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H1JLETT HARPER STEWART LLPKIRK B . HULETT, SBN: 110726550 West C Street, Suite 160 0San Diego , CA 92101Telephone : (619) 338-1133Facsimile : (619) 338-113 9

Plaintiffs' Liaison Counse l

SCHIFFRIN & BARROWAY, LLPSTUART L. BERMA NDARREN J . CHECKSEAN M. HANDLERROBIN WINCHESTERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : (610) 667-7706Facsimile: (610) 667-7056

05 MAR I ! PM 2 : 5 8ULERx: . U .S . DISTRICT COURT

UTHtPH CI$1R1Cf OF CA LIFORNIA

1 + DEPUT Y

GOODKIND LABATON RUDOFF & SUCHAROW LLPJONATHAN M . PLASSECHRISTOPHER J . KELLERSHELLEY THOMPSON100 Park AvenueNew York, NY 10017Telephone : (212) 907-0700Facsimile: (212) 818-0477

Lead Counsel for Lead Plaintiffs

UNITED STATES DISTRICT COUR T

FOR THE SOUTHERN DISTRICT OF CALIFORNI A

In re MAXIM PHARMACEUTICALS, INC. CASE NO, 04CV1900DMS(BLM)

SECURITIES LITIGATION CONSOLIDATED AMENDED CLASSACTION COMPLAINT

This Document Relates to : JURY TRIAL DEMANDEDALL ACTIONS

04CV 1900DMS(BLM)

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1 . Lead Plaintiffs James Brent Allen and William and Lori Milowitz ("Lead

Plaintiffs"), individually and on behalf of all other persons similarly situated, by their undersigne d

attorneys, for their complaint against defendants, allege the following based upon persona l

knowledge as to themselves and their own acts, and information and belief as to all other matters ,

based upon, inter alia , the investigation conducted by and through their atto rneys, 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 Maxim Pharmaceuticals, Inc . 1

("Maxim" or the "Company") securities analysts' reports and advisories about the Company ,

securities cases filed against the Company in 2004, conversations with former employee s

Maxim, and information obtainable on the Internet .

NATURE OF THE ACTION

2. Lead Plaintiffs bring this action as a class action on behalf of a class (the "Class" )

consisting of themselves and all other persons or entities that purchased or otherwise acquired the

securities of Maxim during the period November 11, 2002 and September 17, 2004 (the "Class

Period") . Plaintiffs seek to recover damages caused to the Class by defendants' violation of the

Securities Exchange Act of 1934 (the "Exchange Act") .

3 . Throughout the Class Period, defendants engaged in a scheme to artificially inflate

the market price of Maxim securities and to defraud Class members by making misrepresentations

and nondisclosures of material fact concerning : (i) the so-called success in drug trials of its leading

drug candidate, Ceplene® (formerly called Maximine), in treating advanced malignant melanoma

patients with liver metastases; (ii) the safety of Ceplene® ; and (iii) the prospects of Ceplene®

receiving FDA approval for marketing in the United States .

4. Maxim develops biopharmaceuticals for life threatening cancers and other

diseases . Maxim stated in its press releases that its lead drug candidate was Ceplene® (histamin e

dihydrochloride), which is designed to prevent or reverse damage associated with oxidative stress,

thereby protecting critical cells and tissues. Maxim asserts that because Ceplene® modulates

basic immune functions, it can be used in the treatment of a range of diseases in which oxidative

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stress plays an important role .

5 . Maxim contends that Ceplene® improves the immune system's ability to identify,

disable, and destroy malignant or infected cells by combining with certain agents that stimulate

immune cells . These agents include cytokines such as interleukin 2 ("IL 2") . Ceplene® is not

intended to be used by itself as a treatment for cancer and other diseases, but rather to work with ,

and improve the performance of other drugs such as IL-2 .

6 . Maxim's financial success was contingent on obtaining FDA approval

Ceplene®. Maxim had lost money every quarter since it went public in July 1996 . Its stock price,

and its ability to raise money from investors, is supported solely by the prospect that Ceplene®, or

one of its other drug candidates, will someday receive FDA or other governmental approval .

7 . In the late 1990's, Maxim conducted a Phase III study of Ceplene (the "M0 1

Trial") in order to obtain FDA approval to market Ceplene® as pa rt of a treatment, along with IL-

2, for advanced skin cancer .

8 . In January 2001 (following the unanimous recommendation of the FDA's

Oncologic Drugs Advisory Committee ("ODAC") made in December of 2000), the FDA rejected

Maxim's New Drug Application ("NDA") for Ceplene® based on its analysis of the MO1 trial .

9 . Although Maxim asserted that in the M01 Trial, Ceplene showed a statistically

significant result in the treatment of a subgroup of patients where the cancer had spread to th e

liver, ODAC found that the MO1 Trial was significantly flawed and that there was little or no

evidence that Ceplene® benefited any patients .

10. On or about January 22, Maxim began a new Phase III Trial ("M104 Trial") of

Ceplene® with IL-2, which was specifically designed to determine whether that combination of

drugs would increase life expectancy for persons who had advanced skin cancer that had spread t o

Shortly after this event, a class action alleging violations of the federal securities laws was filedagainst Maxim based on alleged fraudulent statements between November 17, 1999 andDecember 13, 2000 and with respect to Maxim's February 23, 2000 secondary stock offering (the"December 2000 class action") . The third amended complaint in the December 2000 class actionwas dismissed on December 3, 2003 . The alleged fraudulent acts asserted in this action relate to adifferent time period entirely and are not duplicative of any of the alleged fraudulent acts assertedin the earlier class action .

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the liver . As discussed supra, Defendants' press releases and public statements regarding the

M104 Trial consistently, and falsely stated that its purpose was to "confirm" the positive test

results of the MO1 Trial . In fact, the FDA found that due to numerous flaws regarding the M01

Trial, that Trial failed to establish any benefit for patients with advanced skin cancer of the liver

who took Ceplene. Thus, rather than attempting to "con firm" positive results, the M104 Trial was

trying to establish such results for the first time .

11 . When the Company announced on September 19, 2004, that its M104 Trial failed

to demonstrate any improvement in overall patient survival for such persons, the price of the

Company's stock plummeted $2 .90 per share, or 48 .82%, in one day, to close at $3 .04 per share .

12 . As a result of the defendants' misconduct, Lead Plaintiffs and the Class member s

have suffered substantial damages .

13 . Defendants were motivated to make materially false and misleading statements

during the Class Period , among other things, so that the Company could raise additional capital

and sell Maxim ' s securities during the Class Period at a rt ificially inflated prices .

JURISDICTION AND VENUE

14. 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 (17

C.F.R.§240 .10b-5).

15 . This Cou rt has ju risdiction over the subject matter of this action pursuant to §27 of

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

16 . Venue is proper in this Judicial District pursuant to §27 of the Exchange Act, 15

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 's p rincipal

executive office is located in this Judicial District .

