UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-K



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|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 1999.

Or



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|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from
            to

            .

Commission file number 0-18443

MEDICIS PHARMACEUTICAL CORPORATION

(Exact name of registrant as specified in its
charter)


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|Delaware                                                        |  | 52-1574808                          
|(State of other jurisdiction
	of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               
|4343 East Camelback Road, Phoenix, AZ                           |  | 85018-2700                          
|(Address of principal executive office)                         |  | (Zip Code)                          

Registrants telephone
number, including area code:  (602) 808-8800

Securities registered pursuant
to Section 12(b) of the Act:  Class A Common
Stock, $0.014 par value

Preference Share Purchase Rights




(Title of each Class)


Securities registered pursuant
to Section 12(g) of the Act:  NONE

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
 to such filing requirements for the past 90 days. Yes 
 [X]     No  [   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
 herein, and will not be contained, to the best of the
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form or
any amendment to this Form 10-K  [   ].

The aggregate market value of the voting stock held on
September 9, 1999 by non-affiliates of the registrant was
$583,730,041 (calculated by excluding all shares held by
executive officers, directors and holders known to the registrant
 of five percent or more of the voting power of the
registrants Common Stock, without conceding that such
persons are affiliates of the Registrant for purposes
 of the federal securities laws). As of September 9,1999, there
were outstanding 28,370,478 shares of Class A Common Stock
$0.014 par value and 422,962 shares of Class B Common Stock
$0.014 par value.

Documents incorporated by reference:

Portions of the Proxy Statement for the Registrants 1999
Annual Meeting of Stockholders are incorporated herein by
reference in Part III of this Form 10-K to the extent stated
 herein.

Portions of the 1999 Annual Report to Shareholders are
incorporated by reference to Part II and Part IV of this
Form 10-K to the extent stated herein.



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PART I

This Annual Report on Form 10-K (Form 10-K)
 contains forward-looking statements which involve risks and
uncertainties. The actual results of Medicis Pharmaceutical
Corporation (together with its wholly-owned subsidiaries, the
Company or Medicis) could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set
forth in Item 1 under the heading Additional Factors
That May Affect Future Results in this Form 10-K and
the Companys other Securities and Exchange Commission
filings.

Item 1:  Business

The Company

Medicis is the leading independent pharmaceutical company in the
United States focusing primarily on the treatment of
dermatological conditions. The Company offers prescription
products and an over-the-counter (OTC) product,
emphasizing the clinical effectiveness, quality, affordability
and cosmetic elegance of its products. Medicis has achieved a
leading position in branded products for the treatment of acne,
acne-related conditions, dyschromias and hyperpigmentation
disorders and also offers the leading OTC fade cream product in
the United States. The Company has built its business through
successfully introducing prescription products such as
DYNACIN®(minocycline HCl) and TRIAZ® (benzoyl peroxide)
 for the treatment of acne, LUSTRA® (hydroquinone USP 4%)
for the treatment of skin dyschromia associated with photoaging,
as well as by marketing ESOTERICA®, an OTC fade cream
product line. In addition, Medicis has acquired the
dermatological assets LOPROX® (ciclopirox), TOPICORT®
(desoximetasone) and A/ T/ S®(erythromycin) from
Hoechst Marion Roussel, Inc. (HMR) and the
LIDEX®(fluocinonide) and SYNALAR® (fluocinolone
acetonide) corticosteroid product lines from Syntex USA Inc.
(Syntex). The Company derives a majority of its
revenue from sales of the DYNACIN®, TRIAZ® and
LIDEX® products, the newly developed and expanded
LUSTRA® line and the newly acquired LOPROX® and
TOPICORT® products (the Key Products).

Principal Products and Product Lines

The Company currently offers products in the following areas of
dermatology: acne, acne rosacea, fungal infections, psoriasis,
eczema, hyperpigmentation, pediculosis and cosmesis (improvement
in the texture and appearance of skin). The Company addresses
these areas with a range of prescription products and an OTC
product.

Prescription Pharmaceuticals

Prescription pharmaceuticals accounted for 77.0% of the
Companys net revenues in the fiscal year ended
June 30, 1999 (fiscal 1999). The Company
currently focuses its prescription pharmaceutical efforts
primarily on treating acne, acne-related conditions, fungal
infections, psoriasis and dyschromias of the skin. The
Companys principal branded pharmaceutical products are as
follows:

DYNACIN® is an oral, systemic antibiotic, available
in 50-mg., 75-mg. and 100-mg. dosage forms, prescribed as an
adjunctive therapy in the treatment of severe acne. DYNACIN®
 is the number one brand of minocycline for the treatment of
severe acne. Acne-related conditions resulted in over 10 million
visits to dermatologists in the United States in 1995. The most
commonly prescribed systemic acne treatments are tetracycline and
 its derivatives, doxycycline and minocycline. Minocycline, the
active ingredient in the DYNACIN® products, is widely
prescribed for the treatment of acne for several reasons. It has
a more convenient schedule of one or two doses per day as
compared to other forms of tetracycline, which can require up to
four doses per day. Other forms of tetracycline require ingestion
 on an empty stomach and may increase patient sensitivity to
sunlight, creating a greater risk of sunburn. Moreover, the other
 forms of tetracycline, including doxycycline, often cause
gastric irritation. In addition, resistance to several commonly
used antibiotics, including erythromycin, clindamycin,
doxycycline and tetracycline, by the primary bacterial organism
responsible for acne has been documented. Studies suggest that
bacterial resistance to erythromycin exceeds 50% and resistance
to doxycycline and tetracycline exceeds 50%, while the bacteria
showed virtually no resistance to minocycline. The Company

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believes the retail price of DYNACIN® products is
approximately 30% lower than the average reported retail price of
 another branded minocycline product, Minocin®, while
selling at approximately 25% to 30% higher than the average
reported retail price of generic minocycline. DYNACIN® was
launched in the second quarter of the fiscal year ended
June 30, 1993 with 50-mg. and 100-mg. dosage forms
available. The Company launched DYNACIN® in 75-mg. dosage
form, currently the only 75-mg. minocycline product available on
the market, in the fourth quarter of fiscal 1999. The Company has
 entered into a manufacturing and supply agreement with Schein
Pharmaceutical, Inc. (Schein) for the supply of
DYNACIN®products.

TRIAZ® is an internally developed, patented, topical
therapy prescribed for the treatment of all forms and varying
degrees of acne, and is available as a gel or cleanser in two
concentrations. The combined sales of topically applied
prescription acne products were in excess of $500 million in the
United States in 1996. TRIAZ® is currently the leading
branded benzoyl peroxide product in dermatology. While other
topical acne treatments including Cleocin-T® and
Benzamycin® are generally effective, TRIAZ® offers
advantages over each product, including improved stability,
greater convenience of use, reduced cost and fewer side effects.
The Company believes it can gain additional market share by
focusing its promotional efforts on the benefits of TRIAZ®
over Benzamycin®. For example, Benzamycin® requires
refrigeration and mixing by a pharmacist and has a relatively
short shelf life of three months. In contrast, TRIAZ® comes
in a ready-mixed gel that does not require refrigeration and has
a two-year shelf life. In addition, TRIAZ® is aesthetically
pleasing and minimizes the extreme drying and scaling of skin.
The Company believes the average reported retail price of
TRIAZ® is less than that of either Cleocin-T® or
Benzamycin®. TRIAZ® products are manufactured using the
 active ingredient benzoyl peroxide in a patented vehicle
containing glycolic acid and zinc lactate. Studies conducted by
third parties have shown that benzoyl peroxide is the most
efficacious agent available for eradicating the bacteria that
cause acne with no reported resistance. Glycolic acid is believed
 by the Company to enhance the effectiveness of benzoyl peroxide
by exfoliating the outer layer of the skin and zinc lactate is
believed by the Company to act to reduce the appearance of
inflammation and irritation often associated with acne.
TRIAZ® was developed by the Company and introduced in the
second quarter of the fiscal year ended June 30, 1996. The
Company has patents and certain licensed patent rights covering
varying aspects of TRIAZ®. TRIAZ® products are
manufactured to the Companys specifications on a purchase
order basis by West Pharmaceutical Services Lakewood, Inc.
(West) and in accordance with a supply agreement with
 Contract Pharmaceuticals, Limited (Contract
Pharmaceuticals).

LIDEX® is a high-potency topical corticosteroid brand
 prescribed for the treatment of inflammatory and
hyperproliferative skin diseases such as eczema, psoriasis,
atopic dermatitis, poison ivy and other inflammatory skin
conditions. Competing steroid brands in the high-potency category
 include Halog®, Elocon®, and Cyclocort®.
LIDEX® was introduced more than 20 years ago and the
Company believes it is among the most widely accepted, topical
steroid treatments available. Topical corticosteroid treatments
represented sales of approximately $480 million in 1996 in the
United States. The active ingredient in LIDEX®,
fluocinonide, works to alleviate inflammations of the skin by
reducing swelling and pain, relieving itching and constricting
blood vessels in the skin. The LIDEX® product line consists
of various strengths and cosmetically elegant formulations,
including gels, ointments, creams, solutions and emollient
creams. This broad product line allows dermatologists to
prescribe the most appropriate product based on the severity and
location of a patients condition, as well as the thickness
of a patients skin. With the exception of the LIDEX®-E
 Cream, the various forms of LIDEX® are preservative-free,
and the active ingredient is fully dissolved in the vehicle of
the medication, resulting in better absorption of the medication
into the skin. The Company believes LIDEX® is priced
comparably to other branded corticosteroid products, but
significantly higher than the average reported retail price of
generics containing fluocinonide. The Company acquired the rights
 to LIDEX® in the United States and Canada from Syntex in
the third quarter of the fiscal year ended June 30, 1997
(fiscal 1997). The Company has a manufacturing and
supply agreement with Patheon, Inc. (Patheon) for the
 production of LIDEX®.

SYNALAR® is a mid- to low-potency topical
corticosteroid brand prescribed for the treatment of less severe
forms of inflammatory and hyperproliferative skin diseases such
as eczema, psoriasis, poison ivy, atopic dermatitis and other
inflammatory skin conditions. The active ingredient in
SYNALAR®, fluocinolone acetonide, works to alleviate
inflammations of the skin by reducing swelling and pain,
relieving itching and constricting blood vessels in the skin. The
 SYNALAR® product line consists of various strengths and
cosmetically elegant formulations, including ointments, creams,
emollient creams and solutions. This flexibility allows
dermatologists to prescribe the most appropriate product based
upon the severity and location of a patients condition, as
well as the thickness of a patients skin. Competing steroid
 brands in the mid- and low-potency categories include
Aristocort®,

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Cutivate®, and Valisone®, SYNALAR® is priced
comparably to other branded corticosteroid products but higher
than the average reported price of generics containing
fluocinolone acetonide. The Company has a manufacturing and
supply agreement with Patheon for the production of
SYNALAR®.

LUSTRA® and LUSTRA-AF are internally
developed, patented topical therapies prescribed for the
treatment of ultra-violet induced skin discolorations and
hyperpigmentation usually associated with the use of oral
contraceptives, pregnancy, hormone replacement therapy, sun
damage and superficial trauma. Both LUSTRA® and
LUSTRA-AF contain 4% hydroquinone in a vehicle containing
glycolic acid in an anti-oxidant complex. LUSTRA® is the
leading prescription topical treatment for dyschromia and
hyperpigmentation. In controlled clinical trials sponsored by the
 Company in 1998, LUSTRA® demonstrated a reduction in
pigmented lesions in a two-week period with statistically
significant performance over the competing brands Solaquin
Forte® and Melanex®. In another clinical trial
sponsored by the Company in 1997, LUSTRA® demonstrated a
statistically significant reduction of sunburned skin cells when
exposed to cumulative ultra-violet radiation as compared with no
treatment. Such sunburned cells are a measure of ultra-violet
induced skin damage. The Company started shipping LUSTRA® to
 wholesalers in February 1998. LUSTRA-AF, a line
extension of LUSTRA®, containing broad-spectrum UVA and UVB
sunscreen agents, was introduced to the market in June 1999.
 LUSTRA® and LUSTRA-AF are manufactured in accordance
with a manufacturing agreement with Contract Pharmaceuticals.

LOPROX® cream 0.77% and lotion 0.77% are both
broad-spectrum prescription antifungal agents indicated for the
topical treatment of tinea pedis, tinea corporis, tinea cruris,
tinea versicolor and cutaneous candidiasis. LOPROX® is the
only hydroxypyridone antifungal agent available in the United
States, and unlike other antifungals, does not effect sterol
biosynthesis. LOPROX® works with a unique mode of action
that has been shown to have fungistatic, fungicidal, sporicidal,
enhanced penetration and anti-inflammatory properties and to be
active against gram-negative and gram-positive bacteria. This
unique mode of action makes LOPROX® an appropriate choice
for topical treatment alone, or as concomitant treatment with an
oral antifungal. For these reasons, the Company believes
LOPROX® may be a better product to manage the
often-complicated mix of organisms involved in tinea infections.
In clinical trials, LOPROX® was shown to produce clinical
improvement of 82% to 93% after a single week of treatment across
 the range of cutaneous mycoses. The Company believes it is among
 the lowest priced branded prescription topical antifungals. The
United States market for topical antifungal pharmaceuticals
reached $367.7 million in 1996. The overall market for
antifungals in the United States is approximately $800 million
annually. The most frequently prescribed topical antifungal
products besides LOPROX® include Spectazole®,
Nizoral®, Oxistat® and Lotrisone® (steroid/
antifungal combination). Patients suffering from fungal-related
conditions have a variety of other prescription and OTC
medications to choose from. LOPROX® was acquired from HMR in
 November 1998 and re-launched by Medicis in the third
quarter of fiscal 1999. LOPROX® products are manufactured to
 the Companys specifications and supplied by an agreement
with HMR.

