<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 2000

                         Commission File Number 0-15313

                          BIO-TECHNOLOGY GENERAL CORP.
             (Exact name of Registrant as specified in its charter)

Delaware                                                              13-3033811
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                            Identification Number)

70 Wood Avenue South, Iselin, New Jersey                                   08830
(Address of principal executive offices)                              (Zip Code)

       Registrant's telephone number, including area code: (732) 632-8800

           Securities registered pursuant to Section 12(b) of the Act:
                          Common Stock, $.01 par value
                                (Title of class)

           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                              (Title of each class)

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 Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of the Registrant's Common Stock held by non-affiliates
at March 16, 2001 (based on the closing sale price for such shares as reported
by the National Association of Securities Dealers Automated Quotation System):
$348,955,153. Common Stock outstanding as of March 16, 2001: 54,824,876 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's definitive proxy statement for its 2001 annual
meeting of stockholders are incorporated by reference into Part III of this
report.





<PAGE>




                                     PART I

ITEM 1.  BUSINESS

GENERAL OVERVIEW

     We are engaged in the research, development, manufacture and marketing of
biopharmaceutical products. Through a combination of internal research and
development, acquisitions, collaborative relationships and licensing
arrangements, BTG has developed a portfolio of therapeutic products, including
eight products that have received regulatory approval for sale, of which seven
are currently being marketed. Additionally, we have four products in
registration or clinical trials and several products in pre-clinical
development. We distribute our products on a worldwide basis primarily through a
direct sales force in the United States and primarily through third-party
license and distribution relationships elsewhere. We pursue the development of
both products with broad markets as well as products with specialized niche
markets where we can seek Orphan Drug designation and potential marketing
exclusivity.

         Our approved products are:

                  o OXANDRIN(R) (oxandrolone) for the treatment of weight loss
         due to severe trauma, chronic infection, extensive surgery or unknown
         pathophysiology, which is primarily marketed in the United States and
         which, to date, has been primarily used to treat weight loss in AIDS
         patients;
                  o BIO-TROPIN(TM) (human growth hormone), which is currently
         being marketed in Japan and in several countries in Europe, Latin
         America, the Far East and in Israel for the treatment of growth hormone
         deficiency in children or Turner syndrome;
                  o BIOLON(R) (sodium hyaluronate), which is currently marketed
         in the United States and in several other countries in North and Latin
         America, Europe, Asia, Africa, the Far East and in Israel for the
         protection of the corneal endothelium during ophthalmic surgery
         procedures such as cataract removal and intraocular lens implantation;
                  o DELATESTRYL(R) (injectable testosterone), which is currently
         marketed in the United States for hypogonadism and delayed puberty;
                  o MIRCETTE(R), an oral contraceptive dosing regimen that is
         currently being marketed in the United States;
                  o SILKIS(R), a vitamin D derivative, which is currently
         approved in nine European countries for the topical treatment of
         recalcitrant psoriasis and marketed in Germany, Switzerland, The
         Netherlands and Brazil;
                  o BIO-HEP-B(TM), a third generation recombinant vaccine
         against hepatitis B virus, which is currently approved and marketed in
         Israel; and
                  o BIO-HY(TM) (sodium hyaluronate) for osteoarthritis, which
         is currently approved in the European Union, where marketing is
         expected to begin in the second half of 2001 under the name
         ARTHREASE(TM).

         BTG's products in registration or advanced stages of clinical testing
and development include recombinant insulin for diabetes; FIBRIMAGE(R), a
thrombus imaging agent; OXSODROL(TM) (human superoxide dismutase) for the
reduction in the incidence of reactive airways (I.E., asthma) in premature
infants; and PROSAPTIDE(TM), for the treatment of neuropathic pain associated
with diabetic peripheral neuropathy.

         Our research and development focus includes PURICASE(R) for
allopurinol-resistant gout patients; a cancer therapy drug to treat leukemia;
and the development of generic versions of biologics that will be going off
patent.

         BTG was founded in 1980 to develop, manufacture and market novel
therapeutic products. BTG's overall administration, business development, human
clinical studies, marketing activities, quality assurance and regulatory affairs
are primarily coordinated at our headquarters in Iselin, New Jersey.
Pre-clinical studies, research and development activities and manufacturing of
our


                                       1
<PAGE>

biotechnology-derived products are primarily carried out through Bio-Technology
General (Israel) Ltd. ("BTG-Israel"), our wholly-owned subsidiary in Rehovot,
Israel.

PRODUCTS AND APPLICATIONS

         Our products under commercialization are currently being marketed by
third parties, with the exception of OXANDRIN, which we are co-marketing with a
third party in the United States, and DELATESTRYL, which we are marketing on our
own in the United States. In addition, BTG is marketing BIO-TROPIN, BIOLON and
BIO-HEP-B, and intends to market OXANDRIN, SILKIS and ARTHREASE, on its own in
Israel. The following table presents information regarding BTG's principal
products:

<TABLE>
<CAPTION>

                    PRODUCT                          INDICATION/APPLICATION                     STATUS
 ----------------------------------------------- ------------------------------ ---------------------------------------

 PRODUCTS UNDER COMMERCIALIZATION:
 ----------------------------------------------------------------------------------------------------------------------

<S>                                              <C>                            <C>
 OXANDRIN                                        Involuntary weight loss        Commercial sales (United States and
 (oxandrolone)                                                                  various other countries)
 ----------------------------------------------------------------------------------------------------------------------
 BIO-TROPIN                                      Growth hormone deficiency in   Commercial sales (Japan, Europe and
 (human growth hormone)                          children and Turner syndrome   various other countries)
 ----------------------------------------------------------------------------------------------------------------------
 BIOLON                                          Injectable viscous solution    Commercial sales  (Worldwide)
 (sodium hyaluronate)                            for ophthalmic surgical
                                                 procedures
 ----------------------------------------------------------------------------------------------------------------------
 DELATESTRYL                                     Hypogonadism                   Commercial sales (United States)
 (injectable testosterone)
 ----------------------------------------------------------------------------------------------------------------------
 MIRCETTE                                        Reduced pregnancy risk         Commercial sales (United States)
 (oral contraceptive dosing regimen)
 ----------------------------------------------------------------------------------------------------------------------
 SILKIS                                          Anti-psoriasis/contact         Commercial sales (Germany,
 (vitamin D derivative)                          dermatitis agent/other skin    Switzerland, The Netherlands, Brazil)
                                                 disorders
 ----------------------------------------------------------------------------------------------------------------------
 BIO-HEP-B                                       Hepatitis-B vaccine            Commercial sales (Israel)
 ----------------------------------------------------------------------------------------------------------------------
 BIO-HY                                          Osteoarthritis                 Approved for sale (Europe)
 ----------------------------------------------------------------------------------------------------------------------
 ----------------------------------------------------------------------------------------------------------------------

 PRODUCTS IN REGISTRATION AND CLINICAL TRIALS:
 ---------------------------------------------

 INSULIN                                         Diabetes                       Development (most countries of the
                                                                                world); Registration (Poland and
                                                                                several other East European countries)
 ----------------------------------------------------------------------------------------------------------------------
 FIBRIMAGE                                       Diagnostic for locating deep   Phase III clinical trials (Canada)
 (thrombus-imaging agent)                        vein thrombus
 ----------------------------------------------------------------------------------------------------------------------
 OXSODROL                                        Reduction in the incidence     Phase II clinical trials
 (human superoxide dismutase)                    of reactive airways (I.E.,
                                                 asthma) in premature
                                                 infants
 ----------------------------------------------------------------------------------------------------------------------
 PROSAPTIDE                                      Treatment of neuropathic       Phase II clinical trials
                                                 pain associated with
                                                 diabetic peripheral
                                                 neuropathy
 ----------------------------------------------------------------------------------------------------------------------
 ----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>

                    PRODUCT                          INDICATION/APPLICATION                     STATUS
 ----------------------------------------------- ------------------------------ ---------------------------------------

 PRODUCTS IN LABORATORY AND PRE-CLINICAL RESEARCH:
 ----------------------------------------------------------------------------------------------------------------------

<S>                                              <C>                            <C>

 ----------------------------------------------------------------------------------------------------------------------
 PURICASE                                        Gout                           Pre-clinical development
 ----------------------------------------------------------------------------------------------------------------------
 BIOGENERICA                                     Generic versions of biologic   Pre-clinical development
                                                 pharmaceutical products
 ----------------------------------------------------------------------------------------------------------------------
 CANCER THERAPY FOR LEUKEMIA                     Leukemia                       Research
 ----------------------------------------------------------------------------------------------------------------------
 ----------------------------------------------------------------------------------------------------------------------
</TABLE>

         OXANDRIN (OXANDROLONE)

         BTG's oxandrolone product, trademarked OXANDRIN, is an oral anabolic
agent that is an analogue of testosterone and is used to promote weight gain.
There is growing recognition in the medical community that interventional
management of disease-related weight loss (cachexia) is an extremely important
facet of patient care. Involuntary weight loss is associated with a relatively
wide range of clinical conditions which, unless monitored and carefully managed,
can lead to a delay in recovery and a rapid escalation in the incidence of
infection, morbidity and ultimately death. Published studies indicate that the
loss of only 10% (the clinical definition of cachexia) of an individual's lean
body mass (I.E., muscle) is associated with a 20% increase in mortality. At 35%
loss of lean body mass, the death rate approaches 100%. Additionally, weight
loss may lead to increased intensive care and longer recovery and rehabilitation
periods, thereby increasing the cost of treating the underlying disease. We
estimate the incidence of involuntary weight loss in the United States is
several million persons each year.

         The causes of involuntary weight loss suffered by persons with a wide
variety of chronic and acute diseases are believed to be the result of a number
of factors, with inadequate nutrient intake and an altered metabolic state
playing central roles. Malnutrition, the pathophysiology of which is frequently
unknown, is the one feature common to all weight loss disorders, regardless of
etiology. It is generally accepted that anabolic agents promote protein
synthesis, which enhances the building of lean body mass and ultimately weight
gain. However, because natural androgens, such as testosterone, also possess
androgenic or virilizing properties that have undesirable side-effects when used
for treating weight loss, particularly in women, potent anabolic and weak
androgenic effects are preferable drug properties for the treatment of this
condition. Clinical trials have shown that OXANDRIN is an effective adjunctive
therapy to promote weight gain in a variety of pathophysiologic conditions and
that it has low androgenic activity. Unlike many other anabolic agents, OXANDRIN
appears to undergo less overall metabolic transformation in the liver, which BTG
believes offers a safety advantage over other androgenic/anabolic alternatives
that are fully metabolized in the liver and have the potential to cause liver
toxicity. Unlike appetite enhancers currently used for treating weight loss,
studies indicate that OXANDRIN promotes weight gain primarily through the
building of lean body mass rather than fat and water. BTG also believes that
OXANDRIN is preferable to human growth hormone for treatment of weight loss
because of the ease of administration of OXANDRIN (oral versus injectable) and
its lower cost.

         In 1964, the United States Food and Drug Administration ("FDA")
approved OXANDRIN for weight gain following weight loss due to severe trauma,
chronic infection or extensive surgery and for patients who, without definite
pathophysiologic reasons, fail to gain or to maintain normal weight. This
approval permits the use of OXANDRIN to treat disease-related weight loss other
than starvation. G.D. Searle & Company Limited ("Searle"), which originally
developed and obtained FDA approval of OXANDRIN, ceased marketing OXANDRIN in
the 1980s. Searle now licenses OXANDRIN to, and contract manufactures OXANDRIN
for, BTG. With the growing awareness of the importance of combating
disease-related involuntary weight loss, BTG decided to re-launch the product on
its own under the OXANDRIN tradename. BTG commenced selling OXANDRIN in December
1995 to Gentiva Health Services ("Gentiva") (formerly known as Olsten Health
Services), BTG's exclusive distributor in the United States, for all indications
under the FDA approval. In May 2000 BTG signed an agreement with the Ross
Products Division of Abbott Laboratories to co-market OXANDRIN in the United
States.


                                       3
<PAGE>


         Since our launch of OXANDRIN in December 1995, a significant portion of
OXANDRIN sales has been for treatment of patients suffering from AIDS-related
weight loss. In order to increase market awareness and acceptance of OXANDRIN
for the treatment of other disease-related weight loss conditions, BTG has been
conducting controlled clinical trials and post-approval clinical studies to
provide further clinical support for the use of OXANDRIN for such conditions. To
date BTG-sponsored clinical studies at leading institutions have been completed
relating to: (i) the effect of OXANDRIN as an adjunct to promote weight gain and
hasten the rate of skin regrowth and healing in burn patients and as an adjunct
to promote weight gain and hasten healing of decubitus ulcers in malnourished
patients; (ii) the use of OXANDRIN for the promotion of weight gain in patients
suffering from weight loss due to chronic obstructive pulmonary disease; and
(iii) the effect of OXANDRIN on the incidence of fat redistribution syndrome
(lipodystrophy) in HIV-positive patients treated for weight loss. Manuscripts
summarizing the results of these studies have been published and others are
planned for submission in the near future. We are currently sponsoring clinical
trials at leading institutions, including studies of: (i) OXANDRIN for the
promotion of weight gain in malnourished cancer patients; (ii) OXANDRIN for the
promotion of pre-operative weight gain in patients who undergo flap surgery for
closure of intractable decubitus ulcers; and (iii) OXANDRIN for the promotion of
weight gain in the frail elderly population.

         In January 1994, BTG obtained approval to market oxandrolone for
pediatric growth disorders in Australia. This is the first regulatory approval
for the marketing of oxandrolone for pediatric growth disorders anywhere in the
world. BTG has granted CSL Limited ("CSL") of Australia exclusive marketing
rights for oxandrolone in Australia, New Zealand and the nearby South Pacific
region. CSL commenced sales of oxandrolone in Australia in February 1994 under
the tradename Lonavar(R).

         In August 1999, OXANDRIN was approved in Israel for the treatment of
constitutional delay of growth and puberty ("CDGP"). BTG expects to begin
marketing OXANDRIN in Israel during 2001.

