs,the Company may raise capital in the public or private markets, inthe form of debt or equity, in the coming quarters .

As noted above, the Company continues to add manufacturingcapacity and expand its business to meet market demand for itsproducts . In order to support this expansion, Martek has increasedoverall staffing levels . As of October 31, 2004, the Companyemployed 541 full-time employees, of which 189 have been hiredduring the year ended October 31, 2004, including 160 whosefocus relates to production or research and development activities .

Recent Highlights

* Production and Supply of Nutritional Oils -- Since fiscal 2003,the demand for the Company's nutritional oils for use in infantformula products has significantly exceeded production capacity.These shortfalls have resulted from an acceleration of such demandover what customers had projected coupled with a shortage ofARA production capacity from DSM that began in the first quarter

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of fiscal 2004. Martek has historically produced the DHAcomponent at its Winchester, KY facility and purchased the ARAcomponent from DSM as manufactured at its Capua, Italy plant .Recently, Martek began shipping product containing DHAmanufactured at the Company's Kingstree, SC plant and ARAmanufactured at DSM's Belvidere, NJ plant .

The Company is in the process of a significant p roductionexpansion including additional ARA production from DSM. Theseinitiatives include the following :

-- Expansion of Kingstree Production Facility -- Martek hascontinued its extensive expansion at its Kingstree, SC location forthe fermentation and processing of the Company's nutritional oils .The overall expansion is expected to cost approximately $180million when complete . Certain components of the initial phase ofthe expansion, including the fermentation area, commencedcommercial operation during the last six months of fiscal 2004 .The second expansion phase is expected to commence commercialoperation in 2nd Qtr 05.

-- Production at DSM's Belvidere Facility -- After the fireincident in May 2004 at the Belvidere, NJ manufacturing plant ofDSM, the ARA production line was restarted in June . Since thattime, Belvidere has continued to increase its monthly output ofARA. Martek is now receiving approximately 40% of its ARAfrom DSM's Belvidere facility, with that percentage expected togrow as DSM completes its current expansion at Belvidere, inphases, over the next 12 to 16 months .

19 . Also on December 9, 2004, Martek held a conference call to discuss it financial

results. Therein, defendant Linsert stated :

It was another good quarter and another good year . And I feelparticularly proud of that because this was all done during the yearof a lot of construction and the chaos that's associated with that andalso the start up of DSM's Belvidere production facility, not onlyfermentations, but all the downstream processing with that . So Ireally feel that the Company made good strides under thoseconditions.

The revenues for the quarter were nearly $60 million ; an increaseof about 54% and that's up from 28% from the last quarter . Therevenues for the year were almost $185 million, a 61% increaseover the 2003 . Pretax earnings were up -- were 10 million, or 3 3

10

cents per share versus 21 cents per share last year, up 57% . PeteBuzy will go over the tax loss accounting treatment .

Lastly, I would like to finish up with my expectations for '05. Pete[Buzy] will be going into some of these in more detail . We expecta continued growth . We should see the top line up around 300million with upside potential . We should -- and that's coming frommore DHA and ARA production as I mentioned earlier . Our yieldsshould be improving, this is going to help improve the grossmargins, gross profit margins . We should expect higher earningsper share. And we should see more evidence on DHA benefits,from not only our own trials but other trials involved with DHA .Which is the fundamental reason why these DHA -- this DHA willget into many products not only in food, medical foods andpossibly pharmaceuticals . And we expect food deals, as well asfood introductions . So it's going to be more of the same. Fastgrowth and better bottom line, better top line . And we are busypeople here at the Company, but I think we have the people inplace to obtain these objectives . We have a tremendous increase inthe number of employees this year, and they are well trained and Ithink I am very pleased that we can -- they're in place to see thesemuch larger numbers in the future.

20. Additionally, defendant Buzy stated:

Now to discuss the upcoming year . For reference , in 2004 weadded 4 fermenters for DHA production at our South Carolinafacility. And DSM added 7 fermenters for ARA production at itsfacility in the U.S. During the first half of 2005 we will bebringing on 4 more [fermenters ] in South Carolina . DSM plans tobring on 8 more fermenters in the U .S. in phases between thesecond and fourth quarters , as well as additional drying line. Thedrying line is expected to be operational in Martek's third quarter .To increase ARA supply between now and then, we areconverting up to 4 of our existing fermenters to the production ofARA, and are adding drying facilities at our South Carolinafacility . These drying facilities, as well as facilities at other thirdparties, should allow DSM to bring some of its new fermentersand productivity on line during Martek's second quarter , beforeDSM's new drying line is operational .

We are currently running at annual production capacity ratebetween $270 to $280 million in sales . Capacity is expected toincrease each month throughout 2005 and we expect to reach

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annual capacity rate equivalent to approximately $500 million ofsales during the second half of 2005 . It takes some time to qualifynew production for sale . Accordingly, there's a few month gapbetween the production capacity and potential sales levels . Withsignificantly new capacity coming on line, we will continue toshrink the demand supply gap that currently exists for infantformula products . As such, we expect to achieve revenues in 2005of between 290 and 310 million, an equivalent to 57 to 68%growth over 2004 .