TOPICORT® gel, cream, and ointment are Class II,
 high-potency corticosteroids indicated for topical use on
corticosteroid-responsive inflammatory skin conditions, including
 psoriasis, contact dermatitis, seborrheic dermatitis, stasis
dermatitis, rhus dermatitis, atopic dermatitis and more. The
fourth product in the line is TOPICORT® LP cream, a
Class III corticosteroid. Class II, or high-potency
steroids, offer effective treatment without the risks commonly
associated with super-potent, Class I products. Unlike
Class I steroids, TOPICORT® has no dosing restrictions,
 and minimizes the hypothalamic-pituitary-adrenal
(HPA) suppression commonly seen with Class I use. The
Company believes TOPICORT® cream and gel have long been
regarded as preferable to other available creams and gels because
 of their excellent cosmetic qualities. They do not contain
propylene glycol (solvent), parabans (preservatives), or added
fragrances that may cause irritation to sensitive-skin patients.
Each of the TOPICORT® products currently come in 15- and
60-gram tubes. Topical corticosteroid treatments represent a
significant portion of dermatological product sales, with
estimated market sales of $500 million in 1998. The Company
acquired the rights to TOPICORT® in the United States from
HMR during the second quarter of fiscal 1999. The Company has a
manufacturing and supply agreement with HMR for the production of
 TOPICORT®.

NOVACET® is a topical cream prescribed for the
treatment of acne rosacea, a chronic inflammatory skin disorder
resembling acne and seborrheic dermatitis. The active ingredients
 in NOVACET® are sodium sulfacetamide and sulfur. Sales of
products to treat acne rosacea in the United States in 1996 were
approximately $50 million. NOVACET® was introduced by
GenDerm Corporation (GenDerm) in 1993 and competes
with other topical acne rosacea treatments such as
Sulfacet-R®, MetroGel®, MetroCream® and generic
treatments, as well as

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various forms of erythromycin, clindamycin and oral
metronidazole, which also are used from time to time to treat
acne rosacea. In a controlled clinical study sponsored by
GenDerm, NOVACET® was shown to reduce the severity of
redness and inflammation resulting from acne rosacea by 83% over
an eight-week period. By week eight of the study, 98% of the
patients in the study showed significant improvements in their
condition. The Company believes NOVACET® is priced
comparably to competing brands. The Company acquired
NOVACET® in December 1997 when it acquired all the
capital stock of GenDerm and assumed the marketing of this brand
in the United States and Canada. The Company has a manufacturing
and supply agreement with DPT Laboratories, Ltd.
(DPT) for the production of NOVACET®.

OVIDE® lotion 0.5% is a topical pediculicide
indicated for the treatment of pediculus humanus capitis, or head
 lice, and their ova. Head lice products accounted for $170
million in sales in 1998 in the United States alone.
Approximately 10 to 12 million Americans, mostly school-age
children, are infested with head lice each year, and a growing
body of evidence indicates significant levels of head lice that
are resistant to currently available OTC treatments like
NIX® and RID®. OVIDE® is a prescription
alternative to the OTC treatments, offering both an excellent
kill rate and ovicial activity. In addition, in controlled
clinical studies, OVIDE® demonstrated residual activity with
 90.4% of patients still lice-free 7 days after treatment.
Until OVIDE®, the only prescription pediculicide available
was lindane. Because of CNS toxicity potential, the FDA required
a labeling change that recommends lindanes use only for
patients who have either failed to respond to adequate doses, or
are intolerant of other approved therapies. Used as directed,
OVIDE® provides safe and effective control of head lice and
their ova. OVIDE® lotion is available in 2-ounce bottles.
The Company introduced OVIDE® during the fourth quarter of
fiscal 1999. OVIDE® is manufactured for the Company by West
on a purchase order basis.

Non-Prescription Product

The Companys OTC products (including those products that
were divested in the third and fourth quarter of fiscal 1999)
contract revenue and the physician-dispensed division accounted
for 23.0% of the Companys net revenue in fiscal 1999. The
Companys non-prescription product is as follows:

ESOTERICA® is a line of topical creams used to treat
minor skin discoloration conditions such as age spots, uneven
skin tones, dark patches, blotches and freckles. ESOTERICA®
is the leading fade cream line in the United States.
ESOTERICA® is available in five formulations, consisting of
four creams containing various concentrations of the active
ingredient hydroquinone and a body lotion. Hydroquinone is the
only agent proven to reduce hyperpigmentation and the only
product legally sold in the United States for this purpose.
Competing OTC products used to treat minor skin discoloration
include Porcelana® and AMBI®, which are sold in a
variety of creams, gels and lotions. The Company has a
manufacturing agreement for the ESOTERICA®products with
Contract Pharmaceuticals.

Products in Development

The Company has developed and obtained rights to certain
pharmaceutical agents in various stages of development. The
Company has a variety of products under development, ranging from
 existing product line extensions to new products to
reformulations of existing products. Medicis strategy
involves the rapid evaluation and formulation of new therapeutics
 by obtaining preclinical safety and efficacy data, when
possible, followed by rapid safety and efficacy testing in
humans. While development periods may vary, the Company generally
 selects products for internal development with the objective of
proceeding from formulation to product launch within a two-year
period.

The Company directs the efforts of contract laboratory research
facilities to perform formulation and research work on active
ingredients, as well as to conduct preclinical studies and
clinical trials. All products and technologies under development
require significant commitments of personnel and financial
resources. Several products require extensive clinical evaluation
 and premarketing clearance by the United Stated Food and Drug
Administration (FDA) and comparable agencies in other
 countries prior to commercial sale. Certain of the products and
technologies under development have been licensed from third
parties. The failure of the Company to meet its obligations under
 one or more of these agreements could result in the termination
of the Companys rights under such agreements and other
liabilities. In addition, the Company regularly reevaluates its
product development efforts. On the basis of these reevaluations,
 the Company has, in the past, and may in the future, abandon

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development efforts for particular products. There can be no
assurance that any product or technology under development will
result in the successful introduction of any new product.

The Companys research and development costs for
Company-sponsored and unreimbursed co-sponsored pharmaceutical
projects for fiscal 1999, 1998 and 1997 were $3,396,000,
$2,885,000 and $1,450,000, respectively. The Company has in the
past supplemented, and may in the future supplement, its research
 and development efforts by entering into research and
development agreements with other pharmaceutical companies to
defray the cost of product development.

In July 1997, the Company entered into an agreement with
Abbott Laboratories (Abbott) for the development,
manufacture and marketing of a branded dermatologic product.
Abbott is responsible for the development and eventual
manufacture of the product. The Company has agreed to pay certain
 development expenses estimated to be approximately $1,000,000.
There can be no assurance that this collaboration will result in
the successful introduction of any new product or technology or
that the Company will continue the development of the product in
the future.

In December 1997, the Company acquired 100% of the common
stock of GenDerm. The acquisition also included several
in-process research and development projects. Although the
Company intends to continue such development projects, there can
be no assurance that any product or technology previously under
development by GenDerm will result in the successful introduction
 of any new product, or that the Company will continue the
development of any such projects in the future.

In November 1998, the Company acquired the right to
manufacture, market and sell the LOPROX®, TOPICORT® and
 A/ T/ S® products from HMR. The acquisition of these
products also included several in-process research and
development projects. Although the Company intends to continue
such development projects, there can be no assurance that any
technology previously under development by HMR will result in the
 successful introduction of any new line extensions, or that the
Company will continue the development of any such projects in the
 future.

Marketing and Sales

The Company believes that its prescription pharmaceutical
marketing and sales organization is one of the most productive in
 the dermatology sector. The Companys marketing efforts are
 focused on assessing and meeting the needs of dermatologists and
 other specialties that treat conditions of the skin. The
Companys prescription sales team, consisting of 60 members
at September 14, 1999, regularly calls on dermatologists,
focusing on the approximately 3,200 dermatologists who are
responsible for 80% of all prescriptions written by
dermatologists in the United States. Additionally, the Company
recently began calling on high-prescribing podiatrists. The
Company has created an attractive incentive program based upon
goals in market share growth and market share maintenance. The
Company focuses on cultivating relationships of trust and
confidence with the specialists themselves. In addition, the
Company uses a variety of marketing techniques to promote its
products including: sampling, journal advertising, promotional
materials, specialty publications, rebate coupons, product
guarantees, a leadership position in educational conferences and
exposure of its products on the Internet.

The Companys OTC product is promoted to retailers and
wholesalers by manufacturers representatives who also
support a substantial number of products of other manufacturers.
The Company also markets its OTC product through trade
promotions, radio and print advertising, couponing and consumer
awareness.

Warehousing and Distribution

The Company utilizes an independent national warehousing
corporation to store and distribute its products from primarily
two regional warehouses in Nevada and Georgia, as well as other
warehouses in California and Maryland. Upon the receipt of a
purchase order through electronic data input (EDI),
phone, mail or facsimile, the order is processed into the
Companys inventory systems. An inventory picking sheet is
then automatically placed via EDI to the most efficient warehouse
 location for shipment, usually within 24 hours, to the customer
placing the order. Upon shipment, the warehouse sends back to the
 Company via EDI the necessary information to

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automatically process the invoice in a timely manner. Any delay
or interruption in the process could have a material effect on
the Companys business, financial condition and results of
operations.

Customers

The Companys customers include the nations leading
wholesale pharmaceutical distributors, such as McKesson HBOC,
Inc. (McKesson), Bergen Brunswig Corporation
(Bergen Brunswig), Cardinal Health, Inc.
(Cardinal), Bindley Western Industries, Inc.
(Bindley) and other major drug chains. During fiscal
1999, McKesson and Cardinal accounted for 18.0% and 14.1%
respectively, of the Companys revenues. During fiscal 1998,
 McKesson, Bergen Brunswig and Cardinal accounted for 16.9%,
13.2% and 12.6%, respectively, of the Companys revenues.
During fiscal 1997, McKesson, Cardinal and Bergen Brunswig
accounted for 20.6%, 16.3% and 10.9%, respectively, of the
Companys revenues. The distribution network for
pharmaceutical products has, in recent years, been subject to
increasing consolidation. As a result, a few large wholesale
distributors control a significant share of the market. In
addition, the number of independent drug stores and small chains
has decreased as retail consolidation has occurred. Further
consolidation among, or any financial difficulties of,
distributors or retailers could result in the combination or
elimination of warehouses which may result in product returns to
the Company, cause a reduction in the inventory levels of
distributors and retailers, or otherwise result in reductions in
purchases of the Companys products, any of which could have
 a material adverse impact on the Companys business,
financial condition and results of operations. Additionally, the
loss of, or deterioration in, any of these customer accounts
could have a material adverse effect on the Companys
business, financial condition and results of operations.

Manufacturing

The Company currently contracts for all of its manufacturing
needs and is required by the FDA to contract only with
manufacturers that comply with current Good Manufacturing
Practices (cGMP) regulations and other applicable
laws and regulations. The Company typically enters into
short-term manufacturing contracts with third-party
manufacturers. Whether or not such contracts exist, there can be
no assurance that the Company will be able to obtain adequate
supplies of its products in a timely fashion, on acceptable
terms, or at all.

Schein manufactures the Companys DYNACIN® products in
compliance with the Companys specifications and quality
standards pursuant to a supply agreement. Under the agreement,
Schein manufactures DYNACIN® for sale in the branded market
exclusively for the Company, but may manufacture and sell
minocycline for itself or others as a generic product. Schein
currently manufactures minocycline for the generic market under
its own label. The Companys supply agreement expires in
December 2003, but is subject to automatic renewal for
successive two-year periods if neither party gives timely notice
of termination. It may also be terminated by either party without
 cause upon twelve months notice to the other party. Schein may
also terminate the exclusivity portion of the agreement if its
profit margin on sales of DYNACIN® products falls below a
specified level. The agreement also provides that the Company
will purchase all of its requirements for minocycline from Schein
 but may purchase some of its requirements from another
manufacturer if Schein fails to meet certain cost standards or
fails to provide the Company with all of its requirements for two
 of four consecutive quarters. In addition, the Company may use
alternative sources if Schein terminates the Companys
exclusive rights to purchase branded minocycline based upon the
Companys failure to meet the specified profit margins, as
defined. Either party may terminate the agreement if one party
cannot perform under the agreement for a period of three months
or longer for certain reasons beyond its control. The Company
believes that it has alternative sources of supply and that it
would be able to use these alternative sources to preserve an
adequate supply of DYNACIN®. However, the inability of
Schein to fulfill the Companys supply requirements for
DYNACIN®, one of the Companys largest-selling
products, in a timely fashion, could have a material adverse
effect on the Companys business, financial condition and
results of operations.

The majority of the Companys LIDEX® and SYNALAR®
products are manufactured primarily by Patheon in accordance with
 a manufacturing and supply agreement assumed by the Company when
 it acquired the LIDEX® and SYNALAR® products. Under
the terms of an agreement with the Company, F. Hoffman-La Roche,
Ltd. supplies, at cost, active ingredients necessary for
manufacturing the LIDEX® and SYNALAR® products. The
Patheon manufacture and supply agreement expires in
January 2000, however, the Company will extend this
agreement through an automatic one year extension. The extension
is available each year by contract unless either

7



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party gives timely notice of termination. The inability of
Patheon to fulfill the Companys supply requirements for
LIDEX® and SYNALAR® in a timely fashion could have a
material adverse effect on the Companys business, financial
 condition and results of operations.