         BTG is currently evaluating the opportunity to commercialize OXANDRIN
in South Korea, Russia and Azerbaijan, where OXANDRIN has been approved.
OXANDRIN is currently being marketed by IPEX MEDICAL AB on a "name patient
basis" in Scandinavia.

         BTG has been granted U.S. patents directed to the use of oxandrolone in
the treatment of chronic obstructive pulmonary disease and in ameliorating
muscle weakness/wasting in HIV-positive patients. BTG has filed patent
applications directed to other uses of OXANDRIN that are pending in the United
States and other countries.


         BIO-TROPIN (HUMAN GROWTH HORMONE)

         Human growth hormone ("hGH") is naturally secreted by the pituitary
gland and controls many physiological functions that are essential for normal
development and maturation. A deficiency of hGH results in diminished growth
and, in extreme cases, dwarfism. We estimate that current annual worldwide sales
of hGH for the treatment of growth hormone deficiency are approximately $1.5
billion, and that geographic distribution of worldwide sales is approximately
25% in North America and 30% in Europe, with the balance in Japan and other
countries.

         BTG's scientists first produced hGH by recombinant DNA methods in the
early 1980s. As a result of a seven-year Orphan Drug exclusivity period granted
to a competitor, followed by extensive and continuing patent litigation with
Genentech, Inc. ("Genentech"), which resulted in a preliminary injunction
against BTG, we were precluded from marketing BIO-TROPIN in the United States
until January 2000, despite the fact that the FDA approved BIO-TROPIN for
marketing in the United States in May 1995. In January 2000, the U.S. District
Court invalidated Genentech's patent, which would have otherwise expired in
2003, and vacated the preliminary injunction. The appellate court heard
Genentech's appeal of the District Court's decision in December 2000. In
September


                                       4
<PAGE>

1999 the FDA approved BTG's supplemental application for a new expression system
for biosynthesis of BIO-TROPIN that we believe would not violate Genentech's
patent if it were reinstituted on appeal. Our human growth hormone is currently
being marketed by third parties in Japan and several European and Latin American
countries and by us in Israel. See "-Sales and Distribution" and "Item 3. Legal
Proceedings."

         In April 1993, JCR Pharmaceuticals Co., Ltd. ("JCR"), BTG's marketing
partner in Japan, received regulatory approval for hGH for the treatment of
short stature, and began marketing hGH in June 1993. In December 2000, JCR
received regulatory approval for the use of BTG's hGH to treat Turner syndrome,
a condition in which girls born with non-functioning ovaries do not develop
secondary sexual characteristics and are shorter than normal. In January 1995,
we granted JCR exclusive distribution rights in The People's Republic of China
for all hGH-related pharmaceutical indications. In January 1998, JCR signed an
agreement memorandum with Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo"),
relating to a marketing alliance for the marketing of hGH in Japan. Under the
terms of the agreement memorandum, JCR is supplying Sumitomo with BTG's hGH and
Sumitomo commenced distribution in Japan in January 1999, following termination
of its agreement to distribute Pharmacia Upjohn Co., Ltd.'s recombinant human
growth hormone, Genotropin(TM), at the end of 1998. Upon termination of
Pharmacia Upjohn's agreement with Sumitomo, Pharmacia Upjohn began to market
Genotropin in Japan on its own.

         In November 1992, BTG entered into an exclusive distribution agreement
with the Ferring Group ("Ferring") for the marketing of our human growth hormone
for enhancing growth and stature in growth hormone deficient children in Europe
and the countries comprising the former Soviet Union. Sales began during the
fourth quarter of 1994, and our hGH is now approved in more than 15 countries in
Ferring's territory.

         The Company received approval for hGH from the Israel Ministry of
Health in April 1988 and began direct marketing in Israel under the BIO-TROPIN
trademark in October 1988. In July 1992, BIO-TROPIN was approved by the Israel
Ministry of Health for the treatment of a second indication, Turner syndrome. In
July 1997, BIO-TROPIN was approved by the Israel Ministry of Health for the
treatment of children suffering from renal insufficiency.

         In September 1999, we granted Teva Pharmaceutical Industries Ltd.
("Teva") exclusive marketing rights for hGH in the United States, effective July
2003, when Genentech's patent that was the basis for the preliminary injunction
precluding BTG from marketing BIO-TROPIN in the United States was scheduled to
expire. In March 2000, we amended our agreement with Teva to grant Teva
exclusive marketing rights for hGH in the United States as of July 1, 2000. We
are currently engaged in litigation with Serono Laboratories, Inc., a member of
The Ares-Serono Group ("Serono"), to determine whether the non-competition
provisions of a co-promotion agreement relating to Serono's human growth hormone
product, SAIZEN(R), prohibit BTG from supplying hGH to Teva for sale in the
United States. If Teva's launch of hGH is enjoined as a result of Serono's
dispute with BTG, then BTG's royalty rate will be reduced to compensate Teva for
the delay. See "--Sales and Distribution" and "Item 3. Legal Proceedings."

         BTG's human growth hormone is also being sold by third-party
distributors in several countries in South America and the Far East. In
addition, regulatory approval to market BTG's human growth hormone is pending in
several Latin American countries, South Africa and several Pacific Rim
countries.

         Our human growth hormone product is currently being marketed by Ferring
in Europe and JCR in Japan in conjunction with a needleless delivery device. We
have licensed exclusive rights to a needleless delivery device in the United
States for use with any human growth hormone product.



                                       5
<PAGE>

         BIOLON (SODIUM HYALURONATE)

         Sodium hyaluronate is a high-viscosity, gel-like fluid. BTG has
developed a fermentation-derived sodium hyaluronate-based product, trademarked
BIOLON, for use in ophthalmic surgery procedures such as cataract removal and
intraocular lens implantation. BIOLON is a syringe filled with a 1% sodium
hyaluronate solution that facilitates such surgery by acting as a highly viscous
lubricant allowing for surgical manipulation of the ocular tissues.

         Sales of BIOLON commenced in early 1993, and BIOLON is currently
approved for sale in the United States and more than 30 other countries. In June
1995, BIOLON was approved as a medical device by the European Union medical
device certification body ("mdc"). As a result, a CE mark granted to the product
and appearing on the product box allows BTG's partners to freely market BIOLON
throughout Europe. We licensed exclusive BIOLON distribution rights in the
United States to Akorn, Inc. ("Akorn") in March 1998. Akorn launched BIOLON in
the United States in conjunction with Allergan, Inc. in November 1998. In
November, 1999, Akorn signed a distribution agreement with Ciba Vision ("Ciba")
pursuant to which the product will be marketed under Ciba's private label. In
the first quarter of 2000 we halted shipment to the U.S. pending FDA approval of
a supplemental application relating to an upgrade in our manufacturing process
to conform it to a higher standard of quality implemented by BTG. We resumed
shipments to the U.S. in the first quarter of 2001. See "--Sales and
Distribution."

         We have completed the development of a second-generation product,
BIOLON PRIME(TM), that has a higher viscosity than BIOLON and gives increased
support inside the chamber of the eye during the surgical procedure. This
product was granted a CE mark in June 1997, and approval was received in Israel
in February 1998. The product was approved in Canada and Brazil in July 1999 and
September 1999, respectively, and sales commenced in 2000.


         DELATESTRYL (TESTOSTERONE ENANTHATE)

         DELATESTRYL is BTG's injectable testosterone product currently used to
treat men with hypogonadism (testosterone deficiency), a condition associated
with reduced libido, insufficient muscle development and bone loss. We believe
that currently only 100,000 of the approximately 200,000 to 400,000 men in the
United States suffering from this condition are undergoing treatment. The
product is also prescribed for delayed puberty, which we believe is a treatable
condition in approximately 30,000 boys in the United States. BTG acquired the
approved New Drug Application ("NDA") and trademark from Bristol-Myers Squibb
Company ("Bristol"). Bristol contract manufactures DELATESTRYL for BTG on a
purchase order basis, and BTG pays Bristol a fee based on its sales of
DELATESTRYL. We began the sale and distribution of DELATESTRYL in mid-1992. See
"--Risk Factors--We are dependent on third-party suppliers."


         MIRCETTE (ORAL CONTRACEPTIVE DOSING REGIMEN)

         BTG has acquired a patent to an oral contraceptive dosing regimen that
is intended to reduce both the risk of pregnancy, in the event a woman forgets
to take a pill, and the breakthrough bleeding and spotting experienced by many
women who use conventional low-dose oral contraceptives.

         Organon, Inc. ("Organon"), a subsidiary of AKZO Nobel N.V., has
licensed BTG's patented oral contraceptive dosing regimen and has developed a
product using this regimen with the progestogen desogestrel. Organon filed an
NDA with the FDA in April 1997 and, following receipt of approval in April 1998,
began to commercialize the product under the trademark MIRCETTE in the third
quarter of 1998. Our license agreement with Organon provides for milestone
payments and royalties on sales. Regulatory authorities in Germany and the
United Kingdom have declined to approve Organon's desogestrel product using the
oral contraceptive regimen as a result of


                                       6
<PAGE>

reported higher incidence of thromboembolic disease than competing
levonorgestrel oral contraceptive regimens.

         In 2000, Duramed Pharmaceuticals, Inc. filed an Abbreviated New Drug
Application with the FDA seeking approval of a generic version of MIRCETTE.
Pursuant to its license agreement with Organon, BTG filed a patent infringement
suit against Duramed. Duramed is contesting validity and infringement. This
action is now in the discovery stage.

         In 2000, we terminated our license of the oral contraceptive dosing
regimen to Gynetics Inc. for future use with any one or more progestins other
than desogestrel. The license agreement, which was entered into in 1997,
provided for an upfront license fee, milestone payments in shares of Gynetics
common stock and royalties on sales. Gynetics filed an action contesting BTG's
right to terminate the license; however, the court granted BTG's motion to
dismiss the action.


         SILKIS (VITAMIN D DERIVATIVE)

         BTG has obtained an exclusive license to patents covering the
composition and use of certain vitamin D derivatives for topical treatment of
psoriasis, dermatitis and other skin disorders. Patents have issued in the
United States, Israel and in major countries in Europe, including Great Britain.
The British patent has also been extended to Singapore and Hong Kong. In March
1996, we sublicensed exclusive rights under the patents in the United States to
Galderma S.A. ("Galderma"). Galderma has agreed to pay license fees upon the
attainment of certain milestones and a royalty on sales in the United States.
The licensee of BTG's rights under the patents for the remainder of the world
sublicensed those rights to Galderma in 1996. We will receive a royalty on all
commercial sales of products containing these vitamin D derivatives in countries
outside the United States in which the vitamin D derivative patents have issued.
Although the product was approved in The Netherlands and Switzerland in 1995,
Galderma elected to change the formulation prior to marketing. Galderma launched
SILKIS in Brazil in September 2000 and in Germany, Switzerland and The
Netherlands in November 2000.


         BIO-HEP-B (HEPATITIS-B VACCINE)

         BTG has genetically engineered a third generation vaccine against the
hepatitis-B virus. Our BIO-HEP-B vaccine integrates the S, pre-S1 and pre-S2
surface proteins of the virus. Clinical trials in Israel, the Far East and
Europe in adults, children and neonates have been completed and showed the
vaccine to be safe and highly immunogenic. We believe the high immunogenicity
and initial faster rate of response of our BIO-HEP-B vaccine will provide us
with a competitive advantage, particularly in the less developed countries where
hepatitis-B is prevalent. The first generation plasma-derived Hepatitis-B
vaccine is generally used in less developed countries. We believe, however, that
these countries desire an alternative to the plasma-derived vaccine because of
fears of viral transmission. In addition, many of these countries are pursuing
hepatitis-B immunization programs for all newborns in an effort to substantially
decrease the incidence of hepatitis-B.

         BTG's application for approval of its BIO-HEP-B vaccine, which was
filed with the Israel Health Ministry in November 1996, was approved in February
2000. This approval, together with a Certificate of Free Sale, has allowed BTG
and its licensees to initiate the registration process in many countries
worldwide.

         We have licensed marketing rights to SciGen Pte Ltd, a Singapore
company ("SciGen"), for the commercialization of the BIO-HEP-B vaccine in
certain Pacific Rim territories (excluding Japan) and certain other countries,
including The Peoples Republic of China, Australia, New Zealand and India. BTG
and SciGen have completed clinical trials in several countries. In December
1997, BTG


                                       7
<PAGE>

granted SciGen a license to use the technical information provided by BTG to
establish a manufacturing facility to produce the BIO-HEP-B vaccine in India,
China or Australia.

         In February 1998, BTG entered into development and licensing agreements
with Swiss Serum and Vaccine Institute Berne ("Swiss Serum") with respect to its
BIO-HEP-B product in Western Europe, most of Latin America and various other
countries. Swiss Serum will purchase vaccine from BTG for distribution, and we
will receive milestone payments from Swiss Serum, as well as royalties on sales
of the vaccine. Swiss Serum expects to file for regulatory approval in Europe by
early 2002.

         We have licensed marketing rights for South Africa and certain other
African countries to Afrovax Biological Limited.

         We have been engaged in patent litigation with Biogen, Inc. ("Biogen")
relating to Biogen's claim that BTG has infringed Biogen's Israeli patent by
virtue of its preparation of BIO-HEP-B for use in clinical trials and Biogen's
challenge of the grant of a compulsory license to BTG-Israel to manufacture our
vaccine under Biogen's Israeli patent. The Biogen patent and, as a result, the
compulsory license, expired in December 1999.
See "Item 3.  Legal Proceedings."


         BIO-HY

         BIO-HY is a fermentation-derived sodium hyaluronate composition
developed by BTG for intra-articular injection into the knee to reduce arthritic
pain. We conducted a clinical evaluation of BIO-HY versus the market leader to
examine the product's efficacy in treating the pain of osteoarthritis. We
completed the clinical trial in the second half of 2000 and European approval
was obtained from the European Union medical device certification body ("mdc")
and a CE mark awarded in November 2000.