17 . 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 and the

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1 facilities of the national securities exchange .

2 PARTIES

3 18. Lead Plaintiffs, James Brent Allen and William and Lori Milowitz, as set forth it

4 their certifications accompanying their motions for appointment as lead plaintiff, purchases

5 Maxim securities at artificially inflated prices during the Class Period and have been damaged

6 thereby.

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

8 business within this judicial district at 8899 University Center Lane, Suite 400, San Diego,

9 California 92122 .

10 20. Although it calls itself a "global bio pharmaceutical company in its press releases,''

11 Maxim was a small company throughout the Class Period . According to its 10-K filings for 2002,

12 2003 and 2004, respectively, on December 15, 2002, Maxim had 115 employees at 2 facilities ; on

13 December 2, 2003 it had 96 employees at 2 facilities ; and on December 2, 2004, it had only 55

14 employees at 2 facilities .

15 21. Maxim has a number of drug candidates in developmental stage for treating life

16 threatening cancers and other diseases . However, none of its drugs are approved for sale by the

17 FDA or any other governmental agency .

18 22. Defendant Larry G . Stambaugh ("Stambaugh") was, at all relevant times, the

19 Company's President, Chairman and Chief Executive Officer .

20 23. During the Class Period, Stambaugh, as a senior executive officer and/or director

21 of Maxim, was privy to non-public information concerning its business, finances, markets and

22 present and future business prospects concerning its leading drug candidate, Ceplene®, via access

23 to internal corporate documents, conversations and connections with other corporate officers and

24 employees, attendance at management and Board of Directors meetings . Having possession of

25 such information, Stambaugh knew or recklessly disregarded the fact that adverse facts regarding

26 Ceplene® had not been disclosed to the investing public in Company press releases .

27 24. Stambaugh was able to and did control the content of the various SEC filings,

28 press releases and other public statements pertaining to the Company during the Class Period .

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Each Individual Defendant was provided with copies of the documents alleged herein to b

misleading prior to or shortly after their issuance and/or had the ability and/or opportunity t

prevent their issuance or cause them to be corrected . Accordingly, Stambaugh was responsible fo

the accuracy of the public reports and releases detailed herein and is therefore primarily liable fo

the representations contained therein .

25 . Stambaugh is liable as a participant in a fraudulent scheme and course of busines s

that operated as a fraud or deceit on purchasers of Maxim securities by disseminating materially

false and misleading statements and/or concealing material adverse facts . The scheme (i) deceived

the investing public regarding Maxim business, operations, management and the intrinsic value of

Maxim securities ; and (ii) caused Lead Plaintiffs and other members of the Class to purchase

Maxim securities at artificially inflated prices .

PLAINTIFFS' CLASS ACTION ALLEGATION S

26. Lead Plaintiffs 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 or otherwise

acquired the securities of Maxim between November 11, 2002 and September 17, 2004, inclusive

(the "Class Period") and who were damaged thereby . Excluded from the Class are the 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 .

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

impracticable . Throughout the Class Period , Maxim 's securities were actively traded on the

NASDAQ. While the exact number of Class members is unknown to Plaintiffs at this time, and

can only be ascertained through appropriate discovery, Plaintiffs reasonably believe that there are

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

members of the Class may be identi fied from records maintained by Maxim or its transfer agent

and may be noti fied of the pendency of this action by mail, using a form of notice that is

customarily used in securities class actions .

28. Plaintiffs ' claims are typical of the claims of the members of the Class , as al

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

2 federal law that is complained of herein .

3 29. Plaintiffs will fairly and adequately protect the interests of the members of the

4 Class and have retained counsel competent and experienced in class and securities litigation .

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

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

7 questions of law and fact common to the Class are :

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

9 alleged herein ;

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

11 Class Period misrepresented and/or omitted material facts about the business, operations and

12 management of Maxim, including statements concerning its lead investigative drug, Ceplene® ;

13 (c) Whether the market price of Maxim's securities during the Class Period

14 was artificially inflated due to the nondisclosures and/or misrepresentations complained of herein ;

15 (d) Whether defendants acted knowingly, willfully, or recklessly in omitting to

16 state and/or misrepresenting material facts ; and

17 (e) To what extent the members of the Class have sustained damages and the

18 proper measure of damages .

19 31. A class action is superior to all other available methods for the fair and efficient

20 adjudication of this controversy since joinder of all members is impracticable . Furthermore, as the

21 damages suffered by individual Class members may be relatively small, the expense and burden of

22 individual litigation make it impossible for members of the Class to individually redress the

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

24 action .

25 SUBSTANTIVE ALLEGATIONS

26 Background

27 32. As noted above, Maxim purports to develop biopharmaceuticals for the treatment

28 of life threatening cancers and other diseases . Ceplene®, Maxim's highly touted treatment for

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I advanced malignant melanoma patients with liver metastases, was to be Maxim's lead dru g

product .

33 . In the late 1990s Maxim sponsored the MO1 Trial, consisting of 305 persons for

the use of Ceplene® in combination with IL-2 in the treatment of persons with malignant

melanoma . The study had two equal groups: one where patients received IL-2 alone and one

where patients received IL-2 plus Ceplene® .

34. After reviewing preliminary results of the MO1 Trial, Maxim changed its focus and

only sought FDA approval for use of Ceplene® with respect to those persons where the melanoma

had spread to the liver . Maxim contended that a subgroup in its study, persons with liver

metastases, showed a statistically significant survival rate over a control group .

35 . However, on December 13, 2000, based on its analysis of Maxim's MO1 Trial, the

14-member Oncologic Drugs Advisory Committee to the FDA unanimously refused to

recommend the approval of Ceplene® for treatment of malignant melanoma in general or fo r

persons with liver metastases .

36. ODAC found that Maxim's MOI Trial was fatally flawed for a number o f

and that it therefore failed to demonstrate the efficacy of Ceplene® . First, in general, it is

improper to use a subgroup of patients in a study in an attempt to prove the safety and

effectiveness of a drug . The use of subgroups can too easily lead to statistical anomalies .

December 13, 2000 ODAC Hearing Transcript at 7, 11 44, 54, 70 & 72 .

37. Second, more than forty percent of the patients who were selected for the study

should not have been part of it in the first place due to enrollment violations . ("A question about

the eligibility. This is a fairly astoundingly high rate of patients with enrollment violations, I mean

in excess of 40 percent . . . . [I]f you have such poor control over who enters the study, why should

we have any great deal of confidence about the conduct of the study past that point .") Id. at 225 .

38. Third, in the MO1 Trial, there were a far greater number of patients with liver

metastases in the control group (74) than in the treatment group (55) . Id. at 54. Thus, the two

groups were not balanced and results from the two groups could not be properly compared .

39. Fourth , the prognostic factors of patients with liver metastases (e .g ., number

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a 01 disease sites, disease free intervals, and performance status) consistently favored the treatment

2 group over the control group . Id. at 238-251 .