Our assumptions for this range of revenue include additionalARA from improved yields and the ramp up of DSM's facilities,new DSM fermenters coming on line, limited production of ARAby Martek starting in the second quarter, and new DHAfermenters coming on line in South Carolina . As there is a rampup time to bring on new fermenters on line and to achievereasonable yields, we expect production increases to be somewhatlinear during the year although slightly higher in the second andthird quarters . Based upon the current production forecast, weexpect to begin to get ahead of the demand curve in the infantformula market in the third quarter and then to develop somesafety stock. We expect that U.S. market share for our licenseeswill continue to grow at a rate of I to 1 .5% per month, and thatinternational sales will grow throughout the year, particularly inthe second half of the year as we begin to build ARA inventory,which is a driver for our customers' launches in new countries.

We've included in our estimate $7 to $10 million of sales for thepregnancy and nursing market . We believe there is upside in 2005in this market , but are providing a conservative estimate as newmarkets are difficult to gauge customer acceptance at this stage ofthe product launch . We also included in our estimate aconservative $7 to $10 million of sales for food and beverage andother DHA products . We expect additional customerannouncements throughout 2005 that could provide upsidegrowth to this estimate .

We are forecasting gross margins to rise throughout the year from40% to 48%, an average gross margin of 43 to 44% . Grossmargin improvements are expected to come from increased mixof ARA from DSM's U .S. facility, a gradual phase out of ARA airfreight and improved yields for DHA produced in Kentucky andSouth Carolina . There are several factors expected to negativelyimpact gross margins in 2005, including continued weakness inthe U.S. dollar, continued use of air freight for some interimperiod, and the cost to ship [a]broad [sic] fermented by DSM's

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U.S . facilities to Martek for drying during an interim period .Although these last 2 factors are controllable by us, we believe itis critical to the future growth of the Company to be able tosupply our customers to the fullest extent possible even at theexpense of gross margin . These factors are temporary. Theyshould be eliminated by the end of the year .

To put the Euro dollar exchange rate in perspective, ARA makesup approximately 2/3 of our product sales . And over the next fewquarters approximately half of that ARA is expected to beproduced in Italy . Therefore, each percent rise in Euro impactsour gross margins by approximately 1/3 of a percent . The impacton the Euro will continue to be mitigated as production of ARAin the U.S. ramps up .

R&D expense for '05 should be between 8.8% and 9% ofrevenues . The main drivers behind R&D expense will beincreased investment in plant seed oil projects and yieldimprovement projects for ARA, DHA and Martek's food gradeDHA. SG&A expenses should be between 11 .8 and 12% ofrevenues . The primary drivers behind these expenses includeadditional staffing to support the growing business, insuranceexpense and some direct marketing expense for new launches inthe pregnancy and lactation area. Other operating expensesshould continue to be incurred, particularly the first half of '05, asnew trials will be underway to bring ARA fermentation and phase11 DHA fermentation on line. We expect to incur between 3 and3 .5 million during the year in these start-up related activities .

Other income expense should be net expense of 1 to 1 .5 millionas construction projects are put in place. Interest expenseassociated with these projects that was previously capitalized willstart to be expensed at an interest rate approximating 4% . Thiswill be weighted towards the second half of the year. Weanticipate income tax expense to be between an effective rate of37 and 38%. This will largely [ph] be a non-cash expense as wehave a large NOL. We expect pretax net income of 60 to 65million, and net income of 37.5 to 40.5 million. Our dilutedearnings per share guidance is between $1 .21 and $1 .30 ondiluted shares of between 31million and 31 .2 million .

Now for the first quarter guidance . First quarter revenues areexpected to reach between 64 and 65 million, as ARA capacityincreases from continued scale-up of existing fermenters atDSM's U.S . facility. Martek's ARA fermentation is expected toprovide second quarter upside improvement, but will not be

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available in the first quarter. Gross margin should remain stableor slightly improve to a range of 39 to 40% impacted in part byweaker U.S. dollars . R&D expenses should be between 8 .3% and8.5% of revenues . And SG&A expenses should fall between11 .4% to 12 .3% of revenues .

21 . On March 9, 2005, Martek issued a press rele ase with the headline "Martek

Announces First Quarter Financial Results ." Therein, the Company stated :

Martek Biosciences Corporation (Nasdaq : MATK) todayannounced its financial results for the first fiscal quarter of 2005(1st Qtr 05), which ended January 31, 2005 . For the 1st Qtr 05,revenues of $66 .5 million were achieved, up from $35 .6 millionfor the first quarter of fiscal 2004 (1st Qtr 04) . For the 1st Qtr 05,Martek generated income before income taxes of $11 .1 millioncompared to income before income taxes of $3 .4 million in the 1stQtr 04. Net income was $7 .1 million, or $0.23 per diluted share,for the 1st Qtr 05 compared to net income of $3 .4 million, or $0.11per diluted share, for the 1st Qtr 04 . The 1st Qtr 05 net incomeincluded an income tax provision of $4 .1 million, while no incometax provision was included in the 1st Qtr 04 net income .