         BTG licensed worldwide rights, excluding Israel and Japan, to BIO-HY to
DePuy Orthopaedics Inc., a Johnson and Johnson Company ("DePuy"). DePuy expects
to commence commercialization of the product in Europe and to file for
regulatory approval in the United States by mid-2001. DePuy intends to market
BIO-HY under the tradename ARTHREASE.


         INSULIN

         Insulin is a polypeptide hormone essential for the control of blood
glucose levels that is frequently administered to patients suffering from
diabetes mellitus, a metabolic disorder characterized by hyperglycemia resulting
from relative or absolute insulin deficiency. Biosynthetic recombinant human
insulin is currently manufactured by two processes: in E. COLI (Eli Lilly and
Company and Hoechst AG) or in yeast (Novo-Nordisk A/S). BTG has developed a
proprietary expression system and a purification process to efficiently produce
recombinant human insulin in E. COLI. Patent applications relating to this
process have been filed in many countries. BTG's insulin is identical to
naturally-occurring human insulin and does not differ from
commercially-available insulins in terms of purity or biological activity.

         In January 1999, we entered into a technology transfer and license
agreement with Akzo Nobel's wholly owned subsidiary, Diosynth b.v., for our
recombinant human insulin. The license grants Diosynth rights to the product in
most countries of the world. Under the terms of the agreement, BTG transferred
its recombinant human insulin technology to Diosynth and Diosynth will
manufacture the product in bulk form for the licensed territory. Another Akzo
Nobel subsidiary, Organon, may in certain instances finish the bulk and market
it in finished form. BTG will receive license fees linked to the achievement of
certain milestones and royalties on all commercial sales of the product.


                                       8
<PAGE>


         In January 1998, BTG entered into a licensing agreement with IBATECH
Sp. zo.o., a Polish corporation ("Ibatech"), covering the development,
production and commercialization of BTG's recombinant human insulin. Under the
agreement, Ibatech and BTG have collaborated on the development of the know-how
for large scale manufacturing of BTG's recombinant human insulin for the insulin
markets in Poland and several other East European countries. BTG will receive
certain milestone payments and royalties on sales of the product in the licensed
territories.


         FIBRIMAGE (THROMBUS-IMAGING AGENT)

         FIBRIMAGE (formerly called Imagex) is a novel agent for the detection
of thrombi and blood clots in patients suffering from deep vein thrombosis or
pulmonary embolism. Deep vein thrombosis, which results from the development of
thrombi, causes a reduction in the venous blood flow. Pulmonary embolism is the
dislodgement of a piece of thrombus and its relocation via the circulatory
system to the lungs. FIBRIMAGE consists of a genetically-engineered portion of
the fibrin binding domain of fibronectin attached to a radiopharmaceutical tag.
Once injected in the patient, it targets and binds to fibrin, a substance that
is essentially present only in blood clots. BTG holds patents covering FIBRIMAGE
in the United States, in 14 European jurisdictions derived from its European
patent, and in Australia, Hungary, Korea, New Zealand and Russia. In August
1994, we licensed worldwide rights to the polypeptide to Merck Frosst Canada
Inc. ("Merck Frosst") for the development and commercialization of a diagnostic
imaging agent for the detection of thromboembolism. Merck Frosst filed an
application for an Investigational New Drug ("IND") with the Canadian Bureau of
Biologics in April 1996. In September 1997 DRAXIS Health Inc. ("Draxis")
acquired the radio-pharmaceutical division of Merck Frosst and all rights to
FIBRIMAGE. DRAXIS successfully completed a Phase I study of FIBRIMAGE in Canada
in December 1997, and a Phase II study in 1999. In February 2000, Draxis
initiated a Phase III efficacy study in Canada.


         OXSODROL (HUMAN SUPEROXIDE DISMUTASE)

         BTG has developed a process for manufacturing a fully active analog of
human copper/zinc superoxide dismutase ("SOD"), which neutralizes oxygen
free-radicals. Many premature babies are deficient in naturally occurring SOD,
and the high concentrations of oxygen that premature babies require are believed
to be involved in generating excess oxygen free-radicals in the lungs, causing
permanent lung injury at the cellular level. BTG's Phase III clinical efficacy
and safety trial related to the use of SOD to prevent bronchopulmonary dysplasia
("BPD"), a chronic lung disease that develops following treatment with oxygen
and mechanical ventilation of premature infants who experience respiratory
distress, revealed no reduction in the combined incidence of BPD and death at 28
days in neonates treated with OXSODROL. However, preliminary data from earlier
Phase I investigations suggested a delayed protective effect in neonates treated
with OXSODROL. As a result, BTG, in consultation with the FDA, continued the
trial as a Phase II study with preservation of blinded treatment assignments.
The incidence of pulmonary and neurologic complications in the placebo and
OXSODROL-treated groups was assessed at one year corrected postnatal age. This
follow-up study revealed a reduction in the incidence of reactive airways (I.E.,
asthma) in the OXSODROL-treated babies. BTG is in the process of finalizing
plans for additional clinical trials focused on the reactive airways indication
and expects to initiate the initial additional trial in the second half of 2001.

         In January 1995, we licensed OXSODROL to JCR for the treatment of BPD
in Japan and, in August 1997, we licensed to Ares Trading S.A., a member of The
Ares-Serono Group, worldwide distribution rights (excluding the United States,
Canada, Israel and Japan) for OXSODROL for the treatment of bronchopulmonary
dysplasia and other respiratory indications. Although BTG has elected to
discontinue pursuing the BPD indication and to focus on the reactive airways
indication, JCR has expressed an interest in continuing with the BPD indication.
In August 2000, Serono elected not to continue its participation in the
development of OXSODROL and returned worldwide distribution rights to BTG.



                                       9
<PAGE>


         We hold a U.S. patent relating to intratracheal delivery of copper/zinc
SOD to protect human lungs from injury due to hyperoxia and hyperventilation and
are the exclusive licensee of a U.S. patent directed to the DNA encoding
copper/zinc SOD. A U.S. patent assigned to BTG, which is directed to a method
for producing enzymatically active human copper/zinc SOD in bacteria, is the
subject of an interference action with Chiron Corporation ("Chiron"), which also
holds a U.S. patent for bacterially-produced human copper/zinc SOD. A U.S.
patent application directed to SOD and assigned to BTG is involved in a second
interference with a Chiron patent. We are opposing an Israeli patent application
assigned to Chiron that relates to copper/zinc SOD. See "--Risk Factors--We
depend upon proprietary technology, which may be difficult to protect " and
"Item 3. Legal Proceedings."


         PROSAPTIDE

         Prosaptide, a 14 amino acid peptide derived from the natural protein
prosaposin, is being developed to treat neuropathic pain and peripheral
neuropathy. Both of these indications cause substantial disability in patients.
Neuropathic pain is associated with nerve injury and is a result of metabolic
trauma (diabetes), physical trauma (phantom limb pain), infectious trauma
(post-polio syndrome) or chemical trauma (chemotherapy). Peripheral neuropathy
is a common neurological disorder caused by damage to the peripheral nerves
located in the arms, hands, legs and feet, and is the most prevalent
complication of diabetes. An estimated 8.8 million diabetics have peripheral
neuropathy, while approximately 2.6 million of them have been diagnosed and are
symptomatic. Due to the fact that available treatment options for pain
associated with diabetic peripheral neuropathy are often unsatisfactory and
frequently accompanied by unacceptable side effects, only approximately
one-third of patients who are diagnosed and symptomatic are currently treated.
We believe that the annual worldwide market potential for Prosaptide in the
treatment of diabetic neuropathic pain may be in excess of $800 million.

         A Phase II human clinical trial in Type I and Type II diabetes mellitus
demonstrated that Prosaptide effectively decreases pain associated with diabetic
peripheral neuropathy without deleterious side effects. BTG plans to initiate a
Phase II(b) clinical trial of Prosaptide in 2001 to supplement the findings of
this Phase II clinical trial. In addition, in a series of animal studies,
Prosaptide was shown to not only alleviate peripheral neuropathic pain but also
to reverse the underlying neuropathy, thereby inducing neuronal regeneration and
preventing neuronal death. The data from these studies strongly suggest that if
these findings are replicated in human clinical trials, there may well be
additional potential for Prosaptide in the treatment of diabetic peripheral
neuropathy, over and above its demonstrated ability to decrease neuropathic
pain. No approved drugs are available to prevent or reverse the neuropathy
itself.

         BTG acquired PROSAPTIDE in March 2001 through the acquisition of Myelos
Corporation, a privately-held biopharmaceutical company focused on the
development of novel therapeutics to treat diseases of the nervous system. Under
the terms of the acquisition agreement, BTG paid Myelos stockholders $35 million
in a combination of cash and stock ($14 million in cash and $21 million through
the issuance of approximately 2,344,700 shares of our common stock). An
additional future payment of $30 million is contingent upon BTG being in
position to file an NDA for FDA approval of PROSAPTIDE in the treatment of
neuropathic pain. The acquisition agreement provides for a final payment of 15%
of worldwide net sales of PROSAPTIDE in the third year of commercialization.
These payments will be made in shares of our common stock, although we have the
right to elect to make a portion of these payments in cash. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Acquisition of Myelos Corporation."


                                       10
<PAGE>


         PURICASE

         Gout occurs when uric acid accumulates in the joints. The disease
causes severe pain and disability and creates risk of kidney failure, which may
lead to life-threatening complications. Current treatments for gout and related
conditions are sometimes ineffective because of side effects or lack of efficacy
of approved medication. PEG-uricase is a chemically modified enzyme of mammalian
origin that converts uric acid to a more soluble and readily excreted product.
The PEG-modified enzyme has a much longer circulating lifetime and is less
likely to induce immune reactions than the unmodified enzyme. Therefore, the
PEG-uricase enzyme should effectively and efficiently eliminate excess uric acid
from the body of individuals who cannot otherwise excrete excess uric acid.

         In August 1998 BTG licensed exclusive worldwide rights from Duke
University ("Duke") of North Carolina and Mountain View Pharmaceuticals, Inc.
("MVP") to technology relating to polyethylene glycol ("PEG") conjugates of
uricase (urate oxidase). Duke has developed recombinant uricases and, together
with MVP, has developed PEG conjugates of uricases to make them safer and longer
acting. MVP has transferred its PEG technology to BTG, and we will produce PEG
conjugates of uricase, undertake clinical trials and commercialize the product.
In February 2001 we received Orphan Drug designation for the use of this product
in allopurinol-resistant gout patients.

         Toxicology testing of the product has been initiated and clinical
studies are expected to commence in the second half of 2001.


         BIOGENERICA(TM)

         Pursuant to a strategic relationship entered into with Teva
Pharmaceutical Industries Ltd., BTG is currently pursuing the development of two
recombinant human therapeutic proteins chosen by Teva that are currently
marketed worldwide by other biotech companies and which are approaching the end
of their patent protection. Teva will distribute and market the products. See
"--Sales and Distribution."


         CANCER THERAPY

         We are evaluating the use of human monoclonal antibodies that
specifically bind to acute myeloid leukemia ("AML") cells for targeting of
cytotoxic agents used to treat AML patients. Tissue-selective targeting of
therapeutic agents is an emerging discipline in the pharmaceutical industry.
Monoclonal antibodies ("Mabs") to tumor associated antigens have been used in
attempts to target toxins, radionucleotides and chemotherapeutic conjugates to
tumors. BTG has isolated AML cell-specific antibodies. The efficacy of these
antibodies coupled to a cytotoxic agent to specifically kill AML cells is being
evaluated IN-VITRO and in pre-clinical animal models. Chemical and genetic
engineering techniques are being used to enhance the efficacy and selectivity of
the antibodies.


SALES AND DISTRIBUTION

         We market our products primarily on a direct basis in the United States
and Israel and grant exclusive marketing or distribution rights to third parties
for sales in most other countries. BTG has granted Teva exclusive marketing
rights to BIO-TROPIN in the United States. Our sales and marketing team in the
United States, which we established in the second half of 1995, consisted of 41
people at February 1, 2001. With respect to sales outside the United States,
BTG's current distribution arrangements include exclusive relationships with JCR
for the sale of BIO-TROPIN in Japan and The People's Republic of China, Ferring
for the sale of BIO-TROPIN in Europe and the former Soviet Union, as well as
with more than 6 other companies, covering more than 35 countries,


                                       11
<PAGE>

for the sale of BIO-TROPIN, approximately 20 companies, covering more than 35
countries, for the sale of BIOLON, Galderma for the sale of SILKIS worldwide,
and DePuy for the sale of BIO-HY in all countries worldwide, excluding Israel
and Japan.

         In substantially all of BTG's product distribution agreements, BTG
grants exclusive marketing and distribution rights in one or more countries in
exchange for upfront license payments and exclusive supply arrangements.
Pursuant to these agreements, BTG generally supplies product at a price equal to
a percentage of the distributor's net sales price, subject to a minimum price.
Regulatory approvals are obtained either by BTG or by its distributors,
depending on the product, the territory and the terms of the commercial
agreement. BTG is generally obligated to indemnify the distributor for product
liability claims resulting from the failure of supplied product to meet agreed
upon specifications and infringement of third-party patents. See "--Risk
Factors--We are dependent on third-party licensees."

         BTG has an agreement with Gentiva, a provider of home health care
services and products for chronic and acute care, to serve as BTG's exclusive
wholesale distributor of BTG's OXANDRIN and DELATESTRYL products in the United
States. Sales of OXANDRIN in 1998, 1999 and 2000 were primarily to Gentiva. See
"--Risk Factors--We are dependent on OXANDRIN sales." In May 2000 BTG signed an
agreement with the Ross Products Division of Abbott Laboratories to co-market
OXANDRIN in the United States for the long-term care market.

         In September 1999, we entered into a Development and Distribution
Agreement with Teva pursuant to which we granted Teva exclusive distribution
rights in the United States for our hGH product effective July 1, 2003
(subsequently amended to July 1, 2000) and exclusive worldwide distribution
rights for up to three generic biologic pharmaceutical products chosen by Teva,
although to date Teva has elected to pursue only two products. Under the
agreement, BTG is responsible for conducting all development work on the
biologic products, conducting any necessary clinical trials, obtaining all
necessary regulatory approvals and manufacturing the product. Teva will
distribute and market the products once regulatory approvals have been obtained.
Upon execution of the agreement a $10 million payment became due to BTG and was
received in March 2000. BTG received a milestone payment of $2,500,000 in 2000
and will receive up to an additional $5,000,000 in milestone payments and a
royalty based on Teva's net sales of product.

