UNITED STATES DISTRICT COURT

This complaint is pleaded in conformance with Federal Rules of Civil Procedure and the PSLRA. Plaintiffs, Arthur Fields and Hardy Fields, 2929 Galloway, #115, Mesquite, Texas 75150, have alleged the foregoing based upon the investigation of plaintiffs' counsel, which included a review of Biomatrix, Inc.'s ("Biomatrix" or the "Company") SEC filings, securities analysts' reports and advisories about Biomatrix, press releases issued by Biomatrix, and media reports about Biomatrix.

NATURE OF THE ACTION

This is a class action on behalf of a class (the "Class") of all persons who purchased or otherwise acquired the common stock of Biomatrix between July 20, 1999 and April 25, 2000 (the "Class Period), seeking to pursue remedies under the Securities Exchange Act of 1934 ("1934 Act").

JURISDICTION AND VENUE

Plaintiffs bring this action pursuant to the 1934 Act as amended (15 U.S.C. §§§§ 78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. §§ 240.10b-5).

This Court has jurisdiction over the subject matter of this action pursuant to §§ 27 of the 1934 Act (15 U.S.C. §§ 78aa) and 28 U.S.C. §§ 1331.

Venue is proper in this District pursuant to §§ 27 of the 1934 Act, 15 U.S.C. §§ 78aa and 28 U.S.C. §§ 1391(b). Many of the acts and transactions giving rise to the violations of law complained of herein, including the preparation and dissemination to the investing public of false and misleading information, occurred in this District, and Biomatrix maintains its principal executive offices in this District.

In connection with the acts, conduct and other wrongs complained of herein, the defendants used the means and instrumentalities of interstate commerce.

THE PARTIES

Plaintiff John Snyder purchased Biomatrix common stock during the Class Period, as set forth in the certifications attached hereto and incorporated herein by reference, and have suffered substantial damages as a result of the wrongful acts of defendants as alleged herein.

Defendant Biomatrix is a Delaware corporation with its principal executive offices located at 65 Railroad Avenue, Ridgefield, New Jersey. Biomatrix manufactures, markets and sells a series of proprietary products called hylans that are used in therapeutic medical applications and skin care.

The individual defendants (the "Individual Defendants"), at all times relevant to this action, served in the capacities listed below and received substantial compensation:

Name Position

Endre A. Balazs Chief Executive Officer, Chief Scientific Officer and Director

Rory B. Riggs President and Director

By reason of their management positions, and/or membership on Biomatrix's Board of Directors, and their ability to make public statements in the name of Biomatrix, the Individual Defendants were and are controlling persons, and had the power and influence to cause (and did cause) Biomatrix to engage in the unlawful conduct complained of herein.

MOTIVE, OPPORTUNITY AND KNOWLEDGE

Because of their Board memberships and/or executive and managerial positions with Biomatrix, each of the Individual Defendants had access to the adverse non-public information about the business, finances, markets and present and future business prospects of Biomatrix particularized herein via access to internal corporate documents, conversations or connections with corporate officers or employees, attendance at management and/or Board of Directors' meetings and committees thereof and/or via reports and other information provided to them in connection therewith.

Defendants had a duty to promptly disseminate accurate and truthful information with respect to Biomatrix's operations and financial condition or to cause and direct that such information be disseminated and to promptly correct any previously disseminated information that was misleading to the market. As a result of their failure to do so, the price of Biomatrix common stock was artificially inflated during the Class Period, damaging plaintiffs and the Class.

The Individual Defendants, because of their positions with Biomatrix, controlled the contents of quarterly and annual reports, press releases and presentations to securities analysts. Each Individual Defendant was provided with copies of the 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 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 false and misleading. As a result, each of the Individual Defendants is responsible for the accuracy of Biomatrix's corporate releases detailed herein as "group-published" information and is therefore responsible and liable for the representations contained therein.

Each of the defendants is liable as a primary violator in making false and misleading statements, and for participating in a fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Biomatrix stock during the Class Period. All of the defendants had motives to pursue a fraudulent scheme in furtherance of their common goal, i.e., inflating the reported profits of Biomatrix and the trading price of Biomatrix stock by making false and misleading statements and concealing material adverse information. The fraudulent scheme and course of business was designed to and did: (i) deceive the investing public, including plaintiffs and other Class members; (ii) artificially inflate the price of Biomatrix stock during the Class Period; (iii) cause plaintiffs and other members of the Class to purchase Biomatrix stock at inflated prices; (iv) conceal and coverup the Individual Defendants' mismanagement of Biomatrix; and (v) enable Biomatrix to induce Genzyme Corporation to enter into an Agreement and Plan of Merger that will enable defendants Balazs and Riggs to sell their Biomatrix shares for a price well in excess of the shares' actual worth and current fair market value.

CLASS ACTION ALLEGATIONS

Plaintiffs bring this action as a class action pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of a class (the "Class") consisting of all persons who purchased the common stock of Biomatrix between July 20, 1999 and April 25, 2000, inclusive (the "Class Period"). Excluded from the Class are the defendants herein, members of each Individual Defendant's immediate family, any entity in which any defendant has a controlling interest, and the legal affiliates, representatives, heirs, controlling persons, successors, and predecessors in interest or assigns of any such excluded party.