"Financially, Martek's first quarter of 2005 was a good one and thenumbers speak for themselves," stated Henry "Pete" Linsert, Jr .,Chief Executive Officer of Martek .

1st Qtr Consolidated Financial Results

Total revenues for the 1st Qtr 05 were $66 .5 million, an increase of$30.9 million or 87% over the 1st Qtr 04 . Most of the increase wasdue to higher sales of nutritional products to the Company's infantformula licensees. Approximately 90% of Martek's 1st Qtr 05product sales were generated from sales of docosahexaenoic acid(DHA) and arachidonic acid (ARA) to four of the Company'sinfant formula licensees : Mead Johnson, Abbott Laboratories,Nestle and Wyeth . Included in Martek's 1st Qtr 05 revenues weresales of DHA for the pregnancy and nursing market, such saleshaving begun during the fourth quarter of fiscal 2004 . Martek hasexpanded its development as well as its selling, general andadministrative activities as it has grown . See below for additionaldiscussion .

Gross profit margin on total revenues was 41 % for the 1st Qtr 05and 38% for the 1st Qtr 04. This gross profit margin improvementfor the current quarter was due in part to a decrease in the

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Company's overall cost of ARA from DSM Food Specialties B .V .(DSM), Martek's third-party ARA manufacturer . DSM's increasedU.S. production of ARA was largely responsible for this decrease .Improvements in DHA productivity also served to improve thecurrent period's gross margin. DHA productivity coupled withfurther expansion of DSM's U.S . ARA manufacturing and areduction in air freight costs should further improve gross profitmargin in the second half of fiscal 2005 .

Research and development expenses, primarily development,increased by $800,000 or 20% in the 1st Qtr 05 compared to the1st Qtr 04. The increase was primarily the result of additionalefforts in Martek's internal ARA production and its continuingefforts to lower its DHA production costs . Additionally, costs wereincurred from new DHA clinical studies as well as theMartek/SemBioSys plant-based DHA research project .

Selling, general and administrative expenses increased by $2 .3million or 41% during the 1st Qtr 05 over the 1st Qtr 04 . Theincrease was primarily due to additional personnel, legal andinsurance costs required to accelerate and manage the Company'soverall growth. Specifically, the Company increased staffing in itsbusiness development, food and beverage sales and marketing andfinance departments.

Other operating expenses totaled $3 .5 million and $500,000 in the1st Qtr 05 and 1st Qtr 04, respectively . During 1st Qtr 05, theCompany began large- scale production trials with certainfermentors and extraction facilities at both Kingstree, SouthCarolina and Winchester, Kentucky for the production of ARA.These large-scale trials commenced after completion of the ARAtechnology transfer from DSM to Martek in late fiscal 2004 andgenerated start-up costs of approximately $2.0 million in thecurrent quarter . Other operating expenses in the current quarteralso included costs associated with the expansion in Kingstree andstart-up costs related to new extraction technology used in theproduction of Martek's food DHA product.

The provision for income taxes totaled $4 .1 million in 1st Qtr 05and has been recorded based upon the Company's estimatedeffective tax rate for fiscal 2005 . During the fourth quarter of fiscal2004, the Company reversed its valuation allowance on deferredtax assets totaling $50.8 million. As a result, income tax expensehas been recorded based on the 1st Qtr 05 pre-tax income despitethe fact that the Company continues to have significant ne t

15

operating loss carryforwards which will mitigate much of Martek'scash tax expenditures during fiscal 2005 .

Net income of $7 .1 million, or $0.23 per share on a diluted basis,was realized in the 1st Qtr 05, compared to net income of $3.4million, or $0 .11 per share on a diluted basis for the 1st Qtr 04 .

The Company used cash in operations of $1 .5 million in 1st Qtr 05 .This was primarily the result of increases in inventory andaccounts receivable commensurate with the growth of the overallbusiness partially offset by Martek's profitability . Capitalexpenditures for 1st Qtr 05 were $26.3 million, the majority ofwhich related to the expansion of the Kingstree facility to increaseoutput of the Company's nutritional oils . The Company generatedcash flow from financing activities of $49 .0 million, primarily dueto the issuance of common stock under the Company's shelfregistration which generated net proceeds of $81 .5 million, offsetby a use of such proceeds to repay $30 million of borrowingsunder the Company's revolving credit facility. At the end of theperiod, Martek had approximately $67 .5 million in cash, cashequivalents and short-term investments, an increase of $24.9million from October 31, 2004, and had available borrowingsunder the revolving credit facility of $45 .0 million .

