Richard A. Maniskas (ID No. 85942)D. Seamus Kaskela (ID No. 204351)SCHIFRIN BARROWAY TOPAZ & KESSLER, LLP280 King of Prussia RoadRadnor, PA 19087Telephone : (610) 667-7706Facsimile : (610) 667-7056

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF PENNSYLVANIA

CHRISTOPHER BIANCO, Individually and OnBehalf of All Others Similarly Situated,

Plaintiff,

vs.

NUTRISYSTEM, INC., MICHAEL J. HAGAN,and JAMES D. BROWN,

Defendants.

CIVIL ACTION NO.

CLASS ACTION COMPLAINT

JURY TRIAL DEMANDED

Plaintiff, Christopher Bianco ("Plaintiff'), alleges the following based upon the

investigation by Plaintiffs counsel, 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 NutriSystem, Inc. ("NutriSystem" or the "Company"), securities analysts'

reports and advisories about the Company, and information readily available on the Internet, and

Plaintiff believes that substantial additional evidentiary support will exist for the allegations set

forth herein after a reasonable opportunity for discovery.

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NATURE OF THE ACTION AND OVERVIEW

1. This is a federal class action on behalf of purchasers of NutriSystem' s securities

between February 14, 2007 and October 4, 2007, inclusive (the "Class Period"), seeking to

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

2. NutriSystem is a marketer and provider of weight management systems based on

a portion-controlled , prepared-meal program . The Company's customers purchase monthly food

packages containing a 28-day supply of breakfasts, lunches, dinners and desserts. The Company

markets its products through retail outlets and over the Internet.

3. On October 3, 2007, the Company shocked investors when it reported preliminary

third quarter 2007 financial and operational results that were significantly below the Company's

previously issued guidance. Specifically, the Company stated that its quarterly revenue would be

approximately $ 188 million, significantly lower than the Company's previously issued quarterly

revenue guidance of between $200 and $208 million, and that its quarterly earnings per share

("EPS") would be between $0.62 and $0.66, against EPS guidance of between $0.77 and $0.82.

Additionally, the Company stated that it expected to add approximately 218,000 new customers

during the quarter, which represented a 7 percent decline from the third quarter 2006, and which

was dramatically lower than the Company's previously issued guidance of adding 245,000 new

customers in the quarter. The Company's Chief Executive Officer ("CEO") admitted that the

results for the quarter "didn't meet our expectations," and revealed that the Company's

performance with new customers was "affected by shorter-term competitive pressures" which

caused the Company' s marketing dollars to become "less efficient." As a result, the Company

added a substantially lower number of new customers for the quarter, and incurred significantly

2

higher customer acquisition costs. The Company also stated that it would revise its full year

2007 financial guidance.

4. On this news, the Company's shares fell $15.98 per share, or almost 34 percent, to

close on October 4, 2007 at $31.59 per share, on unusually heavy trading volume.

5. The Complaint alleges that, throughout the Class Period, defendants failed to

disclose material adverse facts about the Company's financial well-being and prospects.

Specifically, defendants failed to disclose or indicate the following: (1) that the Company's sales

and revenues were significantly impacted by the introduction of alternative weight loss products

into the market; (2) as such, the Company added fewer new customers, and the Company's

customer acquisition costs significantly increased for those new customers; and (3) that as a

result of the foregoing, the Company's statements about its 2007 financial and operational results

were lacking in any reasonable basis when made.

6. As a result of defendants' wrongful acts and omissions , and the precipitous decline

in the market value of the Company's securities, Plaintiff and other Class Members have suffered

significant losses and damages.

JURISDICTION AND VENUE

7. The claims asserted 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. § 240.1Ob-5).

8. This Court has jurisdiction over the subject matter of this action pursuant to

Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

9. Venue is proper in this Judicial District pursuant to Section 27 of the Exchange

Act, 15 U.S.C. § 78aa and 28 U.S.C. § 1391(b). Many of the acts and transactions alleged

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

information, occurred in substantial part in this Judicial District. Additionally, NutriSystem's

principal executive offices are located within this Judicial District.

