892025--1/13/2006--MARTEK_BIOSCIENCES

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If clinical trials do not continue to yield positive results on the benefits of DHA on cognitive function, cardiovascular health or other health applications, our future revenues may be limited in the food and beverage market and the dietary supplement market. Our current patents may not be able to provide protection against competitive products and we may be unable to protect our intellectual property portfolio in the future. We have a single third-party supplier of our ARA with whom we have a contractual relationship. If this supplier of our ARA is unable to supply us with our required amounts of ARA or if an over-capacity situation by our supplier leads to higher cost ARA, our results of operations and/or financial position may be adversely affected. If we are unable to successfully expand, continuously utilize and adequately manage our production capacity or enter into favorable agreements with third parties to produce our oils or if our suppliers fail to produce and supply us with adequate amounts of oil, our customers may not be able to obtain a sufficient supply of DHA and ARA from us and our future revenues from these products may be limited. As we and our major suppliers increase production of our nutritional oils, we may experience certain risks associated with the start-up/ ramp-up of commercial manufacturing that could have a material adverse effect on our business, financial condition, and/ or results of operations. We have significantly increased our manufacturing capacity and have incurred substantial costs in doing so. If we are unable to increase our revenues from our nutritional oils produced at these facilities, we may experience excess production capacity and we may be unable to recover these plant expansion costs. Failure to effectively manage our growth could disrupt our operations and prevent us from generating the revenues and gross profit margins we expect. Experts differ in their opinions on the importance of DHA and/or ARA in infant formula and the levels of DHA and/or ARA required to achieve health benefits for babies. Some experts feel that they are not necessary ingredients for infant development and that supplemented formulas will remain a premium product and never gain widespread acceptance worldwide. If clinical trials do not continue to yield positive results and certain favorable regulatory guidelines are not enacted, our future revenues in the infant formula market may be limited. Our oils are very sensitive to oxidation and may not be very compatible with many liquid or dry foods that are currently on the market. If economical methods are not developed to successfully incorporate our oils into various food and beverage applications, we may never be able to gain large-scale entry into the food and beverage market. If it is determined that large amounts of eicosapentaenoic acid ( EPA ) must be added to DHA in order to achieve optimal health benefits, we may never be able to gain large- scale entry into the food and beverage market. Because infant formula pricing is very competitive, the premium that our oils adds to the cost of the formula may never allow it to be priced at levels that will allow worldwide acceptance by consumers. If market demand for our products continues to grow, we may need significant additional capital to expand our production capability. We may also need additional capital in the future to continue our research and development efforts, to conduct product testing, including preclinical and clinical trials, and to market our products. The market price of our common stock may experience a high level of volatility due to factors such as the volatility in the market for biotechnology stocks generally, and the short-term effect of a number of possible events. If significant shares eligible for future sales are sold, the result may depress our stock price by increasing the supply of our shares in the market at a time when demand may be limited. Our business would be harmed if we fail to comply with applicable good manufacturing practices as required by the FDA. Our corporate compliance program cannot guarantee that we are in compliance with all potentially applicable federal and state regulations. Our business exposes us to potential product liability claims and recalls, and our insurance may not provide adequate coverage. Our opportunity in the U.S. infant formula market may be limited by the renewal rate of supplemented formulas into the Women, Infants and Children program. Our manufacturing process involves the handling of hazardous materials and the mishandling of these hazardous materials could result in substantial costs and harm to our business. Our adoption of the Financial Accounting Standards Board s SFAS No. 123 (revised 2004), Share-Based Payment, or alternative incentive compensation plans that we could adopt, could result in our recognition of significant additional compensation expense. Changes in foreign currency exchange rates or interest rates could result in losses. We are a defendant in putative class action lawsuits which, if determined adversely, could have a material adverse affect on us.

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892025--1/13/2006--MARTEK_BIOSCIENCES_CORP