         In 1988 and 1995, respectively, we granted exclusive distribution
rights in Japan and The Peoples Republic of China to JCR for all hGH-related
pharmaceutical indications. BTG sells bulk product to JCR at a fixed price. BTG
is obligated to indemnify JCR for all expenses incurred and damages suffered by
JCR as a result of any infringement of third-party patents. A substantial
portion of our hGH sales has been to JCR. See "Item 3. Legal Proceedings."

         In November 1992, we entered into an exclusive distribution agreement
with Ferring for marketing of our human growth hormone for the enhancement of
growth and stature in growth hormone deficient children in Europe and the
countries comprising the former Soviet Union. BIO-TROPIN is now available in 17
countries in Ferring's territory. BTG sells finished product to Ferring and
receives a percentage of Ferring's net sales. Ferring has the right to purchase
bulk product from BTG and formulate, vial and package the product. BTG is
obligated to indemnify Ferring for all expenses incurred and damages suffered by
Ferring as a result of any infringement of third-party patents.

         BTG has concluded agreements for the commercialization and distribution
of BIOLON with several companies covering most countries in Europe and Latin
America and several countries in Africa, Asia and the Far East. These agreements
provide for license fees and/or royalties and most require minimum guaranteed
purchases in the first years after registration and commencement of
commercialization.

         In June 2000 BTG granted DePuy exclusive marketing rights to BIO-HY in
all countries worldwide except Japan and Israel. Clinical efforts, where
required, and applications for regulatory


                                       12
<PAGE>

approvals will be undertaken by DePuy in the licensed territory except in
Europe, where BTG conducted a Phase III safety and efficacy study of the
product. BTG will receive royalties on sales of the product by DePuy.

         In June 1999 BTG terminated its May 1998 co-promotion agreement with
Serono Laboratories, Inc., a member of Serono, pursuant to which BTG undertook
to promote in the United States to Gentiva Serono's recombinant human growth
hormone, SAIZEN(R) (somatropin [r-DNA origin] for injection) for the treatment
of children with growth failure due to inadequate levels of growth hormone.
Serono has disputed BTG's right to terminate the agreement and is asserting that
BTG cannot, by virtue of a non-competition clause, sell hGH in the United States
before April 30, 2002. BTG believes that to the extent the non-competition
clause is applicable, it expired in June 2000 and in any case does not apply to
sales of our hGH by Teva. BTG has filed a declaratory judgment action in state
court in New Jersey seeking to have the court confirm BTG's positions with
respect to the agreement and the non-competition clause. See "Item 3. Legal
Proceedings" and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations".


RESEARCH AND DEVELOPMENT

         We conduct research on potential products for which we have retained
future rights for our own account and on behalf of our partners for which we
receive certain current payments and, if successful, future payments in the form
of royalties or manufacturing rights. At February 1, 2001, our research and
development organization comprised 101 scientists, associates and related
personnel with expertise in molecular biology, cell biology and protein
chemistry. These individuals have received various undergraduate and advanced
degrees at prestigious universities throughout the world. Twenty seven hold
Ph.D. or M.D. degrees, and several have completed post-doctoral studies under
the direction of internationally renowned scientists in the area of
biotechnology.

         BTG applies to the Chief Scientist of the State of Israel (the "Chief
Scientist") annually for research and development funding for its various
projects for the coming year. The projects and amount funded each year are
within the sole discretion of the Chief Scientist. There can be no assurance
that BTG will be able to continue to secure additional funds from the Chief
Scientist at the same levels or at all. BTG is obligated to pay royalties to the
Chief Scientist for products resulting from research and development partially
funded by the Chief Scientist. These royalties range from 3% to 5% on commercial
sales, if any, of these products if produced in Israel, up to the amount so
funded, and 4% to 6% of commercial sales, if any, if these products are produced
outside Israel, up to 120% to 300% of the amount so funded. During 1996, BTG
completed payment of its entire obligation for royalties to the Chief Scientist
for funding of its human growth hormone development.


MANUFACTURING AND SUPPLY AGREEMENTS

         We currently operate a Good Manufacturing Practices-certified facility
in Israel for production of our bulk human growth hormone, BIOLON, BIO-HEP-B,
OXSODROL and insulin products, as well as the genetically-engineered portion of
the FIBRIMAGE product. We also operate a modern filling suite for our BIOLON
syringes which has undergone inspection and was approved by European and U.S.
regulatory authorities. Based on these inspections, European Device Approval (CE
Mark) and FDA approval were granted.

         Although a substantial portion of the hGH supplied by BTG to its
distributors is in bulk form, BTG also provides distributors with fully packaged
product. For these distributors, BTG's bulk human growth hormone is formulated,
filled and packed in vials in Germany by Dr. Madaus GmbH, our subcontractor for
manufacturing the packaged product. In addition, sterilization of the BIOLON
syringe is performed by Mediplast Israel Ltd., our subcontractor for these
purposes. We believe that


                                       13
<PAGE>

we operate our facilities under, and are in compliance in all material respects
with, FDA good laboratory and manufacturing practices.

         In April 1999, BTG purchased an existing building located approximately
12 miles south of its current facility in Israel. A modern production facility
meeting FDA GMP requirements for drugs, biologics and devices is under
construction. The new facility is designed to allow us to meet all current
regulatory requirements and our currently foreseeable manufacturing capacity
needs. We expect to complete construction of the facility in the second half of
2001, although there can be no assurance that completion of the new facility
will not be delayed. Following completion of construction we will begin the
validation process, which we currently expect will take approximately six to
nine months for all products.

         Our OXANDRIN product is currently being manufactured for us by Searle,
which originally developed the product. Our agreement with Searle provides that
Searle will produce and exclusively sell OXANDRIN to BTG. The agreement requires
that BTG purchase from Searle 80% of its bulk requirements through April 2001.
Thereafter, the agreement is automatically renewed for successive two-year
periods during which BTG must purchase at least 50% of its OXANDRIN bulk
requirements from Searle, subject to earlier termination under certain
circumstances. The agreement provides that Searle will not produce OXANDRIN for
any other entity prior to April 2006.

         In addition to a long term exclusive supply agreement with Searle, BTG
has an alternative exclusive agreement with Societa Prodotti Antibiotici S.p.A.
("SPA") covering, if necessary, the supply of oxandrolone to BTG through at
least the year 2003, contingent on SPA obtaining certain regulatory approvals.
To date SPA has been unable to gain such approvals. As a result, in February
1999, we entered into a supply agreement with Gedeon-Richter Ltd. ("GRL")
pursuant to which GRL will supply oxandrolone to BTG on an exclusive basis
provided certain annual minimum purchase requirements are met. Should Searle for
any reason be unable to supply OXANDRIN to BTG prior to GRL obtaining the
necessary approvals, BTG's business, results of operations and financial
condition could be materially adversely affected. GRL has advised us that it
believes it will obtain the necessary approvals by the end of 2002. Solchem, a
former affiliate of SPA, has commenced a declaratory judgment action seeking a
determination that it is not a party to the BTG SPA agreement, which binds
affiliates of SPA, and therefore is not bound by the non-compete and is free to
sell oxandrolone to a generic drug manufacturer. See "--Risk Factors--We are
dependent on third-party suppliers" and "Item 3. Legal Proceedings."

         Bristol has manufactured DELATESTRYL for BTG on a purchase order basis
following expiration of a supply agreement in December 1997. There can be no
assurance that Bristol will continue to honor our purchase orders or that our
supply requirements will be satisfied. Additionally, Bristol has from time to
time indicated to BTG that it intends to close the facility at which it
manufactures DELATESTRYL in June 2001. The need to find a new manufacturer could
affect the availability of DELATESTRYL.

         In February 1995, BTG-Israel was awarded ISO 9002 certification by the
Standards Institution of Israel ("SII"). The certification was issued with
respect to the manufacture, packaging and dispatch of BTG's pharmaceutical
products for human use. ISO 9002 is one of a series of Quality Management System
Standards established by the International Organization for Standardization
("ISO") based in Geneva, Switzerland. It is equivalent to the European Community
Standard EN 29002. SII is a member of an international organization, the
International Quality Certification Network ("IQNet"), that encompasses quality
certification institutes worldwide in a mutual recognition agreement. Receipt of
the ISO 9002 certification was a significant milestone in the process of
obtaining the BIOLON CE mark. In August 1997, SII awarded BTG-Israel ISO 14001
certification for its Environmental Management System. The ISO 14000 series of
standards, dealing with the environment and its protection, are important from
both a regulatory and commercial point of view.


                                       14
<PAGE>


GOVERNMENTAL REGULATION

         Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the timing of the commercialization
of our products and our ongoing research and development activities. BTG's
policy is to conduct its research and development activities in compliance with
current United States National Institutes of Health Guidelines for Research
Involving Recombinant DNA Molecules, and with comparable guidelines in Israel
and other countries where we may be conducting clinical trials or other
developmental activities. See "--Risk Factors--We are subject to stringent
governmental regulation."

         Clinical testing, manufacturing and marketing of human pharmaceutical
products require prior approval from the FDA and comparable agencies in foreign
countries. The FDA has established mandatory procedures and safety and efficacy
standards that apply to the testing, manufacture and marketing of such products
in the United States. In the United States, these procedures include
pre-clinical studies, the filing of an Investigational New Drug Application
("IND"), human clinical trials and approval of an NDA. European countries
generally follow the same procedures. The European Union has established a
unified filing system administered by the Committee for Proprietary Medicinal
Products ("CPMP") designed to reduce the administrative burden of processing
applications for new pharmaceutical products. Following CPMP review and
approval, marketing applications are submitted to member countries for final
approval and pricing approval, as appropriate. These processes are likely to
take a number of years and often involve substantial expenditures. There can be
no assurance that any approval will be granted and, even if granted, such
approval may be withdrawn if compliance with regulatory standards is not
maintained. In addition, certain environmental and consumer groups are generally
opposed to genetically engineered products, although their opposition is
primarily in the agricultural field. There can be no assurance that opposition
from such groups will not adversely affect the FDA approval process with respect
to our biotechnology products.

         In addition to the foregoing, BTG's present and future business may be
subject to regulation under the United States Atomic Energy Act, Drug
Enforcement Agency, Clean Air Act, Clean Water Act, Occupational Safety and
Health Act, National Environmental Policy Act, Toxic Substances Control Act,
Resource Conservation and Recovery Act, Comprehensive Environmental Response,
Compensation and Liability Act and similar state and foreign statutes, as well
as national restrictions on technology transfer, and import, export and customs
regulations and similar laws and regulations in foreign countries.


PATENTS AND PROPRIETARY RIGHTS

         Our scientific staff and consultants are actively working in various
areas of biotechnology to develop techniques, microorganisms, processes and
products to achieve BTG's commercial aims. BTG protects its intellectual
property rights in this work by a variety of means, including filing patent
applications in the United States and major industrialized countries. BTG also
relies upon trade secrets and improvements, unpatented proprietary know-how and
continuing technological innovation to develop and maintain its competitive
position. See "--Risk Factors--We depend upon proprietary technology, which may
be difficult to protect."

         As of February 1, 2001, BTG was maintaining worldwide approximately 500
granted patents either owned or exclusively licensed by BTG, including 66
patents granted in the United States, 18 patents granted by the European Patent
Office ("EPO"), which in turn resulted in the grant of 207 national patents in
Europe, and 21 patents granted in Israel. Additionally, approximately 130 patent
applications owned or exclusively licensed by BTG are pending in various
countries. There can be no assurance that any of the patent applications
assigned or licensed to BTG will result in granted patents, or that granted
patents will not be circumvented or invalidated. We believe that important legal
issues remain to be resolved as to the extent and scope of patent protection,
and we expect that in certain cases litigation may be necessary to determine the
validity and scope of our and


                                       15
<PAGE>

others' proprietary rights. Such litigation may consume substantial amounts of
our resources. See "--Risk Factors--We depend upon proprietary technology, which
may be difficult to protect" and "Item 3. Legal Proceedings."

         We are aware of patent applications filed by, or patents issued to,
other entities with respect to technology potentially useful to BTG and, in some
cases, related to products and processes being developed by BTG. We cannot
presently assess the effect, if any, that these patents may have on our
operations. The extent to which efforts by other researchers have or will result
in patents and the extent to which the issuance of patents to others would have
a materially adverse effect on our business or would force us to obtain licenses
from others is currently unknown. See "--Risk Factors--We depend upon
proprietary technology, which may be difficult to protect."

         To date, BTG has been, or currently is, party to several legal and
administrative proceedings relating to its technologies, products and patents
and the patents of others. See "Item 3. Legal Proceedings."


INSTITUTIONAL AND GOVERNMENTAL RELATIONSHIPS

         We believe our relationships with research institutions in the United
States, Europe and Israel and with the Government of Israel to be important in
our research and product development efforts. We believe that these
relationships greatly enhance our research and product development efforts, and
we intend to develop and maintain relationships with leading universities and
research institutions even as we continue to expand our capability to conduct
research and product development at our own facilities.

         The State of Israel supports and encourages research and development in
the field of high technology, as well as manufacturing for export through
programs that provide for research and development funding, export financing,
tax benefits and capital investment incentives. BTG's research and development
activities in Israel through BTG-Israel enable us to take advantage of these
programs. There can be no assurance, however, that such programs will continue.


OPERATIONS IN ISRAEL

         BTG's primary research and development and production activities are
conducted in Israel and are affected by economic, military and political
conditions there. Israel has been involved in a number of armed conflicts with
its bordering countries. During the course of military operations, Israel's
military reserves, which include a number of our employees and executives, may
be called up. To date, we have been able to continue our research and
development and production activities during periods of military mobilization,
although there can be no assurance that such activities could be continued in
the event of future hostilities. See "--Risk Factors--Our business may be
adversely affected by developments in Israel."