3 40. Fifth, the treatment regimen was highly toxic : "about 14 percent of patients

4 required dose reduction for adverse events ." "Thirty-three patients died within 30 days of last

5 dose of study medication . Three deaths were attributed to study medication by the applicant and

6 all three were on the histamine/IL-arm. We could not exclude toxicity-related death in 12 patients

7 based on review of the patient narratives ." Id. at 243-44 .

8 41. Moreover, even if the MO1 Trial had been well-controlled - and it clearly was not

9 - the FDA likely would not have approved the use of Ceplene® based on that single study . That is

10 because the FDA generally requires at least two such trials to show the safety and effectiveness of

11 a new drug. "With regard to quantity, it has been FDA's position that Congress generally intended

12 to require at least two adequate and well-controlled studies, each convincing on its own, to

13 establish effectiveness . . ." Statistical Review at 2 .

14 "If we are not going to be making available to the public a lot of ineffective andtoxic treatments, then, the only way really to guard against that is to have the two

15 trial rule. I think the situation is even more extreme when you start talking about16 subset analyses . "

17 d. at 265 .

18 "[G]iven all of the imbalances and ineligible patients and inevaluable patients and19 large numbers of patients dying in the first two months, I certainly don't find this

even approaches convincing evidence of effectiveness overall or for the subset."

20 Id. at 266 .

21 42. In January 2001, the FDA followed the unanimous recommendation of ODAC and

22 issued Maxim a letter rejecting the use of Ceplene® as a treatment for malignant melanoma,

23 including persons with liver metastases .

24 43. Maxim, however, continued to aggressively push the idea that the MO1 Trial

25 showed that Ceplene® provided a statistically significant benefit to the sub-group of skin cancer

26 patients with liver metastases . (As noted above, ODAC had already rejected that argument,

27 finding that Maxim's failure to randomize patients in the liver metastases subgroup, and not the

28 drug itself, caused the so-called statistically significant benefit for skin cancer patients with liver

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metastases . )

44. Indeed, both before and after the FDA rejected Maxim's application to market

Ceplene® in January 2001, the Company illegally promoted the investigative drug as being both

"safe and effective ." As reported in a June 12, 2001 article in the San Diego Union-Tribune titled

"Maxim Agrees to Stop Touting Cancer Therapy," in a letter dated May 31, 2001, the FDA said

Maxim had improperly promoted Ceplene® as safe and effective at two medical conferences and

on the Company's web site .

45 . The same article also noted that six months earlier, on December 27, 2000, the

FDA had reprimanded Maxim for making unproved claims for Ceplene® and that the Company

pledged to stop claiming that the drug is safe and effective . The December 27, 2000 FDA letter

found that Maxim's statements "are in violation of the Federal Food, Drug and Cosmetic Act an d

its implementing regulations ." The FDA also said that numerous claims about Ceplene® on

Maxim's web site were "based solely upon preliminary and inconclusive data . "

46. The results of Maxim's failed MO1 Trial were published in the January 2002 issue

of the Journal of Clinical Oncology ("JCO"). In March 2002, an editorial was published in JCO

detailing its shortcomings, and concluding : "We believe ODAC was correct in recommending

against the approval of this regimen based on this study, and that, unfortunately, the addition of

histamine to IL-2 does not represent a significant clinical advance for patients with metastati c

melanoma, even those with liver metastases ."

47. Nevertheless, Maxim did not give up pursuing a trial that would demonstrate the

supposed safety and effectiveness of Ceplene® . In a continuing effort to get FDA approval for

that drug, the Company sponsored a new phase III study, the M 104 Trial, for the use of Ceplene®

in combination with IL 2 for the treatment of advanced malignant melanoma patients with liver

metastases .

48. As set forth in detail below, during the Class Period, defendants repeatedly

referred to its M104 Trial as "confirmatory," with the clear implication that if the results were

positive, the FDA would quickly approve Ceplene® for sale . However, as noted above, ODAC

had unequivocally stated that Maxim's original MO1 Trial did not establish that Ceplene® had any

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I beneficial effect whatsoever. Therefore, M104 could not be "confirmatory ." At best, it could be

2 the first of two adequate and well-controlled studies, "each convincing on its own ," to establish

3 the safety and effectiveness of Ceplene® .

4 49. Further, Maxim repeatedly stated that Ceplene® could be used by patients outside

5 of a hospital setting. However, these statements completely ignore the significant concerns voiced

6 by ODAC regarding the toxicity of the Ceplene®-IL-2 treatment .

7 Materially False and Misleading Statements Issued During the Class Perio d

8 50. The Class Period commences on November 11, 2002 . At that time, defendants

9 announced that clinical researchers presented results from a Phase 2 study in advanced metastatic

10 melanoma patients demonstrating that combination therapy with Ceplene® and IL 2 induced

11 significant and measurable increases in the number and function of key activated immune cells

12 that are known to target cancer cells . According to the Company, "advanced metastatic melanoma

13 is the most deadly form of skin cancer and one of the fastest growing cancers in the developed

14 world, and there is no established or proven standard of care. Maxim's drug candidate Ceplene®

15 is currently being tested in a final Phase 3 trial in advanced metastatic melanoma designed to

16 support registration for marketing approval . "

17 51. More specifically, with respect to the results of the study, the Company stated as

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19 Dr. Theresa Whiteside, University of Pittsburgh Cancer Institute, Pittsburgh, andcolleagues reported the results of a multi center, Phase 2 advanced metastatic

20 melanoma clinical study at the 17th Annual Society for Biological Therapy (SBT)21 Meeting in San Diego. A total of 50 patients were evaluated in the study t o

investigate the effect of Ceplene® and IL 2 on the expression of specific cellular22 markers that may be associated with the function of key immune cells . Among the

findings presented was that treatment with a combination of Ceplene® and IL 223 significantly increased the expression of CD3 zeta in T cells and Natural Killer

(NK) cells, white blood cells with anti cancer properties . CD3 zeta expression is24 emerging as a potential biomarker of immune cell function in patients with cancer .25 Treatment with Ceplene® and IL 2 also resulted in a decrease in the production o f

IL 6, a pro inflammatory cytokine associated with the down regulation of T cells26 and NK cells.