Because Biomatrix has millions of shares of common stock outstanding, and because the Company's common stock was actively traded, members of the Class are so numerous that joinder of all members is impracticable. While the exact number of Class members can only be determined by appropriate discovery, plaintiffs believe that Class members number at least in the thousands and that they are geographically dispersed.

Plaintiffs' claims are typical of the claims of the members of the Class, because plaintiffs and all of the Class members sustained damages arising out of defendants' wrongful conduct complained of herein.

Plaintiffs will fairly and adequately protect the interests of the Class members and have retained counsel who are experienced and competent in class and securities litigation. Plaintiffs have no interests that are contrary to or in conflict with the members of the Class plaintiffs seeks to represent.

A class action is superior to all other available methods for the fair and efficient adjudication of this controversy, since joinder of all members is impracticable. Furthermore, as the damages suffered by individual members of the Class may be relatively small, the expense and burden of individual litigation make it impossible for the members of the Class individually to redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

Questions of law and fact common to the members of the Class predominate over any questions that may affect only individual members, in that defendants have acted on grounds generally applicable to the entire 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;

(b) whether the Company's publicly disseminated releases and statements during the Class Period omitted and/or misrepresented material facts and whether defendants breached any duty to convey material facts or to correct material facts previously disseminated;

(c) whether defendants participated in and pursued the fraudulent scheme or course of business complained of;

(d) whether the defendants acted willfully, with knowledge or recklessly, in omitting and/or misrepresenting material facts;

(e) whether the market prices of Biomatrix common stock during the Class Period were artificially inflated due to the material nondisclosures and/or misrepresentations complained of herein; and

(f) whether the members of the Class have sustained damages and, if so, what is the appropriate measure of damages.

BACKGROUND

Biomatrix Promotes Synvisc As
An "Innovative" Product

Biomatrix manufactures, markets and sells viscoelastic proprietary products called hylans in the form of fluids, gels and solids that are made of biological polymers and used in therapeutic medical applications and skin care. According to the Company's public filings, hylan products are highly biocompatible, which means that doctors can use them in the body without causing allergic or foreign body reactions.

Biomatrix's leading product is Synvisc, a gel-like substance that, once injected into arthritic knees, is supposed to put off or even be a substitute for knee-replacement surgery. Biomatrix also is conducting clinical trials to evaluate Synvisc's effectiveness in the treatment of osteoarthritis of the hip.

Defendants have repeatedly promoted Synvisc as an innovative treatment and have done so by attempting to associate Synvisc and the Company with Balazs. For example, in Biomatrix's Form 10-K for the year ended December 31, 1999 ("1999 Form 10-K), defendants stated:

We believe that Biomatrix is distinguished from other companies in the field by our association with Dr. Endre A. Balazs. Dr. Balazs is a co-founder and current Chief Executive Officer and Chief Scientific Officer of Biomatrix, and is also the author of numerous publications on the medical application of hyaluronan-based viscoelastic products. Before co-founding Biomatrix, Dr. Balazs invented the use of hyaluronan in medicine and developed the first generation hyaluronan-based viscoelastics used in medicine worldwide. These products were based on a highly purified fraction of the unmodified, naturally occurring hyaluronan.

The Company distributes Synvisc in the United States, Europe and the Middle East through its partner Wyeth-Ayerst Laboratories, a division of American Home Products ("Wyeth"). In 1999, Biomatrix received "milestone" payments from Wyeth in the first and third quarters totaling $13 million as a result of Biomatrix shipments of Synvisc to Wyeth having reached a certain predetermined level. The milestone payments were reported as revenue during the 1999 fiscal year. The Company's product revenue also is recognized at the time the products are shipped, although defendants acknowledged in the 1999 Form 10-K that under current SEC regulations, the Company's 1999 revenues will probably have to be adjusted through a deferral of up to $20 million of up-front and milestone payments.

The Company has expanded rapidly. In August 1997, the Company gained Federal Food & Drug Administration ("FDA") approval to use Synvisc to treat osteoarthritis of the knee in the United States. In the first quarter of 1999, the Company received FDA approval to ship Synvisc within the United States from its facility in New Jersey, which was constructed in 1998. Operation of the New Jersey facility enabled the Company to quadruple its Synvisc production capacity and, during 1997 and 1998, the Company more than doubled the number of its employees. In the Company's 1999 Form 10-K, defendants stated that, "We have planned our operating expenses on the assumption that revenues from sales will continue to grow."

Despite the fact that the Company had geared up for a huge increase in Synvisc sales, Synvisc had yet to gain widespread acceptance in the medical community and many doctors were convinced, by scientific studies, that Synvisc was not better than conventional treatments that cost much less, such as anti-inflammatory drugs, or even a placebo of saline solution injected into a patient's knee. Consequently, the Company's Synvisc production capacity and Synvisc supply far exceeded demand.