10. 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 facilities of the national securities exchange.

PARTIES

11. Plaintiff, Christopher Bianco, as set forth in the accompanying certification,

incorporated by reference herein, purchased NutriSystem' s securities at artificially inflated prices

during the Class Period and has been damaged thereby.

12. Defendant NutriSystem is a Delaware corporation with its executive offices

located at 300 Welsh Road, Suite 100, Horsham, Pennsylvania.

13. Defendant Michael J. Hagan ("Hagan") was, at all relevant times, the Company's

President , CEO, and Chairman of the Board of Directors.

14. Defendant James D. Brown ("Brown") was, at all relevant times, the Company's

Chief Financial Officer ("CFO"), Secretary, Treasurer, and an Executive Vice President.

15. Defendants Hagan and Brown are collectively referred to hereinafter as the

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

Company, possessed the power and authority to control the contents of NutriSystem 's reports to

the SEC, press releases and presentations to securities analysts, money and portfolio managers

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

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

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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, each of these defendants knew that the adverse facts specified herein had not been

disclosed to, and were being concealed from, the public, and that the positive representations

which were being made were then materially false and misleading. The Individual Defendants

are liable for the false statements pleaded herein, as those statements were each "group-

published" information, the result of the collective actions of the Individual Defendants.

SUBSTANTIVE ALLEGATIONS

Background

16. NutriSystem is a marketer and provider of weight management systems based on

a portion-controlled , prepared-meal program . The Company's customers purchase monthly food

packages containing a 28-day supply of breakfasts, lunches, dinners and desserts. The Company

markets its products through retail outlets and over the Internet.

Materially False and MisleadingStatements Issued During the Class Period

17. The Class Period begins on February 14, 2007. On this day, the Company issued

a press release entitled "NutriSystem, Inc. Announces Fourth Quarter and Year End 2006

Results." Therein, the Company, in relevant part, stated:

Reports 2006 Revenues of $568 Million; EPS of $2.29

Expects EPS of $3.00 to $3.10 for 2007

Announces $200 Million Share Repurchase Program

NutriSystem, Inc. (NASDAQ:NTRI), a leading provider of weightmanagement and fitness products and services , today reportedfinancial results for the fourth quarter and full year 2006. TheCompany also announced that its Board of Directors has

5

authorized the repurchase of up to $200 million of its outstandingshares of common stock.

***

"2006 was an exceptional year for us," said Michael J. Hagan,Chairman, President and Chief Executive Officer. "For the pastseveral years the NutriSystem team has had a singular focus onour customer, and that obsession has paid off with extraordinaryfinancial results. "

"We also proved that the men's weight loss market, long neglectedby commercial weight loss companies, can become a largeopportunity for NutriSystem because of our successful product,anonymous delivery platform and convenient approach to weightloss. We feel the men's weight loss market will be an importantdriver of our business in the years to come," continued Mr. Hagan."Additionally, the first quarter of 2007 has started off strong withgrowth across all of our market segments, with particularmomentum in the men's segment and reactivations of ex-customers. Other key financial metrics such as customeracquisition costs have improved over the course of the quarter,especially considering the 'infancy stage' of the men's and senior'smarket segments. The women's market, our core customersegment, continued to perform well in 2006 and is growing in 2007due to enhanced media marketing efforts and a strong referralbusiness."

***

"We continue to increase the profitability and scalability of ourbusiness model. Year over year, fourth quarter gross marginincreased by 5.6 percentage points and operating margin jumpedby 8.0 percentage points," said James D. Brown, Executive VicePresident and Chief Financial Officer. "We expect operatingmargin to continue to expand in the first quarter of 2007. Using thehigh end of our guidance, we anticipate operating margin to reach25% in the first quarter of 2007."