The Companys LOPROX® and TOPICORT® products are
manufactured by HMR in accordance with a supply agreement entered
 into by the Company in connection with the acquisition of
LOPROX® and TOPICORT®. The HMR supply agreement expires
 in November 2001, but is subject to renewal. The inability
of HMR to fulfill the Companys supply requirements for
LOPROX® and TOPICORT® in a timely fashion would have a
material adverse effect on the Companys business, financial
 condition and results of operation.

The Companys NOVACET® product is manufactured for
distribution in the United States primarily by DPT and Patheon in
 accordance with manufacturing and supply agreements assumed by
the Company when it acquired GenDerm. Under the agreement, the
Company is required to purchase at least 90% of its annual sales
requirements from DPT. The DPT manufacturing agreement expires in
 December 2003. Either party may terminate the agreement upon
two-year notice by the Company and three-year notice by DPT. Such
 termination period becomes 60 days if either party fails to
 perform, without cure, its obligations under the DPT
manufacturing agreement.

The Companys ESOTERICA®, LUSTRA®, LUSTRA-AF
 and TRIAZ® products are manufactured by Contract
Pharmaceuticals pursuant to manufacturing agreements expiring in
July 2001. The inability of Contract Pharmaceuticals to
fulfill the Companys supply requirements for these products
 could have a material adverse effect on the Companys
business, financial condition and results of operations.

The remainder of the Companys principal products are
produced on a purchase order basis only; one LIDEX® product,
 a TRIAZ® product and the OVIDE® product are
manufactured by West.

Certain License and Royalty Agreements

Pursuant to license agreements with third parties, the Company
has acquired rights to manufacture, use or market certain of its
products, as well as many of its other proposed products and
technologies. Such agreements contain provisions requiring the
Company to use its best efforts or otherwise exercise diligence
in pursuing market development for such products in order to
maintain the rights granted under the agreements and may be
canceled upon the Companys failure to perform its payment
or other obligations. In addition, the Company has entered into
agreements to license certain rights to manufacture, use and sell
 certain of its technologies outside the United States and Canada
 to various licensees.

There can be no assurance that the Company will fulfill its
obligations under its license agreements due to insufficient
resources, lack of successful product development, lack of
product acceptance or other reasons. The failure to satisfy the
requirements of any such agreements may result in the loss of the
 Companys rights under that agreement or under related
agreements and other liabilities. The inability of the Company to
 continue to license these products or to license other necessary
 products for use with its products or substantial increases in
royalty payments under third-party licenses could have a material
 adverse effect on the Companys business, financial
condition and results of operations. In addition, the effective
implementation of the Companys strategy depends upon the
successful integration of these licensed products with the
Companys products. Therefore, any flaws or limitations of
such licensed products may prevent or impair the Companys
ability to market and sell the Companys products, delay new
 product introductions, and/or adversely affect the
Companys reputation. Such problems could have a material
adverse effect on the Companys business, financial
condition and results of operations.

In November 1998, the company entered into a license
agreement with HMR. The license is for a term of three years with
 an option to purchase the products at the end of the term. The
products licensed from HMR include LOPROX®, TOPICORT®
and A/T/S®.

Trademarks

The Company believes that trademark protection is an important
part of establishing product recognition. The Company owns more
than 100 registered trademarks and trademark applications. United
 States federal

8



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registrations for trademarks remain in force for 10 years
and may be renewed every 10 years after issuance, provided
the mark is still being used in commerce. There can be no
assurance that any such trademark or service mark registrations
will afford the Company adequate protection, or that the Company
will have the financial resources to enforce its rights under any
 such trademark or service mark registrations. The inability of
the Company to protect its trademarks or service marks from
infringement could result in the impairment of any goodwill,
which may be developed in such trademarks or service marks.
Moreover, the Companys inability to use one or more of its
trademarks or service marks, because of successful third-party
claims to such marks, could have a material adverse effect on the
 Companys business, financial condition and results of
operations.

From time to time, the Company receives communications from
parties who allege that their trademark or service mark interests
 may be damaged either by the Companys use of a particular
trademark or service mark or its registration of such trademark
or service mark, and, on occasion, the Company also sends such
communications to third parties. In general, the Company seeks to
 resolve such conflicts before an actual opposition to
registration or suit for infringement is filed. There can,
however, be no assurance that such actions will not be filed or
that, if filed, they will not have a material adverse effect upon
 the Companys business, financial condition or results of
operations.

Patents and Proprietary Rights

The Company is pursuing several United States patent
applications. There can be no assurance that patents will be
issued with respect to any of these applications. The Company has
 acquired rights under certain patents and patent applications
from third-party licensors. The Company has obtained patents on
some of its products directed to aspects of a compound, including
 a United States patent expiring in October 2015 covering
various formulations of its TRIAZ® product line, and a
United States patent expiring in August 2017 covering its
LUSTRA® and LUSTRA-AF products. The Company has
recently acquired from certain of its consultants and principals
an assignment of their rights to certain United States patents or
 patent applications. Certain of such patents and patent
applications may be subject to claims of rights by third parties
by reason of existing relationships with the party who filed such
 patents or patent applications. There can be no assurance that
the Company will be able to obtain any rights under such patents
or patent applications as a result of such conflicting claims, or
 that any rights that the Company may obtain will be sufficient
for the Company to market products that may be the subject of
such patents or patent applications. The Company may be required
to obtain licenses and/or pay royalties to obtain the rights it
acquires under such patents or patent applications. There can be
no assurance that the Company will be able to obtain rights under
 such patents or patent applications on terms acceptable to the
Company, or at all.

The Company believes that its success will depend in part on its
ability to obtain and maintain patent protection for its own
inventions, and to obtain and maintain adequate licenses for the
use of patents licensed or sublicensed by third parties. There
can be no assurance that any patent issued to, or licensed by,
the Company will provide protection that has commercial
significance. In this regard, the patent position of
pharmaceutical compounds is particularly uncertain. There can be
no assurance that challenges will not be instituted against the
validity or enforceability of any patent owned by or licensed to
the Company or, if instituted, that such challenges will not be
successful. The cost of litigation to uphold the validity and
prevent infringement of patents can be substantial and require a
significant commitment of managements time. Furthermore,
there can be no assurance that others will not independently
develop similar technologies or duplicate the technology owned by
 or licensed to the Company or design around the patented aspects
 of such technology. The Company only conducts complete searches
to determine whether its products infringe upon any existing
patents as it deems appropriate. There can be no assurance that
the products and technologies the Company currently markets, or
may seek to market in the future, will not infringe patents or
other rights owned by others.

The Company believes that obtaining foreign patents may be more
difficult than obtaining domestic patents because of differences
in patent laws, and therefore, recognizes that its patent
position may be stronger in the United States than in Europe or
elsewhere. In addition, the protection provided by foreign
patents once they are obtained may be weaker than that provided
by domestic patents.

The Company relies and expects to continue to rely upon
unpatented proprietary know-how and continuing technological
innovation in the development and manufacture of many of its
principal products. The Companys policy is to require all
its employees, consultants and advisors to enter into
confidentiality agreements with the

9



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Company. There can be no assurance, however, that these
agreements will provide meaningful protection for the
Companys trade secrets or proprietary know-how in the event
 of any unauthorized use or disclosure of such information. In
addition, there can be no assurance that others will not obtain
access to or independently develop similar or equivalent trade
secrets or know-how.

Competition

The pharmaceutical industry is characterized by intense
competition, rapid product development and technological change.
Competition is intense among manufacturers of prescription
pharmaceuticals, such as for the Companys Key Products for
the treatment of dermatological conditions, in the OTC market for
 ESOTERICA®, as well as other products, which the Company
may develop and market in the future. Most of the Companys
competitors are large, well-established pharmaceutical, chemical,
 cosmetic or health care companies with considerably greater
financial, marketing, sales and technical resources than those
available to the Company. Additionally, many of the
Companys present and potential competitors have research
and development capabilities that may allow such competitors to
develop new or improved products that may compete with the
Companys product lines. The Companys products could
be rendered obsolete or made uneconomical by the development of
new products to treat the conditions addressed by the
Companys products, technological advances affecting the
cost of production, or marketing or pricing actions by one or
more of the Companys competitors. Each of the
Companys products competes for a share of the existing
market with numerous products, that have become standard
treatments recommended or prescribed by dermatologists.

DYNACIN® competes with Minocin® a branded minocycline
product marketed by American Home Products (AHP) and
generic minocycline products marketed by Schein, Barr
Laboratories, Inc. (Barr Labs) and ESI Lederle, Inc.
Other oral antibiotics utilized for the treatment of acne include
 erythromycin, doxycycline and tetracycline marketed in branded
and generic form by a variety of companies. LIDEX®,
SYNALAR® and TOPICORT® compete with a number of
corticosteroid brands in the super-, high-, mid-, and low-potency
 categories for the treatment of inflammatory and
hyperproliferative skin conditions. Competing brands include
Halog® and Ultravate®, marketed by Bristol-Myers Squibb
 Company (Bristol-Myers); Elocon® and
Diprolene®, marketed by Schering-Plough Corporation
(Schering-Plough); Cyclocort and Aristocort, marketed
 by Fujisawa Healthcare, Inc.; Temovate® and Cutivate®,
 marketed by Glaxo Wellcome, Inc. (Glaxo Wellcome);
and Psorcon®, marketed by Dermik Laboratories, Inc.
(Dermik Labs). The Company believes that TRIAZ®
competes with Benzamycin®, marketed by Dermik Labs;
Cleocin-T® and a generic topical clindamycin, marketed by
Pharmacia & Upjohn Co, Inc. (Pharmacia &
Upjohn); and Benzac®, marketed by Galderma
Laboratories, Inc. (Galderma). The Company believes
that LUSTRA® primarily competes with Solaquin Forte®,
marketed by ICN Pharmaceuticals, Inc. and Melanex®, marketed
 by Neutrogena Dermatologics. ESOTERICA® primarily competes
with Porcelana®, marketed by Schwarzkopf & Dep, Inc. and
 AMBI®, marketed by Kiwi Brands, a division of Sara Lee
Brands Corporation. The Company believes that LOPROX®
competes primarily with Lamisil®, marketed by Novartis
Pharmaceuticals Corporation; Nizoral®, marketed by Janssen
Pharmceutica, Inc; and Spectazole®, marketed by Ortho
Dermatological. The Company believes that OVIDE® primarily
competes with the OTC products NIX®, marketed by
Warner-Lambert Consumer Healthcare and RID®, marketed by
Pfizer, Inc. (Pfizer) and with generic products such
as the prescription product lindane, marketed by various
manufacturers.

Several of the Companys products, including DYNACIN®
and LIDEX®, compete with generic (non-branded)
pharmaceuticals, which claim to offer equivalent therapeutic
benefits at a lower cost. In some cases, insurers and other
third-party payors seek to encourage the use of generic products
making branded products less attractive, from a cost perspective,
 to buyers.

Government Regulation

The manufacture and sale of cosmetics and drugs are subject to
regulation principally by the FDA and state and local authorities
 in the United States, and by comparable agencies in certain
foreign countries. The Federal Trade Commission (FTC)
 and state and local authorities regulate the advertising of OTC
drugs and cosmetics. The Food and Drug Act and the regulations
promulgated thereunder, and other federal and state statutes and
regulations, govern, among other things, the testing,
manufacture, safety, effectiveness, labeling, storage, record
keeping, approval, advertising and promotion of the
Companys products. In general, products falling within the
FDAs definition of new drugs require
premarketing clearance by the FDA. Products falling within the
FDAs

10



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definition of cosmetics or of drugs that
are not new drugs and that are generally recognized
as safe and effective do not require premarketing
clearance.

The steps required before a new drug may be marketed
in the United States include (i) preclinical laboratory and
animal testing, (ii) submission to the FDA of an
Investigational New Drug (IND) application, which
must become effective before clinical trials may commence,
(iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug,
(iv) submission to the FDA of a New Drug Application
(NDA) and (v) FDA approval of the NDA prior to
any commercial sale or shipment of the drug. In addition to
obtaining FDA approval for each product, each domestic
drug-manufacturing establishment must be registered with, and
approved by, the FDA. Drug product manufacturing establishments
located in California also must be licensed by the State of
California in compliance with separate regulatory requirements.

Preclinical testing is generally conducted in laboratory animals
to evaluate the potential safety and the efficacy of a drug. The
results of these studies are submitted to the FDA as a part of an
 IND application, which must be approved before clinical trials
in humans can begin. Typically, clinical evaluation involves a
time consuming and costly three-phase process. In Phase I,
clinical trials are conducted with a small number of subjects to
determine the early safety profile, the pattern of drug
distribution and metabolism. In Phase II, clinical trials
are conducted with groups of patients afflicted with a specific
disease to determine preliminary efficacy, optimal dosages and
expanded evidence of safety. In Phase III, large-scale,
multi-center, comparative trials are conducted with patients
afflicted with a target disease to provide sufficient data to
demonstrate the efficacy and safety required by the FDA. The FDA
closely monitors the progress of each of the three phases of
clinical trials and may, at its discretion, re-evaluate, alter,
suspend or terminate the testing based upon the data that have
been accumulated to that point and its assessment of the
risk/benefit ratio to the patient.