Defendants Decide to Cash Out

Balazs, Riggs and Janet L. Denlinger, the Company's Executive Vice President, own 36% of Biomatrix's 23.3 million outstanding shares. Balazs and Denlinger are married and together, they own 6.7 million Biomatrix shares. Riggs owns 1.7 million Biomatrix shares, according to the Company's Form 10-K/A for the year ended December 31, 1999.

In 1999, Balazs, Denlinger and Riggs determined that they wanted to cash out their investment in Biomatrix. They faced two obstacles: (1) they could not unload their substantial holdings on the market without driving down the price of their shares in the process and (2) the Company's enormous production capacity coupled with the low end-user demand for Synvisc was likely to result in stagnant or decreasing sales and net earnings, which would prevent a runup in the price of Biomatrix shares. Defendants solved the first problem by engineering a combined cash and stock merger of the Company into Genzyme Corporation ("Genzyme") thereby creating a sale event that would enable them to sell their stock without deflating its price in the process. They solved the second problem by repeatedly representing to investors that Synvisc was an innovative product, that end-user sales of Synvisc were steadily increasing, and that the Company was reporting increasing revenues from its sales of Synvisc.

Unbeknownst to investors, the truth was that, throughout 1999, Biomatrix was selling Synvisc to its partner Wyeth faster than Wyeth could distribute it. As a result, even as defendants were boasting of increased sales, the number of boxes of Synvisc sitting in Wyeth's warehouses gradually increased threefold, from 32,000 boxes in the first quarter of 1999 to 95,317 boxes in the fourth quarter of 1999.

By building inventory at Wyeth, Biomatrix accelerated a huge portion of 2000 end-user sales into 1999 reported revenue and thereby led investors to believe that end-user demand for Synvisc was increasing. In fact, by booking revenues as it moved the Synvisc from Biomatrix's storage facility to its partner Wyeth's storage facility, defendants artificially inflated sales during the Class Period. Then, in the first-quarter of fiscal year 2000, Wyeth refused to pay for any more Synvisc and Biomatrix was forced to report that product sales had declined and that its cash flow was negative throughout the first quarter.

Before disclosure of the adverse facts described above, defendants were successful in inflating the price of Biomatrix stock to $37 and securing a merger agreement with Genzyme that guaranteed the individual defendants a price of $37 per share for a up to 28 percent of their Biomatrix shares, and one share of the new company created by the merger for each of their remaining Biomatrix shares.

FALSE AND MISLEADING STATEMENTS
DURING THE CLASS PERIOD

The Company Promises to
Stop Stuffing the Channels

The Class Period commences on July 20, 1999. On that date, defendants held a conference call during which they announced second-quarter product sales of $18.1 million (excluding a one-time $7 million milestone payment), told analysts that the Company's inventory buildup had reached a maximum, and predicted strong sales throughout the remainder of the year.

During the July 20, 1999 conference call Riggs assured analysts that the inventory buildup was part of the plan all along but that going forward, the Company was going start making more end-user sales. During the question and answer period, an investor asked, "40% of your sales went to inventory build in Q2, where do you expect that number going forward?" Riggs responded:

Our intention was to build to 90-day inventory over the first two quarters and that's what we have done, and it's not our expectation that we should be building inventory [anymore]. [Emphasis added.]

The investor then asked, "So going forward, 0% of sales will be inventory build?" and Riggs replied, "Our goal is to manage an even production schedule." Riggs concluded the conference call on an upbeat note, stating:

We think that this is a very important quarter in terms of us putting in place the things we needed to build this company; we've been encouraged by the trends we've seen.

In the earnings announcement released the next day over the M2 Communications PressWire, Balazs likewise put a positive spin on the Company's financial results, stating,

Second quarter 1999 marks our tenth consecutive profitable quarter, and underscores Biomatrix' commitment to growth with profitability. We are encouraged by the increased promotional and selling activity of our U.S. marketing partner for Synvisc, including the Direct to Consumer advertising campaign which Wyeth-Ayerst Laboratories began last month. The increasing demand for Synvisc from the US, Europe and other recently launched markets is evidence of the medical community's growing acceptance of viscosupplementation with Synvisc as an effective therapy to treat osteoarthritis of the knee . [Emphasis added.] We expect demand for Synvisc to continue to increase and are confident that the programs and strategies established by our marketing partners will foster the worldwide growth of Synvisc.

Not surprisingly, analysts thought these statements boded well for Biomatrix. On July 21, 1999, Fahnstock & Co., Inc. issued a report, stating in relevant part:

Although revenue and earnings (before a $7.1 million royalty payment from American Home Products) slightly exceeded expectations, the stock price has dropped sharply due to a lack of convincing sales data reflecting rising Synvisc utilization. As Biomatrix's shipments of Synvisc are still going in some measure towards American Home Products inventory build-up (to a 90-day supply) of the product, the second quarter was not a pivotal one. We believe it is too early to expect Synvisc to have gained widespread acceptance. The direct-to-consumer promotional campaign and the sales efforts of American Home Products have not had time to make a substantive impact. It could take another three to six months before sales begin to reflect widespread Synvisc utilization in the US knee osteoarthritic patient population. At that point, the stock price should begin to rise steadily toward our target of $45.