***

First Quarter and Full Year 2007 Outlook

For the first quarter of 2007, the Company estimates that revenueswill be between $205 million and $215 million, an increase of atleast 40% year-over-year. Diluted earnings per share is expected tobe between $0.88 and $0.92, an increase of at least 47% year-over-year. Further, the Company expects to add at least 300,000 new

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Direct channel customers in the first quarter of 2007. For the fullyear 2007, the Company estimates that revenues will be between$720 million and $740 million, and diluted earnings per sharewill be between $3.00 and $3.10 per share. This guidance does notreflect the effect of any stock repurchases.

"We are very pleased with our start in 2007 . Our advertisingcontinues to perform, our new market segments provide usadditional visibility for growth, and our revenue stream from ex-customers is starting strong," commented Michael Hagan,Chairman, President and Chief Executive Officer. [Emphasisadded.]

18. In response to these statements , the Company's shares increased $5.91, or over

13.4 percent, to close on February 15, 2007 at $49.79 per share, on heavy trading volume.

19. On April 25, 2007, the Company issued a press release entitled "NutriSystem, Inc.

Reports Results for First Quarter 2007." Therein, the Company, in relevant part, stated:

Reports Q1 Revenues of $238 Million and EPS of $1.04

Raises Guidance for Full Year 2007; Expects EPS of $3.34 to$3.46 for 2007

NutriSystem, Inc. (NASDAQ:NTRI), a leading provider of weightmanagement and fitness products and services, today announcedresults for the first quarter ended March 31, 2007, including:

• An increase in revenues of 62% to $238,360,000 in the firstquarter of 2007 compared to $146,751,000 in revenues in thefirst quarter of 2006;

• Growth in operating income to $59,610,000 (25.0% ofrevenues) in the first quarter of 2007 compared to $35,179,000(24.0% of revenues) in the first quarter of 2006; and

• An increase in net income of 70% to $37,867,000 or $1.04 perdiluted share in the first quarter of 2007 compared to netincome of $22,335,000 or $0.60 per diluted share in the firstquarter of 2006.

"The solid growth of our core women's market and continuedstrength of the men's market allowed us to achieve recordearnings," said Michael J. Hagan, Chairman, President and ChiefExecutive Officer. "In addition, an integral part of our first quarter

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has been the ongoing expansion of our pool of ex-customers andtheir desire to return to NutriSystem for weight managementservices. The operating margin expansion we saw in the firstquarter was partially due to the growth in revenue from ex-customers," continued Mr. Hagan.

***

"Our customer economics are strong and getting stronger," saidJames D. Brown, Executive Vice President and Chief FinancialOfficer. "Compared to the first quarter of last year, revenue percustomer in the initial diet cycle, gross margin and the value percustomer net of food and customer acquisition costs all increased.We also expect that reactivation revenue (revenue from customersmore than nine months removed from their first purchase) will beabout $93 million in the aggregate in 2007 compared to $38million in 2006."

***

Second Quarter and Revised Full Year 2007 Outlook

For the second quarter of 2007, the Company estimates thatrevenues will be between $190 and $200 million, an increase of atleast 43% year over year. Diluted earnings per share are expectedto be between $0.82 and $0.86, an increase of at least 55%.Further, the Company expects to add at least 210,000 new Directchannel customers in the second quarter of 2007. The Companynow expects full year 2007 revenues will be between $790 millionand $805 million. 2007 diluted earnings per share are expected tobe between $3.34 and $3.46 per share. This guidance does notreflect the effect of any potential future stock repurchases.

"2007 is shaping up to be a very good year for us. Our 2007strategy is to focus on three areas: profitable new customergrowth across all market segments - women, men, and seniors;continue to improve retention and reactivation efforts; and investin product areas such as our new 2008 weight loss program thatadvance customer health while growing the lifelong value of eachcustomer," commented Mr. Hagan. [Emphasis added.]

20. In response to these statements, the Company's shares increased $5.05, or over 8.6

percent, over the following two trading days, to close on April 27, 2007 at $63.29 per share, on

heavy trading volume.

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21. On July 24, 2007, the Company issued a press release entitled "NutriSystem, Inc.