In general, FDA approval is required before a new drug product
may be marketed in the United States. However, most OTC drugs are
 exempt from the FDAs premarketing approval requirements.
In 1972, the FDA instituted the ongoing OTC Drug Review to
evaluate the safety and effectiveness of OTC drug ingredients
then in the market. Through this process, the FDA issues
monographs that set forth the specific active ingredients,
dosages, indications and labeling statements for OTC drug
ingredients that the FDA will consider generally recognized as
safe and effective and therefore not subject to premarket
approval. OTC drug ingredients are classified by the FDA in one
of three categories: Category I ingredients which are deemed
 safe and effective for OTC use; Category II
ingredients which are deemed not generally recognized as
safe and effective for OTC use; and Category III
ingredients which are deemed possibly safe and effective
with studies ongoing. Based upon the results of these
ongoing studies, the FDA may reclassify all Category III
ingredients as Category I or Category II ingredients.
For certain categories of OTC drugs not yet subject to a final
monograph, the FDA usually permits such drugs to continue to be
marketed until a final monograph becomes effective, unless the
drug will pose a potential health hazard to consumers. Drugs
subject to final monographs, as well as drugs that are subject
only to proposed monographs, are subject to various FDA
regulations concerning, for example, cGMP, general and specific
OTC labeling requirements, prohibitions against promotion for
conditions other than those stated in the labeling, and
requirement that OTC drugs contain only suitable inactive
ingredients. OTC drug manufacturing facilities are subject to FDA
 inspection, and failure to comply with applicable regulatory
requirements may lead to administrative or judicially imposed
penalties.

The active ingredient in DYNACIN® products, minocycline;
LOPROX®, ciclopirox; TOPICORT®, desoximetasone;
OVIDE® lotion, malathion; BUPHENYL powder and tablets,
 sodium phenylbutyrate; and LIDEX® and SYNALAR®,
fluocinonide and fluocinolone acetonide, respectively, have been
approved by the FDA under a NDA. The active ingredient in the
TRIAZ® products has been classified as a Category III
ingredient under a tentative final FDA monograph for OTC use in
treatment of labeled conditions. The FDA has requested, and a
task force of the Non-Prescription Drug Manufacturers Association
 (NDMA), a trade association of OTC drug
manufacturers, has undertaken further studies to confirm that
benzoyl peroxide, an active ingredient in the TRIAZ®
products, is not a tumor promoter when tested in conjunction with
 UV light exposure. The TRIAZ® products, which the Company
sells on a prescription basis, have the same ingredients at the
same dosage levels as the OTC products. When the FDA issues the
final monograph, the Company may be required by the FDA to sell
TRIAZ® as an OTC drug unless the Company files an NDA
covering such product. There can be no assurance as to the
results of these studies or any FDA action to reclassify benzoyl
peroxide. In addition, there can be no assurance that adverse
test results would not result in withdrawal of TRIAZ® from
marketing. An adverse decision by the FDA with respect to the
safety of benzoyl peroxide could result in the assertion of
product liability claims against the Company and could have a
material adverse effect on the Companys business, financial
 condition and results of operations.

Certain ESOTERICA® and LUSTRA® products contain the
active ingredient hydroquinone at a 2% and 4% concentration,
respectively, currently a Category I ingredient. Independent
 expert dermatologists have formally expressed the view that
hydroquinone at a 2% concentration is generally recognized as
safe and effective for its intended use. In 1992, with the
concurrence of the FDA, the industry initiated dermatological
metabolism and toxicity studies to fully support
hydroquinones continued Category I status.
Notwithstanding the pendency or results of these tests, which may

11



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The ESOTERICA®, TRIAZ® and LUSTRA® products must
meet the composition and labeling requirements established by the
 FDA for products containing their respective basic ingredients.
The Company believes that compliance with those established
standards avoids the requirement for premarketing clearance of
these products. There can be no assurance that the FDA will not
take a contrary position. NOVACET®, which contains the
active ingredients sodium sulfacetamide and sulfur, is marketed
under the FDA compliance policy entitled Prescription Drugs
 Marketed with an NDA.

The Company believes that certain of its products, as they are
promoted and intended by the Company for use, are exempt from
being considered new drugs based upon the
introduction date of their active ingredients and therefore do
not require premarketing clearance. There can be no assurance
that the FDA will not take a contrary position. If the FDA were
to do so, the Company may be required to seek FDA approval for
such products, market such products as OTC products or withdraw
such products from the market. The Company believes that such
products are subject to regulations governing product safety, use
 of ingredients, labeling and promotion and manufacturing
methods.

Clinical trials and the marketing and manufacturing of
pharmaceutical products are subject to the rigorous testing and
approval processes of the FDA and foreign regulatory authorities.
 The process of obtaining FDA and other required regulatory
approvals is lengthy and expensive. There can be no assurance
that the Company will be able to obtain the necessary approvals
to conduct clinical trials or to manufacture and market such
products, that all necessary clearances will be granted to the
Company or its licensors for future products on a timely basis,
or at all, or that FDA review or other actions will not cause
delays adversely affecting the marketing and sale of the
Companys products. In addition, the testing and approval
process with respect to certain new products, which the Company
may develop or seek to introduce, is likely to take a substantial
 number of years and involve the expenditure of substantial
resources. There can be no assurance that pharmaceutical products
 currently in development, or those products acquired or licensed
 by the Company, will be cleared for marketing by the FDA.
Failure to obtain any necessary approvals or failure to comply
with applicable regulatory requirements could have a material
adverse effect on the Companys business, financial
condition and results of operations. Furthermore, future
government regulation could prevent or delay regulatory approval
of the Companys products.

There can be no assurance that any approval will be granted on a
timely basis, or at all; that the FDA will not require
post-marketing testing and surveillance to monitor the product
and continued compliance with regulatory requirements; that the
FDA will not require the submission of any lot of any product for
 inspection and will not restrict the release of any lot that
does not comply with FDA standards; that the FDA will not
otherwise order the suspension of manufacturing, recall or
seizure of products; or that the FDA will not withdraw its
marketing clearance of any product if compliance with regulatory
standards is not maintained or if problems concerning safety or
efficacy of the product are discovered following approval.

From time to time, the FDA has issued correspondence to
pharmaceutical companies, including the Company, alleging that
certain advertising or promotional practices are false,
misleading or deceptive. The Company seeks to resolve all such
complaints without any further adverse action by the FDA and
without incurring

12



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substantial expense. However, there can be no assurance that the
Company will not receive such correspondence from the FDA in the
future, or that, if such notices are received, they will not
result in substantial cost or disruption, including fines and
penalties, in material changes to the manner in which the Company
 promotes its products, in loss of sales of the Companys
products or other material adverse effects on the Companys
business, financial condition and results of operations.

For both currently marketed and future products, failure to
comply with the applicable regulatory requirements could, among
other things, result in fines, suspensions of regulatory
approvals, product recalls, operating restrictions, criminal
prosecution, relabeling costs, delays in product distribution,
marketing and sales, or seizure or cessation of manufacture of
the products and the imposition of civil or criminal sanctions.
There can be no assurance that the FDA or other regulatory
agencies will not change its position with regard to the safety
or effectiveness of the Companys current or future products
 or that the FDA or other regulatory agencies will agree with the
 Companys position regarding the regulatory status of its
products. In the event that the FDA or other regulatory agencies
takes a contrary position regarding any of the Companys
current or future products, the Company may be required to change
 its labeling or formulation or cease manufacturing and marketing
 such products. In addition, even prior to any formal regulatory
action, the Company could decide voluntarily to cease
distribution and sale or to recall any of its products if concern
 about the safety or efficacy of any of its products was to
develop. Any such action could have a material adverse effect on
the Companys business, financial condition and results of
operations.

The Company also will be subject to foreign regulatory
authorities governing clinical trials and pharmaceutical sales if
 it seeks to market its products outside the United States.
Whether or not FDA approval has been obtained, approval of a
product by the comparable regulatory authorities of foreign
countries must be obtained prior to the commencement of marketing
 of the product in those countries. The approval process varies
from country to country and the time required may be longer or
shorter than that required for FDA approval. There can be no
assurance that any foreign regulatory agency will approve any
product submitted for review by the Company.

Third-Party Reimbursement

The operating results of the Company will depend in part on the
availability of adequate reimbursement for the Companys
products from third-party payors, such as government entities,
private health insurers and managed care organizations.
Third-party payors increasingly are seeking to negotiate the
pricing of medical services and products and to promote the use
of generic, non-branded pharmaceuticals through payor-based
reimbursement policies designed to encourage their use. In some
cases, third-party payors will pay or reimburse users or
suppliers of a prescription drug product only a portion of the
product purchase price. In the case of the Companys
prescription products, payment or reimbursement by third-party
payors of only a portion of the cost of such products could make
such products less attractive, from a cost perspective, to users,
 suppliers and prescribing physicians. There can be no assurance
that reimbursement, if available, will be adequate. Moreover,
certain of the Companys products are not of a type
generally eligible for third-party reimbursement. If government
entities or other third-party payors do not provide adequate
reimbursement levels for the Companys products, or if those
 reimbursement policies increasingly favor the use of generic
products, the Companys business, financial condition and
results of operations would be materially adversely affected. In
addition, managed care initiatives to control costs have
influenced primary-care physicians to refer fewer patients to
dermatologists, resulting in a declining target market for the
Company. Further reductions in referrals to dermatologists could
have a material adverse effect upon the Companys business,
financial condition and results of operations.

A number of legislative and regulatory proposals aimed at
changing the U.S. health care system have been proposed in recent
 years. While the Company cannot predict whether any such
proposals will be adopted, or the effect that any such proposal
may have on its business, such proposals, if enacted, could have
a material adverse effect on the Companys business,
financial condition and results of operations.

Product Liability Insurance

The Company faces an inherent risk of exposure to product
liability claims in the event that the use of one or more of its
products is alleged to have resulted in adverse effects. Such
risk exists even with respect to those products that are
manufactured in licensed and regulated facilities or that
otherwise received regulatory approval for

13



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commercial sale. There can be no assurance that the Company will
not be subject to significant product liability claims. The
Company currently has product liability insurance in the amount
of $50.0 million per claim and $50.0 million in the aggregate on
a claims-made basis. Many of the Companys customers require
 the Company to maintain product liability insurance coverage as
a condition to their conducting business with the Company. As the
 loss of such insurance coverage could result in a loss of such
customers, the Company intends to take all reasonable steps
necessary to maintain such insurance coverage. There can be no
assurance that insurance coverage will be available in the future
 on commercially reasonable terms, or at all, or that such
insurance will be adequate to cover potential product liability
claims. The loss of insurance coverage or the assertion of a
product liability claim or claims could have a material adverse
effect on the Companys business, financial condition and
results of operations.

Employees

As of June 30, 1999, the Company had 144 full-time
employees. The Company believes its relationship with its
employees is good. The Company intends to hire additional
personnel as needed during the next 12 months.

Additional Factors That May Affect Future Results

Our disclosure and analysis in this report, in other reports that
 we file with the Securities and Exchange Commission, in our
press releases and in public statements of our officers contain
forward-looking statements. Forward-looking statements give our
current expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate
strictly to historical or current events. They use words such as
anticipate, estimate, expect,
 intend, plan, believe and
other words of similar meaning in connection with discussion of
future operating or financial performance. These include
statements relating to future actions, prospective products or
product approvals, future performance or results of current and
anticipated products, sales efforts, expenses, the outcome of
contingencies such as legal proceedings and financial results.

Forward-looking statements may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks
and uncertainties. Many factors mentioned in this
report  for example, governmental regulation and
competition in our industry  will be important in
determining future results. No forward-looking statement can be
guaranteed, and actual results may vary materially from those
anticipated in any forward-looking statement.

We undertake no obligation to update any forward-looking
statement. We provide the following discussion of risks and
uncertainties relevant to our business. These are factors that we
 think could cause our actual results to differ materially from
expected and historical results. Medicis could also be adversely
affected by other factors besides those listed here. The
following discussion is provided pursuant to the Private
Securities Litigation Reform Act of 1995.

We Rely on Others to Manufacture Our
Products

Currently, we contract out for all of our product manufacturing
needs and do not manufacture any of our products. Typically,
these manufacturing contracts are short-term. We are dependent
upon renewing agreements with our existing manufacturers or
finding replacement manufacturers to satisfy our requirements. As
 a result, we cannot be certain that manufacturing sources will
continue to be available or that we can continue to out-source
the manufacturing of our products on reasonable or acceptable
terms.

The underlying cost to Medicis for manufacturing our products is
established in our agreements with these outside manufacturers.
Because of the short-term nature of these agreements, our
expenses for manufacturing are not fixed and could change from
contract to contract. If the cost of production increases, our
gross margins could be negatively impacted.

In addition, we rely on outside manufacturers to provide us an
adequate and reliable supply of our products on a timely basis.
Any loss of a manufacturer or any difficulties which could arise
in the manufacturing process could significantly affect our
inventories and supply of products available for sale. In some
cases, we do not have alternative sources of supply for our
products. In the event our primary suppliers are unable to
fulfill our requirements for any reason it could have a negative
effect on our sales margins and market share, as well as our

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overall business and financial results. If we are unable to
supply sufficient amounts of our products on a timely basis, our
market share could decrease and, correspondingly, our
profitability could decrease.