Based on the Company's statements, Prudential Vector Healthcare rated Biomatrix a "strong buy" and on July 26, 1999 issued a report stating: "We expect sales growth in the second half of this year as supply and demand increase, with revenue of $81 million in 1999, up 57%, to $127 million in 2000. Similarly, on July 21, 1999, a Robertson Stephens analyst rated Biomatrix common stock a "Buy," stating:

We now believe that Wyeth-Ayerst has largely completed its process of inventory buildup for Synvisc. During the first half of 1999 we believe that roughly one-third of Biomatrix's U.S. shipments were attributable to inventory build, with the remaining two-thirds attributable to sell-through to end users. Looking ahead we believe that U.S. syringe shipments will largely reflect sell-through to end users.

The statements referenced above in ¶¶¶¶32 - 34 were each materially false or misleading when issued as they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including:

(a) There was a 126-day supply of Synvisc in inventory at Wyeth's facility, not a 90-day supply as Riggs stated;

(b) Studies have shown that Synvisc is no more effective than a placebo or salt water injections in treating osteoarthritis and can have significant adverse effects lasting up to three weeks, such as pain and swelling at the site of the injection. Other studies have suggested that Synvisc injections can actually damage cartilage; and

(c) There was not growing medical community "acceptance of viscosupplementation with Synvisc as an effective therapy." Rather, as the medical community's experience with Synvisc grew, and as increasing anecdotal and scientific evidence of Synvisc's limitations came to light, there was growing medical community doubt that viscosupplementation with Synvisc is a viable medical treatment;

Despite Their Prior Representations
Biomatrix Continues to Build Inventory

On October 18, 1999, Wyeth reported that sales of Synvisc increased by 40% to $36.5 million but because Biomatrix sales of Synvisc to Wyeth increased at a faster rate, Wyeth's inventory of Synvisc continued to increase. By the end of the third quarter, Wyeth had a 108-day supply of Synvisc in inventory, an increase of 60% or 32,000 boxes over the number of Synvisc boxes in inventory at the beginning of the second quarter.

The next day, on October 19, 1999, defendants issued a press release over PR Newswire announcing the Company's third-quarter results without disclosing the effect the Synvisc inventory buildup was having and would have on product sales, revenues and earnings. The Company announced total third-quarter revenue of $18.3 million, and product sales of $18.1, compared to third-quarter revenue of $11.6 million and product sales of $11.5 million recorded during the third quarter of 1998. The Company attributed the increase in product sales to "increased U.S. and European sales of Synvisc." Balazs boasted:

Third quarter 1999 marked yet another outstanding quarter for our company. In addition to recording our eleventh consecutive quarter of profitability, third quarter 1999 witnessed significant progress in a number of important areas:
--Synvisc sales by U.S. marketing partner, Wyeth-Ayerst increased significantly with over 40% sequential quarter-to-quarter net growth and 37% year-to-date net growth compared with 1998 year to date. [Emphasis added.]

[. . . ] These results clearly demonstrate Synvisc's ability to respond positively to promotion. With nearly 76% of U.S. sales during the third quarter 1999 made directly to physicians or hospitals, we continue to see increased adoption of our advanced technology by the U.S. medical community. [Emphasis added.]

Likewise, during a conference call with analysts, held on October 19, 1999, Riggs stated the following with regard to Synvisc:

We think this was a very important quarter that showed Synvisc back strong again. Everyone of our products is in clinical trials or in queue at the FDA for clinical trials. We see dramatic improvement in doctor response to Synvisc. [Emphasis added.]

Balazs' and Riggs' statements had their intended effect and analysts, unaware that the Wyeth pipeline had been stuffed with Synvisc, reacted enthusiastically. On October 19, 1999, Robertson Stephens issued a report stating that, "This morning, Biomatrix announced strong Q3'99 financial results" and rated Biomatrix common stock a "buy." Similarly, on October 20, 1999, Prudential Vector Healthcare issued a report stating:

Although revenues were lower than our expectations, Biomatrix's lead product, Synvisc, continues to show increased market penetration as end-user sales reported by US marketing partner Wyeth-Ayerst were up more than 40% sequentially in 3Q99. [. . .] Biomatrix remains a strong growth story with projected one year EPS growth of 71%.

On November 15, 1999, Biomatrix filed its Form 10-Q for the third-quarter of 1999, the period ending September 30, 1999, in which it confirmed the previously announced results and which was signed by defendant Balazs.