As noted above, the Company has continued to add manufacturingcapacity and expand its business to meet market demand for itsproducts . To support this expansion, Martek increased overallstaffing levels. As of January 31, 2005, the Company employed612 full-time employees, of which 71 were hired during 1st Qtr 05,including 64 working on production or research and development .

Recent Highlights

Production and Supply of Nutritional Oils -- Since fiscal 2003, thedemand for the Company's nutritional oils for use in infant formulaproducts has continued to exceed production capacity . In responseto this and to meet expected demand for other uses, the Companyhas :

Expanded the Kingstree Production Facility -- Martek is nearingcompletion of its extensive expansion in Kingstree for thefermentation and downstream processing of the Company'snutritional oils . Phase one of this expansion, which included fournew fermentors, commenced commercial operation in late 2004and phase two, which includes four additional fermentors, i s

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complete with respect to construction and commercial operation isexpected to commence by the end of the second quarter of fiscal2005 . With this expansion, the expected commencement ofdownstream ARA processing capacity from a third-party providerand a phase-in of the DSM expansion, as noted below, Martekexpects to have production capacity equivalent to approximately$500 million in annualized sales in the second half of fiscal 2005 .

Arranged for ARA Produc tion at DSM's Belvidere Facility -- DSMcommenced ARA production at its Belvidere, New Jersey facilityin April 2004. Martek is now receiving approximately 40% of itsARA from DSM's Belvidere facility . That percentage is expectedto grow as DSM completes its current expansion at Belvidere, inphases, over the next 9 to 12 months .

Initiated Internal ARA Fermentation and Processing -- TheCompany began internal fermentation of ARA at its Winchesterand Kingstree facilities . Furthermore, additional ARA downstreamprocessing capacity is being added through a third-party providerand will be added internally at Kingstree . These additions toMartek's overall supply chain will reduce the risks inherent inhaving single suppliers .

DHA License and Supply Agreement with Major Food Company -- In February 2005, the Company announced that it had enteredinto a 15-year, non- exclusive DHA license and supply agreementwith a major consumer food products company . Under thisagreement, the food company will develop foods containingMartek DHA and must purchase, subject to certain exceptions,almost all of its DHA needs from Martek for products in theUnited States and other designated territories . There are nominimum purchase requirements or other financial commitmentsto Martek. In products containing Martek DHA, the food companymust display the Martek DHA logo on all product packages, printadvertisements and certain other promotional materials . Whilesubject to final product selection, food formulation, and consumertesting, the food company intends for the initial product launch totake place in mid-2006 .

Sale of Common Stock -- In January 2005, the Company offeredand sold approximately 1 .8 million shares of its common stockunder its effective shelf registration statement in an underwrittenpublic offering. Martek received net proceeds of approximately$81 .5 million from the offering after deducting an underwritingdiscount and offering expenses . Of these proceeds, $30 million hasbeen used for the partial repayment of debt with the remainder

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intended to be used for capital expenditures, working capital andgeneral corporate purposes .

USDA and HHS Updated Dietary Guidelines -- In January 2005,the U.S . Department of Health and Human Services and U .S .Department of Agriculture released updated Dietary Guidelinesmentioning for the first time DHA, an omega-3 fatty acid. The2005 Dietary Guidelines recognize that "limited evidence suggestsan association between consumption of fatty acids in fish andreduced risks of mortality from cardiovascular disease for thegeneral population ." In addition, the 2005 Dietary Guidelinesrecognize that there are other sources of DHA andeicosapentaenoic acid (EPA) that may provide similarcardiovascular benefits, but state that "more research is needed . "

22. Also on March 9, 2005, Martek held a conference call to discuss its financia l

results . During the call, defendant Linsert stated :

I'd like to talk briefly about Q3 and beyond . As I mentioned earlierthe -- our supply should be coming in big time in Q3 and Q4, andin fact I'm very optimistic about the whole process . In fact, I'mmore optimistic about Martek's future over the next 12 months to18 months, than I have been in pretty much the whole time thatI've been at the company. As I say, production is coming on inspades .

23. Additionally, defendant Buzy added:

. . . Prior to our customers expanding sales, Martek must first billedfinished goods inventory. We should be in this position in our thirdquarter. During the past two years, we have been on allocationbasis with our infant formula customers . As product launches innew countries have been limited due to intermediate supplyconcerns, higher production levels in the past two quarters haveallowed our customers to build a moderate level of safety stockinventory. Although increasing, ARA production continues to beour benchpoint and the shortage was magnified in March due tosome limited production problems in DSM's U .S. site, accordingly,we will continue to keep our customers on allocation during oursecond quarter .