We have entered into exclusive supply or manufacturing agreements
 for several of our largest-selling products, such as
DYNACIN® and LIDEX®. Under these agreements, with
certain exception, we must purchase most of our product supply
from specific manufacturers. If any of these exclusive
manufacturer or supplier relationships were terminated, we would
be forced to find a replacement manufacturer or supplier. The FDA
 requires that all manufacturers used by pharmaceutical companies
 such as Medicis comply with the FDAs regulations,
including those cGMP regulations applicable to manufacturing
processes. The cGMP validation of a new facility and the approval
 of that manufacturer for a new drug product may take a year or
more before manufacture can begin at the facility. Delays in
obtaining FDA validation of a replacement manufacturing facility
could cause an interruption in the supply of our products.
Although we have business interruption insurance covering the
loss of income for up to 12 months, which may mitigate the
harm to Medicis from the interruption of the manufacturing of our
 largest selling products caused by certain events, the loss of a
 manufacturer could still have a negative effect on our sales,
margins and market share, as well as our overall business and
financial results.

Our Reliance on Third-Party Manufacturers and
Suppliers Can Be Disruptive to Our Inventory Planning

We and the manufacturers of our products rely on suppliers of raw
 materials used in the production of our products. Some of these
materials are available from only one source and others may
become available from only one source. Any disruption in the
supply of raw materials or an increase in the cost of raw
materials to our manufacturers could have a significant effect on
 their ability to supply us with our products.

We try to maintain inventory levels that are no greater than
necessary to meet our current projections. Any interruption in
the supply of finished products could hinder our ability to
timely distribute finished products. If we are unable to obtain
adequate product supplies to satisfy our customers orders,
we may lose those orders and our customers may cancel other
orders and stock and sell competing products. This in turn could
cause a loss of our market share and negatively affect our
revenues.

We cannot be certain that supply interruptions will not occur or
that our inventory will always be adequate. Numerous factors
could cause interruptions in the supply of our finished products
including shortages in raw material required by our
manufacturers, changes in our sources for manufacturing, our
failure to timely locate and obtain replacement manufacturers as
needed and conditions effecting the cost and availability of raw
materials.

The Growth of Managed Care Organizations and Other
 Third-Party Reimbursement Policies May Have an Adverse Effect on
 Our Pricing Policies and Our Margins

Our operating results and business success depends in large part
on the availability of adequate third-party payor reimbursement
to patients for our prescription-brand products. These
third-party payors include governmental entities (such as
Medicaid), private health insurers and managed care organizations
 (MCOs). Over 70% of the U.S. population now
participates in some version of managed care. Because of the size
 of the patient population covered by MCOs, marketing of
prescription drugs to them and the pharmacy benefit managers
(PBMs) that serve many of these organizations has
become important to our business. MCOs and other third-party
payors try to negotiate the pricing of medical services and
products to control their costs. MCOs and PBMs typically develop
formularies to reduce their cost for medications. Formularies can
 be based on the prices and therapeutic benefits of the available
 products. Due to their lower costs, generics are often favored.
The breadth of the products covered by formularies varies
considerably from one MCO to another, and many formularies
include alternative and competitive products for treatment of
particular medical conditions. Exclusion of a product from a
formulary can lead to its sharply reduced usage in the MCO
patient population. Payment or reimbursement of only a portion of
 the cost of our prescription products could make our products
less attractive, from a net-cost perspective, to patients,
suppliers and prescribing physicians. We cannot be certain that
the reimbursement policies of these entities will be adequate for
 Medicis branded pharmaceutical products to compete on a
price basis. If our products are not included within an adequate
number of formularies or adequate reimbursement levels are not
provided, or if those policies increasingly favor generic
products, our market share and gross margins could be negatively
affected, as could our overall business and financial condition.

15



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Some of our products are not of a type generally eligible for
reimbursement. It is possible that products manufactured by
others could address the same effects as our products and be
subject to reimbursement. If this were the case, our products may
 be unable to compete on a price basis.

Managed care initiatives to control costs have influenced
primary-care physicians to refer fewer patients to dermatologists
 and other specialists. The result has been a declining market
for dermatological products. Further reductions in these
referrals could have a material adverse effect on the size of our
 potential market as well as our business, financial condition
and results of operation.

Our Continued Growth Depends on Acquisitions

Medicis strategy for continued growth to a material extent
involves the acquisition of new product lines or businesses.
These acquisitions could be by acquiring other pharmaceutical
companies, acquiring a portion of a companys assets or
product lines, or obtaining licenses or other rights to
manufacture and distribute products. Currently, we intend to
focus our acquisition, licensing and development efforts on skin
care products, which has been our historical focus, and possibly
on other specialty pharmaceutical niches. We cannot be certain
that we will be able to identify suitable acquisition candidates
or products or if any will be available at all. In addition, even
 if suitable acquisitions are identified, we may not be able to
secure terms which are beneficial. Other pharmaceutical companies
 with greater financial, marketing and sales resources than we do
 also try to grow through these same acquisition and licensing
strategies. Because of their greater resources, our competitors
may be able to offer better terms for an acquisition than Medicis
 can offer or they may be able to demonstrate a greater ability
than Medicis to market licensed products.

Our Continued Growth Depends Upon Our Ability to
Develop New Products

Medicis has internally developed potential pharmaceutical
compounds and agents; we also have acquired the rights to certain
 potential compounds and agents in various stages of development.
 We currently have a variety of new products in various stages of
 research and development and are working on possible
improvements, extensions and reformulations of some existing
products. These research and development activities, as well as
the clinical testing and regulatory approval process, which must
be completed before commercial quantities of these developments
can be sold, will require significant commitments of personnel
and financial resources. Delays in the research, development,
testing or approval processes will cause a corresponding delay in
 revenue generation from those products. Regardless of whether
they are ever released to the market, the expense of such
processes will have already been incurred.

We reevaluate our research and development efforts regularly to
assess whether our efforts to develop a particular product or
technology are progressing at a rate that justifies our continued
 expenditures. On the basis of these reevaluations, we have
abandoned in the past, and may abandon in the future, our efforts
 on a particular product or technology. There can be no certainty
 that any product we are researching or developing will ever be
successfully released to the market. If we fail to take a product
 or technology from the development stage to market on a timely
basis, we may incur significant expenses without a near-term
financial return.

We have in the past, and may in the future, supplement our
internal research and development by entering into research and
development agreements with other pharmaceutical companies. We
cannot be sure, however, that we will be able to locate adequate
research partners or that supplemental research will be available
 on terms acceptable to us in the future. If Medicis is unable to
 enter into additional research partnership arrangements, we may
incur additional costs to continue research and development
internally or abandon certain projects.

Our Business Strategy May Cause Fluctuating
Operating Results

Our operating results and financial condition may fluctuate from
quarter to quarter and year to year depending upon the relative
timing of events or uncertainties which may arise. For example,
the following events or occurrences could cause fluctuations in
our financial performance from period to period:



| |   |                                                                                  
| | - | ---------------------------------------------------------------------------------
| |  | changes in the levels we spend to develop, acquire or license new
	 product lines
| |  | changes in the amount we spend to promote our products                           

16



---



| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | delays between our expenditures to acquire new product lines or
	businesses and the generation of revenues from those acquired
	products or businesses         
| |  | changes in treatment practices of physicians that currently
	prescribe our products                                                                            
| |  | changes in reimbursement policies of health plans and other
	similar health insurers, including changes that affect newly
	developed or newly acquired products
| |  | increases in the cost of raw materials used to manufacture our
	products                                                                                       
| |  | the development of new competitive products by others                                                                                                          
| |  | the mix of products that we sell during any time period                                                                                                        
| |  | our responses to price competition                                                                                                                             

Fluctuations in Demand for Our Products
Create Inventory Maintenance Uncertainties

Medicis historically has experienced lower sales levels in the
first quarter of our fiscal year (July 1 
September 30). In addition, we typically experience greater
revenues and, correspondingly, greater income during the last
month of each fiscal quarter. We try to match our expenditures
for inventory with these historical fluctuations in demand.
However, if these demand patterns change or we experience even a
small delay in delivery of inventory, revenue could be deferred
or even lost if products are unavailable to meet peak demand. A
deferral of revenue to a later period, or the loss of revenue
completely, could cause significant period-to-period fluctuations
 in our operating results, as a significant portion of our
operating expenses are fixed in the short term. These
fluctuations could result in our not meeting earnings
expectations or result in operating losses for a particular
period.

Medicis Is Subject to Extensive
Governmental Regulation

Pharmaceutical companies are subject to heavy regulation by a
number of national, state and local agencies. Of particular
importance is the FDA in the United States. It has jurisdiction
over all of our business and administers requirements covering
testing, manufacture, safety, effectiveness, labeling, storage,
record keeping, approval, advertising and promotion of our
products. In addition, the FTC and state and local authorities
regulate the advertising of OTC drugs and cosmetics. Failure to
comply with applicable regulatory requirements could, among other
 things, result in fines; suspensions of regulatory approvals of
products; product recalls; delays in product distribution,
marketing and sale; and civil or criminal sanctions.

Our prescription and OTC products receive FDA review regarding
their safety and effectiveness. However, the FDA is permitted to
revisit and change its prior determinations and we cannot be sure
 that the FDA will not change its position with regard to the
safety or effectiveness of our products. If the FDAs
position changes, we may be required to change our labeling or
formulations, or cease to manufacture and market the challenged
products. Even prior to any formal regulatory action, we could
voluntarily decide to cease distribution and sale or recall any
of our products if concerns about the safety or effectiveness
develop.

Before marketing any drug that is considered a new
drug by the FDA, the FDA must provide its premarketing
approval of the product. All products which are considered
cosmetics or drugs which are not new
drugs and that generally are recognized as safe and
effective for use by the FDA do not require the FDAs
premarketing approval. We believe that some of our products, as
they are promoted and intended for use, are exempt from treatment
 as new drugs and are not subject to premarketing
approval by the FDA. The FDA, however, could take a contrary
position and we could be required to seek FDA approval of those
products and the marketing of those products. We could also be
required to withdraw those products from the market.

In recent years, various legislative proposals have been offered
in Congress and in some state legislatures that include major
changes in the health care system. These proposals have included
price or patient reimbursement constraints on medicines and
restrictions on access to certain products. We cannot predict the
 outcome of such initiatives, and it is difficult to predict the
future impact of the broad and expanding legislative and
regulatory requirements affecting us.

We Face Significant Competition Within Our
Industry

The pharmaceutical industry is highly competitive. Competition in
 our industry occurs on a variety of fronts, including developing
 and bringing new products to market before others, developing
new technologies to

17



---



improve existing products, developing new products to provide the
 same benefits as existing products at less cost and developing
new products to provide benefits superior to those of existing
products.

Most of our competitors are large, well-established companies in
the fields of pharmaceuticals, chemicals, cosmetics and health
care. Our competitors include AHP, Warner Chilcott, Barr Labs,
Schering-Plough, Bristol-Myers, Glaxo Wellcome, Galderma, Dermik
Labs, Pharmacia & Upjohn and Pfizer. Many of these companies
have greater resources than we do to devote to marketing, sales,
research and development and acquisitions. As a result, they have
 a greater ability to undertake more extensive research and
development, marketing and pricing policy programs. It is
possible that our competitors may develop new or improved
products to treat the same conditions as our products treat or
make technological advances reducing their cost of production so
that they may engage in price competition through aggressive
pricing policies to secure a greater market share to our
detriment. These competitors also may develop products which make
 our current or future products obsolete. Any of these events
could have a significant negative impact on our business and
financial results, including reductions in our market share and
gross margins.

Medicis sells and distributes both prescription brands and an OTC
 product. Each of these products competes with products produced
by others to treat the same conditions. Several of our
prescription products, including DYNACIN®, LIDEX®,
SYNALAR® and TOPICORT®, compete with generic
pharmaceuticals, which claim to offer equivalent benefit at a
lower cost. In some cases, insurers and other health care payment
 organizations try to encourage the use of these less expensive
generic brands through their prescription benefits coverages and
reimbursement policies. These organizations may make the generic
alternative more attractive to the patient by providing different
 amounts of reimbursement so that the net cost of the generic
product to the patient is less than the net cost of our
prescription brand product. Aggressive pricing policies by our
generic product competitors and the prescription benefits
policies of insurers could cause us to lose market share or force
 us to reduce our margins in response.

Our Success Depends on the Management of
Recent and Future Growth

Medicis recently experienced a period of rapid growth from both
acquisitions and internal expansion of our operations. This
growth has placed significant demands on our human and financial
resources. We must continue to improve our operational, financial
 and management information controls and systems and effectively
motivate, train and manage our employees to properly manage this
growth. Even if these steps are taken, we cannot be sure that our
 recent acquisitions will be assimilated successfully into our
business operations. If we do not manage this growth effectively,
 maintain the quality of our products despite the demands on our
resources and retain key personnel, our business could be
negatively impacted.