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measurable changes in the number and function of key immune cells and furthersupports the hypothesis that Ceplene® protects T cells and NK cells from downregulation due to oxidative stress," said Kurt R. Gehlsen, Ph .D ., Maxim's ChiefScientific Officer . "The immunomodulatory benefit of Ceplene® described inthis study complements the substantial body of clinical results evaluated in aseries of seven completed or ongoing clinical trials conducted in more than1,000 malignant melanoma patients. "

Last month, clinical researchers presented the 36-month data for the largest studyof Ceplene® completed to date, the U .S.-based Phase 3 trial (the "MO 1" trial) forthe treatment of advanced metastatic melanoma . The 36-month results of theintent-to-treat population of all 305 advanced metastatic melanoma patientsrandomized into the trial demonstrated a statistically significant improvement insurvival for patients treated with the combination of Ceplene® and IL-2 (p=O .037,evaluated by comparing Kaplan-Meier survival curves using the unadjusted Log-Rank statistical method) as compared to patients treated with IL-2 alone . The rateof three-year survival for patients treated with the Ceplene®/IL-2 combinationwas approximately two times the rate of survival for the control patients. The36-month data also demonstrated that the Ceplene®/IL-2 combinationsignificantly increased survival in the subpopulation of advanced metastaticmelanoma patients with liver metastases (p=0 .003) . For the liver metastasessubpopulation , the rate of three-year survival for patients treated with theCeplene®/IL-2 combination was approximately six times the rate of survival forthe control patients. The combination of Ceplene® and IL-2 is currently beingtested in a confirming Phase 3 trial (the "MO104" trial) designed to support, incombination with the results of the MO1 trial, application for approval in the U .S .and other countries . These results were published last month in the Journal ofClinical Oncology (JCO) "Classic Papers and Current Comments" (Agarwala, etal . JCO; 7(3): 589-598) . . . .

52. This press release was materially misleading in that it repo rted so-called )

significant results from the 36-month data of the MO1 study, but failed to acknowledge the FDA's )

scathing criticism of that Trial, and the unanimous decision of ODAC to not recommend FDA I

approval of Ceplene based on the unreliable MOl Trial results .

53 . Moreover, Maxim improperly stated that the purpose of the M104 Trial wa s

"con firm" the results of the M01 Trial . In fact , ODAC, the FDA and the Journal of Clinical

Oncology all found that the MOl Trial utterly failed to prove that Ceplene® was safe and effective .

Thus, Maxim was hoping that its M104 Trial would refute, not con firm the results of the MO1

Trial . This is of critical importance because under these circumstances the FDA generally requires

two well -designed trials before granting NDA approval . Thus, even if the results of the M104

Trial were positive , it likely would not have led to FDA approval for Ceplene® because that

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would have been, at best, only a single well-designed trial with positive results .

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54. On June 12, 2003, Maxim announced the publication of quality of life result s

the MO1 Trial of Ceplene®. As part of the trial, an independent health outcomes assessment grou p

compared the quality of life effects of combination treatment with Ceplene® and IL 2 versus IL 2

alone for patients with advanced metastatic melanoma . The researchers concluded that treatment

with the combination of Ceplene® and IL 2 resulted in a significant increase in median quality

adjusted survival versus treatment with IL 2 alone for the intent to treat population of all patients

randomized into the trial and also for the population of patients with baseline liver metastases .

More specifically, the Company stated :

"These published results are important as they suggest that the survival benefitassociated with Ceplene® in the Phase 3 trial was achieved without adverselyaffecting patient quality of life," said Sanjiv S . Agarwala, M .D., a principalinvestigator in the trial and Associate Medical Director of the Melanoma Center atthe University of Pittsburgh Cancer Institute . "These results are all the moreimportant given that some of the available treatments for metastatic melanoma,such as higher dose regimens of IL 2, have a high incidence of toxic side effectsnecessitating in patient hospitalizations . Our experience in treating patients withCeplene® to date is that this drug candidate can be safely administered bypatients at home and is well tolerated. "

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The publication of quality of life results complements last year's publication of the24 and 36 month efficacy and safety results from the MO1 Phase 3 trial in theJournal of Clinical Oncology (JCO, Vol 20, No 1, 2002) and in the JCO "ClassicPapers and Current Comments" (Vol 7, No 3, 2002) . The Classic Papers andCurrent Comments publication represents a selection of key articles related tomelanoma research published in the JCO over the last 20 years . The 24 and 36month results from the M01 Phase 3 trial suggested that for the intent to treatpopulation of all 305 advanced metastatic melanoma patients randomized intothe trial a statistically significant improvement in survival was demonstrated forpatients treated with the combination of Ceplene® and IL 2 compared topatients treated with IL 2 alone.

The combination of Ceplene® and IL 2 is currently being tested in a Phase 3trial (the "M0104" trial) designed to support, in combination with the results ofthe M0l trial, marketing approval in the U.S. and other countries . The FDAreviewed and accepted the protocol for the M0104 Phase 3 trial under its "SpecialProtocol Assessment" procedures and has confirmed that it will consider the tria l

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1 to be an adequate and well controlled study if conducted in accordance with the2 protocol . The Company currently plans to file an application for approval to

market Ceplene ® for the treatment of advanced metastatic melanoma in Europe in3 late 2003.

4 55. On September 24, 2003, Maxim announced that it had completed enrollment for

5 the confirmatory Phase 3 trial of Ceplene® in combination with IL 2 for the treatment of advanced

6 malignant melanoma patients with liver metastases . The M104 Trial included 225 patients with

7 advanced malignant melanoma with liver metastases . It was designed to compare patient survival

8 of the combination treatment of Ceplene® and IL 2 versus IL 2 alone , and it was expected to

9 conclude in the second half of 2004 . More specifically , with respect to the trial , the Company

10 stated :

11 The M0104 trial studies the treatment of patients with advanced malignant12 melanoma who have liver metastases , a patient population with expected survival

duration of less than five months . Ceplene® demonstrated the strongest

13 statistically significant survival benefit in liver metastases patients in thecompleted M01 Phase 3 trial, despite the poor prognosis for this patient

14 population. The p rimary endpoint of the M0104 Phase 3 study is survival, withsecondary endpoints including tumor response rate, progression free survival, and

15 duration of response . The study protocol has been reviewed and accepted under16 the Food and Drug Administration 's (FDA) "Special Protocol Assessment"

procedures .

17"This is the third clinical trial of Ceplene® in which I have pa rt icipated over the

18 last six years, and my personal observation is that the combination of Ceplene®and IL 2 appears to be safe and well tolerated by patients ," said Dr . Sanjiv S .