Reports Results for Second Quarter 2007." Therein, the Company, in relevant part, stated:

Reports Second Quarter Revenue of $214 Million and EPS of$0.96

Raises Full Year Revenue and EPS Guidance

NutriSystem, Inc. (NASDAQ: NTRI), a leading provider of weightmanagement and fitness products and services , today announcedresults for the second quarter ended June 30, 2007, including:

• An increase in revenue of 61% to $213,556,000 in the secondquarter of 2007 compared to $132,631,000 in revenue in thesecond quarter of 2006;

• Growth in operating income to $52 ,729,000 (24.7% ofrevenues) in the second quarter of 2007 compared to$31,030,000 (23 .4% of revenues) in the second quarter of2006; and

• An increase in diluted earnings per share of 81% to $0.96 inthe second quarter of 2007 compared to $0.53 per diluted sharein the second quarter of 2006.

"The quarter was a very good one and we were pleased with thesolid growth in our core women's market and continued strength inrevenue coming from our ex-customers," said Michael J. Hagan,Chairman, President and Chief Executive Officer. "In addition, thegrowth in the men's and senior's market segments for the secondquarter exceeded our expectations," continued Mr. Hagan.

***

"In the second quarter, we increased operating margin by 130 basispoints year over year," said James D. Brown, Executive VicePresident and Chief Financial Officer. "At the same time we madesubstantial investments in the business to improve futureprofitability including a new e-commerce platform, the new foodprogram, a new call center and international expansion."

***

Third Quarter and Revised Full Year 2007 Outlook

For the third quarter of 2007, the Company estimates thatrevenue will be between $200 and $208 million, and expects

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diluted earnings per share to be between $0.77 and $0.82.Further, the Company expects to add approximately 245,000 newDirect channel customers in the third quarter of 2007. TheCompany is raising its full year 2007 guidance and now expectsrevenue to be between $810 million and $820 million and 2007diluted earnings per share to be between $3.46 and $3.52 pershare. This guidance does not reflect the effect of any potentialfuture stock repurchases.

"The business performed extremely well for the first half of 2007.We continue to be excited about the new market segments we'velaunched in the past year and even more excited about how oftenour ex-customers are returning to us," commented Mr. Hagan."We've come a long way in the last few years with over twomillion Americans relying on NutriSystem to help them reach andmaintain their weight loss goals. The future remains bright with anall-new program planned for 2008, our first international market,and new product extensions that we believe will expand ourcustomer's life long value." [Emphasis added.]

22. Also on July 24, 2007, NutriSystem held an earnings conference call with

investors and financial analysts. During this call, the Individual Defendants, as well as

additional Company representatives, in relevant part, stated:

MIKE HAGAN: Now, turning to the rest of 2007 . We are raisingour revenue guidance to be between 810 and 820 million andalso an EPS of $3.46 to $3.52 per share on a GAAP basis. Someadditional color on the start of our third quarter. We did seesome slight softness in demand starting in late June and carryinginto early July. We believe the launch of a new over-the-counterweight loss pill with significant PR and media behind it has hadan effect. And based on the information we have, this is fullyreflected in our guidance for the remainder of the year. Ourrevised full year guidance reflects an EBITDA of approximately200 million and that's growth of over 40% over 2006. And ofcourse we have no debt and with the strong balance sheet and cashflow characteristics of this business, we will continue to createmany opportunities for us down the road.

***

JIM BROWN: Finally, I would like to repeat the guidancefor thethird quarter and the full year 2007 that appeared in today'searnings release. We anticipate that revenue in the third quarterof2007 will be between 200 and $208 million. We expect dilutive

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earnings per share to be between $0.77 and $0.82. Using the lowend of the range, this represents growth of at least 29% in revenueyear-over-year and a 22% growth in diluted earnings per share. Wealso expect to add about 245,000 direct channel new customers inthe third quarter of 2007. We estimate the revenue in the fullyear of2007 to be between 810 and $820 million, and we expectdilutive earnings per share to be between $3.46 and $3.52. Thisguidance does not reflect the effect of any potential future stockrepurchases.