The availability of Arachidonic Acid from both DSM and Martekin the second quarter will be heavily weighted to the month ofApril . Although a surplus of Arachidonic is projected --Arachidonic Acid is projected for late April, our customers wil l

18

require more lead time to schedule additional launches . As a resultof these factors revenue for the second quarter is expected to bebetween $54 and $55 million . Growth for the second half of 2005should not be constrained by supply, but should be contingent onU.S . conversion rates and international expansion for infantformula . Prior to complete U .S . conversion and more internationalexpansions, Martek must provide our formula customers with thefollowing assurances : First we need to increase our productionlevels to produce an amount greater than current demand . Second,we must build at inventory level to protect -- predict -- protectagainst unexpected problems, and then also be able to supply thatlevel evenly throughout the month and throughout the quarter . Webelieve these assurances will be adequately addressed during thesecond quarter .

New ARA fermentation capacity will come primarily from DSMwhich plans to bring four additional fermenters on line in the U .S .during the second quarter and plans to add another four fermentersin phases throughout the year . Martek is increasing levels ofArachidonic Acid fermentation and internal production is expectedto be qualified for sale in April . To process these additionalproducts and fermentation and to smooth out the timing ofArachidonic Acid supply from month to month we plan to bring online Arachidonic Acid drying equipment at our South Carolinafacility and expect additional Arachidonic Acid extraction capacityat our third party-contractor in North Carolina during the secondquarter . DSM plans to add a second drying line in the second halfof the year and we plan to bring on additional Arachidonic Acidextraction facilities at the Martek's plant in South Carolina in thesecond half of the year as well .

We are now in a production level of approximately between $280million and $300 million of annual product sales, and with thisadditional capacity we are on track to reach our annual capacitygoals of near half a billion dollars or $500 million in the secondhalf of the year. Between ARA expansions at Martek and DSMand third-party suppliers, we expect to reach levels of productionnecessary to exceed Q3 demand and billed finished goodsinventory. Accordingly, we plan to take our customers off ofallocation during the third quarter .

The reduction in revenues in the second quarter will impact ourannual revenue guidance as we will not be able to make up forthese lost sales. Now that we plan to take our customers off ofallocation, we will be working with them throughout the secondquarter to finalize the ordering forecast based upon higher Q3 an d

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Q4 availability . Once this process is complete, we should be ableto provide annual guidance during our second quarter conferencecall, which is currently planned for June . It is likely that a revisedguidance will be at the low end of our current revenue range .

However, based upon revised spending levels, we do -- we expectto remain within net earnings guidance previously provided, of$37.5 to $40 .5 million . This estimate does not include the effectsof recognizing expense for non-cash equity compensation in ourfourth quarter. We are adjusting our diluted average share guidanceto 32.1 million to 32 .4 million to include shares of common stockissued in the common stock offering in January . We areforecasting gross margins to decrease slightly in the second quarterto approximately 39 percent as a result of cost related to a plannedmaintenance shut down in Winchester and additional freight coststo ship Arachidonic Acid broth fermented at DSM's U .S. plant toour South Carolina facilities for drying . The two-week annual shutdown was planned to allow for certain maintenance improvementsthat are best made during a period without production,, and thesecosts will not be incurred again until 2006 . The additional freightfor Arachidonic Acid brought is temporary and is expected to endsduring the third quarter once DSM's new drawing line isoperational.

These factors were considered in our annual guidance provided inDecember and we expect to reach margins in the upper 40-percentrange by our fourth quarter driven by an increased mix ofArachidonic Acid from DSM's facility, a gradual phase out ofArachidonic Acid air freight from Italy, and improved yields andoutput for DSA. produced at both Martek's South Carolina andKentucky facilities . R&D expenses for the quarter are expected tobe between $5.4 million and $5 .6 million . The main drivers behindR&D expense will be increased investment in the plant-seed oilproject, yield improvement projects for DHA, Arachidonic Acid,and food applications .

Selling, General, and Administrative expenses in the secondquarter are planned to be between $8 .3 million and $8 .6 million .The primary drivers behind these expenses include additional tosupport the growing business, legal, insurance expense andadditional resources in preparation of Sarbanes Oxley, andmarketing support for certain DHA products . Other operatingexpenses should continues to be incurred at a lower rate as trial forARA fermentation continues and drying is phased in in at ourSouth Carolina facility. We expect to incur approximately $1 .2million to $1 .6 million of these costs during our second quarter.

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Other income and expenses should be a net positive ofapproximately $200,000 to $300,000 . We anticipate income taxexpense to be between 36 percent and 37 percent . This will largelybe a non-cash expense item, as we have a large NOL . And weexpect pretax net income of $5 .4 million to $5 .7 million, and netincome of $3 .4 million to $3 .6 million in the quarter. Our dilutedearnings per share guidance is between $0 .10 and $0 .11 on dilutedshares between -- of between 30 -- 32 .5 million and 32 .7 million .