19 Agarwala, a p rincipal investigator in the trial and Associate Professor at the20 University of Pittsburgh Cancer Institute . "Previous studies strongly suggest that

there is a meaningful survival benefit associated with Ceplene ® therapy with no21 trade off in terms of adversely effecting the patient 's quality of life. I look

forward to the results of the confirming Phase 3 clinical study. "22

"Available treatments for advanced malignant melanoma , such as higher doses of23 IL 2, often require in patient hospitalization due to the severity of toxic side24 effects," said Professor Ulrich Keilholz , a principal investigator in the trial an d

Professor at the Benjamin Franklin University Clinic in Berlin , Germany . "By25 contrast , in clinical trials completed or ongoing to date Ceplene® has been

shown to be well tolerated and safe to administer at home, an important26 consideration for critically ill patients and their caregivers . "

27 56 . Commenting on the news , defendant Stambaugh stated :

28 With the enrollment of this trial complete, we have achieved another major 2003

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corporate objective and moved closer to bringing Ceplene® to market[ .] . . . Datafrom this confirmatory trial will supplement the results of the first Phase 3 trial(M0I) reported in 2000 and will be added to our existing New Drug Application(NDA) to seek U.S approval We are also proceeding with our plans to file anapplication for market authorization in Europe in November 2003 . We will fileunder the central procedure to seek approval in the European Union to marketCeplene® for the treatment of advanced malignant melanoma based on the resultsfrom the MO1 Phase 3 trial combined with the results of our recently completedM0103 Phase 2 trial . 2

57. On April 14, 2004, the Company issued a press release entitled "Maxim

Pharmaceuticals Receives Approval from FDA of a Treatment Protocol for Ceplene®TM in

Advanced Malignant Melanoma ." In the release, Maxim announced that its treatment protocol to

provide Ceplene®, in combination with IL 2, for the treatment of patients with advanced

malignant melanoma, had been "approved" by the FDA . The treatment protocol allowed Maxim

to provide expanded access of Ceplene® to patients in the United States while investigation of th e

drug continued in the Company's "confirming" Phase 3 clinical trial . With respect to th e

"approval", the Company stated :

Maxim Pharmaceuticals today announced that its treatment protocol to provide itsinvestigational drug Ceplene®TM, in combination with interleukin-2 (IL-2), forthe treatment of patients with advanced malignant melanoma, has been approvedby the U .S. Food and Drug Administration (FDA) . The treatment protocol allowsMaxim to provide expanded access of Ceplene® to patients in the United Stateswhile investigation of the drug continues in the Company's confirming Phase 3clinical trial.

Based on earlier clinical findings indicating that the Ceplene®IIL 2 investigationaltherapy may provide a survival benefit to patients with advanced malignantmelanoma, the FDA agreed to allow Maxim to provide expanded access ofCeplene® to critically ill patients who face limited treatment options . The FDAhas also approved reimbursement for study medication, which allows Maxim torecover costs associated with providing qualified patients access to Ceplene®therapy. Patients, their families and/or caregivers who wish further informationregarding the treatment protocol should call Maxim Pharmaceuticals at 888 5629465 or visit the Company's website at www .maxim.com.

The FDA specifies four criteria for approval of a treatment protocol . These

2 M0103 was a single-arm trial, i.e. it was neither blinded trial, nor did it have a control group .Indeed the "FDA previously indicated to the applicant, this single arm study would not directlyaddress whether us of histamine added benefit to IL-2 without a control arm ." The Companynevertheless attempted to use the so-called encouraging results of this Phase Il trial to bolster theresults that ODAC and the FDA had emphatically rejected in the MO1 Trial .

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I criteria require that the disease be serious and life threatening, that no satisfactory2 alternative treatments are available, that the drug is under investigation in a

controlled clinical trial under an existing IND and that the sponsor is actively3 seeking marketing approval .

4 ***

5 The treatment protocol will be available to all eligible patients in the United Statesand will initially be provided in approximately ten geographically divers e

6 locations. The Company intends to expand the protocol to additional qualified7 treatment centers over subsequent months . Maxim estimates that the net cost of

making the treatment protocol available to patients will be approximately $1 . 58 million in the current fiscal year . The actual financial impact of the treatment

protocol to the Company will depend upon the number of patients enrolled and the9 rate of reimbursement . The National Organization of Rare Diseases (NORD) ha s

agreed to collaborate with Maxim to facilitate treatment for indigent patients who10 wish to participate in this treatment protocol .

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12 Advanced metastatic melanoma is the most deadly form of skin cancer and the13 fastest-growing cancer in the developed world, and there is no established o r

proven standard of care for the treatment of this life-threatening disease .14 Ceplene® is an investigational drug and has not been approved by the FDA or any

international regulatory agency . Ceplene®, which has orphan drug status, has15 been tested in seven completed or ongoing clinical trials for malignant melanoma16 in more than 1,000 patients, including the current confirming Phase 3 trial

designed to support U .S . FDA registration for marketing approval .

17 58. Commenting on the news, defendant Stambaugh stated :

1$ We appreciate the guidance provided by the FDA regarding a treatment protocol19 for the Ceplene®/IL 2 combination in advanced metastatic melanoma[ .] . . . We are

ready to provide these patients and their caregivers an additional therapeutic option20 that may enhance their survival with a quality of life. We look forward to

implementing this program to provide critically ill patients with the potential21 clinical benefit that has been observed in our ongoing clinical trials .

22 59. On June 4, 2004, Maxim announced that the 36 month patient follow up data from

23 the M01 Trial had been published electronically in an article by Hellstrand, et . al ., for the June

24 issue of the Journal of Cancer Immunology and Immunotherapy . The Company, in its press

25 release, stated :

26 The 36 month results demonstrate that the intent to treat population of all 30527 advanced metastatic melanoma patients randomized into the trial demonstrated a

statistically significant improvement in survival for patients treated with th e28 combination of Ceplene® and IL 2 (p=0.037, evaluated by comparing Kaplan

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Meier survival curves using the log rank test) compared to patients treated with IL2 alone. The improvement in three year survival remained significant in thesubpopulation of advanced metastatic melanoma patients with liver metastases(p=0.006) .

"We are pleased that the scientific and clinical community continue to recognizethe results of our first phase 3 trial in advanced stage IV melanoma. Patientswith this rapidly progressive disease today do not have an effective treatmentoption," said Dr . Kurt R. Gehlsen, Maxim's Chief Scientific Officer. "Our initialphase 3 trial remains the first large randomized clinical trial, for any newtreatment, to demonstrate a survival benefit in this patient population. "

60. The statements contained in IT 51-59 were materially false and misleading when

made because defendants failed to disclose or indicate the following : (1) that the MOl Trial could

not be used to show that the addition of Ceplene® to IL-2 demonstrated an improvement in overal l

survival for patients with advanced malignant melanoma with liver metastases due to the critical

flaws in the design of the study; (2) the M104 Trial was intended to refute, not to confirm, the

results of the MO1 Trial; (3) Ceplene® was not "approved" by the FDA . Moreover, the

defendants' statements concerning Ceplene® at issue here were lacking in any reasonable basi s

when made .

Confidential Witnesses Confirm that Defendants Knew that the M104 Trial WasUnsuccessful Long Before this Information Was Announced to the Public

61 . Con fidential Witness No . 1 ("CW I"), was employed by Maxim during the

relevant time period as a clinical program liaison responsible for managing . inter alia, certain

Maxim study sites where contract research organizations were participating in the M104 Trial .

CW I was horrified by fraternization between the M 104 investigators and defendant Stambaugh

and Kurt Gehlsen ("Gehlsen"), Maxim's CSO (chief scientific officer) .