***

[ANALYST]: You had a phenomenal second quarter, and I missedthe early part of the call but I believe you mentioned there wassome weakness due to the new diet drug on the market. Can youjust provide some color on that? And also how much of yourguidance is being impacted by just normal conservativism and howmuch of it's due to just sort of that other impact I believe youmentioned?

MIKE HAGAN: We are obviously classically conservative butforthe first time we did see some slight softening of demand as weentered the second half of June. And that's, coincidentally, webelieve that it might be related to a launch of a new over-the-counter drug from GSK and the big PR media blitz surroundingit. But we also believe that while demand has been picking upover the last week or so, weprovided guidance in what we believeto be a conservative fashion to reflect what we've been seeingover the last month. And that includes the last couple ofweeks ofJune.

So, we believe that we often see in cases such as this, you get a lotof pent-up demand because of the huge amount of hype around thisproduct but if consumers either don't lose the weight or not fastenough or don't like the side effects, then we believe it's just atemporary type ofthing. And that's what we believe.

***

MIKE HAGAN: As you see in our core women's segment, whichis the most mature, we grew 31% in Q2. We believe we just gotstronger as the quarter went on. And April and May were justreally solid; first half of June was really solid and then we had a bitof a hiccough. But recognizing that we had that hiccough, wereined in a little bit Q3 guidance but still when you look atgrowth year-over-year, we're going to have a very solid year.

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***

[ANALYST]: Okay. And aside from the launch of [Alli] there, doyou think that the recent weakness is due to increasingcompetition? Are you hearing that you're losing customers to othercommercial weight loss companies?

JIM BROWN: No, we don't. We don't, Michael.

***

[ANALYST]: I just want to drill down a little bit more on thetrends you're seeing this quarter to date . And I guess first, Tom, I'mcurious if you have been making any adjustments to the marketingplan at all in response to the competition from -- on thepharmaceutical side and if that's giving you some direct benefit?

TOM CONNERTY: Yes, I think in areas where we've seenmarginal buys not perform as well as they have in previousquarters, we've cut them back based on the softness in demand. Sowe've just been a little bit more conservative about how we've goneabout buying during the course of the past couple of weeks.

One of the nice aspects of our business model is the fact that wecan adjust relatively quickly on our media spend And whenwe're seeing competitive influences kind ofpush our acquisitioncosts up a little bit, we can adjust accordingly and pull back onour spending. And then when we kind of see the tsunami effect ofnew introduction of competitive products start to lull a little bit, wecan start turning the media spend back on.

***

[ANALYST]: In terms of this -- the diet that has been launched,Tom, you spoke about pulling back in marketing spend . Are thereany ways you can be proactive and actually be aggressive maybein grabbing more [market] share? Or do you think that would be awasteful expenditure?

MIKE HAGAN: We've got campaigns in the works that we'reworking to be a little bit more aggressive about, talking about ourprogram and why it is superior to other weight loss programs inthe marketplace. It does take a little bit of time to initiate andlaunch those. And like everything we do, we test. So it's not likewe would go out there overly aggressively with a campaign thatwouldn't yield positive return on the media investment. [Emphasisadded.]

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23. The statements contained in ¶¶ 17, 19, 21, and 22 were materially false and

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

the Company's sales and revenues were significantly impacted by the introduction of alternative

weight loss products into the market; (2) as such, the Company added fewer new customers, and

the Company's customer acquisition costs significantly increased for those new customers; and

(3) that as a result of the foregoing, the Company's statements about its 2007 financial and

operational results were lacking in any reasonable basis when made.

The Truth Begins to Emerge

24. On October 3, 2007, the Company shocked investors when it issued a press

release entitled "NutriSystem, Inc. Reports Preliminary Third Quarter 2007 Results , Authorizes

Additional Share Repurchases and Establishes $200 Million Credit Facility." Therein, the

Company, in relevant part, stated:

NutriSystem(R), Inc . (NASDAQ:NTRI), a leading provider ofweight management and fitness products and services, todayannounced preliminary financial results for its third quarter endingSeptember 30, 2007 . The Company announced further that itsBoard of Directors has authorized a $100 million increase to itsexisting stock repurchase program and it has entered into a $200million credit facility.