In closing we had started off -- we started off with a strong firstquarter, achieving higher than anticipated sales and margins, whilemaking significant progress in executing our production plans . Wehave started initiatives to increase Arachidonic Acid capacity asplanned and we are on track to reach our capacity goals for theyear. Martek will soon be entering a new phase of its evolution,where the capacity constraints on infant formula that has been inplace since 2002 will be lifted, opening doors for further -- furtherexpansion of our customers . New markets are opening up with thecontinued launch of Mead Johnson's Expecta LIPIL supplementand the announcement of a contract with Kellogg's. Thesedevelopments will provide growth and open more businessdevelopment opportunities in the future .

24. The statements contained in 18-23 were materially false and misleading when

made because defendants failed to disclose or indicate the following : (1) that due to the

Company's productions issues in the past, the defendants put in place a system by which they

allowed their customers to build a moderate level of safety stock inventory ; (2) that throughout

the fourth quarter of fiscal year 2004 and the first quarter of fiscal year 2005, defendants

manipulated its channels of distribution by flooding its major customers with inventory in excess

of their allotted levels, so that Martek could meet its financial numbers and complete an $81 .4

million stock offering; (3) as a result of defendants' channel manipulation, Martek's financial

results were materially inflated; and (4) that as a result of the above, the Company's statements

about its fiscal year 2005 financial performance were lacking in any reasonable basis when

made.

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The Truth Begins to Emerge

25 . On April 27, 2005, after the market closed, Martek provided an update of it s

earnings estimates and production plan for fiscal year 2005 . More specifically, the Compan y

stated:

Martek's second quarter revenues should be approximately $55million, the high end of our previous estimate. Earnings are alsoexpected to be within our estimate of $3 .4 million to $3 .6 millionfor the second quarter .

Although Martek will be able to take its customers off allocationduring the third quarter, we anticipate a decrease in third qua rtersales primari ly due to reduced customer demand caused by thebuild up of inventory by large customers du ring the past severalquarters to protect themselves from supply shortages . We wereonly recently made aware of the extent of this inventory build up .We do not believe that the decrease in sales is an indication ofreduced demand at the consumer level, which we believe continuesto grow . We also anticipate unforeseen delays in our customers'international expansion plans in part due to our previous inabilityto supply customers on a consistent basis, and delays in plans forcomplete conversion of the U .S . market to formulas containing ouroils .

Therefore, we are revising our estimate of third quarter revenues to$38 million to $42 million, fourth quarter revenues to $61 millionto $76 million and fiscal year 2005 revenues to $220 million to$240 million. We anticipate our earnings will be materially lowerthan the current estimate and will provide details during Martek'ssecond quarter earnings release planned for the week of June 6,2005 .

Martek's combined annual production capacity of ARA and DHAas of May is estimated to be between $380 million to $400 million,in line with our plan to have $500 million of annualized capacity inplace during the second half of the year, thereby ending a supplyshortage that has existed for the past two years . A tremendousamount of progress has been made in the production of ARA sincethe early March supply gap. Plant expansions as well asproductivity improvements for both DHA and ARA havecontributed to resolving the production shortfall that previouslyexisted.

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Martek will begin to build a finished goods inventory of ARA inthe third quarter, which along with our finished goods inventory ofDHA, has enabled us to assure our customers that we will havesufficient invento ry to protect from product shortages and wi llenable us to meet market dem and. This facilitates further customerexpansion into international markets and further conversion of theU.S . infant formula market .

26 . News of this shocked the market. Shares of Martek, on April 28, 2005, fel l

$32 .49 per share , or 45 .9 percent , on unusually heaving trading volume .

UNDISCLOSED ADVERSE FACTS

27 . The market for Martek's securities was open, well-developed and efficient at al l

relevant times . As a result of these materially false and misleading statements and failures to

disclose, Martek's securities traded at artificially inflated prices during the Class Period .

Plaintiff and other members of the Class purchased or otherwise acquired Martek securitie s

relying upon the integrity of the market price of Martek's securities and market information

relating to Martek, and have been damaged thereby .

28 . During the Class Period, defendants materially misled the investing public ,

thereby inflating the price of Martek's securities, by publicly issuing false and misleading

statements and omitting to disclose material facts necessary to make defendants' statements, a s

set forth herein, not false and misleading . Said statements and omissions were materially fals e

and misleading in that they failed to disclose material adverse information and misrepresented

the truth about the Company, its business and operations , as alleged herein .

29. At all relevant times, the material misrepresentations and omissions particularized

in this Complaint directly or proximately caused or were a substantial contributing cause of th e

damages sustained by Plaintiff and other members of the Class. As described herein, during th e

Class Period, defendants made or caused to be made a series of materially false or misleadin g

23

statements about Martek's business, prospects and operations . These material misstatements and

omissions had the cause and effect of creating in the market an unrealistically positive

assessment of Martek and its business, prospects and operations , thus causing the Company' s

securities to be overvalued and artificially inflated at all relevant times . Defendants' materiall y

false and misleading statements during the Class Period resulted in Plaintiff and other member s

of the Class purchasing the Company's securities at artificially inflated prices, thus causing th e

damages complained of herein .