         Because BTG-Israel is involved in a technological industry and is an
exporter of Israeli goods, BTG has enjoyed the benefits of certain programs
promulgated by the Government of Israel in order to encourage the development of
technology and export of Israeli products. However, there can be no guarantee
that these programs will continue.


COMPETITION

         Therapeutic drug development is conducted by numerous companies
throughout the world. Competition is intense in the product areas in which BTG
has focused its efforts. Significant competition comes from independent,
dedicated biotechnology companies as well as from large, established
pharmaceutical companies. The primary competitive factors in this field are the
ability


                                       16
<PAGE>

to attract and retain highly qualified scientists and technicians, to create and
maintain scientifically advanced technology during a period of rapid
technological development and to develop proprietary products or processes.

         The principal parameters influencing competition are the efficacy of
products and their production processes, the patent protection available for
such products, the timing of commercialization vis-a-vis competitors' products
and, to a limited extent, price. BTG's competitive position in the industry
varies on a product-by-product and country-by-country basis depending upon the
efficacy of BTG's products as compared to competing products, the scope of
patent protection in each country for BTG's products as compared to competing
products, whether BTG's product is the first such product to be commercialized
and, where there are a number of similar products, the price of BTG's product as
compared to its competitors' products, and the relative strength of BTG's
partner in said territory.

         Many of our current competitors have significantly greater financial
and organizational resources than us. Since technological developments are
expected to continue at a rapid pace in the biotechnology industry, the
successful development of BTG's products will be dependent upon its ability to
maintain a competitive position with respect to its technology. See "--Risk
Factors--We operate in a highly competitive market and our competitors may
develop alternative technologies and products."

         We are currently seeking to expand our operations and product pipeline
through the acquisition of businesses, products and/or technologies. We face
significant competition for acquisitions, which could adversely affect our
ability to expand our operations and product pipeline. See "--Risk Factors--We
are seeking to expand through acquisition, which entails risks."


EMPLOYEES

         As of February 1, 2001, we had 325 employees, most of whom are engaged
in research, development, manufacturing, quality assurance and marketing
activities, including 40 who hold Ph.D. or M.D. degrees. In addition, we have
consulting arrangements with scientists at various institutions and universities
in the United States and Israel.

         BTG's ability to develop marketable products and to establish and
maintain its competitive position in light of technological developments will
depend, in part, on its ability to attract and retain qualified scientific,
marketing and management personnel. Competition for such personnel is intense.

         None of BTG's employees is represented by a labor union and BTG has
experienced no work stoppages. We believe our relations with our employees is
good and we have experienced a low turnover rate among our employees.


RISK FACTORS

         This Annual Report on Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements regarding
BTG's expected future financial position, results of operations, cash flows,
financing plans, business strategy, competitive position, plans and objectives
and words such as "anticipate," "believe," "estimate," "expect," "intend,"
"plan" and other similar expressions are forward-looking statements. These
forward-looking statements are based on our current expectations, assumptions,
estimates and projections about our business and the biopharmaceutical industry,
and involve known and unknown risks, uncertainties and other factors that may
cause BTG's results, levels of activity, performance or achievements to be
materially different from the results, levels of activity, performance or
achievements expressed or implied in


                                       17
<PAGE>


or contemplated by these forward-looking statements. Accordingly, stockholders
must recognize that BTG's actual results could differ materially from those
projected or contemplated in the forward-looking statements as a result of a
variety of factors, including the factors set forth below. Stockholders should
not place undue reliance on these forward-looking statements.

         The forward-looking statements speak only as of the date on which they
are made, and BTG undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated events. In
addition, we cannot assess the effect of each factor on our business or the
extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements.

We are dependent on OXANDRIN sales.

         Sales of OXANDRIN in 1998, 1999 and 2000 amounted to approximately
$40.5 million, $24.9 million and $32.2 million, respectively, representing 59%,
40% and 52%, respectively, of BTG's total product sales in those periods. In
April 1999 Gentiva began to reduce its purchases of OXANDRIN in order to reduce
the amount of OXANDRIN inventory it carried as a result of a slowing in the rate
of increase of OXANDRIN prescriptions. Gentiva finished this inventory reduction
in May 2000, and is now purchasing, on a monthly basis, an amount of OXANDRIN
equal to the average end-user (I.E., wholesaler) sales during the preceding
three months. Gentiva's reduction in OXANDRIN inventory adversely affected the
growth in BTG's revenues and sales and BTG's results of operations in 1999 and
2000. There can be no assurance that Gentiva will not determine to further
reduce its OXANDRIN inventory levels.

         Since BTG's launch of OXANDRIN in December 1995 through December 2000,
a significant portion of OXANDRIN sales has been for treatment of patients
suffering from AIDS-related weight loss. However, the rate of growth in the
AIDS-related weight loss market has slowed substantially, and there can be no
assurance that it will continue to grow in the future. Our failure to continue
to increase our sales in the AIDS-related weight loss market or to expand into
other markets could have a material adverse effect on our business. OXANDRIN
sales have experienced rapid growth in December 2000 and the first quarter of
2001 as a result of the commencement by the Ross Products Division of Abbott
Laboratories of the marketing of OXANDRIN to the long-term care market. There
can be no assurance that demand for OXANDRIN in this market will continue.

         OXANDRIN is facing increasing competition from other products,
including human growth hormone, and there can be no assurance that sales of
OXANDRIN will continue to increase. A substantial number of users of OXANDRIN
are patients with AIDS and as more successful treatments for this disease, such
as protease inhibitors, are developed, the need to use OXANDRIN by these
patients may be reduced. Although BTG is working to expand the use of OXANDRIN
to treat other conditions covered by the product's current FDA approval, such as
the treatment of involuntary weight loss associated with burns, non-healing
wounds, chronic obstructive pulmonary disease and cancer, there can be no
assurance that BTG will be successful in its efforts. Additionally, there are no
patents covering the use of OXANDRIN and there can be no assurance that others
will not introduce an oxandrolone product.

We are dependent on third-party suppliers.

         BTG is dependent on third parties for the manufacture of OXANDRIN and
DELATESTRYL and the filling and vialing of its BIO-TROPIN product. Although BTG
is a party to an exclusive supply arrangement with Searle, covering the supply
of OXANDRIN to BTG through 2003, and an agreement with GRL, there can be no
assurance that Searle will continue, or that GRL will be able, to provide BTG
with sufficient supplies of OXANDRIN to satisfy its future needs. Bristol has
manufactured DELATESTRYL for BTG pursuant to an agreement which expired in
December 1997. There can be no assurance that Bristol will continue to honor
BTG's purchase orders or that BTG's supply requirements will be satisfied.
Additionally, Bristol has from time to time indicated to BTG


                                       18
<PAGE>


that it intends to close the facility at which it manufactures DELATESTRYL in
June 2001. Our need to find a new manufacturer could affect the availability of
DELATESTRYL. In addition, BTG is dependent on Dr. Madaus GmbH ("Dr. Madaus") to
fill and vial our BIO-TROPIN product.

         A shutdown in any of the manufacturing facilities utilized by BTG's
suppliers due to technical, regulatory or other problems, resulting in an
interruption in supply of products, could significantly delay the manufacture of
one or more of our products, which could have an adverse impact on our financial
results. The manufacturing process for pharmaceutical products is highly
regulated, and regulators may shut down manufacturing facilities that they
believe do not comply with regulations. The FDA's current Good Manufacturing
Practices are extensive regulations governing the manufacturing process,
stability testing, record-keeping and quality standards. Because the suppliers
of key components and materials must be named in an NDA filed with the FDA for a
product, significant delays can occur if the qualification of a new supplier is
required. In the event of any interruption in supply from Searle, GRL, Bristol
or Dr. Madaus due to regulatory reasons, processing problems, capacity
constraints or other causes, alternative manufacturing arrangements may not be
available on a timely basis, if at all. Any failure of Searle, GRL, Bristol or
Dr. Madaus to fulfill its obligations to BTG could have a material adverse
effect on our business, results of operations and financial condition. See
"--Manufacturing and Supply Agreements."

We are dependent on third-party licensees.

         BTG is dependent on third-party licensees to distribute its products
outside the United States and Israel and to distribute certain of its products
in the United States. These arrangements typically provide our licensees with
certain rights to manufacture and market specified products developed using our
proprietary technology, subject to an obligation to pay royalties to us based on
any future product sales or to purchase product from us, and require the
licensee to conduct required clinical trials and obtain any necessary regulatory
approvals. The success of these arrangements depends on each licensee's own
financial, competitive, marketing and strategic considerations, which include
the relative advantages, including patent and proprietary positions, of
alternate products being marketed or developed by others. Furthermore, the
amounts of any payments to be received by BTG under its license agreements from
sales of product by licensees will be dependent on the extent to which its
licensees devote resources to the development and commercialization of the
products. Although we believe our licensees have an economic motivation to
commercialize their products, we have no effective control over the licensees'
commercialization efforts.

         BTG's business strategy with respect to its products under development
includes finding larger pharmaceutical companies to collaborate on the research,
development and commercialization of certain products. In trying to attract
corporate partners to collaborate in the research, development and
commercialization process, BTG faces serious competition from other
biopharmaceutical companies and the in-house research and development staffs of
the larger pharmaceutical companies. If BTG is unable to enter into arrangements
with corporate partners, its ability to proceed with the research, development
and commercialization of its products may be severely limited. Furthermore,
larger pharmaceutical companies often explore multiple technologies and products
for the same medical conditions. Therefore, they are likely to enter into
collaborations with BTG's competitors for products addressing the same medical
conditions addressed by BTG's products. Depending on how other product
candidates advance, a corporate partner may slow down or abandon its work on
BTG's product candidates or terminate its collaborative arrangement with BTG in
order to focus on these other prospects.

We depend upon proprietary technology, which may be difficult to protect.

         BTG's success will depend, in part, on its ability to obtain patent
protection for its technology (including use of its products), preserve trade
secrets and operate without infringing the proprietary rights of third parties.
The patent positions of pharmaceutical and biopharmaceutical companies are
highly uncertain and involve complex legal and factual questions. Patent
disputes are frequent


                                       19
<PAGE>


and costly, can delay or preclude the commercialization of products and could
subject BTG to significant liabilities to third parties. Many biopharmaceutical
companies have employed intellectual property litigation as a way to gain a
competitive advantage.

         BTG has developed patentable technology and proprietary know-how and
has acquired from various universities and institutions certain basic
technologies, as to which either patents have been issued or patent applications
are pending. There can be no assurance that patent applications will result in
issued patents, that the claims allowed in such issued patents will be
sufficiently broad to protect our proprietary rights or that patents will not be
challenged, circumvented or invalidated or that rights granted pursuant to such
patents will provide competitive advantages to BTG. Because patent applications
are maintained in secrecy for a period of time after filing, we cannot be
certain that others have not filed patent applications for technology covered by
our pending applications or that we were the first to file patent applications
for such technology. BTG also relies on trade secrets, proprietary know-how and
technological innovation that it seeks to protect with confidentiality
agreements with its employees, consultants and licensees. There can be no
assurance that these agreements will not be breached, that BTG will have
adequate remedies for any breach or that BTG's trade secrets and proprietary
know-how will not otherwise become known or be independently discovered by
competitors.

         BTG's commercial success will also depend in part on our not infringing
patents or proprietary rights of third parties. A number of companies and
research and academic institutions have developed technologies, filed patent
applications or received patents on various technologies that relate to our
business, and such entities may file applications for or be issued patents in
the future with respect to technology potentially necessary or useful to BTG.
Some of these technologies, applications or patents may conflict with BTG's
technologies and existing or future patents, if any, or patent applications.
Such conflict could limit the scope of patents that BTG has obtained or may
obtain in the future or result in patent applications failing to issue as
patents. In addition, if third parties obtain patents which cover our
activities, there can be no assurance that BTG would be able to license such
patents on reasonable terms, or at all, or be able to license or develop
alternative technology on a timely basis, or at all. As more patents are issued
to third parties, the risk that BTG's products and activities may give rise to
claims that they infringe the patents of others increases. In addition, the
presence of patents or other proprietary rights belonging to other parties may
lead to the termination of research and development of a particular product.

         BTG has in the past been, is currently and may in the future be
involved in litigation and administrative hearings to determine the validity and
scope of its and others' patents and proprietary rights. Such litigation and
administrative proceedings have to date required, and may in the future require,
a significant commitment of our resources. Any such commitment may divert
resources from other areas of BTG's business. See "Item 3. Legal Proceedings."

The successful development of pharmaceutical products is highly uncertain.

         Successful pharmaceutical product development is highly uncertain and
is dependent on numerous factors, many of which are beyond BTG's control.
Products that appear promising in the early phases of development may fail to
reach the market for numerous reasons, including, but not limited to:

               o they may be found to be ineffective or to have harmful side
          effects in preclinical or clinical testing;
               o they may fail to receive necessary regulatory approvals;
               o they may turn out to be uneconomical because of manufacturing
          costs or other factors; or
               o they may be precluded from commercialization by the
          proprietary rights of others or by competing products for the same
          indication.


                                       20
<PAGE>


Success in preclinical and early clinical trials does not ensure that
large-scale trials will be successful. Data obtained from preclinical and
clinical trials are frequently susceptible to varying interpretations that may
delay, limit or prevent regulatory approvals. Many biopharmaceutical companies,
including BTG, have suffered significant setbacks in advanced clinical trials,
even after experiencing promising results in preclinical and early human
testing.

         BTG is currently seeking to expand its product pipeline through the
acquisition of businesses, products and/or technologies. The acquisitions that
BTG is currently able to pursue in general involve products that are still in
clinical trials and, therefore, face the risks discussed above. To the extent
BTG uses its cash resources, incurs debt and/or issues shares of its common
stock in these acquisitions but the acquired product cannot be commercialized,
BTG's business and prospects could be adversely affected.

         The length of time necessary to complete clinical trials and to submit
an application for marketing approval for a final decision by a regulatory
authority varies significantly and is dependent upon a number of factors, many
of which are outside our control, including the rate of patient enrollment.
Patient enrollment is a function of several factors, including the size of the
patient population and the proximity of patients to clinical sites. Delays in
patient enrollment could result in increased costs and delays in completion of
the clinical trials. In addition, preclinical and clinical trials must meet
regulatory and institutional requirements.