The statements referenced above in ¶¶¶¶39 - 40 were each materially false or misleading when issued as they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including:

(a) The Company omitted to disclose that studies have shown that Synvisc is no more effective than a placebo or salt water injections in treating osteoarthritis and can have significant adverse effects lasting up to three weeks, such as pain and swelling at the site of the injection. Other studies have suggested that Synvisc injections can actually damage cartilage;

(b) Consequently, there was no "dramatic improvement in doctor response to Synvisc." Rather, as experience with Synvisc has increased, and as increasing anecdotal and scientific evidence of its limitations came to light, there was growing doubt in the medical community that viscosupplementation with Synvisc is a viable medical treatment;

(c) The Company's reported net revenue, net income, earnings per share, and product sales of Synvisc were artificially inflated by the Company's twin practices of reporting revenue upon the shipment of product to distributors and stuffing the pipeline with excess inventory; and

(d) The Company omitted to mention that during the third-quarter, Wyeth had accumulated a 108-day supply of Synvisc that would have a materially adverse effect on Biomatrix's future revenues, net income and earnings per share.

Defendants' Campaign to Pump Up the Price of
Biomatrix Shares Reaches a Crescendo With The
Release of Biomatrix's Year-End Results

On February 22, 2000, defendants' campaign to pump up the price of Biomatrix stock reached a crescendo with the Company's announcement over the PR Newswire that product sales in 1999 were $72.0 million, up 90% from 1998 product sales of $37.8 million. Defendants reported that product sales in the fourth quarter of 1999 increased 53% to $19.3 million compared with product sales of $12.6 million recorded during fourth quarter 1998. "Biomatrix closed the century with its strongest showing to date, proudly announcing its fourth consecutive year of profitability," said Balazs in a Company release over PR Newswire. Balazs further stated:

The opening of the company's U.S. manufacturing facility allowed us to provide our worldwide marketing partners with enough product to meet the demand for Synvisc. This allowed our U.S. marketing partner, Wyeth Ayerst, to start its first direct-to-consumer advertising campaign in July 1999, which boosted end user sales approximately 50% for the first half of 1999 to the second half of 1999. [Emphasis added.]

During a February 22, 2000 conference call with analysts, an investor asked Riggs, "If they [Wyeth] can only sell 70,000 boxes in a quarter, that means that the 97,000 to 98,000 boxes that you have to sell in Q1 [2000] looks like a pretty tough task, doesn't it?" Riggs sidestepped the question. "I think that we're in the middle of a promotional campaign, and I think that they're managing their inventory on the expectation of the campaign, and I think that you'll need to talk to them on this issue, thanks," he said.

Riggs concluded the conference by stating:

We believe that have completed a very important 1999, which helps position our company for the year 2000. I think we did a number of things to put Synvisc at a level of sales and allows it to be a very important product even within Wyeth Ayerst. I think that its' a good base from which we're comfortable that we can grow from. I think it's a base from which we have a number of campaigns to try to grow this product , and I think that it's a combination of trying to grow Synvisc and get some of our other new products out there and really establishes us in 2000 in a position to try to grow our business. [Emphasis added.]

In short, Riggs told analysts that the year 2000 looked great for Biomatrix and Synvisc.

Throughout the first quarter, as Riggs and Balazs guided analysts to expect a substantial increase in Synvisc sales, Biomatrix's share price increased steadily, by 36%, from 20 1/8 on January 3 to 27 7/16 on February 22, 2000. During the nine trading days following the February 22, 2000 announcement of Biomatrix's fourth quarter and year-end results, Biomatrix's share price rose another 29% to $37 on March 1, the Class Period high, before declining to 35 ½½ on March 6. Between January 3 and March 6, Biomatrix shares increased by a total of 76%.

Then, on March 6, Balazs and Riggs announced that Biomatrix had agreed to merge into Genzyme Biosurgery, a new entity to be comprised of Biomatrix, Genzyme Tissue Repair and Genzyme Surgical Products, in a deal that would make the Individual Defendants fabulously wealthy. Genzyme agreed to pay cash at $37 per share for up to 28.38 % of the outstanding shares of Biomatrix common stock and to exchange Genzyme Biosurgery stock on a one-to-one basis for the remaining 71.62 % of the outstanding shares of Biomatrix stock. Under this agreement, as the owners of 6,751,506 shares between them, Balazs and his wife Denlinger stand to receive a minimum of $70 million in cash and 4.8 million shares of the new Company. As the owner of 1,746,000 Biomatrix shares, Riggs stands to receive $18 million in cash and 1.2 million shares of the new company. Not surprisingly, Balazs, Riggs and the Company's other executive officers, who together own 37 % of Biomatrix's outstanding shares, agreed to vote their shares in favor of the merger. The deal was supposed to close by the end of June 2000 but on June 26, TheStreet.com, an internet business-related web site, speculated that the fact that Biomatrix's stock was trading so far below Genzyme's offer indicated that investors may believe the deal will be scrapped.