ADDITIONAL SCIENTER ALLEGATION S

30. As alleged herein, defendants acted with scienter in that defendants knew that th e

public documents and statements issued or disseminated in the name of the Company were

materially false and misleading; knew that such statements or documents would be issued o r

disseminated to the investing public ; and knowingly and substantially participated or acquiesce d

in the issuance or dissemination of such statements or documents as primary violations of the

federal securities laws . As set forth elsewhere herein in detail, defendants, by virtue of thei r

receipt of information reflecting the true facts regarding Martek, their control over, and/or receip t

and/or modification of Martek allegedly materially misleading misstatements and/or thei r

associations with the Company which made them privy to confidential proprietary information

concerning Martek, participated in the fraudulent scheme alleged herein .

31 . Defendants knew and/or recklessly disregarded the falsity and misleading nature

of the information which they caused to be disseminated to the investing public . The ongoing

fraudulent scheme described in this complaint could not have been perpetrated over a substantia l

period of time, as has occurred, without the knowledge and complicity of the personnel at th e

highest level of the Company, including the Individual Defendants .

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32. Defendants were motivated to engage in the fraudulent practices alleged herein in

order to complete an offering of 1,756,614 shares of common stock at a public offering price of

$49.10 per share for net proceeds of approximately $81 .4 million on January 26, 2005 .

Applicability Of Presumption Of Reliance :Fraud-On-The-Market Doctrine

33. At all relevant times, the market for Martek securities was an efficient market for

the following reasons, among others :

(a) Martek stock met the requirements for listing, and was listed and actively

traded on the NASDAQ, a highly efficient and automated market ;

(b) As a regulated issuer, Martek filed periodic public reports with the SEC an d

the NASDAQ ;

(c) Martek regularly communicated with public investors via established market

communication mechanisms, including through regular disseminations of press releases on th e

national circuits of major newswire services and through other wide-ranging public disclosures,

such as communications with the financial press and other similar reporting services; and

(d) Martek was followed by several securities analysts employed by major

brokerage firms who wrote reports which were distributed to the sales force and certai n

customers of their respective brokerage firms . Each of these reports was publicly available and

entered the public marketplace .

34. As a result of the foregoing, the market for Martek securities promptly digeste d

current information regarding Martek from all publicly-available sources and reflected such

information in Martek stock price . Under these circumstances, all purchasers of Martek securities

during the Class Period suffered similar injury through their purchase of Martek securities at

artificially inflated prices and a presumption of reliance applies .

25

NO SAFE HARBOR

35 . The statutory safe harbor provided for forward-looking statements under certai n

circumstances does not apply to any of the allegedly false statements pleaded in this complaint .

Many of the specific statements pleaded herein were not identified as "forward-lookin g

statements" when made. To the extent there were any forward- looking statements , there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements . Alternatively, to th e

extent that the statutory safe harbor does apply to any forward-looking statements pleade d

herein, defendants are liable for those false forward-looking statements because at the time eac h

of those forward-looking statements was made, the part icular speaker knew that the particular

forward-looking statement was false, and/or the forward-looking statement was authorize d

and/or approved by an executive officer of Martek who knew that those statements were false

when made.

FIRST CLAIMViolation Of Section 10(b) Of

The Exchange Act Against And Rule 10b-5Promulgated Thereunder Against All Defendant s

36 . Plaintiff repeats and realleges each and every allegation contained above as i f

fully set forth herein.

37. During the Class Period, defendants carried out a plan, scheme and course o f

conduct which was intended to and, throughout the Class Period, did : (i) deceive the investing

public, including Plaintiff and other Class members, as alleged herein ; and (ii ) cause Plaintiff and

other members of the Class to purchase Martek securities at artificially inflated prices . In

furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them ,

took the actions set forth herein .

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38. Defendants (a) employed devices, schemes, and artifices to defraud ; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements not misleading; and (c) engaged in acts, practices, and a course of business which

operated as a fraud and deceit upon the purchasers of the Company's securities in an effort to

maintain artificially high market prices for Martek securities in violation of Section 10(b) of the

Exchange Act and Rule lOb-5 . All defendants are sued either as primary participants in the

wrongful and illegal conduct charged herein or as controlling persons as alleged below .

39. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

operations and future prospects of Martek as specified herein .

40. These defendants employed devices, schemes and artifices to defraud, while in

possession of material adverse non-public information and engaged in acts, practices, and a

course of conduct as alleged herein in an effort to assure investors of Martek value and

performance and continued substantial growth, which included the making of, or the

participation in the making of, untrue statements of material facts and omitting to state material

facts necessary in order to make the statements made about Martek and its business operations

and future prospects in the light of the circumstances under which they were made, not

misleading, as set forth more particularly herein, and engaged in transactions, practices and a

course of business which operated as a fraud and deceit upon the purchasers of Martek securities

during the Class Period .