There are High Costs of Obtaining FDA and
Other Regulatory Approvals

The process of obtaining FDA and other regulatory approvals is
lengthy and expensive. Clinical trials are required and the
marketing and manufacturing of pharmaceutical products are
subject to rigorous testing procedures. We may not be able to
obtain FDA approval to conduct clinical trials or to manufacture
and market any of the products we develop, acquire or license.
Moreover, the costs to obtain approvals could be considerable and
 the failure to obtain or delays in obtaining an approval could
have a significant negative effect on our business performance
and financial results. Even if premarketing approval from the FDA
 is received, the FDA is authorized to impose post-marketing
requirements such as:



| |   |                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | testing and surveillance to monitor the product and its continued
	 compliance with regulatory requirements                                                              
| |  | submitting products for inspection and, if any inspection reveals
	 that the product is not in compliance, the prohibition of the
	sale of all products from the same lot
| |  | suspending manufacturing                                                                                                                                                 
| |  | recalling products                                                                                                                                                       
| |  | withdrawing marketing clearance                                                                                                                                          

In its regulation of advertising, the FDA from time to time
issues correspondence to pharmaceutical companies alleging that
some advertising or promotional practices are false, misleading
or deceptive. The FDA has

18



---



the power to impose a wide array of sanctions on companies for
such advertising practices, and the receipt of correspondence
from the FDA alleging these practices can result in the
following:



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incurring substantial expenses, including fines, penalties, legal
	 fees and costs to comply with the FDAs requirements                                          
| |  | changes in the methods of marketing and selling products                                                                                                          
| |  | taking FDA-mandated corrective action, which may include placing
	advertisements or sending letters to physicians rescinding
	previous advertisements or promotion
| |  | disruption in the distribution of products and loss of sales
	until compliance with the FDAs position is obtained                                                

Dependence of Licenses from Others

We have acquired the right to manufacture, use or market certain
products, including our Key Products. We also expect to continue
to obtain licenses for other products and technologies in the
future. Our license agreements generally require us to develop a
market for the licensed products. If we do not exert enough
efforts to develop these markets, the licensors may be entitled
to terminate these license agreements.

We cannot be certain that we will fulfill all of our obligations
under any particular license agreement for any variety of
reasons, including insufficient resources to adequately develop
and market a product, lack of market development despite our
diligence and lack of product acceptance. Our failure to fulfill
our obligations could result in the loss of our rights under a
license agreement.

Our inability to continue the distribution of any particular
licensed product could have a material negative effect on our
business, market share and profitability. Also, certain products
we license are used in connection with other products we own or
license. A loss of a license in such circumstances could
materially harm our ability to market and distribute these other
products.

Our growth and acquisition strategy depends on the successful
integration of licensed products with our existing products.
Therefore, any loss, limitation or flaw in a licensed product
could impair our ability to market and sell our products, delay
new product development and introduction, and/or adversely affect
 our reputation. These problems, individually or together, could
have a material adverse effect on our business and results of
operation.

Adequacy of Trademarks, Patents and
Proprietary Rights

We believe that the protection of our trademarks and service
marks is an important factor in product recognition and in
maintaining or increasing market share. If we do not adequately
protect our rights in our various trademarks and service marks
from infringement, any goodwill which has been developed in those
 marks could be lost or impaired. If the marks we use are found
to infringe upon the trademark or service mark of another
company, we could be forced to quit using those marks and, as a
result, we could lose all the goodwill which has been developed
in those marks and could be liable for damages caused by an
infringement.

We are pursuing several U. S. patent applications, although we
cannot be sure that any of these patents will ever be issued. We
also have acquired rights under certain patents and patent
applications in connection with our licenses to distribute
products and from the assignment rights to patents and patent
applications from certain of our consultants and officers. These
patents and patent applications may be subject to claims of
rights by third parties. If there are conflicting claims to the
same patent or patent application, we may not prevail and, even
if we do have some rights in a patent or application, those
rights may not be sufficient for the marketing and distribution
of products covered by the patent or application.

The patents and applications in which we have an interest may be
challenged as to their validity or enforceability. Challenges may
 result in potentially significant harm to our business. The cost
 of responding to these challenges and the inherent costs to
defend the validity of our patents, including the prosecution of
infringements and the related litigation, could be substantial.
Such litigation also could require a substantial commitment of
managements time.

19



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The ownership of a patent or an interest in a patent does not
always provide significant protection. Others may independently
develop similar technologies or design around the patented
aspects of our technology. We only conduct patent searches to
determine whether our products infringe upon any existing
patents, when we think such searches are appropriate. As a
result, the products and technologies we currently market, and
those we may market in the future, may infringe on patents and
other rights owned by others. If we are unsuccessful in any
challenge to the marketing and sale of our products or
technologies, we may be required to license the disputed rights,
if the holder of those rights is willing, or to cease marketing
the challenged products, or to modify our products to avoid
infringing upon those rights.

We also rely upon unpatented proprietary know-how and continuing
technological innovation in developing and manufacturing many of
our principal products. Medicis requires all of its employees,
consultants and advisors to enter into confidentiality agreements
 prohibiting them from taking our proprietary information and
technology. Nevertheless, these agreements may not provide
meaningful protection of our trade secrets and proprietary
know-how if they are used or disclosed. Despite all of the
precautions we may take, people who are not parties to
confidentiality agreements may obtain access to our trade secrets
 or know-how. In addition, others may independently develop
similar or equivalent trade secrets or know-how.

Product Liability

Medicis is exposed to risks of product liability claims from
allegations that our products resulted in adverse effects to the
patient or others. These risks exist even with respect to those
products that are approved for commercial sale by the FDA and
manufactured in facilities licensed and regulated by the FDA.

In addition to our desire to reduce the scope of our potential
exposure to these types of claims, many of our customers require
us to maintain product liability insurance as a condition of
conducting business with us. We currently carry product liability
 insurance in the amount of $50.0 million per claim and $50.0
million in the aggregate on a claims-made basis. Nevertheless,
this insurance may not be sufficient to cover all claims made
against us. We also cannot be certain that our current coverage
will continue to be available in the future on reasonable terms,
if at all. If we are liable for any product liability claims in
excess of our coverage or outside of our coverage, the cost and
expense of such liability could severely damage our business,
financial condition and profitability.

Successful Integration of New Products Is
Not Certain

When we acquire or develop new products and product lines, we
must be able to integrate those products and product lines into
our systems for marketing, sales and distribution. If these
products or product lines are not integrated successfully, the
potential for growth is limited. The new products we acquire or
develop could have channels of distribution, competition, price
limitations or marketing acceptance different from our current
products. As a result, we do not know whether we will be able to
compete effectively and obtain market acceptance in any new
product categories. After acquiring or developing a new product,
we may need to significantly increase our sales force and incur
additional marketing, distribution and other operational
expenses. These additional expenses could negatively affect our
gross margins and operating results. In addition, many of these
expenses could be incurred prior to the actual distribution of
new products. Because of this timing, if the new products are not
 accepted by the market or if they are not competitive with
similar products distributed by others, the ultimate success of
the acquisition or development could be substantially diminished.

Item 2:  Properties

The Company presently occupies approximately 29,000 square feet
of office space, at an average annual expense of $433,000, under
a lease agreement that expires in May 2005. The lease
contains certain rent escalation clauses and, upon expiration,
can be renewed for a period of five years. Rent expense was
approximately $564,000, $350,000 and $203,000 for fiscal 1999,
1998 and 1997, respectively. The Company is currently evaluating
its present office space in conjunction with its estimated
personnel growth and is considering acquiring additional space,
either at its existing location or, if not available, in another
building within the Phoenix metropolitan area.

20



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Medicis Canada, Inc., a wholly owned subsidiary, presently leases
 approximately 7,500 square feet of office and warehouse space in
 St-Laurent, Quebec, Canada, under a lease agreement that expires
 in April 2000.

Item 3:  Legal Proceedings

The Company and certain of its subsidiaries are parties to
actions and proceedings incident to their businesses, including
certain litigation assumed in connection with the GenDerm
acquisition. The Company believes liability in the event of final
 adverse determinations in any of these matters is either covered
 by the indemnification provided to the Company under the GenDerm
 acquisition agreement, insurance and/or established reserves,
or, will not, in the aggregate, have a material adverse effect on
 the business, financial position or results of operations of the
 Company. There can be no assurance, however, that an adverse
determination on any action or proceeding will not have a
material adverse effect on the business, financial condition and
results of operations of the Company, or that the Company will be
 able to realize the full amount of any indemnification
obligation that any person may have to the Company under the
GenDerm acquisition agreement.

Item 4:  Submission of Matters to a Vote of
Security Holders

No matters were submitted to a vote of the security holders of
the Company during the fourth quarter of fiscal 1999.

PART II

Item 5:  Market for Registrants Common
Equity and Related Stockholder Matters

The market for the Companys Class A Common Stock is
the New York Stock Exchange. Additional information required by
this item is incorporated by reference from page 39 of the
Companys 1999 Annual Report to Shareholders.

Item 6:  Selected Financial Data

Historical financial information is incorporated by reference
from the Selected Financial Data table on page 40 of the 1999
Annual Report to Shareholders.

Item 7:  Managements Discussion and
Analysis of Financial Condition and Results of Operations

Information required by this item is incorporated by reference on
 pages 14-21 of the 1999 Annual Report to Shareholders.

Item 7A:  Quantitative and Qualitative
Disclosures about Market Risk

Information required by this item is incorporated by reference
from the discussion under the heading Market Risk and Risk
Management Policies on page 21 of the 1999 Annual Report to
Shareholders.

21



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Item 8:  Financial Statements and Supplementary
Data

Information required by this item is incorporated by reference
from the Independent Auditors Report found on page 22 and from
the Consolidated Financial Statements and Supplementary Data on
pages 23-40 of the 1999 Annual Report to Shareholders.

Item 9:  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10:  Directors and Executive Officers of the
 Registrant

Item 11:  Executive Compensation

Item 12:  Security Ownership of Certain
Beneficial Owners and Management

Item 13:  Certain Relationships and Related
Transactions

The information called for by Items 10, 11, 12 and 13 are
incorporated by reference to the Companys definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders to be filed
 pursuant to Regulation 14A.

PART IV

Item 14:  Exhibits, Financial Statement Schedules
 and Reports on Form 8-K

Item 14(a)(1):

Financial Statements

The following consolidated financial statements, related notes
and independent auditors report, from the 1999 Annual Report to
Shareholders, are incorporated by reference into item 8 of Part
II of this report:

|                                               |  |                            |    |    
|---------------------------------------------- |  | -------------------------- | -- | ---
|                                               |  | Page(s) In The 1999 Annual
|                                               |  | Report To Shareholders    
|                                               |  | Page                      
|                                               |  |                           
|Independent Auditors Report                    |  |                            | 22 |    
|                                              
|                                              
|                                              
|                                              
|Consolidated Balance Sheets                    |  |                            | 23 | -24
|                                              
|                                              
|                                              
|                                              
|Consolidated Statements of Income (Loss)       |  |                            | 25 |    
|                                              
|                                              
|                                              
|                                              
|Consolidated Statement of Shareholders Equity |  |                            | 26 | -27
|                                              
|                                              
|                                              
|                                              
|Consolidated Statements of Cash Flows          |  |                            | 28 |    
|                                              
|                                              
|                                              
|                                              
|Notes to Consolidated Financial Statements     |  |                            | 29 | -38
|                                              
|                                              
|                                              
|                                              
|Quarterly Consolidated Financial Information   |  |                            | 38 |    

22



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Item 14 (a)(2):

Financial Statement Schedules

Schedule II 
Valuation and Qualifying
Accounts                         S-1

The financial statement schedule should be read in conjunction
with the consolidated financial statements. Financial Statement
schedules not included in this Form 10-K have been omitted
because they are not applicable or the required information is
shown in the financial statements or notes thereto.

Item 14 (a)(3):