The statements referenced above in ¶¶¶¶44-46 were each materially false or misleading when issued as they misrepresented and/or omitted the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including:

(a) The Company omitted to disclose that (i) inventory had built steadily over the course of 1999 as a result of the fact that Biomatrix sold significantly more Synvisc into its partner Wyeth than Wyeth was able to sell to its customers; (ii) in 1999, Biomatrix sold 322,008 boxes of Synvisc into Wyeth but Wyeth could distribute only 243,771 boxes of Synvisc; (iii) at December 31, 1999, Wyeth was holding more than four months of Synvisc inventory; and (iv) this inventory buildup would have a materially adverse effect on Biomatrix's first quarter 2000 results;

(b) Biomatrix did not enter the year in a "strong" position. Rather, due to its channel stuffing the excess inventory buildup at Wyeth, Wyeth was withholding payment on additional product shipment. As a result, Wyeth entered the new century with a negative cash flow and no prospects for a first-quarter increase in sales; and

(c) The Company had not "boosted end user sales approximately 50% from the first half of 1999 to the second half of 1999." Rather, by channel stuffing, the Company simply recorded revenue 1999 for sales that would not occur until the year 2000 and which were properly recorded only at that time.

THE TRUTH BEGINS TO EMERGE

It was only after the merger agreement had been finalized that defendants sought to manage the disclosure that, due to the buildup of inventory at Wyeth, first-quarter sales might not be as robust as they had led everyone to believe just weeks ago. On March 6, 1999, defendants held a conference call for analysts to announce the merger agreement. Riggs' remarks during the call were taped and the transcript shows him backpedaling as follows:

We did find in January, we think largely through Y2K or through inventory buying [in 1999], that the expectations for the first quarter will be a growth in Synvisc but probably not as much growth as we expected. [Emphasis added.]
We do know that we don't have as many wholesalers in January as we had and we're doing our best to maximize our sales through a number of the efforts we're putting in place. [Emphasis added.]

I think we are at a point that we can say that in the first two months of the quarter that we did not see as many wholesalers as we said ... I think my investors are looking to me to have sequential growth quarter to quarter and I think that between the middle of a promotional campaign and the things that you saw in January I think that we did not see what we would expect to be as large a growth pattern. [Emphasis added.]

I think the message is that we really are off end user sales, and we need to make sure that Wyeth end user sales are growing sequentially for our revenues on a U.S. basis to grow sequentially. [Emphasis added.]

I think that there will be growth but I don't think that it is the growth that we previously projected in the quarter. [Emphasis added.]

. . . the data shows that wholesalers are not purchasing as much in January.

These statements about January revenues are inconsistent with what Riggs told analysts less than a month ago during the February 22 call, i.e., "Well, we have a number of programs and we're doing everything that we can to push this and I think we're comfortable " and that the Company had a good base "from which we're comfortable that we can grow from."

Defendant Riggs, however, continued to conceal the fact that the Company was experiencing reduced cash flow due to Wyeth's refusal to continue to build its inventory of Synvisc.

On March 7, 2000, Prudential lowered its rating from "Strong Buy" to "Hold" while on that same date, Robertson Stephens and Warburg Dillon Read both lowered their first-quarter revenue projections significantly, Robertson Stephens to $16.7 million, down from $21.1 million, and Warburg Read to $16.6 million, down from $20 million. On April 25, 2000 the Company announced first-quarter revenues of $16.7 million and net income of $0.5 million or $0.02 per diluted share. The Company claimed that "Biomatrix ended the first quarter of 2000 with $33.3 million in cash and $78 million in shareholders' equity. By this time the Company's share price had dropped to $19 15/16, down 85% from a Class Period high of $37 on March 1, 2000.

On May 15, 2000, the Company filed its form 10-Q with the SEC for the first quarter ending March 31, 2000 in which it was revealed for the first time that the Company had been in a negative cash flow position:

For the three months ended March 31, 2000 the Company had negative cash flow from operations of $1.3 million. This decrease is primarily related to a slight increase in accounts receivable as a result of the timing of shipments in the first quarter and a reduction in accrued expenses that resulted from tax payments. During the quarter, the Company also invested $0.4 million in property, plant and equipment. [Emphasis added.]

In the Company's 1999 Form 10-K, defendants also revealed that they expected the Company to be forced to take a $13 to $20 million adjustment to defer recognized revenue into future quarters. The Company stated:

We are in the process of reviewing each of our many distribution agreements to assess whether non-refundable, up-front license fees and/or milestone payments should be deferred in accordance with SAB 101. Accordingly, we anticipate that a change in our accounting policy will result in a cumulative effect adjustment for a change in accounting principle. The total cumulative effect of the non-cash, after-tax charge is preliminary estimated to range from $13 million to $20 million. Such amount would be recorded as deferred revenue and recognized as product revenue in future periods. We intend to implement changes resulting from SAB 101 in the second quarter of 2000.

UNDISCLOSED ADVERSE INFORMATION

The market for Biomatrix common stock was open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, Biomatrix common stock traded at artificially inflated prices during the Class Period. The artificial inflation continued until April 25, 2000, when defendants announced their first-quarter results and admitted that they had been adversely effected by channel stuffing. Plaintiffs and other members of the Class purchased or otherwise acquired Biomatrix common stock relying upon the integrity of the market price of Biomatrix common stock and market information relating to Biomatrix, and have been damaged thereby.