         The principal factors affecting BTG's research and development expenses
include the number of and outcome of clinical trials currently being conducted
by it and/or its collaborators, the number of products in development and later
stage research and future levels of revenue.

We have limited manufacturing capacity.

         The manufacture of BTG's products involves a number of technical steps
and requires meeting stringent quality control specifications imposed by
governmental regulatory bodies and by BTG itself. Further, such products can
only be manufactured in facilities approved by the applicable regulatory
authorities. As a result, BTG may not be able to quickly and efficiently replace
its manufacturing capacity in the event that it is unable to manufacture its
products at its facilities. In the event of a natural disaster, equipment
failure, strike, war or other difficulty, BTG may be unable to manufacture its
products in a manner necessary to fulfill demand. BTG's inability to fulfill
demand may permit its licensees and distributors to terminate their agreements,
seek alternate suppliers or manufacture the products themselves. Additionally,
if BTG does not receive regulatory approval for its new facility, it would
likely be unable to meet the anticipated increased demand for its products,
which would have a material adverse effect on BTG's business, results of
operations and financial condition. Any substantial delay in obtaining
regulatory approval for its manufacturing processes and facilities could also
have a material adverse effect on BTG.

         BTG is dependent on third parties to manufacture all or a portion of
certain of its products. See "--We are dependent on third-party suppliers."

We have limited marketing capability and experience.

         BTG established a sales and marketing force in the United States during
the second half of 1995 to promote distribution of OXANDRIN and other BTG
products in the United States. With respect to territories outside the United
States, BTG does not yet have an established sales force and relies on third
parties to market its products. There can be no assurance that our marketing
strategy will be successful. BTG's ability to market its products successfully
in the future will be dependent on a number of factors, many of which are not
within its control. See "--We are dependent on third-party licensees."


                                       21
<PAGE>

We are seeking to expand through acquisitions, which entails risk.

         BTG is currently seeking to expand its operations and product pipeline
through the acquisition of businesses, products and/or technologies. Expansion
through acquisition involves several risks. In order to consummate an
acquisition, BTG might issue additional equity, which would dilute current
stockholders' percentage ownership, incur substantial debt and/or assume
contingent liabilities. BTG may not be able to successfully integrate any
acquired business, product and/or technology without a significant expenditure
of operating, financial and management resources, if at all. In addition,
acquired businesses may not at the time of acquisition be profitable, and
acquired products may require substantial additional research and development
and clinical trials before they can be commercialized, all of which could
adversely affect BTG's results of operations and financial position. Potential
products acquired at an early stage of development may fail to reach the market
for numerous reasons, including those set forth above under "--The successful
development of pharmaceutical products is highly uncertain." To the extent we
acquire technology that is not fully commercially developed and has no
alternative future use at the time of acquisition, we will be required to
write-off immediately the fair market value of such technology, which will
adversely affect our results of operations. Further, recently proposed changes
in accounting for acquisitions as a result of a proposal to eliminate
"pooling-of-interests" accounting could adversely affect BTG's results of
operations.

We expect our quarterly results to fluctuate, which may cause volatility in our
stock price.

         BTG's revenues and expenses have in the past and may in the immediate
future continue to display significant variations, which variations have caused
our operating results to vary significantly from quarter to quarter and year to
year. These variations are due to a variety of factors, including:

               o the amount and timing of product sales,
               o the timing of the introduction of new products,
               o the timing and realization of milestone and other payments from
          licensees,
               o the timing and amount of expenses relating to research and
          development, product development and manufacturing activities,
               o the extent and timing of costs of obtaining, enforcing and
          defending intellectual property rights, and
               o any charges related to acquisitions.

Because many of BTG's expenses are fixed, particularly in the short-term, any
decrease in revenues will adversely affect BTG's earnings until revenues can
be increased or expenses reduced. In 1999 and the first five months of 2000,
BTG's revenues and earnings were adversely affected by Gentiva's decision to
reduce the amount of OXANDRIN inventory it carried as a result of a slowing
in the rate of increase of OXANDRIN prescriptions. In addition, BTG
anticipates that an amount in excess of the purchase price paid at closing
will be written off in the first quarter of 2001 as "in process research and
development", because the technology acquired in the acquisition was not
fully commercially developed and had no alternative future use at the time of
the acquisition. This will adversely affect our results of operations for the
first quarter and full year of 2001. Because of fluctuations in revenue and
expenses, it is possible BTG's operating results for a particular quarter or
quarters will not meet the expectations of public market analysts and
investors, causing the market price of BTG common stock to decline. We
believe that period-to-period comparisons of our operating results are not a
good indication of our future performance and stockholders should not rely on
those comparisons to predict our future operating or share price performance.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."

                                       22
<PAGE>

We may be unable to obtain any additional capital needed to operate and grow our
business.

         The development and commercialization of products requires a
substantial amount of funds. In addition, we may require cash to acquire
businesses, products and/or technologies. Our cash requirements are currently
satisfied primarily through product sales and contract fees. Historically, cash
requirements were satisfied primarily through (i) product sales, (ii) funding of
projects through collaborative research and development arrangements, (iii)
contract fees, (iv) government of Israel funding of a portion of certain
research and development projects, mainly through the office of its Chief
Scientist, and (v) equity and debt financings. There can be no assurance that
these financing alternatives will be available in the future to satisfy our cash
requirements. We believe that our current cash resources, together with
anticipated product sales, scheduled payments to be made to us under our current
agreements with pharmaceutical partners and third parties and continued funding
from the Chief Scientist at current levels, will be sufficient to fund our
ongoing operations for the foreseeable future. There can, however, be no
assurance that product sales will occur as anticipated, that scheduled payments
will be made by third parties, that current agreements will not be canceled,
that the Chief Scientist will continue to provide funding at current levels,
that we will not use a substantial portion of our cash resources to acquire
businesses, products and/or technologies, or that unanticipated events requiring
the expenditure of funds will not occur.

         The satisfaction of our future cash requirements will depend in large
part on the status of commercialization of our products, our ability to enter
into additional research and development and licensing arrangements, and our
ability to obtain additional equity investments, if necessary. There can be no
assurance that BTG will be able to obtain additional funds or, if such funds are
available, that such funding will be on favorable terms. If additional funds are
raised by issuing equity securities of BTG, dilution to existing stockholders
may result. If additional funds are raised through the issuance of debt
securities or borrowings, BTG may incur substantial interest expense and could
become subject to financial and other covenants that could restrict our ability
to operate our business. If adequate funds are not available, BTG may be
required to significantly curtail one or more of its commercialization efforts
or research and development programs or obtain funds through arrangements with
collaborative partners or others on less favorable terms than might otherwise be
available.

We are subject to stringent governmental regulation.

         BTG is subject to stringent regulation with respect to product safety
and efficacy by numerous governmental authorities in the United States and other
countries. Of particular significance are the requirements covering research and
development, testing, manufacturing, quality control, labeling and promotion of
pharmaceutical products for human use. All of BTG's products, manufacturing
processes and facilities require governmental licensing or approval prior to
commercial use. A pharmaceutical product cannot be marketed in the United States
until it has been approved by the FDA, and then can only be marketed for the
indications and claims approved by the FDA. As a result of these requirements,
the length of time, the level of expenditures and the laboratory and clinical
information required for approval of an NDA are substantial. The approval
process applicable to products of the type being developed by BTG usually takes
five to seven years from the commencement of human clinical trials and typically
requires substantial expenditures. BTG and its licensees may encounter
significant delays or excessive costs in their respective efforts to secure
necessary approvals or licenses. Before obtaining regulatory approval for the
commercial sale of its products, BTG is required to conduct preclinical and
clinical trials to demonstrate that the product is safe and efficacious for the
treatment of the target disease. The timing of completion of clinical trials is
dependent upon a number of factors, many of which are outside our control. In
addition, BTG and its partners may encounter delays or rejections based upon
changes in the policies of regulatory authorities.

         Future United States or foreign legislative or administrative acts
could also prevent or delay regulatory approval of BTG's or its licensees'
products. Failure to obtain requisite governmental approvals, or failure to
obtain approvals of the scope requested, could delay or preclude BTG or

                                       23
<PAGE>

its licensees from marketing their products, could limit the commercial use
of the products and could also allow competitors time to introduce competing
products ahead of product introduction by BTG and thereby have a material
adverse effect on BTG's results of operations, liquidity and financial
condition. Even after regulatory approval is obtained, use of the products could
reveal side effects that, if serious, could result in suspension of existing
approvals and delays in obtaining approvals in other jurisdictions.

         Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the timing of the commercialization
of BTG's products and its ongoing research and development activities. The
timing of regulatory approvals is not within our control. To date, the length of
time required to obtain regulatory approval of genetically-engineered products
has been significantly longer than expected, both for BTG and the biotechnology
industry in general. These delays have had and, if they continue, could have a
material adverse effect on our results of operations and financial condition. We
believe that these delays have in the past negatively impacted our ability to
attract funding and that, as a result, the terms of such financings have been
less favorable to us than they might otherwise have been had BTG's product
revenues provided sufficient funds to finance the large costs of taking a
product from discovery through commercialization. As a result, BTG has had to
license the commercialization of many of its products to third parties in
exchange for research funding and royalties on product sales; this will result
in lower revenues than if BTG had commercialized the products on its own.

         Failure to comply with applicable regulatory requirements can, among
other things, result in fines, suspension of regulatory approvals, product
recalls, seizure of products, imposition of operating restrictions and criminal
prosecutions. Further, FDA policy or similar policies of regulatory agencies in
other countries may change and additional governmental requirements may be
established that could prevent or delay regulatory approval of our products.

We are subject to uncertainties regarding healthcare reimbursement and reform.

         BTG's ability to successfully commercialize human therapeutic products
depends in part on the extent to which reimbursement for the cost of such
products and related treatment will be available from government health
administration authorities, private health coverage insurers and other
organizations. Significant uncertainty exists as to the reimbursement status of
newly approved healthcare products, and there can be no assurance that adequate
third-party coverage will be available for BTG to maintain price levels
sufficient for the realization of an appropriate return on its investment in
product development. Government and other third party payors are increasingly
attempting to contain healthcare costs by limiting both coverage and the level
of reimbursement for new therapeutic products approved for marketing by the FDA
and by refusing, in some cases, to provide any coverage for use of approved
products for disease indications for which the FDA has not granted marketing
approval. If adequate coverage and reimbursement levels are not provided by
government and third-party payors for use of our healthcare products, the market
acceptance of these products would be adversely affected. In addition, in recent
years a number of federal and state healthcare reform proposals have been
introduced to contain healthcare costs. There can be no assurance as to the
ultimate content, timing or effect of any healthcare reform legislation, nor is
it possible at this time to estimate the impact of potential legislation on our
business.

         Regulatory approval of prices is also required in most countries
outside the United States. In particular, certain European countries will
condition their approval of a product on the agreement of the seller not to sell
the product for more than a certain price in that country. There can be no
assurance that the establishment of a price in one European country will not
have the practical effect of requiring our marketing partners to sell the
product in other European countries at no higher than such price. Because BTG
generally supplies product to its marketing partners for a specified percentage
of net sales, there can be no assurance that the resulting prices would be
sufficient to generate an acceptable return on our investment in its products or
even cover our manufacturing costs for such product.



                                       24
<PAGE>

We operate in a highly competitive market and our competitors may develop
alternative technologies and products.

         The pharmaceutical and biotechnology industries are intensely
competitive, and the technological areas in which we work continue to evolve at
a rapid pace. Our future success depends upon maintaining our ability to compete
in the research, development and commercialization of products and technologies
in our areas of focus. Competition from pharmaceutical, chemical and
biotechnology companies, universities and research institutions is intense and
expected to increase. Many of these competitors have substantially greater
research and development capabilities and experience and manufacturing,
marketing, financial and managerial resources than we do. Acquisitions of
competing companies by large pharmaceutical companies or other companies could
enhance the financial, marketing and other resources available to these
competitors.

         Our competitors may develop products that are superior to those we are
developing. Rapid technological development may result in our products or
processes becoming obsolete before marketing of these products or before we
recover a significant portion of the research, development and commercialization
expenses incurred with respect to those products.

         Our products must compete with others to gain market acceptance and
market share. An important factor will be the timing of market introduction of
competitive products. Accordingly, the relative speed with which we and
competing companies can develop products, complete the clinical testing and
approval processes, and supply commercial quantities of the products to the
market will be an important element of market success. Significant competitive
factors include:

                    o capabilities of our collaborators,
                    o product efficacy and safety,
                    o timing and scope of regulatory approval,
                    o product availability,
                    o marketing and sale capabilities,
                    o reimbursement coverage from insurance companies and
               others,
                    o the amount of clinical benefit of our product candidates
               relative to their cost,
                    o the method of administering a product,
                    o price, and
                    o patent protection.

         Our competitors may develop more effective or more affordable products
or achieve earlier product development completion, patent protection, regulatory
approval or product commercialization than we do. Our competitors' achievement
of any of these goals could have a material adverse effect on our business.
These companies also compete with BTG to attract qualified personnel and to
attract third parties for acquisitions, joint ventures or other collaborations.

We may be unable to obtain and retain skilled personnel.

         We are dependent upon the efforts of our officers, scientists and other
employees. The loss of certain of these key employees could materially and
adversely affect our business. Our business is dependent upon our ability to
attract and retain qualified research and managerial personnel. There is a great
deal of competition for the limited number of scientists with expertise in the
area of BTG's operations. We do not maintain, and have no current intention of
obtaining, "key man" life insurance on any of our employees. We cannot assure
you that we will be successful in hiring or retaining the personnel we require
for continued growth. The failure to hire and retain such personnel could
materially adversely affect our business.



                                       25
<PAGE>

Our business may be adversely affected by developments in Israel.

         BTG's primary research, development and production activities are at
this time conducted in Israel by its wholly-owned subsidiary BTG-Israel and can
be affected by economic, military and political conditions in that country and
in the Middle East in general.