Exhibits Filed as Part of This Report

|            |          |  |  |             |  |                                                                                                                                                                                                                                         
|----------- | -------- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 2.1      |  |  |            |  | Agreement of Merger by and between Medicis Pharmaceutical
	Corporation, a Delaware corporation, Medicis Acquisition
	Corporation, a Delaware corporation, and GenDerm Corporation, a
	Delaware corporation, dated November 28,  1997(14)
|            | 3.1      |  |  |            |  | Certificate of Incorporation of the Company, as amended(7)                                                                                                                                                                              
|            | 3.3(a)   |  |  |            |  | Amended and Restated By-Laws of the Company(16)                                                                                                                                                                                         
|            | 4.1      |  |  |            |  | Rights Agreement, dated August 17, 1995, between the Company
	 and American Stock Transfer & Trust Company, as Rights
	Agent(7)                                                                                                         
|            | 4.1b     |  |  |            |  | Amendment No. 2 to Rights Agreement, dated March 17,
	1997, between the Company and Norwest Bank
	Minnesota, N.A.(12)                                                                                                                   
|            | 4.3      |  |  |            |  | Form of specimen certificate representing Class A Common
	Stock(1)                                                                                                                                                                      
|            | 10.8     |  |  |            |  | Medicis Pharmaceutical Corporation 1995 Stock Option Plan
	(incorporated by reference to Exhibit C to the definitive
	Proxy Statement for the 1995 Annual Meeting of Shareholders
	previously filed with the SEC, File No. 0-18443)     
|            | 10.9     |  |  |            |  | Employment Agreement between the Company and Jonah Shacknai,
	dated July 24, 1996(11)                                                                                                                                                   
|            | 10.10    |  |  |            |  | Medicis Pharmaceutical Corporation 1988 Stock Option Plan, as
	amended(2)                                                                                                                                                               
|            | 10.14    |  |  |            |  | Non-Exclusive License Agreement between Syosset Laboratories,
	Inc. and Medicis Dermatologics, Inc., dated July 25, 1990,
	and the Guaranty of the Company(3)                                                                           
|            | 10.15    |  |  |            |  | Manufacturing Agreement between Syosset Laboratories, Inc. and
	Medicis Dermatologics, Inc., dated July 25, 1990, and the
	Guaranty of the Company(3)                                                                                   
|            | 10.16    |  |  |            |  | Sales Agency Agreement between Syosset Laboratories, Inc. and
	Medicis Dermatologics, Inc., dated July 25, 1990, and the
	Guaranty of the Company(3)                                                                                    
|            | 10.18    |  |  |            |  | Medicis Pharmaceutical Corporation 1990 Stock Option Plan, as
	amended(2)                                                                                                                                                               
|            | 10.49    |  |  |            |  | Option to Purchase Class A Common Stock granted to
	Stephen  B. Booke(2)                                                                                                                                                                
|            | 10.58    |  |  |            |  | Medicis Pharmaceutical Corporation 1992 Stock Option Plan(5)                                                                                                                                                                            
|            | 10.59    |  |  |            |  | Supply Agreement, dated October 21, 1992, between Schein and
	 the Company(4)                                                                                                                                                           
|            | 10.70    |  |  |            |  | Amendment to Manufacturing and Supply Agreement, dated
	March 2, 1993, between Schein and the Company(6)                                                                                                                                
|            | 10.72(a) |  |  |            |  | Credit and Security Agreement, dated August 3, 1995, between
	 the Company and Norwest Business Credit, Inc.(8)                                                                                                                         
|            | 10.72(b) |  |  |            |  | First Amendment to Credit and Security Agreement, dated May 
	 29, 1996, between the Company and Norwest Bank Arizona, N.A.(11)                                                                                                         
|            | 10.72(c) |  |  |            |  | Second Amendment to Credit and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A. as successor-in-interest to Norwest Business
	Credit, Inc.(13)                                  
|            | 10.72(d) |  |  |            |  | Third Amendment to Credit and Security Agreement, dated
	November 22, 1998 by and between the Company and Norwest
	Bank Arizona, N.A., as successor-in-interest to Norwest Business
	Credit, Inc.(15)                                   
|            | 10.73(a) |  |  |            |  | Patent Collateral Assignment and Security Agreement, dated
	August 3, 1995 by the Company to Norwest Business Credit,
	Inc.(9)                                                                                                          
|            | 10.73(b) |  |  |            |  | First Amendment to Patent Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(11)                                                                                          
|            | 10.73(c) |  |  |            |  | Amended and Restated Patent Collateral Assignment and Security
	Agreement, dated November 22, 1998, by the Company to
	Norwest Bank Arizona, N.A.(15)                                                                                   

23



---



|            |          |  |  |             |  |                                                                                                                                                                                                  
|----------- | -------- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 10.74(a) |  |  |            |  | Trademark Collateral Assignment and Security Agreement, dated
	August 3, 1995, by the Company to Norwest Business Credit,
	Inc.(10)                                                              
|            | 10.74(b) |  |  |            |  | First Amendment to Trademark Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(11)                                                
|            | 10.74(c) |  |  |            |  | Amended and Restated Trademark, Tradename, and Service Mark
	Collateral Assignment and Security Agreement, dated
	November 22, 1998, by the Company to Norwest Bank Arizona,
	N.A.(15)           
|            | 10.75    |  |  |            |  | Assignment and Assumption of Loan Documents, dated May 29,
	1996, from Norwest Business Credit, Inc., to and by Norwest Bank
	Arizona, N.A.(11)                                                  
|            | 10.76    |  |  |            |  | Multiple Advance Note, dated May 29, 1996, from the Company
	to Norwest Bank Arizona, N.A.(11)                                                                                                   
|            | 10.77    |  |  |            |  | Securities Account Pledge and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A.(13)                                                       
|            | 10.77(a) |  |  |            |  | First Amendment to Securities Account Pledge and Security
	Agreement dated November 22, 1998, by and between the
	Company and Norwest Bank Arizona, N.A.(15)                                     
|            | 10.78    |  |  |            |  | Acknowledgment of Control of Pledged Securities Account, dated
	November 22, 1996, by and among Norwest Bank Arizona, N.A.
	and the Company and Norwest Bank Minnesota, N.A.(13)                 
|            | 10.78(a) |  |  |            |  | First Amendment to Acknowledgement of Control of Pledged
	Securities Account dated November 22, 1998, by and between
	the Company and Norwest Bank Arizona, N.A.(15)                             
|            | 10.79    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and Syntex (U.S.A.), Inc.(12)                                                                                             
|            | 10.80    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and Syntex (U.S.A.), Inc.(12)                                                                                             
|            | 10.81    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and F. Hoffman-La Roche, Limited(12)                                                                                      
|            | 10.82    |  |  |            |  | Asset Purchase Agreement dated January 21, 1997, between the
	 Company and Syntex Pharmaceuticals International Limited(12)                                                                      
|            | 10.83    |  |  |            |  | Transition Services Agreement dated January 21, 1997,
	between the Company and F. Hoffman-La Roche, Inc.(12)                                                                                     
|            | 10.84    |  |  |            |  | Transition Services Agreement dated January 21, 1997,
	between the Company and F. Hoffman-La Roche Limited(12)                                                                                   
|            | 10.85    |  |  |            |  | Supply Agreement (Fluocinolone Acetonide and Fluocinonide), dated
	 January 21, 1997, between the Company and Syntex
	Pharmaceuticals International Limited(12)                                  
|            | 10.86    |  |  |            |  | License Agreement, dated March 28, 1997, between the Company
	 and Platinum (R) Software Corporation(12)                                                                                         
|            | 10.87    |  |  |            |  | Master Software License Agreement, dated March 28, 1997,
	between the Company and FocusSoft, Inc.(12)                                                                                            
|            | 10.88    |  |  |            |  | Replacement Acquisition Revolving Note dated November 22,
	1998, by and between the Company and Norwest Bank Arizona,
	N.A.(15)                                                                  
|            | 10.89    |  |  |            |  | Asset Purchase Agreement dated November 15, 1998, by and
	among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMHB and Hoechst Marion Roussel,
	S.A.(15)     
|            | 10.90    |  |  |            |  | License and Option Agreement dated November 15, 1998, by and
	 among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMBH and Hoechst Marion Roussel,
	S.A.(15)
|            | 10.91    |  |  |            |  | Loprox Lotion Supply Agreement dated November 15, 1998, by
	and between the Company and Hoechst Marion Roussel, Inc.(15)                                                                         
|            | 10.92    |  |  |            |  | Supply Agreement dated November 15, 1998, by and between the
	 Company and Hoechst Marion Roussel Deutschland GMBH(15)                                                                           
|            | 10.93    |  |  |            |  | Asset Purchase Agreement effective January 31, 1999, between
	 the Company and Bioglan Pharma PLC(17)                                                                                            
|            | 10.94    |  |  |            |  | Stock Purchase Agreement by and among the Company, Ucyclyd
	Pharma, Inc. and Syed E. Abidi, William Brusilow,
	Susan E. Brusilow and Norbert L. Wiech, dated
	April 19, 1999(17)                 
|            | 10.95    |  |  |            |  | Asset Purchase Agreement by and between the Company and Bioglan
	Pharma Plc dated June 29, 1999(17)                                                                                              
|            | 10.96    |  |  |            |  | Asset Purchase Agreement by and among The Exorex Company, LLC,
	Bioglan Pharma Plc, the Company and IMX Pharmaceuticals, Inc.
	dated June 29, 1999(17)                                           

24



---



|            |       |  |  |             |  |                                                                
|----------- | ----- |  |  | ----------- |  | ---------------------------------------------------------------
|Exhibit No. |       |  |  | Description
|            |       |  |  |            
|            | 10.97 |  |  |            |  | Medicis Pharmaceutical Corporation Executive Retention Plan(17)
|            | 13    |  |  |            |  | 1999 Annual Report to Shareholders(17)                         
|            | 21.1  |  |  |            |  | Subsidiaries(17)                                               
|            | 23.1  |  |  |            |  | Consent of Ernst & Young LLP, Independent Auditors(17)         
|            | 24.1  |  |  |            |  | Power of Attorney(17) See signature page(s)                    
|            | 27.1  |  |  |            |  | Financial Data Schedule(17)                                    




|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the exhibit with the same number in
	the Registration Statement on Form S-1 of the Registrant,
	File No. 33-32918, filed with the SEC on January 16,
	1990                           
|   
|(2) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1992, as amended, File
	No. 0-18443, previously filed with the SEC
|   
|(3) | Incorporated by reference to the exhibit with the same number in
	Amendment No.  2 to the Registration Statement on
	Form S-1 of the Company, File No. 33-34041, filed with
	the SEC on August 2, 1990            
|   
|(4) | Incorporated by reference to the exhibit with the same number in
	Registration Statement on Form S-1 of the Company, File
	No.  33-54276, filed with the SEC on June 11, 1993                                     
|   
|(5) | Incorporated by reference to Exhibit B to the Companys
	 definitive Proxy Statement for its 1992 Annual Meeting of
	Shareholders, File No. 0-18443, previously filed with the
	SEC.                              
|   
|(6) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1993, File No. 0-18443, filed with
	 the SEC on October 13, 1993  
|   
|(7) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1995, File No. 0-18443, filed with
	 the SEC on September 27, 1995
|   
|(8) | Incorporated by reference to exhibit number 4.2 in the 1995
	Form 10-K                                                                                                                                            
|   
|(9) | Incorporated by reference to exhibit number 4.4 in the 1995
	Form 10-K                                                                                                                                            



|     |                                                                                                                                                                                                                   
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to exhibit number 4.5 in the 1995
	Form 10-K                                                                                                                                            
|    
|(11) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1996, File No. 0-18443, filed with
	 the SEC on September 24, 1996
|    
|(12) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1997, File No. 0-18443,
	previously filed with the SEC             
|    
|(13) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1996, File No. 0-18443,
	previously filed with the SEC          
|    
|(14) | Incorporated by reference to the exhibit with the same number in
	the Companys Current Report on Form 8-K filed with the
	 SEC on December 15, 1997                                                              
|    
|(15) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1998, File No. 0-18443,
	previously filed with the SEC          
|    
|(16) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1999, File No. 0-18443,
	previously filed with the SEC             
|    
|(17) | Filed herewith                                                                                                                                                                                                    

25



---





|    |                    
|--- | -------------------
|(b) | Reports on Form 8-K

During the fourth quarter of fiscal 1999, the Company filed the
following reports on Form 8-K:



| |      |                                                                                                                                                                                                                        
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)  | Current report on Form 8-K dated April 23, 1999
	reporting under Item 5 that the Company acquired all the
	issued and outstanding common stock of Ucyclyd Pharma, Inc.                                                 
|
| | (ii) | Current report on form 8-K dated May 18, 1999 reporting
	under Item 5 that the Companys Board of Directors
	adopted a resolution authorizing the plan to repurchase up to $75
	 million of the Companys common stock.

26



---



POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonah Shacknai and
Mark A. Prygocki, Sr., or either of them, as his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and a all capacities, to sign any and all
amendments to this Annual Report on Form 10-K and any
documents related to this report and filed pursuant to the
Securities and Exchange Act of 1934, and to file the same, with
all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority
to do and perform each and every act and thing requisite and
necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Date:  September 28, 1999



| |                                   
| | ----------------------------------
| | MEDICIS PHARMACEUTICAL CORPORATION



| |     |                   
| | --- | ------------------
| | By: | /s/ JONAH SHACKNAI

| |                                                  
| | -------------------------------------------------
| | Jonah Shacknai                                   
| | Chairman of the Board and Chief Executive Officer



| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pursuant to the requirements of the Securities Exchange Act of
	1934, this report has been signed below by the following persons
	on behalf of the Registrant in the capacities and on the dates
	indicated.

|                                                   |  |                                                                                               |  |                   
|-------------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | ------------------
|Signature                                          |  | Title                                                                                         |  | Date              
|                                                   |  |                                                                                               |  |                   
|/s/ JONAH SHACKNAIJonah Shacknai                   |  | Chairman of the Board of Directors and Chief Executive Officer
	(Principal Executive Officer) |  | September 28, 1999
|                                                  
|/s/ MARK A. PRYGOCKI, SR.Mark A. Prygocki, Sr.     |  | Chief Financial Officer (Principal Financial and Accounting
	Officer)                         |  | September 28, 1999
|                                                  
|/s/ ARTHUR G. ALTSCHUL, JR.Arthur G. Altschul, Jr. |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ SPENCER DAVIDSONSpencer Davidson               |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ RICHARD L DOBSON, M.D.Richard L. Dobson, M.D.  |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ PETER S. KNIGHT, ESQ.Peter S. Knight, Esq.     |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ MICHAEL A. PIETRANGELOMichael A. Pietrangelo   |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ PHILIP S. SCHEIN, M.D.Philip S. Schein, M.D.   |  | Director                                                                                      |  | September 28, 1999
|                                                  
|/s/ LOTTIE SHACKELFORDLottie Shackelford           |  | Director                                                                                      |  | September 28, 1999

27



---



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

|                         |                               |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |           | 
|------------------------ | ----------------------------- | ------------------- |  | ---------- | --------- | -------------- |  | ---------- | ---------- | ----------- |  | - | --------- | --- |  | - | - |  |  | - | --------- | 
|                         |                               | Balance at          |  | Charged to |           |                |  |            |            |            
|                         |                               | beginning of        |  | Costs and  |           | Charged to     |  |            |            | Balance at 
|Description              |                               | year                |  | expenses   |           | other accounts |  | Deductions |            | end of year
|                         |                               |                     |  |            |           |                |  |            |            |            
|Year Ended June 30, 1999 |                               |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                         |                               | Allowances          |  | $          | 2,826,000 |                |  | $          | 989,000    |             |  | $ |          |     |  | $ |  |  |  | $ | 3,815,000 | 
|Year Ended June 30, 1998 |                               |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                         |                               | Allowances          |  |            | 1,150,000 |                |  |            | 460,000    |             |  |   | 1,216,000 | (1) |  |   |  |  |  |   | 2,826,000 | 
|Year Ended June 30, 1997 |                               |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                         |                               | Allowances          |  |            | 680,000   |                |  |            | 470,000    |             |  |   |          |     |  |   |  |  |  |   | 1,150,000 | 
|                        
|                        
|                        
|                        
|                         | Deferred tax assets:          |                     |  |            |           |                |  |            |            |             |  |   |           |     |  |   |   |  |  |   |          
|                         |                               | Valuation allowance |  |            | 8,600,000 |                |  |            | (8,600,000 | )           |  |   |          |     |  |   |  |  |  |   |          | 




|    |                                             
|--- | --------------------------------------------
|(1) | Allowance related to acquisition of GenDerm.