During the Class Period, defendants materially misled the investing public, thereby inflating the price of Biomatrix common stock, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants' statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, including, inter alia:

(a) There has been not been growing medical community "acceptance of viscosupplementation with Synvisc as an effective therapy." Rather, as experience with Synvisc has increased, and as increasing anecdotal and scientific evidence of its limitations came to light, there was been growing medical community doubt that viscosupplementation with Synvisc is a viable medical treatment;

(b) Viscosupplementation is not an effective treatment for osteoarthritis of the knee. Rather, many studies have shown that Synvisc is no more effective than a placebo or salt water injections in treating osteoarthritis and can have significant adverse effects lasting up to three weeks, such as pain and swelling at the site of the injection. Other studies have suggested that Synvisc injections can actually damage cartilage;

(c) Demand for Synvisc could not "continue to increase" because to date it had not increased but rather decreased as its limitations became increasingly obvious; and

(d) Throughout the Class Period, defendants artificially inflated the Company's reported net revenue, net income, earnings per share, and product sales of Synvisc through the twin practices of reporting revenue upon the shipment of product to distributors and stuffing the pipeline with excess inventory.

At all relevant times, the material misrepresentations and omissions particularized in this Complaint directly or proximately caused or were a substantial contributing cause of the damages sustained by plaintiffs and other members of the Class. As described herein, during the Class Period, defendants made or caused to be made a series of materially false or misleading statements about Biomatrix'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 Biomatrix and its business, prospects and operations, thus causing the Company's common stock to be overvalued and artificially inflated at all relevant times. Defendants' materially false and misleading statements during the Class Period resulted in plaintiffs and other members of the Class purchasing the Company's common stock at artificially inflated prices, thus causing the damages complained of herein.

SCIENTER ALLEGATIONS

As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements, issued or disseminated by or in the name of the Company were materially false and misleading; knew or recklessly disregarded that such statements or documents would be issued or disseminated to the investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violators of the federal securities laws. As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Biomatrix and its business practices, their control over and/or receipt of Biomatrix's allegedly materially misleading misstatements and/or their associations with the Company which made them privy to confidential proprietary information concerning Biomatrix were active and culpable participants in the fraudulent scheme alleged herein. 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 substantial period of time, as has occurred, without the knowledge and complicity of the personnel at the highest level of the Company, including the Individual Defendants.

The Individual Defendants engaged in such a scheme to inflate the price of Biomatrix common stock in order to: (i) protect and enhance their executive positions and the substantial compensation and prestige they obtained thereby; (ii) enhance the value of their personal holdings of Biomatrix common stock; and (iii) induce Genzyme Corporation enter into an Agreement and Plan of Merger that will enable defendants Balazs and Riggs to sell their Biomatrix shares for a price many times their actual worth and current fair market value.

STATUTORY SAFE HARBOR

The federal statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this Complaint. Further, none of the statements pleaded herein which were forward-looking statements were identified as "forward-looking statements" when made. Nor was it stated that actual results "could differ materially from those projected." Nor were the forward-looking statements pleaded accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from the statements made therein. Defendants are liable for the forward-looking statements pleaded because, at the time each of those forward-looking statements was made, the speaker knew the forward-looking statement was false and the forward-looking statement was authorized and/or approved by an executive officer of Biomatrix who knew that those statements were false when made.

APPLICABILITY OF PRESUMPTION OF RELIANCE:
FRAUD-ON-THE-MARKET DOCTRINE

At all relevant times, the market for Biomatrix common stock was an efficient market for the following reasons, among others:

(a) Biomatrix common stock met the requirements for listing, and was listed and actively traded, on the New York Stock Exchange (the "NYSE"), a highly efficient market;

(b) As a regulated issuer, Biomatrix filed periodic public reports with the SEC and the NYSE;

(c) Biomatrix stock was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace; and

(d) Biomatrix regularly issued press releases which were carried by national newswires. Each of these releases was publicly available and entered the public marketplace.

As a result, the market for Biomatrix securities promptly digested current information with respect to Biomatrix from all publicly-available sources and reflected such information in Biomatrix's stock price. Under these circumstances, all purchasers of Biomatrix common stock during the Class Period suffered similar injury through their purchase of stock at artificially inflated prices and a presumption of reliance applies.

COUNT I

For Violations Of Section 10(b) Of The
1934 Act And Rule 10b-5 Promulgated
Thereunder Against All Defendants

Plaintiffs repeat and reallege the allegations set forth above as though fully set forth herein. This claim is asserted against all defendants.

During the Class Period, defendants Biomatrix and the Individual Defendants, and each of them, carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (i) deceive the investing public, including plaintiffs and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Biomatrix common stock; and (iii) cause plaintiffs and other members of the Class to purchase Biomatrix stock at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants Biomatrix and the Individual Defendants, and each of them, took the actions set forth herein.

These 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 common stock in an effort to maintain artificially high market prices for Biomatrix common stock in violation of Section 10(b) of the Exchange Act and Rule 10b-5. These defendants are sued as primary participants in the wrongful and illegal conduct charged herein. The Individual Defendants are also sued herein as controlling persons of Biomatrix, as alleged below.