         BTG manages its Israeli operations with the objective of protecting
against any material net financial loss in U.S. dollars from the impact of
Israeli inflation and currency devaluations on its non-U.S. dollar assets and
liabilities. The cost of BTG's operations in Israel, as expressed in dollars, is
influenced by the extent to which any increase in the rate of inflation in
Israel is not offset (or is offset on a lagging basis) by a devaluation of the
Israeli Shekel in relation to the U.S. dollar. The rate of inflation (as
measured by the Israeli consumer price index) was approximately 9% in 1998 and
1% in 1999, while the Shekel was devalued by approximately 18% and less than 1%,
respectively, in these periods. In 2000 there was no change in the consumer
price index and the Shekel's value in relation to the U.S. dollar increased by
approximately 3%. As a result, for those expenses linked to the Israeli Shekel,
such as salaries and rent, this resulted in corresponding decreases in these
costs in U.S. dollars in 1998, but an increase in these costs in U.S. dollar
terms in 1999 and in 2000. To the extent that expenses in Shekels exceed BTG's
revenues in Shekels (which to date have consisted primarily of research funding
from the Chief Scientist and product sales in Israel), the devaluations of
Israeli currency have been and will continue to be a benefit to BTG's financial
condition. However, should BTG's revenues in Shekels exceed its expenses in
Shekels in any material respect, the devaluation of the Shekel will adversely
affect BTG's financial condition. Further, to the extent the devaluation of the
Shekel with respect to the U.S. dollar does not substantially offset the
increase in the costs of local goods and services in Israel, BTG's financial
results will be adversely affected as local expenses measured in U.S. dollars
will increase.

We may incur substantial product liability.

         The testing and marketing of BTG's products entail an inherent risk of
product liability and associated adverse publicity. Pharmaceutical product
liability exposure could be extremely large and pose a material risk. Although
BTG has so far been able to obtain indemnification from pharmaceutical companies
commercializing its products, there can be no assurance that other such
companies will agree in the future to indemnify BTG for other of BTG's products
or that such companies will, if obligated to do so, have adequate resources to
fulfill their indemnity agreements. Further, to the extent BTG elects to test or
market products independently, it will bear the risk of product liability
directly. BTG presently has $15,000,000 of product liability insurance coverage
in place. There can be no assurance that we will be able to maintain existing
insurance or obtain additional insurance on acceptable terms, or at all. It is
possible that a single product liability claim could exceed our insurance
coverage limits, and multiple claims are possible. Any successful product
liability claim made against BTG could substantially reduce or eliminate any
stockholders' equity BTG may have and could have a significant adverse impact on
the BTG's business.

Our stock price may be volatile.

         The market prices for securities of biopharmaceutical companies,
including BTG, have been volatile, and it is likely that the price of our common
stock will fluctuate in the future. Factors such as announcements of
technological innovations or new commercial products by BTG or its competitors,
announcements by BTG or its competitors of results in preclinical testing and
clinical trials, governmental regulation, patent or proprietary rights
developments, public concern as to the safety or other implications of
biotechnology products, changes in earnings estimates and recommendations by
securities analysts, period-to-period fluctuations in financial results and
market conditions in general may have a significant impact on the market price
of our common stock. The stock market has also experienced significant price and
volume fluctuations that are often unrelated to the operating performance of
particular companies. In the past, following periods of volatility in the market
price of the securities of biopharmaceutical companies, securities class action
litigation


                                       26
<PAGE>

has often been instituted against these companies. If we face such litigation in
the future, it would result in substantial costs and a diversion of management's
attention and resources, which could adversely affect our business.

         In addition, the market price of our common stock could be adversely
affected by future exercises of outstanding options and the issuance of
common stock in acquisitions of businesses, products and/or technologies. At
December 31, 2000 options to purchase an aggregate of approximately 7,052,000
shares of common stock were outstanding. A substantial portion of these
options have exercise prices below the current market price of the common
stock. Additionally, all of the shares of common stock issuable upon exercise
of these outstanding options have been registered under the Securities Act of
1933, as amended, and, accordingly, when issued will be freely tradable
without restriction. We have also agreed to register the approximately
2,344,700 shares of common stock we issued in the acquisition of Myelos. The
sale of a significant amount of these shares at one time could adversely
affect the market price of our common stock. In addition, BTG may issue
additional stock, warrants and/or options to raise capital or complete
acquisitions in the future. BTG may also issue additional securities in
connection with its employee benefit plans. During the terms of such options
and warrants, the holders thereof are given the opportunity to profit from a
rise in the market price of the common stock. The exercise of such options
and warrants may have an adverse effect on the market value of the common
stock. The existence of such options and warrants may adversely affect the
terms on which BTG can obtain additional equity financing. To the extent the
exercise prices of such options and warrants are less than the net tangible
book value of the common stock at the time such options and warrants are
exercised, BTG's stockholders will experience an immediate dilution in the
net tangible book value of their investment. Further, the future sale of a
substantial number of shares of common stock by existing stockholders and
option holders may have an adverse impact on the market price of the common
stock. See "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters."

Effecting a change of control of BTG could be difficult, which may discourage
offers for shares of our common stock.

         Our certificate of incorporation and the Delaware General Corporation
Law contain provisions that may delay or prevent an attempt by a third party to
acquire control of us. These provisions include the requirements of Section 203
of the Delaware General Corporation Law. In general, Section 203 prohibits
designated types of business combinations, including mergers, for a period of
three years between us and any third party who owns 15% or more of our common
stock. This provision does not apply if:

                    o our Board of Directors approves of the transaction before
               the third party acquires 15% of our stock,
                    o the third party acquires at least 85% of our stock at the
               time its ownership goes past the 15% level, or
                    o our Board of Directors and two-thirds of the shares of our
               common stock not held by the third party vote in favor of the
               transaction.

         We have also adopted a stockholder rights plan intended to deter
hostile or coercive attempts to acquire us. Under the plan, if any person or
group acquires more than 20% of our common stock without approval of the Board
of Directors under specified circumstances, our other stockholders have the
right to purchase shares of our common stock, or shares of the acquiring
company, at a substantial discount to the public market price. The plan thus
makes an acquisition much more costly to a potential acquirer.

         Our certificate of incorporation also authorizes us to issue up to
4,000,000 shares of preferred stock in one or more different series with terms
fixed by the Board of Directors. Stockholder approval is not necessary to issue
preferred stock in this manner. Issuance of these shares of preferred stock
could have the effect of making it more difficult for a person or group to
acquire control of us. No shares of our preferred stock are currently
outstanding. While our Board


                                       27
<PAGE>


of Directors has no current intentions or plans to issue any preferred stock,
issuance of these shares could also be used as an anti-takeover device.









                                       28
<PAGE>


EXECUTIVE OFFICERS OF THE COMPANY

         The executive officers and key personnel of the Company are as follows:

<TABLE>
<CAPTION>

Name                                                  Age          Positions
-------------------------------------------        ---------       -------------------------------------------------------
<S>                                                   <C>
Sim Fass ................................             59           Chairman of the Board, Chief Executive Officer
                                                                   and Treasurer; President of BTG-Israel; Director

Norman Barton, M.D., Ph.D................             53           Senior Vice President--Chief Medical Officer

Zvi Ben-Hetz.............................             55           Vice President--Operations and Logistics,
                                                                   BTG-Israel

Leah Berkovits...........................             52           Vice President--Administration and Corporate
                                                                   Communications

Lawrence Brown...........................             42           Vice President--Business Development

Thomas Ekhardt Dr.sc.nat.................             55           Vice President--Regulatory Affairs

Meir Fischer, Ph.D.......................             60           Vice President--Process Development, BTG-Israel

Donald Fishbein..........................             46           Vice President--Marketing

Dov Kanner, Ph.D.........................             47           Senior Vice President; General Manager,
                                                                   BTG-Israel

Ernest Kelly, Ph.D.......................             51           Senior Vice President--Quality Assurance,
                                                                   Quality Control and Regulatory Affairs.

Avigdor Levanon, Ph.D....................             54           Vice President--Research, BTG-Israel

John Librie..............................             43           Vice President--National Sales

Rachel Perlman-Schoen ...................             50           Vice President--Human Resources, BTG-Israel

Robert Shaw..............................             47           Senior Vice President--General Counsel, Secretary

Ronald Simko.............................             50           Vice President--Manufacturing

Yehuda Sternlicht........................             46           Vice President--Finance, Chief Financial Officer

Bernard Tyrrell..........................             46           Senior Vice President--Worldwide Marketing and
                                                                   Sales

Yehuda Zelig.............................             48           Vice President--Manufacturing, BTG-Israel

</TABLE>

--------------

         Sim Fass has served as Chief Executive Officer of BTG and President of
BTG-Israel since May 1984 and as Chairman of the Board of Directors since March
1997. He has also been a Director and Treasurer of BTG since August 1983. Dr.
Fass served as Chief Operating Officer of BTG-Israel from August 1983 to May
1987 and as President of BTG from May 1984 to May 1999. From April 1980 to
August 1983, he was Vice President, General Manager of Wampole Laboratories, a
division of Carter-Wallace, Inc., a company that manufactures health
care-related products. Prior to that, he held various positions at Pfizer Inc.
from September 1969 until March


                                       29
<PAGE>


1980, including Director, Marketing Research and Planning, Pfizer
Pharmaceuticals, and Vice President, Marketing and Sales, Pfizer Diagnostics
Division of Pfizer Pharmaceutical and Group Marketing Manager of Pfizer
Laboratories. Dr. Fass received his Ph.D. in developmental biology/biochemistry
from the Massachusetts Institute of Technology.

         Norman Barton, M.D., Ph.D. joined BTG in April 1996 in the newly
created position of Vice President--Medical Affairs and was appointed Senior
Vice President--Chief Medical Officer in March 1998. From 1985 until he joined
BTG in 1996 Dr. Barton served as Chief of the Clinical Investigations and
Therapeutics Section of the National Institute of Neurological Disorders and
Stroke in Bethesda, Maryland. During that time, he was instrumental in the
development and clinical investigation of macrophage-targeted glucocerebrosidase
(CEREDASE(TM)), the first enzyme replacement product for Gaucher disease, a
genetic disorder of lipid metabolism. Between 1978 and 1985, Dr. Barton held
positions as a staff neurologist at The New York Hospital and the National
Institute of Neurological Disorders and Stroke. Dr. Barton is a board-certified
neurologist and holds a Ph.D. in Biological Chemistry.

         Zvi Ben-Hetz joined BTG-Israel in December 1980 as facility manager.
His work included the organization and construction of the manufacturing
facility and logistics system of BTG in Israel. Between 1986 and 1988, he headed
the unit involved in the construction of the present facility in Israel. In
1988, he was appointed Operations and Logistics Manager of BTG-Israel and in
1992 was appointed Vice President--Operations and Logistics of BTG-Israel. From
1976 until he joined BTG-Israel, Mr. Ben-Hetz worked at the Volcani Institute,
the National Institute for Agriculture Research in Israel, as a Junior
Agricultural Engineer.

         Leah Berkovits joined BTG in March 1985. Since then, she has held a
variety of positions including Manager, Administration, and Director, Corporate
Communications. In September 1999, she was promoted to Vice
President--Administration and Corporate Communications. From 1978 until she
joined BTG in 1985, Ms. Berkovits was assistant to three successive Ambassadors
who served in the capacity of Permanent Representative of Israel to the United
Nations.

         Lawrence Brown joined BTG in October 1998 in the newly created position
of Vice President--Business Development. Prior to joining BTG, Mr. Brown was
employed by Centocor, Inc. from April 1987 to October 1998 in several
capacities, most recently as Director, Business Development.

         Thomas Ekhardt, Dr.sc.nat joined BTG in May 2000 as Vice
President--Regulatory Affairs. Prior to joining BTG he was with Wyeth-Vaccines
for fourteen years in various research and development positions, most recently
as Senior Director, Global Regulatory Affairs. He obtained his doctorate degree
in microbial genetics at the Swiss Institute for Advanced Technology in Zurich,
Switzerland in 1974. He spent twelve years in molecular genetics research in
academia and industry.

         Meir Fischer, Ph.D. was appointed to the newly-created position of Vice
President--Process Development of BTG-Israel in January 1998. Dr. Fischer joined
BTG-Israel in 1981 as group leader, served as Assistant Director of the
Molecular Biology Department from 1984 to 1988, and as Department Head from 1988
to 1994 in the Research Division, and Department Head of Process Development
from 1994 to 1997 in the Division of Manufacturing and Process Development. Dr.
Fischer obtained his Ph.D. in Biochemical Genetics and Microbiology from Indiana
University in 1974 and subsequently did post-doctoral research in the Department
of Biochemistry of Duke University and at Burroughs Wellcome Company.

         Donald Fishbein joined BTG as Director of Marketing in June 1995 and
was appointed Vice President--Marketing in July 1998. Prior to joining BTG, Mr.
Fishbein spent four years as Director of Marketing Planning for Wyeth-Ayerst
Laboratories. Prior to Wyeth-Ayerst Laboratories, Mr. Fishbein spent four years
with Genentech, three years with the McNeil Pharmaceuticals division of


                                       30
<PAGE>


Johnson & Johnson and four years with SmithKline Beecham Clinical Laboratories
in various marketing, strategic planning and market research positions.

         Dov Kanner, Ph.D. was appointed Senior Vice President of BTG and
General Manager of BTG-Israel in January 2000. Prior thereto, he served as Vice
President--Quality Assurance and Regulatory Affairs of BTG-Israel from September
1994. Dr. Kanner joined BTG-Israel in 1981 as a staff scientist, served as Head
of Fermentation from 1984 to 1989 and as Deputy Director, Manufacturing and
Process Development, from 1989 to 1994. He obtained his Ph.D. in microbiology
from Rutgers University in 1980.