S-1



---



EXHIBIT INDEX

|            |          |  |  |             |  |                                                                                                                                                                                                                                        
|----------- | -------- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 2.1      |  |  |            |  | Agreement of Merger by and between Medicis Pharmaceutical
	Corporation, a Delaware corporation, Medicis Acquisition
	Corporation, a Delaware corporation, and GenDerm Corporation, a
	Delaware corporation, dated November 28, 1997(14)
|            | 3.1      |  |  |            |  | Certificate of Incorporation of the Company, as amended(7)                                                                                                                                                                             
|            | 3.3(a)   |  |  |            |  | Amended and Restated By-Laws of the Company(16)                                                                                                                                                                                        
|            | 4.1      |  |  |            |  | Rights Agreement, dated August 17, 1995, between the Company
	 and American Stock Transfer & Trust Company, as Rights
	Agent(7)                                                                                                        
|            | 4.1b     |  |  |            |  | Amendment No. 2 to Rights Agreement, dated March 17,
	1997, between the Company and Norwest Bank Minnesota, N.A.(12)                                                                                                                   
|            | 4.3      |  |  |            |  | Form of specimen certificate representing Class A Common
	Stock(1)                                                                                                                                                                     
|            | 10.8     |  |  |            |  | Medicis Pharmaceutical Corporation 1995 Stock Option Plan
	(incorporated by reference to Exhibit C to the definitive
	Proxy Statement for the 1995 Annual Meeting of Shareholders
	previously filed with the SEC, File No. 0-18443)    
|            | 10.9     |  |  |            |  | Employment Agreement between the Company and Jonah Shacknai,
	dated July 24, 1996(11)                                                                                                                                                  
|            | 10.10    |  |  |            |  | Medicis Pharmaceutical Corporation 1988 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.14    |  |  |            |  | Non-Exclusive License Agreement between Syosset Laboratories,
	Inc. and Medicis Dermatologics, Inc., dated July 25, 1990,
	and the Guaranty of the Company(3)                                                                          
|            | 10.15    |  |  |            |  | Manufacturing Agreement between Syosset Laboratories, Inc. and
	Medicis Dermatologics, Inc., dated July 25, 1990, and the
	Guaranty of the Company(3)                                                                                  
|            | 10.16    |  |  |            |  | Sales Agency Agreement between Syosset Laboratories, Inc. and
	Medicis Dermatologics, Inc., dated July 25, 1990, and the
	Guaranty of the Company(3)                                                                                   
|            | 10.18    |  |  |            |  | Medicis Pharmaceutical Corporation 1990 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.49    |  |  |            |  | Option to Purchase Class A Common Stock granted to
	Stephen  B. Booke(2)                                                                                                                                                               
|            | 10.58    |  |  |            |  | Medicis Pharmaceutical Corporation 1992 Stock Option Plan(5)                                                                                                                                                                           
|            | 10.59    |  |  |            |  | Supply Agreement, dated October 21, 1992, between Schein and
	 the Company(4)                                                                                                                                                          
|            | 10.70    |  |  |            |  | Amendment to Manufacturing and Supply Agreement, dated
	March 2, 1993, between Schein and the Company(6)                                                                                                                               
|            | 10.72(a) |  |  |            |  | Credit and Security Agreement, dated August 3, 1995, between
	 the Company and Norwest Business Credit, Inc.(8)                                                                                                                        
|            | 10.72(b) |  |  |            |  | First Amendment to Credit and Security Agreement, dated May 
	 29, 1996, between the Company and Norwest Bank Arizona, N.A.(11)                                                                                                        
|            | 10.72(c) |  |  |            |  | Second Amendment to Credit and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A. as successor-in-interest to Norwest Business
	Credit, Inc.(13)                                 
|            | 10.72(d) |  |  |            |  | Third Amendment to Credit and Security Agreement, dated
	November 22, 1998 by and between the Company and Norwest
	Bank Arizona, N.A., as successor-in-interest to Norwest Business
	Credit, Inc.(15)                                  
|            | 10.73(a) |  |  |            |  | Patent Collateral Assignment and Security Agreement, dated
	August 3, 1995 by the Company to Norwest Business Credit,
	Inc.(9)                                                                                                         
|            | 10.73(b) |  |  |            |  | First Amendment to Patent Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(11)                                                                                         
|            | 10.73(c) |  |  |            |  | Amended and Restated Patent Collateral Assignment and Security
	Agreement, dated November 22, 1998, by the Company to
	Norwest Bank Arizona, N.A.(15)                                                                                  



---



|            |          |  |  |             |  |                                                                                                                                                                                                  
|----------- | -------- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 10.74(a) |  |  |            |  | Trademark Collateral Assignment and Security Agreement, dated
	August 3, 1995, by the Company to Norwest Business Credit,
	Inc.(10)                                                              
|            | 10.74(b) |  |  |            |  | First Amendment to Trademark Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(11)                                                
|            | 10.74(c) |  |  |            |  | Amended and Restated Trademark, Tradename, and Service Mark
	Collateral Assignment and Security Agreement, dated
	November 22, 1998, by the Company to Norwest Bank Arizona,
	N.A.(15)           
|            | 10.75    |  |  |            |  | Assignment and Assumption of Loan Documents, dated May 29,
	1996, from Norwest Business Credit, Inc., to and by Norwest Bank
	Arizona, N.A.(11)                                                  
|            | 10.76    |  |  |            |  | Multiple Advance Note, dated May 29, 1996, from the Company
	to Norwest Bank Arizona, N.A.(11)                                                                                                   
|            | 10.77    |  |  |            |  | Securities Account Pledge and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A.(13)                                                       
|            | 10.77(a) |  |  |            |  | First Amendment to Securities Account Pledge and Security
	Agreement dated November 22, 1998, by and between the
	Company and Norwest Bank Arizona, N.A.(15)                                     
|            | 10.78    |  |  |            |  | Acknowledgment of Control of Pledged Securities Account, dated
	November 22, 1996, by and among Norwest Bank Arizona, N.A.
	and the Company and Norwest Bank Minnesota, N.A.(13)                 
|            | 10.78(a) |  |  |            |  | First Amendment to Acknowledgement of Control of Pledged
	Securities Account dated November 22, 1998, by and between
	the Company and Norwest Bank Arizona, N.A.(15)                             
|            | 10.79    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and Syntex (U.S.A.), Inc.(12)                                                                                             
|            | 10.80    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and Syntex (U.S.A.), Inc.(12)                                                                                             
|            | 10.81    |  |  |            |  | Asset Purchase Agreement, dated January 21, 1997, between
	the Company and F. Hoffman-La Roche, Limited(12)                                                                                      
|            | 10.82    |  |  |            |  | Asset Purchase Agreement dated January 21, 1997, between the
	 Company and Syntex Pharmaceuticals International Limited(12)                                                                      
|            | 10.83    |  |  |            |  | Transition Services Agreement dated January 21, 1997,
	between the Company and F. Hoffman-La Roche, Inc.(12)                                                                                     
|            | 10.84    |  |  |            |  | Transition Services Agreement dated January 21, 1997,
	between the Company and F. Hoffman-La Roche Limited(12)                                                                                   
|            | 10.85    |  |  |            |  | Supply Agreement (Fluocinolone Acetonide and Fluocinonide), dated
	 January 21, 1997, between the Company and Syntex
	Pharmaceuticals International Limited(12)                                  
|            | 10.86    |  |  |            |  | License Agreement, dated March 28, 1997, between the Company
	 and Platinum®Software Corporation(12)                                                                                             
|            | 10.87    |  |  |            |  | Master Software License Agreement, dated March 28, 1997,
	between the Company and FocusSoft, Inc.(12)                                                                                            
|            | 10.88    |  |  |            |  | Replacement Acquisition Revolving Note dated November 22,
	1998, by and between the Company and Norwest Bank Arizona,
	N.A.(15)                                                                  
|            | 10.89    |  |  |            |  | Asset Purchase Agreement dated November 15, 1998, by and
	among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMHB and Hoechst Marion Roussel,
	S.A.(15)     
|            | 10.90    |  |  |            |  | License and Option Agreement dated November 15, 1998, by and
	 among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMBH and Hoechst Marion Roussel,
	S.A.(15)
|            | 10.91    |  |  |            |  | Loprox Lotion Supply Agreement dated November 15, 1998, by
	and between the Company and Hoechst Marion Roussel, Inc.(15)                                                                         
|            | 10.92    |  |  |            |  | Supply Agreement dated November 15, 1998, by and between the
	 Company and Hoechst Marion Roussel Deutschland GMBH(15)                                                                           
|            | 10.93    |  |  |            |  | Asset Purchase Agreement effective January 31, 1999, between
	 the Company and Bioglan Pharma PLC(17)                                                                                            
|            | 10.94    |  |  |            |  | Stock Purchase Agreement by and among the Company, Ucyclyd
	Pharma, Inc. and Syed E. Abidi, William Brusilow,
	Susan E. Brusilow and Norbert L. Wiech, dated April 19,
	 1999(17)                
|            | 10.95    |  |  |            |  | Asset Purchase Agreement by and between the Company and Bioglan
	Pharma Plc dated June 29, 1999(17)                                                                                              
|            | 10.96    |  |  |            |  | Asset Purchase Agreement by and among The Exorex Company, LLC,
	Bioglan Pharma Plc, the Company and IMX Pharmaceuticals, Inc.
	dated June 29, 1999(17)                                           



---



|            |       |  |  |             |  |                                                                
|----------- | ----- |  |  | ----------- |  | ---------------------------------------------------------------
|Exhibit No. |       |  |  | Description
|            |       |  |  |            
|            | 10.97 |  |  |            |  | Medicis Pharmaceutical Corporation Executive Retention Plan(17)
|            | 13    |  |  |            |  | 1999 Annual Report to Shareholders(17)                         
|            | 21.1  |  |  |            |  | Subsidiaries(17)                                               
|            | 23.1  |  |  |            |  | Consent of Ernst & Young LLP, Independent Auditors(17)         
|            | 24.1  |  |  |            |  | Power of Attorney(17) See signature page(s)                    
|            | 27.1  |  |  |            |  | Financial Data Schedule(17)                                    




|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the exhibit with the same number in
	the Registration Statement on Form S-1 of the Registrant,
	File No. 33-32918, filed with the SEC on January 16,
	1990                           
|   
|(2) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1992, as amended, File
	No. 0-18443, previously filed with the SEC
|   
|(3) | Incorporated by reference to the exhibit with the same number in
	Amendment No.  2 to the Registration Statement on
	Form S-1 of the Company, File No. 33-34041, filed with
	the SEC on August 2, 1990            
|   
|(4) | Incorporated by reference to the exhibit with the same number in
	Registration Statement on Form S-1 of the Company, File
	No.  33-54276, filed with the SEC on June 11, 1993                                     
|   
|(5) | Incorporated by reference to Exhibit B to the Companys
	 definitive Proxy Statement for its 1992 Annual Meeting of
	Shareholders, File No. 0-18443, previously filed with the
	SEC.                              
|   
|(6) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1993, File No. 0-18443, filed with
	 the SEC on October 13, 1993  
|   
|(7) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1995, File No. 0-18443, filed with
	 the SEC on September 27, 1995
|   
|(8) | Incorporated by reference to exhibit number 4.2 in the 1995
	Form 10-K                                                                                                                                            
|   
|(9) | Incorporated by reference to exhibit number 4.4 in the 1995
	Form 10-K                                                                                                                                            



|     |                                                                                                                                                                                                                   
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to exhibit number 4.5 in the 1995
	Form 10-K                                                                                                                                            
|    
|(11) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1996, File No. 0-18443, filed with
	 the SEC on September 24, 1996
|    
|(12) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1997, File No. 0-18443,
	previously filed with the SEC             
|    
|(13) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1996, File No. 0-18443,
	previously filed with the SEC          
|    
|(14) | Incorporated by reference to the exhibit with the same number in
	the Companys Current Report on Form 8-K filed with the SEC
	on December 15, 1997                                                               
|    
|(15) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1998, File No. 0-18443,
	previously filed with the SEC          
|    
|(16) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the quarter
	ended March 31, 1999, File No. 0-18443, previously
	filed with the SEC             
|    
|(17) | Filed herewith