Third Quarter 2007 Preliminary Results:

• Revenues expected to be approximately $188 million,representing a 21% increase over the third quarter prior year.

• New customers expected to be approximately 218,000 for theDirect business, representing a 7% decline from the thirdquarterprior year.

• Operating income for the nine months ended September 30,2007 expected to be between $145 million and $148 million.

• Earnings per diluted share expected to be between $0.62 and$0.66.

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• Cash, cash equivalents and marketable securities expected toincrease by $35 million in the quarter, with $117 million incash, cash equivalents and marketable securities expected atquarter end.

Michael J. Hagan, Chairman and Chief Executive Officer ofNutriSystem stated, "After a very strong first half of the year, ourresults for the third quarter didn 't meet our expectations. Wecontinue to be satisfied with our success in reactivating formercustomers, but our performance with new customers we believewas affected by shorter-term competitive pressures which causedour marketing dollars to become less efficient, resulting in fewernew Direct Business customers than anticipated and customeracquisition costs to be higher than anticipated."

"The results reflect expenses associated with continuedinvestments in infrastructure and approximately $600,000 oftransaction costs in the third quarter associated with a proposedacquisition that the Company is no longer pursuing," said James D.Brown, Executive Vice President and Chief Financial Officer. "Inaddition, we expect customer acquisition costs for the thirdquarter 2007 to be between $212 and $216. "

***

The Company expects to report final third quarter 2007 financialresults on October 23, 2007, at which time the Company willconduct a conference call with remarks from senior managementabout the third quarter. Management willprovide revisedfull year2007financial guidance at that time . [Emphasis added.]

25. On this news, the Company's shares fell $15.98 per share, or almost 34 percent, to

close on October 4, 2007 at $31.59 per share, on unusually heavy trading volume.

26. Also on October 4, 2007, Bloomberg published a story entitled "NutriSystem

Plunges Most in Seven Years on Earnings ." The story, in relevant part, stated:

NutriSystem Inc., the weight-loss company promoted by formerfootball player Dan Marino, fell the most in seven years in U. S.trading after saying third-quarter profit was less than it forecast ona decline in new customers.

Preliminary profit for the three months that ended Sept. 30 was62 cents to 66 cents a share, less than the company's July

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forecast of 77 cents to 82 cents , Horsham, Pennsylvania-basedNutriSystem said yesterday.

New customers fell 7 percent in the third quarter after health-conscious consumers chose to take GlaxoSmithKline Plc'sweight-loss pill Alli. NutriSystem, which rose 22fold in the twoyears that ended Dec. 31, has seen its market value slashed inhalfsince the non-prescription drug's June introduction.

"Management has some bridges to build with investors aftermisjudging Alli," said Laura Richardson, an analyst at BB&TCapital Markets, in a research note today. She lowered her ratingon the shares to "hold"from "buy. "

NutriSystem plunged $15.98, or 34percent, to $31.59 at 4p.m. inNasdaq Stock Market composite trading, the biggest drop sinceOctober 2000.

Sales at NutriSystem, which sells prepared meals and exerciseequipment to help clients lose weight, had surged almost 15-foldover the past two years to $568.2 million in 2006 aftermanagement increased spending on advertising, using "real-world"consumers to promote its products.

Four analysts surveyed by Bloomberg had estimated averageprofit of83 cents a share.

"Our results for the third quarter didn't meet our expectations," saidChief Executive Officer Michael J. Hagan in a statementyesterday. "Our performance with new customers, we believe, wasaffected by shorter-term competitive pressures, which caused ourmarketing dollars to become less efficient." [Emphasis added.]

PLAINTIFF'S CLASS ACTION ALLEGATIONS

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

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

NutriSystem' s securities between February 14, 2007 and October 4, 2007 , inclusive (the "Class

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

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

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

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or had a controlling interest.

28. The members of the Class are so numerous that joinder of all members is

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

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

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

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

may be identified from records maintained by NutriSystem, or its transfer agent, and may be

notified of the pendency of this action by mail, using the form of notice similar to that

customarily used in securities class actions.