In addition to the duties of full disclosure imposed on defendants as a result of their making of affirmative statements and reports, or participation in the making of affirmative statements and reports to the investing public, they each had a duty to promptly disseminate truthful information that would be material to investors in compliance with the integrated disclosure provisions of the SEC as embodied in SEC Regulation S-X (17 C.F.R. §§ 210.01 et seq.) and S-K (17 C.F.R. §§ 229.10 et seq.) and other SEC regulations, including accurate and truthful information with respect to the Company's operations, financial condition and performance so that the market prices of the Company's publicly traded securities would be based on truthful, complete and accurate information.

Biomatrix and the Individual Defendants, individually and in concert, directly and indirectly, by the use of 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, business practices, performance, operations and future prospects of Biomatrix as specified herein. 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 Biomatrix's value and performance and 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 Biomatrix 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 Biomatrix securities during the Class Period.

Each of the Individual Defendants' primary liability, and controlling person liability, arises from the following facts: (i) each of the Individual Defendants was a high-level executive and/or director at the Company during the Class Period; (ii) each of the Individual Defendants, by virtue of his responsibilities and activities as a senior executive 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) the Individual Defendants enjoyed significant personal contact and familiarity with each other and were advised of and had access to other members of the Company's management team, internal reports, and other data and information about the Company's financial condition and performance at all relevant times; and (iv) the Individual Defendants were aware of the Company's dissemination of information to the investing public which they knew or recklessly disregarded was materially false and misleading.

These 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 readily available to them. Such defendants' material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose and effect of concealing Biomatrix's operating condition, business practices and future business prospects from the investing public and supporting the artificially inflated price of its stock. As demonstrated by their overstatements and misstatements of the Company's financial condition and performance throughout the Class Period, the Individual 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.

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 Biomatrix's common stock was artificially inflated during the Class Period. In ignorance of the fact that the market price of Biomatrix's shares was 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 trade, and/or on the absence of material adverse information that was known to or recklessly disregarded by defendants but not disclosed in public statements by defendants during the Class Period, plaintiffs and the other members of the Class acquired Biomatrix common stock during the Class Period at artificially inflated high prices and were damaged thereby.

At the time of said misrepresentations and omissions, plaintiffs and other members of the Class were ignorant of their falsity, and believed them to be true. Had plaintiffs and the other members of the Class and the marketplace known of the true performance, business practices, future prospects and intrinsic value of Biomatrix, which were not disclosed by defendants, plaintiffs and other members of the Class would not have purchased or otherwise acquired their Biomatrix securities during the Class Period, or, if they had acquired such securities during the Class Period, they would not have done so at the artificially inflated prices which they paid.

By virtue of the foregoing, Biomatrix and the Individual Defendants each violated Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder.

As a direct and proximate result of defendants' wrongful conduct, plaintiffs and the other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.

COUNT II
For Violations Of Section 20(a) Of The
1934 Act Against Individual Defendants

Plaintiffs repeat and reallege the allegations set forth above as if set forth fully herein. This claim is asserted against the Individual Defendants.

The Individual Defendants were and acted as controlling persons of Biomatrix within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions with the Company, participation in and/or awareness of the Company's operations and/or intimate knowledge of the Company's actual performance, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which plaintiffs contend are false and misleading. Each of the Individual Defendants was provided with or had unlimited access to copies of the Company's reports, press releases, public filings and other statements alleged by plaintiffs to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

In addition, each of the Individual Defendants had direct involvement in 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 alleged herein, and exercised the same.

As set forth above, Biomatrix and the Individual Defendants each violated Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their controlling positions, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of defendants' wrongful conduct, plaintiffs and other members of the Class suffered damages in connection with their purchases of the Company's securities during the Class Period.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs, on their own behalf and on behalf of the Class, pray for judgment as follows:

(a) Appointing plaintiffs as lead plaintiffs and their counsel as lead plaintiff counsel;

(b) Declaring this action to be a class action pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure on behalf of the Class defined herein;

(c) Awarding plaintiffs and the members of the Class damages in an amount which may be proven at trial, together with interest thereon;

(d) Awarding plaintiffs and the members of the Class pre-judgment and post-judgment interest, as well as their reasonable attorneys' and experts' witness fees and other costs; and

(e) Awarding such other and further relief as this Court may deem just and proper including any extraordinary equitable and/or injunctive relief as permitted by law or equity to attach, impound or otherwise restrict the defendants' assets to assure plaintiffs have an effective remedy.

JURY DEMAND

Plaintiffs demand a trial by jury.

WOLF HALDENSTEIN ADLER

FREEMAN & HERZ LLP

Fred Taylor Isquith, Esq.

270 Madison Avenue

New York, New York 10016

(212) 545-4600

LAW OFFICES OF CHARLES J. PIVEN, P.A.

Charles J. Piven – Federal Bar No. 00967

The World Trade Center, Suite 2525

401 East Pratt Street

Baltimore, Maryland 21202

(410) 332-0030

197683