62. CW 1 reported that Maxim provided the investigators with first-class travel

arrangements to attend meetings with Maxim management . Indeed, many investigators for

Ceplene clinical trials played dual roles as both investigators and members of Maxim's Advisory

Panel . Among the investigator/panel members were Sanjiv Agarwala (based in Pittsburgh, PA .),

Axel Haushield and Ulrich Keilholtz (both based in Germany), and Kristoffer Hellstrand (based i n

Sweden) .

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63. CW I reported that these panel members/investigators were paid thousands

dollars each month from Maxim .

64. CW 1 also reported that the panel member / investigators met with Gehlsen and

defendant Stambaugh throughout the course of the M104 Trial and that patient information an d

I results of the Trial were discussed at those meetings . CW 1 attended several of these meeting s

personally .

65 . CW 1 also repo rted that Gehlsen and defendant Stambaugh visited several M10 4

Trial investigation sites in or about June -July 2004 . For example , Gehlsen visited an M104

investigation site in Berlin, Germany (a site with one of the largest enrollments) . Although,

pursuant to the Trial protocol, Gehlsen was not supposed to do be near the trial data during the

Trial, he reviewed case report forms containing patient data during his visit . In addition, Gehlsen

visited another M104 investigation site during this period in Pittsburgh, PA . (the site run by

Gehlsen's friend Dr. Agrawala) .

66. Based upon this information, the CW 1 believed that Gehisen was trying to

perform an analysis of the data on his own in order to make an early determination of the results of

the study .

67. In addition, CW 1 stated that based on the results of the MO1 Trial, the CW 1 did

not expect the M 104 Trial to be successful and therefore was not surprised when the results were

negative .

68 . Confidential Witness No. 2 ("CW 2"), a Senior Director of Marketing for Maxin

during the relevant period, reported to the Manager of Business Development, who reporter

directly to Stambaugh .

69. CW 2 stated that the M104 Trial ended in mid to late July or the beginning o

August (after the death of a pre-determined number of persons who participated in the Trial .) . CV

2 confirmed that after the M104 Trial ended, defendant Stambaugh and Sharon Tonetta, Maxim '

Vice President in charge of Drug Development, had access to the M104 Trial data and were

directly involved in the process of analysis and apprised on the progress of that analysis on a dail y

basis .

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70. CW 2 also repo rted that Maxim ' s public announcements were almost exclusively

handled by Stambaugh and Maxim CFO Altig, who, the witness believed , were quite aggressive in

their public representations about the prospects of Ceplene .

71 . Confidential Witness No. 3 ("CW 3 "), was employed by Maxim as an off-site

study manager based in Pennsylvania throughout the relevant time period .

72 . CW 3 confirmed that personnel at Maxim were not supposed to have access to th e

data before the trial was complete .

73 . CW 3 explained that the M104 Trial was scheduled to end after 190 deaths . Once

the study reached 180 deaths, Maxim scheduled a data clean-up, meaning they checked to make

sure data from the case report forms was complete and entered into the database . Then, once the

190th death occurred, the clean-up was not extensive .

74. CW 3 believed that the final death may have occurred in May 2004 . Once the data

was completely entered into the database, it was transferred to Maxim for analysis . CW 3 believed

that only a short period of time was needed to analyze the data . Thus, defendants were aware that

the M104 Trial ended in failure well before they announced that fact to the public .

75 . Confidential Witness No. 4 ("CW 4") was employed by Maxim as Vice President

of Drug Development during the relevant period . CW 4 recalled attending an investigator meeting

related to the M104 Trial in San Diego in February 2003 . CW 4 also said there were several more

investigator meetings conducted in Europe, including one in France, the U .K. and Germany .

Maxim paid for travel and accommodations at the meetings and the investigators also receive d

grants on a per patient basis .

76 . CW 4 explained that drug safety at Maxim was required to report SAEs (serious

adverse events) to the FDA in a timely manner . Drug Safety Physician George Dimitrov was

responsible for reporting the SAEs to the FDA . When an SAE occurred (such as death), CW 4

said the investigation site would inform Maxim either by telephone or fax . Dimitrov entered the

event into an SAE database at the Maxim facility and then, in accordance with FDA guidelines,

the SAE was reported to the FDA within a couple days . The Maxim SAE database wa s

maintained internally, and likely was accessible to Stambaugh and Gehlsen .

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9

1 77. Defendant Stambaugh's and Gehlsen's had knowledge of the failure of the M104

2 Trial via their unfettered access to the patient data as described above . This knowledge was

3 obtained in or around the same time that the Company was reporting to the public, on the

4 Company's Website and elsewhere, that the M104 Trial was proceeding successfully .

5 The Truth Begins to Emerge

6 78. On September 19, 2004, Maxim announced that its confirmatory M104 Phase 3

7 trial of the investigational drug Ceplene® in combination with IL 2 for the treatment of advanced

8 malignant melanoma patients with liver metastases failed to demonstrate an improvement in

9 overall patient survival, the primary endpoint . More specifically, the Company, in its press

10 release, stated-

I I . . . While this study did not meet its primary endpoint, we remain committed tofurther studying Ceplene®'s potential . It is our belief, as supported by the Phase 3

12 Acute Myeloid Leukemia data released this past May, and other clinical and13 preclinical evidence, that Ceplene® still holds promise for the treatment of certai n

cancers," commented Larry G . Stambaugh, Maxim's Chief Executive Officer.

14"Moving forward, our dedication to meeting the challenge of improving survival

15 and quality of life for seriously ill cancer patients will remain unchanged . Maximplans to pursue regulatory submissions to the FDA and EMEA seeking approval o f

16 Ceplene® to treat AML patients in complete remission, and to continue evaluatingthe M104 study data . We will also conduct a review of our pipeline, our

17 operations and resources, so that we can focus on efficiently advancing Ceplene®18 and other product candidates towards the market . Additional information will be

provided after we further evaluate the melanoma study data and our other19 programs, and we have met with regulators," added Mr . Stambaugh .

20 About the M 104 Phase 3 Tria l

21 The current M 104 study was conducted under the Special Protocol Assessmentprocedure of the FDA to confirm results from an earlier Phase 3 trial (MO I), which

22 demonstrated statistical significance at 12 months in the subgroup of advanced23 malignant melanoma patients with liver metastases . Follow up data at 24 and 3 6

months in the entire intent to treat population of all 305 advanced malignant24 melanoma patients randomized into the earlier M01 trial also demonstrated a

statistically significant improvement in survival for patients treated with th e25 combination of Ceplene® and IL 2 compared to patients treated with IL 2 alone .26 The improvement in two and three year survival remained -statistically

significant in the subpopulation of advanced malignant melanoma patients with27 liver metastases.

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The current M104 trial was a multi center, randomized, and controlled Phase 3study evaluating Ceplene® plus IL 2 against IL 2 alone in 230 patients at 35 sitesin North America and Europe . IL 2 is an immunotherapeutic agent approved inthe U.S. for the treatment of advanced malignant melanoma. It was conductedunder the same treatment protocol as the prior M01 study, but enrollment waslimited to advanced malignant melanoma patients with liver metastases . Theprimary endpoint of the trial was duration of patient survival, as assessed by thestratified log rank test in the intent to treat population .