29. Plaintiff s claims are typical of the claims of the members of the Class as all

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

federal law that is complained of herein.

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

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

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

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

questions of law and fact common to the Class are:

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

alleged herein;

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

Class Period misrepresented material facts about the business, operations

and management of NutriSystem; and

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

proper measure of damages.

32. 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 Class members may be relatively small, the expense and

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

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

a class action.

UNDISCLOSED ADVERSE FACTS

33. The market for NutriSystem'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, NutriSystem' s securities traded at artificially inflated prices during the Class Period.

Plaintiff and other members of the Class purchased or otherwise acquired NutriSystem's

securities relying upon the integrity of the market price of NutriSystem's securities and market

information relating to NutriSystem, and have been damaged thereby.

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

thereby inflating the price of NutriSystem's securities, 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 , as alleged herein.

35. 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

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damages sustained by Plaintiff 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 NutriSystem's financial well-being and prospects. These material misstatements

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

assessment of NutriSystem and its financial well-being and prospects, thus causing the

Company's securities to be overvalued and artificially inflated at all relevant times . Defendants'

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

members of the Class purchasing the Company's securities at artificially inflated prices, thus

causing the damages complained of herein.

LOSS CAUSATION

36. Defendants' wrongful conduct, as alleged herein, directly and proximately caused

the economic loss suffered by Plaintiff and the Class.

37. During the Class Period, Plaintiff and the Class purchased NutriSystem's

securities at artificially inflated prices and were damaged thereby. The price of NutriSystem's

securities significantly declined when the misrepresentations made to the market, and/or the

information alleged herein to have been concealed from the market, and/or the effects thereof,

were revealed, causing investors' losses.

SCIENTER ALLEGATIONS

38. As alleged herein, defendants acted with scienter in that defendants knew that the

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

materially false and misleading; knew that such statements or documents would be issued 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 violations of the

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

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

receipt and/or modification of NutriSystem's allegedly materially misleading misstatements

and/or their associations with the Company which made them privy to confidential proprietary

information concerning NutriSystem, participated in the fraudulent scheme alleged herein.

39. Additionally, during the Class Period, and with the Company's securities trading

at artificially inflated prices, Company insiders sold 305,279 shares of the Company's stock for

gross proceeds of $19,503,546. This trading by Company insiders is evidenced by the following

chart:

Date of Trade Inside Trader Number of

Shares

Price per

Share

Gross

Proceeds

September 10, 2007 Brown, James D. 12,000 $57.26 $687,120

July 10, 2007 Brown, James D. 7,000 $71.37 $499,590

July 2, 2007 Berg, Ian 6,000 $70.00 $420,000

July 2, 2007 Berg, Ian 10,112 $70.00 $707,840

June 11, 2007 Brown, James D. 7,000 $66.37 $464,590

June 8, 2007 Tierney, Brian 15,000 $65.68 - $65.84 $987,440

June 4, 2007 Hagan, Michael J. 32,307 $67.00 $2,164,569

June 1, 2007 Connerty, Thomas 25,000 $65.15 - $66.90 $1,651,250

June 1, 2007 Hagan, Michael J. 27,693 $67.00 - $67.32 $1,849,075

May 25, 2007 Connerty, Thomas 41,200 $65.00 - $65.19 $2,678,555

May 10, 2007 Brown, James D. 21,000 $61.48 $1,291,080

May 3, 2007 DiPiano, Michael A. 500 $62.52 $31,260

May 2, 2007 Blair, Brice 41,667 $61.70 - 62.46 $2,581,319

May 1, 2007 Connerty, Thomas 10,000 $60.63 - $61.88 $610,124

April 26, 2007 Connerty, Thomas 18,800 $65.00 - $65.97 $1,229,140

April 5, 2007 Connerty, Thomas 21,300 $55.00 - $55.07 $1,172,051

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April 4, 2007 Connerty, Thomas 8,700 $55.00 - $55.03 $478,543

TOTAL: 305,279 $19,503,546

Applicability of Presumption of Reliance:Fraud On The Market Doctrine

40. At all relevant times, the market for NutriSystem's securities was an efficient

market for the following reasons, among others:

(a) NutriSystem's securities met the requirements for listing, and were listed

and actively traded on the NASDAQ, a highly efficient and automated

market;

(b) As a regulated issuer , NutriSystem filed periodic public reports with the

SEC and the NASDAQ;

(c) NutriSystem 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) NutriSystem 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.

