1288379--3/14/2007--NEW_RIVER_PHARMACEUTICALS

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{debt, indebtedness, cash}

{stock, price, share}

{property, intellectual, protect}

{interest, director, officer}

{product, liability, claim}

{tax, income, asset}

{cost, operation, labor}

{provision, law, control}

{system, service, information}

{customer, product, revenue}

{control, financial, internal}

{personnel, key, retain}

{product, market, service}

{cost, regulation, environmental}

We have a history of operating losses and may incur additional substantial losses in 2007. We may never achieve profitability. Our product candidates are based on a technology that could ultimately prove ineffective or unsafe. If we are unable to develop and commercialize our product candidates successfully, we may never achieve profitability. We face intense competition in the markets targeted by our lead product candidates. Many of our competitors have substantially greater resources than we do, and we expect that all of our product candidates under development will face intense competition from existing or future drugs. If we fail to protect our intellectual property rights, our ability to pursue the development of our technologies and products would be negatively affected. We have not commissioned an extensive investigation concerning our freedom to practice or the validity or enforceability of our Carrierwave technology and have only recently commissioned an investigation concerning our freedom to practice or the validity or the enforceability for our product candidates, and we may be held to infringe the intellectual property rights of others. We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time-consuming. If preclinical testing or clinical trials for our product candidates are unsuccessful or delayed, we will be unable to meet our anticipated development and commercialization timelines. If the FDA does not accept our filing for NRP290 under Section 505(b)(1) and we are unable to file for approval under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act or if we are required to generate additional data related to safety and efficacy in order to obtain approval under Section 505(b)(1) or 505(b)(2), we may be unable to meet our anticipated development and commercialization timelines. We will be unable to begin commercial sale of Vyvanse until the DEA concludes proceedings to place the drug in Schedule II under the CSA The potential market for Vyvanse may be limited by the placement of the drug in Schedule II. We have engaged in extensive financial and operational transactions with Randal J. Kirk, our Chairman, President and Chief Executive Officer, and his affiliates, and therefore these transactions may not be as favorable to us as if we had negotiated them with unaffiliated third parties. As of March 6, 2007, Randal J. Kirk controlled approximately 50.2% of our common stock and is able to control or significantly influence corporate actions, which may result in Mr. Kirk taking actions that advance his interests to the detriment of our other shareholders. We rely on Third Security, LLC, to provide us with certain services. If Third Security, LLC ceases to provide these services and we are unable to establish and maintain the necessary infrastructure to be self-sufficient, our business will be adversely affected. Our executive officers and other key personnel are critical to our business, and our future success depends on our ability to retain them. We rely on third parties to manufacture the compounds used in our trials, and we intend to rely on them for the manufacture of any approved products for commercial sale. If these third parties do not manufacture our product candidates in sufficient quantities and at an acceptable cost, clinical development and commercialization of our product candidates could be delayed, prevented or impaired. Failure by our third-party manufacturers to comply with the regulatory guidelines set forth by the FDA and DEA with respect to our product candidates could delay or prevent the completion of clinical trials, the approval of any product candidates or the commercialization of our products. We may need additional capital in the future. If additional capital is not available or is available at unattractive terms, we may be forced to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or curtail our operations. Even if we obtain regulatory approval to market our product candidates, our product candidates may not be accepted by the market. If we fail to establish marketing, sales and distribution capabilities, or fail to enter into arrangements with third parties to do this on our behalf, we will not be able to create a market for our product candidates. In the event that we are successful in bringing any products to market, our revenues may be adversely affected if we fail to obtain acceptable prices or adequate reimbursement for our products from third-party payors. We could be forced to pay substantial damage awards if product liability claims that may be brought against us are successful. We use hazardous chemicals in our business. Potential claims relating to improper handling, storage or disposal of these chemicals could be time-consuming and costly. If Shire, our collaboration partner on Vyvanse, or any other collaborative partners we retain, do not satisfy their obligations, we will be unable to develop our partnered product candidates. Our indebtedness could adversely affect our financial health and limit our ability to react to changes in our industry or to implement our strategic initiatives. Risks Related to the Notes The Notes rank junior in right of payment to our senior debt and effectively junior to the liabilities of our existing subsidiary or any future subsidiaries. There are no restrictive covenants in the indenture for the Notes relating to our ability to incur future indebtedness or complete other transactions. Fluctuations in the price of our common stock may prevent you from being able to convert the Notes and may impact the price of the Notes and make them more difficult to resell. The make whole premium that may be payable upon conversion in connection with a fundamental change may not adequately compensate you for the lost option time value of your Notes as a result of such fundamental change. Because your right to require repurchase of the Notes is limited, the market price of the Notes may decline if we enter into a transaction that does not constitute a fundamental change under the indenture. If you hold Notes, you are not entitled to any rights with respect to our common stock, but you are subject to all changes made with respect to our common stock. We may not have the ability to purchase Notes when required under the terms of the Notes. You should consider the U.S. federal income tax consequences of owning the Notes. You may have to pay taxes with respect to distributions on our common stock that you do not receive. The convertible note hedge and warrant transactions may affect the value of the Notes and our common stock. There is no established trading market for the Notes and no guarantee that a market will develop or that you will be able to sell your Notes. The conditional conversion feature of the Notes could result in your receiving less than the value of the common stock into which a note is convertible. Certain provisions of Virginia law, and our amended and restated articles of incorporation and amended and restated bylaws could make it more difficult for our shareholders to remove our board of directors and management. The price of our common stock may be volatile. Risks Related to the Merger The pending merger with Shire may create uncertainty for our employees and business partners. The merger with Shire is subject to various approvals and may not occur.

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1288379--3/14/2007--NEW_RIVER_PHARMACEUTICALS_INC