On April 14, 2004, Maxim Pharmaceuticals announced that it received approvalfrom the U.S. Food and Drug Administration (FDA) to provide Cepiene® tomelanoma patients under a treatment protocol . The treatment protocol allowedMaxim to provide expanded Ceplene® access to melanoma patients in the UnitedStates while investigation of the drug continued in the Company's confirmingM 104 trial . . . .

79. News of the failure of the M104 Trial shocked the market . Shares of Maxim fel l

$2 .90 per share, or 48 .82 percent, to close at $3 .04 per share, on September 20, 2004 .

80. However, even after the Company admitted that the M104 Trial ended in failure

(and as late as February 2005), the Company continued to provide to the public information on its

Website under the heading of "Recent Milestones," stating that it had "completed enrollment for

confirming Phase 3 clinical results of Ceplene® (MP-8899-0104) in advanced malignant

melanoma with liver metastases, designed to be the final trial to support U .S. marketing approval ."

81 . The Company also continued to report to the public that "36-month follow-up

results from Phase 3 (MP-US-M01) in advanced malignant melanoma demonstrate statistically

significant long-term survival benefit . "

82 . The Company also continued to report that "Ceplene® Phase 3 (MP-US-M01)

advanced malignant melanoma results were published in the Journal of Clinical Oncology

("JCO") and in the JCO "Classic Papers and Current Comments" .

83 . Maxim's website also stated that "Maxim is currently conducting Phase 3 clinica l

trials in Advanced Malignant Melanoma . "

84. However, the Recent Milestone section of the Company Website did not provide

investors and the public any information regarding the fact that the FDA soundly criticized and

rejected Maxim's M01 Study and that the M104 Study "did not meet its primary endpoint . "

85 . Indeed, while Maxim's website currently states that it is being updated, it also

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states that "CepleneTM, Maxim's histamine based drug candidate, administered in combination

with IL-2 as a remission maintenance therapy, demonstrated an improvement in leukemia free

survival in one Phase 3 study of Acute Myeloid Leukemia patients compared to patients receiving

no treatment, the current standard of care." Maxim does not state that the results of this "Phase 3

study," i.e . the MOl Trial was rejected by the FDA, nor does it state that the M104 Trial ended i n

failure .

UNDISCLOSED ADVERSE FACT S

86. The market for Maxim's securities was open, well-developed and efficient at all

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

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

and other members of the Class purchased or otherwise acquired Maxim securities, relying upon

the integrity of the market price of Maxim's securities and market information relating to Maxim ,

and have been damaged thereby.

87. At all relevant times, the material misrepresentations and omissions particular i

in this complaint directly or proximately caused or were a substantial contributing cause of i

damages sustained by Lead Plaintiffs and other members of the Class . As described herein, duri

the Class Period, defendants made or caused to be made a series of materially false or mislead i

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

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

of Maxim and its business, prospects and operations, thus causing the Company's securities to be

overvalued and artificially inflated at all relevant times . Defendants' materially false an d

misleading statements during the Class Period resulted in Lead Plaintiffs and other members of the

Class purchasing the Company's securities at artificially inflated prices, thus causing the damages

complained of herein .

ADDITIONAL SCIENTER ALLEGATION S

88. As alleged herein, defendants acted with scienter in that they knew that the public

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

false and misleading ; knew that such statements or documents would be issued or disseminated to

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the investing public ; and knowingly and substantially participated or acquiesced 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 their receipt of i

reflecting the true facts regarding Maxim, and their control over, and/or receipt of and/or

modification of Maxim's allegedly materially misleading misstatements, participated in the

fraudulent scheme alleged herein .

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

of the information 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 defendant Stambaugh .

90. Although Maxim lost money in 2004, as it did every year (and every quarter) since

it became a public company, Defendant Stambaugh (who has led the Company since 1993)

continued to take a very large salary and bonus . As set forth in the Company's Schedule 14A

Proxy Statement, dated January 19, 2005, in 2004 alone, Stambaugh's compensation from Maxim

included $450,000 in salary, $300,000 as a cash bonus (equal to 67% of his base salary), and

225,000 stock options . "The Company's incentive bonus program . . . is based on the achievement

of annual performance targets and other management objectives, which are established

annually . . . . The Company's targets and objectives consist of operating, strategic and financial

goals that are considered to be critical to the Company's fundamental long-term goal of buildin g

stockholder value ."

91 . All together, Stambaugh owns more than 1 .2 million shares of Maxim,

approximately 4 .32% of the Company's 28 .56 million outstanding shares . Thus, Defendant

Stambaugh had the incentive to inflate the price of Maxim stock by issuing false and misleadin g

public statements about Ceplene® .

92. Furthermore, on September 23, 2003, as Maxim stock traded at artificially inflated

levels reaching as high as $6 .36 per share, defendants announced a private placement of more than

4.5 million shares of stock, for gross proceeds of $25 .5 million .

93 . Finally, CW 2 stated that although Maxim reported the results of its M102 and

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M103 Ceplene Trials (both were Phase II Trials) in a positive light, those results were not entirely

encouraging . Also, CW 2 reported that the Company was aware that its Phase 11 Ceplene Hepatitis

C study and Phase II renal study results were not encouraging long before the Company made

public announcements to that effect . This is additional evidence that defendants regularly, and as

a matter of course, misrepresented "positive" trial results regarding Ceplene to the public and

failed to timely disclose negative results to the public .

Applicability of Presumption of Reliance : Fraud on the Market Doctrin e

94. At all relevant times, the market for Maxim securities was an efficient market for

the following reasons, among others :

(a) Maxim 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, Maxim filed periodic public reports with the SEC

and the NASDAQ ;

(c) Maxim regularly communicated with public investors via established

market communication mechanisms, including through regular disseminations of press releases on

the 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) Maxim was followed by several 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 .

95 . As a result of the foregoing, the market for Maxim securities promptly digested

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

information in Maxim's stock price . Under these circumstances, all purchasers of Maxim

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

securities at artificially inflated prices and a presumption of reliance applies .

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NO SAFE HARBO R

96 . The 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 .

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

f statements" when made . To the extent there were any forward-looking statements, there were

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

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

extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein,

defendants are liable for those false forward-looking statements because at the time each of those

forward-looking statements was made, the particular speaker knew that the particular forward-

looking statement was false, and/or the forward-looking statement was authorized and/or

by an executive officer of Maxim who knew that those statements were false when made .

FIRST CLAIM

Violation of Section 10(b) of the Exchange Act Against and Rule 10b-5 PromulgatedThereunder Against All Defendant s

97. Plaintiffs repeat and reallege each and eve ry allegation contained above as if full y

set forth herein .