41. As a result of the foregoing, the market for NutriSystem's securities promptly

digested current information regarding NutriSystem from all publicly-available sources and

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reflected such information in the price of NutriSystem's securities. Under these circumstances,

all purchasers of NutriSystem's securities during the Class Period suffered similar injury through

their purchase of NutriSystem's securities at artificially inflated prices and a presumption of

reliance applies.

NO SAFE HARBOR

42. 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-looking

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

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

differ materially from those in the purportedly forward-looking statements . Alternatively, to 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 approved by an executive officer of NutriSystem who knew that those statements were

false when made.

FIRST CLAIMViolation of Section 10(b) of

The Exchange Act and Rule 10b-5Promulgated Thereunder Against All Defendants

43. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

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

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

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

other members of the Class to purchase NutriSystem' s securities at artificially inflated prices. In

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

took the actions set forth herein.

45. Defendants (i) employed devices, schemes, and artifices to defraud; (ii) made

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

statements not misleading; and (iii) 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 NutriSystem's securities in violation of Section 10(b)

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

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

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

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

continuous course of conduct to conceal adverse material information about NutriSystem's

financial well-being and prospects, as specified herein.

47. 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 NutriSystem's value and

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

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

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

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

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

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course of business which operated as a fraud and deceit upon the purchasers of NutriSystem's

securities during the Class Period.

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

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

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

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

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

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

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

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

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

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

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

knew or recklessly disregarded was materially false and misleading.

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

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

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

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

for the purpose and effect of concealing NutriSystem's financial well-being and prospects from

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

demonstrated by defendants' overstatements and misstatements of the Company's financial well-

being and prospects throughout the Class Period, defendants , if they did not have actual

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

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

those statements were false or misleading.

50. 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 NutriSystem's

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

prices of NutriSystem's securities were artificially inflated, and relying directly or indirectly on

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

which the securities trades, and/or in 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, Plaintiff and the other members of the Class acquired NutriSystem's

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

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

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

other members of the Class and the marketplace known the truth regarding the problems that

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

members of the Class would not have purchased or otherwise acquired their NutriSystem

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.

52. By virtue of the foregoing, defendants have violated Section 10(b) of the

Exchange Act and Rule I Ob-5 promulgated thereunder.

53. As a direct and proximate result of defendants' wrongful conduct, Plaintiff and 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.

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SECOND CLAIMViolation of Section 20(a) of

The Exchange Act Against the Individual Defendants

54. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

55. The Individual Defendants acted as controlling persons of NutriSystem within the

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

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

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

Company with the SEC and disseminated to the investing public, the Individual Defendants 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 Plaintiff contends 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 Plaintiff 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.

56. 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 particular transactions giving rise to the securities violations as alleged

herein, and exercised the same.

57. As set forth above, NutriSystem and the Individual Defendants each violated

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

of their positions as controlling persons , the Individual Defendants are liable pursuant to Section

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

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

the Company's securities during the Class Period.

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

(a) Determining that this action is a proper class action under Rule 23 of the

Federal Rules of Civil Procedure;

(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' wrongdoing, in an amount to be proven

at trial, including interest thereon;

(c) Awarding Plaintiff 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 DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: October 25, 2007 Respectfully submitted,

By:

SCHIFRIN BARROWAYTOPAZ & KESSLER, LLPRichard A. Maniskas (ID No. 85942)D. Seamus Kaskela (ID No. 204351)280 King of Prussia RoadRadnor, PA 19087Telephone : (610) 667-7706Facsimile : (610) 667-7056

Attorneys for Plaintiff

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