41 . Each of the Individual Defendants' primary liability, and controlling person

liability, arises from the following facts: (i) the Individual Defendants were high-level executive s

27

and/or directors at the Company during the Class Period and members of the Company's

management team or had control thereof; (ii) each of these defendants, by virtue of his

responsibilities and activities as a senior officer and/or director of the Company was privy to and

participated in the creation, development and reporting of the Company's internal budgets, plans,

projections and/or reports ; (iii) each of these defendants enjoyed significant personal contact and

familiarity with the other defendants and was advised of and had access to other members of th e

Company's management team, internal reports and other data and information about the

Company's finances, operations, and sales at all relevant times ; and (iv) each of these defendants

was aware of the Company's dissemination of information to the investing public which they

knew or recklessly disregarded was materially false and misleading.

42. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Such

defendants' material misrepresentations and/or omissions were done knowingly or recklessly and

for the purpose and effect of concealing Martek's operating condition and future business

prospects from the investing public and supporting the artificially inflated price of its securities .

As demonstrated by defendants' overstatements and misstatements of the Company's business,

operations and earnings throughout the Class Period, defendants, if they did not have actual

knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain

such knowledge by deliberately refraining from taking those steps necessary to discover whether

those statements were false or misleading .

43. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of Martek securitie s

28

was artificially inflated during the Class Period . In ignorance of the fact that market prices of

Martek's publicly-traded securities were artificially inflated, and relying directly or indirectly on

the false and misleading statements made by defendants, or upon the integrity of the market in

which the securities trades, and/or on the absence of material adverse information that wa s

known to or recklessly disregarded by defendants but not disclosed in public statements b y

defendants during the Class Period, Plaintiff and the other members of the Class acquired Martek

securities during the Class Period at artificially high prices and were damaged thereby .

44. At the time of said misrepresentations and omissions, Plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true . Had Plaintiff and the

other members of the Class and the marketplace known the truth regarding the problems tha t

Martek was experiencing, which were not disclosed by defendants, Plaintiff and other members

of the Class would not have purchased or otherwise acquired their Martek securities, or, if the y

had acquired such securities during the Class Period, they would not have done so at th e

artificially inflated prices which they paid .

45 . By virtue of the foregoing, defendants have violated Section 10(b) of th e

Exchange Act , and Rule lob-5 promulgated thereunder.

46. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and th e

other members of the Class suffered damages in connection with their respective purchases and

sales of the Company's securities during the Class Period.

SECOND CLAIMViolation Of Section 20(a) O f

The Exchange Act Against the Individual Defendant s

47. Plaintiff repeats and realleges each and every allegation contained above as i f

fully set forth herein .

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48. The Individual Defendants acted as controlling persons of Martek within the

meaning of Section 20(a) of the Exchange Act as alleged herein . By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of th e

Company's operations and/or intimate knowledge of the false financial statements filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants ha d

the power to influence and control and did influence and control, directly or indirectly, th e

decision-making of the Company, including the content and dissemination of the various

statements which Plaintiff contend are false and misleading . The Individual Defendants wer e

provided with or had unlimited access to copies of the Company's reports, press releases , publi c

filings and other statements alleged by Plaintiff to be misleading prior to and/or shortly afte r

these statements were issued and had the ability to prevent the issuance of the statements or

cause the statements to be corrected .

49. In particular, each of these defendants had direct and supervisory involvement i n

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as allege d

herein, and exercised the same .

50. As set forth above, Martek and the Individual Defendants each violated Section

10(b) and Rule lOb-5 by their acts and omissions as alleged in this Complaint . By virtue of their

positions as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) o f

the Exchange Act. As a direct and proximate result of defendants ' wrongful conduct , Plaintiff

and other members of the Class suffered damages in connection with their purchases of th e

Company's securities during the Class Period .

WHEREFORE, Plaintiff prays for relief and judgment, as follows :

30

(a) Determining that this action is a proper class action, designating Plaintiff a s

Lead Plaintiff and certifying Plaintiff as a class representative under Rule 23 of the Federal Rule s

of Civil Procedure and Plaintiff's counsel as Lead Counsel ;

(b) Awarding compensatory damages in favor of Plaintiff and the other Clas s

members against all defendants , jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding Plaintiff and the Class their reasonable costs and expenses incurre d

in this action, including counsel fees and expert fees ; and

(d) Such other and further relief as the Court may deem just and proper .

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JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury .

Dated: TYDINGS & ROSENBERG LLP

By:John B . IsbisterLarry Quinn100 East Pratt StreetBaltimore, Maryland 21202(410) 752-9700

SCHIFFRIN & BARROWAY, LLPMarc A. TopazRichard A. Maniskas280 King of Prussia Rd .Radnor, PA 19087(610) 667-7706

Attorneys for Plaintiff

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