98 . During the Class Period, defendants carried out a plan, scheme and course of

conduct which was intended to and did : (i) deceive the investing public, including Plaintiffs and

other Class members, as alleged herein ; and (ii) cause Plaintiffs and other members of the Class to

purchase Maxim securities at artificially inflated prices .

99. 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 Maxim securities in violation of Section 10(b) of the

Exchange Act and Rule I Ob-5 .

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

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

continuous course of conduct to falsely promote the prospects of its leading drug candidate,

Ceplene®, and to conceal adverse material information about the business, operations and futur e

prospects of Maxim as specified herein .

101 . The defendants had actual knowledge of the misrepresentations and omissions o f

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 .

102 . 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 Maxim securities was

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

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 trade, and/or on the absence of material adverse information that was known to o r

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 Maxim securities durin g

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

103 . Had Plaintiffs and the other members of the Class and the marketplace known the

truth regarding the problems that Maxim was experiencing, which were not disclosed by

defendants, Plaintiffs and other members of the Class would not have purchased or otherwise

acquired their Maxim securities, 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.

104. As a direct and proximate result of defendants' wrongful conduct, Plaintiffs an d

the 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 CLAIM

Violation of Section 20(a) of the Exchange Act Azainst the Individual Defendant s

105 . Plaintiffs repeat and re-allege each and every allegation contained above as if fully

set forth herein .

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106. The Individual Defendants acted as controlling persons of Maxim within th e

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

position, participation in and/or awareness of the Company's operations and/or intimate

knowledge of the facts regarding the false statements concerning Ceplene® disseminated by the

Company to the investing public, defendant Stambaugh had the power to influence and control and

did in fact influence and control, directly or indirectly, the decision-making of the Company,

including the content and dissemination of the various statements regarding Ceplene® that

Plaintiffs contend are false and misleading . The Individual Defendants were 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 b e

corrected .

107. In particular, each of these defendants had direct and supervisory involvement in

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

control or influence the press releases regarding Ceplene® giving rise to the securities violation s

as alleged herein, and exercised the same .

108 . As set forth above, Maxim and defendant Stambaugh each violated Section 10(b)

and Rule 10b-5 by their acts and omissions as alleged in this Complaint . By virtue of his position

as a controlling person, defendant Stambaugh is 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 .

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

(a) Determining that this action is a proper class action, designating Plaintiffs as

Plaintiffs and certifying Plaintiffs under Rule 23 of the Federal Rules of Civil Procedur e

Plaintiffs' counsel as Lead Counsel ;

(b) Awarding compensatory damages in favor of Plaintiff and the other Class members

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

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

(c) Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this

action, including counsel fees and expert fees ; and

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

JURY TRIAL DEMANDE D

Plaintiffs hereby demand a trial by jury .

DATED : March 11, 2005 HULETT HARPER STEWART LLPKIRK B. HULETT

KIRK B. HULETT

550 West C Street, Suite 1600San Diego , CA 92101Telephone : (619) 338-1133Facsimile: (619) 338-113 9

Plaintiffs' Liaison Counse l

SCHIFFRIN & BARROWAY, LLPSTUART L . BERMANDARREN J . CHECKSEAN M. HANDLERROBIN WINCHESTERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone: (610) 667-7706Facsimile : (610) 667-705 6

GOODKIND LABATON RUDOFF &SUCHAROW LLP

JONATHAN M. PLASSECHRISTOPHER J . KELLERSHELLEY THOMPSON100 Park AvenueNew York, NY 10017Telephone : (212) 907-0700Facsimile : (212) 818-047 7

Lead Counsel for Lead Plaintiffs

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PROOF OF SERVICE

In re Maxim Pharmaceuticals , Inc . Securities LitigationCASE NO . : 04CV 1900DMS(BLM )

1, the undersigned, declare under penal ty of perjury that I am over the age of eighteen yearsand not a par ty to this action . I am employed in the County of San Diego, State of California. Mybusiness address is : 550 West C Street , Suite 1600, San Diego , CA 92101 .

That on March 11, 2005, I served the following document(s) entitled : CONSOLIDATEDAMENDED CLASS ACTION COMPLAINT on ALL INTERESTED PARTIES in this action :

SEE ATTACHED SERVICE LIST

BY MAIL : By placing a true copy thereof in a scaled envelope addressed as above, and

placing it for collection and mailing following ordina ry business practices . I am readilyfamiliar with the firm's practice of collection and processing correspondence, pleadings,and other matters for mailing with the United States Postal Se rv ice . The correspondence,pleadings and other matters are deposited with the United States Postal Se rv ice withpostage thereon fully prepaid in San Diego , California , on the same day in the ordinarycourse of business . I am aware that on motion of the party served , serv ice is presumedinvalid if the postal cancellation date or postage meter date is more than one day after dateof deposit for mailing in affidavit .

~XL1 BY OVERNIGHT COURIER: I caused the above-referenced document(s) to be

contained in an overn ight envelope and to be deposited in an Overnight Express boxlocated at 550 W C Street , San Diego , Califo rnia , for delive ry to the above address(es) .

❑ BY FAX : I transmitted a copy of the foregoing document (s) this date via telecopier to the

facsimile numbers shown on the attached serv ice list . The facsimile machine I usedreported no error and I caused the machine to print a transmission record of thetransmission .

❑ BY PERSONAL SERVICE : I had such envelope delivered by hand where indicated .

I declare under penalty of perjury under the laws of the United States of America that theforegoing is true and correct . Executed on March 11 , 2005 , at San Diego , California .

L 142LJLt,~220~ANITA VILLANUEVA

04CV 1900DMS(BLM)

MAXIMCase No. 04CV 1900DMS(BLM)Service Lis t

PLAINTIFFS' COUNSEL

Louis Gottlieb Kirk B . HulettHollis L. Salzman HULLETT HARPER STEWART LL PGOODKIND LABATON RUDOFF & 550 West C Street, Suite 1600

SUCHAROW LLP San Diego, CA 9210 1100 Park Avenue, 12th Floor Telephone : (619) 338-113 3New York, NY 10017-5563 Facsimile: (619) 338-113 9Telephone : (212) 907-0700 Plaintiffs Liaison CounselFacsimile: (212) 818-047 7Lead Counsel for Lead Plaintiffs

Marc A. TopazRichard A. ManiskasTamara SkvirskySCHIFFRIN & BARROWAY LLP280 King of Prussia RoadRadnor, PA 19087

Telephone : (610) 667-7706Facsimile : (610) 667-7056

Lead Counsel for Lead Plaintiffs

DEFENSE COUNSEL

*Philip C . TencerCOOLEY GODWARD LLP4401 Eastgate Mal lSan Diego , CA 92121-1909Telephone :(858) 550-6000Facsimile : (858) 550-642 0Attorneys for Maxim Pharmaceuticals, Inc .,Larry G. Stambaugh and Anthony E. Altig

* Denotes service via overnight delivery

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