         Ernest Kelly, Ph.D. joined BTG in February 1996 in the newly created
position of Senior Vice President--Quality Assurance, Quality Control and
Regulatory Affairs. Prior to joining BTG, he was Vice President, Worldwide
Quality Assurance for Rhone-Poulenc Rorer Inc. ("RPR"). From 1979 to 1996, Dr.
Kelly served in various positions at RPR in both research and development and
industrial operation quality assurance. Prior to joining RPR, he served Merck
Sharp and Dohme from 1974 to 1979 and McNeil Labs from 1972 to 1974 in quality
assurance and analytical research positions. Dr. Kelly received his Ph.D. in
Physical Chemistry from Villanova University, served on several United States
Pharmacopeia Advisory Panels and also served as Adjunct Professor of
Pharmaceutics at Temple University.

         Avigdor Levanon, Ph.D. joined BTG-Israel in 1980 as group leader,
served as Head of the Molecular Biology Department from 1983 to 1995 and as
assistant to the Chief Scientist from 1995 to 1998. In October 1998 Dr. Levanon
was appointed to the newly-created position of Vice President--Research of
BTG-Israel. Dr. Levanon obtained his Ph.D. in Medical Virology and Microbiology
from The Tel-Aviv University Medical School in 1977 and subsequently did
post-doctoral research at the Institute of Molecular Biology of Zurich
University.

         John Librie joined BTG in October 1995 as the Executive Director of
Sales and was appointed Vice President--National Sales in July 1997. Prior to
joining BTG, Mr. Librie spent nine years with Genentech, holding positions in
sales, marketing and sales management. Prior to joining Genentech, Mr. Librie
spent five years with Marion Laboratories, a pharmaceutical company, in various
sales positions.

         Rachel Perlman-Schoen joined BTG-Israel in September 1982 as assistant
to the Controller. In 1994, she was appointed Senior Director of Human Resources
for BTG-Israel, and in September 1999, was promoted to Vice President, Human
Resources of BTG-Israel. Prior to joining BTG-Israel, Mrs. Perlman-Schoen served
as Patent Administrator in the Weizmann Institute from 1974 through 1982.

         Robert Shaw joined BTG in April 1998 as Vice President--General Counsel
and was appointed Senior Vice President--General Counsel in June 1999 and
Secretary in March 2000. Prior to joining BTG, Mr. Shaw was Vice President,
Intellectual Property and Assistant Secretary at BASF Corporation. From 1984 to
1989, he was Associate General Counsel at Hoechst-Celanese Corporation. Between
1979 and 1984 he held Associate positions at the Fish & Neave and Synnestvedt &
Lechner law firms. Mr. Shaw has a J.D. from Washington University School of Law.
He is admitted to the Bar in New York, Pennsylvania and Missouri.

         Ronald Simko joined BTG in August 1994 as Vice President--
Manufacturing. From 1977 to 1989, Mr. Simko worked in numerous manufacturing
capacities at Schering-Plough Corporation managing the process validation
organization as well as the sterile products and tablet production operations.
From 1989 to 1994, he was at Enzon, Inc., where he served as Senior Director,
Manufacturing and Materials Management.

         Yehuda Sternlicht joined BTG-Israel in July 1992 as financial manager
and in January 1993 was appointed Chief Financial Officer of BTG. In June 1995,
he was appointed Vice President--Finance and Chief Financial Officer of BTG.
From 1988 until he joined BTG-Israel, he


                                       31
<PAGE>

was financial manager of Bordeaux Textile Ltd., an Israeli company. From 1985 to
1988, he served as controller of Laser Industries Ltd., an Israeli company
listed on the American Stock Exchange. Prior to that, he held various positions
at Haft & Haft, one of the largest CPA firms in Israel. From 1983 to 1985, he
worked at Haft & Haft's affiliate's New York office. Mr. Sternlicht is qualified
as a Certified Public Accountant in the State of Israel.

         Bernard Tyrrell joined BTG in March 2001 as Senior Vice
President--Worldwide Marketing and Sales. From June 1999 until he joined BTG Mr.
Tyrrell was Sector Head for Pharmaceuticals for The Hay Group, a consulting
firm. Mr. Tyrrell served as Director of Global Strategic Marketing for metabolic
diseases at Johnson & Johnson from May 1998 to June 1999 and Vice President,
Marketing and Sales at Oncor Inc. from September 1997 to May 1998. Prior to
joining Oncor, Mr. Tyrrell held various positions at Eli Lilly from 1977 to
1997, most recently as Director, Sales and Marketing, Oncology. Mr. Tyrrell is a
registered pharmacist and has an MBA from Bryant College.

         Yehuda Zelig joined BTG-Israel in March 1983 as a research assistant.
In 1988 he was appointed Manager-Protein Purification of BTG-Israel, and from
1989 to 1994 he served as Manager of BTG-Israel's Protein Purification
Department. In 1994 Mr. Zelig was appointed Head of the Manufacturing Department
of BTG-Israel and in September 1995 he was appointed Director of Manufacturing
of BTG-Israel. In January 1998, Mr. Zelig was appointed Vice
President--Manufacturing of BTG-Israel.


ITEM 2.  PROPERTY

         BTG's administrative offices are located in Iselin, New Jersey, where
BTG has leased approximately 23,000 square feet of office space. The lease has a
base average annual rental expense of approximately $415,000 and expires in
October 2003. In addition, BTG leases approximately 2,000 square feet in New
York City for its business activities, including its investor and public
relations activities. This lease expires in September 2003. We also lease
approximately 10,000 square feet of space in San Diego, California, where our
recently acquired PROSAPTIDE research is being conducted. This lease expires in
October 2004. BTG's research, development and manufacturing facility is located
in Rehovot, Israel, where BTG leases approximately 95,000 square feet at an
annual rental of approximately $1,110,000. The lease term expires in December
2002. BTG also leases 5,000 square feet of warehouse space near its research and
manufacturing facility. Although we believe our space is suitable and adequate
for our current activities, we determined that we will require a new, larger
manufacturing facility in Israel within the next several years to meet
anticipated increased demand for our products and increased regulatory
requirements. Accordingly, in April 1999 BTG purchased a building in Israel for
approximately $6.25 million. A modern production facility meeting FDA GMP
requirements for drugs, biologics and devices is currently under construction
and is expected to be completed in the second half of 2001. Following completion
of construction we will begin the validation process, which we currently expect
will take approximately six to nine months for all products. BTG will initially
locate its production activities for FIBRIMAGE at this new facility, and will
thereafter move the remainder of its production activities to this facility.


ITEM 3.  LEGAL PROCEEDINGS

         On December 1, 1994, Genentech filed a lawsuit against BTG in the
United States District Court for the District of Delaware alleging that BTG's
importation of hGH infringed two Genentech process patents. In January 1995, BTG
commenced an action against Genentech in the United States District Court for
the Southern District of New York (the "U.S. District Court") seeking, among
other things, declaratory judgments as to the non-infringement, invalidity and
unenforceability of certain Genentech patents. The Delaware action was
consolidated with the New York action, and in August 1995 the U.S. District
Court granted a preliminary injunction prohibiting the commercial introduction
in the United States of BTG's hGH pending the outcome of the patent infringement


                                       32
<PAGE>


action. The U.S. Court of Appeals for the Federal Circuit ("CAFC") rejected
BTG's appeal of the grant of the preliminary injunction, and the United States
Supreme Court denied BTG's petition for a writ of CERTIORARI.

         Two of the Genentech patents originally at issue have expired, and only
a third patent of Genentech, expiring in July 2003, remained in issue. The
action in the U.S. District Court was tried in January 2000 and the U.S.
District Court found that the remaining Genentech patent was invalid and vacated
the preliminary injunction. The CAFC heard Genentech's appeal in December 2000.
Although BTG believes that it does not infringe any valid Genentech patent,
there can be no assurance that the CAFC will not reverse the District Court's
decision. If the Genentech patent is ultimately found valid, BTG likely will be
precluded in the United States from selling its current hGH product during the
remaining life of this Genentech patent; however, this should not preclude BTG
from marketing hGH manufactured using a new expression system for which BTG
obtained FDA approval in September 1999.

         Three patent applications of Genentech in Israel which cover general
methods relating to genetically engineered products and to human growth hormone
have been allowed -- two in 1983 and one in 1985. BTG opposed the grant of all
these patents. Two of these patent applications expired during 1998 without ever
being granted. The third, which expired in June 2000, corresponds to the U.S.
patent that was invalidated by the U.S. District Court in January 2000.
Procedurally, hearings before the Israel Registrar of Patents took place during
1999 regarding the third patent application and summations and replies were
subsequently filed. A decision may be issued regarding these proceedings during
2001. There can be no assurance that BTG will be successful in its opposition to
the grant of this now expired patent application. If BTG is unsuccessful in its
opposition in Israel the patent may be deemed effective and Genentech may sue
for infringement.

         In September 1993, JCR received a letter from attorneys representing
Genentech and its licensee, Kabi Pharmacia, claiming that JCR's sale of BTG's
hGH infringed certain Genentech patents and patent applications and demanding
that JCR cease the sale of BTG's hGH in Japan. JCR and BTG have filed
oppositions to five Genentech patent applications in Japan; oppositions with
respect to four of these patent applications were denied but the fifth was
successful, which resulted in that patent application being revoked during 1999.
We do not believe that we are infringing or have ever infringed any valid
Genentech patent or patent application, but there can be no assurance that our
hGH will not be found to infringe certain Genentech patents in Japan, the latest
of which expires in July 2000, or any patents issued pursuant to pending patent
applications, the latest of which expires in April 2001 (subject to extension
under certain circumstances). If BTG's hGH is found to infringe certain
Genentech patents in Japan, JCR and/or BTG may be obligated to pay damages, and
would need to obtain a license from Genentech for the remaining term of the
patents in order to continue sales of hGH in Japan. There can be no assurance
that such a license will be granted by Genentech, or that JCR will not be
required to stop selling BTG's hGH in Japan until expiration of these patents.
Sales of hGH to JCR in 1998, 1999 and 2000 were approximately $11.1 million,
$10.5 million and $13.0 million, respectively, representing16%,17% and 21%,
respectively, of BTG's total product sales in those periods and 64%, 58% and
63%, respectively, of BTG's total hGH product sales in those periods.

         During 1991, BTG received notification from the United States Patent
Office Board of Patent Appeals and Interferences (the "Patent Office") of the
declaration of an interference between an issued patent assigned to BTG covering
a method for producing enzymatically active human copper/zinc SOD in bacteria
and a pending application of Chiron Corporation ("Chiron") which claims an
earlier filing date. While BTG is vigorously defending its patent, it cannot
predict the outcome of such interference. However, should BTG's patent be
disallowed and a corresponding patent be issued to Chiron, BTG's present method
of producing enzymatically active human copper/zinc SOD in bacteria may need to
be altered, which may or may not be possible; alternatively, BTG could seek a
license to market under Chiron's patent, which may or may not be available.



                                       33
<PAGE>

         Subsequent to the interference being declared, Chiron was issued a U.S.
patent for the bacterially produced form of recombinant human copper/zinc SOD.
At BTG's request, the Patent Office in 1998 declared a second interference to
determine whether BTG rather than Chiron should hold the patent for the
bacterially produced form of recombinant human copper/zinc SOD on the basis that
BTG scientists, not Chiron scientists, invented the method for producing
recombinant human copper/zinc SOD in bacteria.

         Unless BTG is able to prevail in these interference actions or to
obtain a license from Chiron, BTG may be unable to commercialize its OXSODROL
product in the United States. Papers were filed and both interferences are under
consideration by the Patent Office. In December 1999 preliminary decisions on
the motions were issued. One ruling by the Patent Office in the first
interference is that Chiron's claims were found to be invalid on the ground of
lack of enablement and on indefiniteness. Another ruling is that some of
Chiron's claims are not within the scope of this interference. In the second
interference, one ruling is that the claims of BTG and Chiron are unpatentable
over certain prior art based on their filing dates. However, BTG has an
exclusive license to a third patent which currently has the earliest invention
date based on its filing date. As a result, BTG could be the only party, by
virtue of its exclusive licence, to claims to the relevant subject matter. If
the rulings are not reversed following the final hearing in March 2001, then BTG
should prevail in the first interference, but neither BTG nor Chiron will be
entitled to claims in the second interference unless one of the parties can
establish an invention date earlier than the prior art and the other party.

         In addition, the Israeli Patent Office has accepted a Chiron patent
application covering a DNA construct having certain specified functions for
expression of active copper/zinc SOD and a method for production of active
copper/zinc SOD in a microorganism harboring this construct. BTG is opposing the
grant of this patent; however, there can be no assurance that this opposition
will be successful. If the opposition is unsuccessful, BTG may be precluded from
manufacturing OXSODROL in Israel.

         In March 1993, the United States Patent Office issued a patent, which
is exclusively licensed to BTG, containing broad claims for the gene encoding
human copper/zinc SOD, related recombinant expression vectors and genetically
engineered cells containing the gene. BTG believes that Chiron could not
commercialize its yeast-produced SOD product in the United States without
infringing this patent. However, the issuance of this patent does not assure
BTG's ability to commercialize its OXSODROL product. See "Item 1. Business --
Products and Applications -- OXSODROL (human superoxide dismutase)."

         In September 1991, we received a letter from Biogen stating that it
believed that our recombinant surface antigen of the hepatitis-B virus, which is
an active ingredient of our BIO-HEP-B vaccine, or the intermediates for the
process of making such antigen, falls within the claims of one or more of
Biogen's patents and/or patent applications. We made inquiries of Biogen and
SmithKline Beecham (the exclusive licensee of all of Biogen's hepatitis-B
patents except those in Japan) requesting that BTG be granted a license to the
Biogen patents; however, such efforts were not successful.

         In January 1992, BTG-Israel filed an application in the Israeli Patent
Office for a compulsory license to manufacture BTG's BIO-HEP-B vaccine under
Biogen's Israeli patent. In September 1995, the Registrar ruled in an
interlocutory decision that BTG-Israel is entitled to a compulsory license to
the Biogen patent. Biogen's appeal of the interlocutory decision was rejected.
In November 1996, the Registrar set the terms of the license, including
royalties to be paid by BTG to Biogen. Biogen appealed the Registrar's decision
to the District Court of Tel Aviv, Israel, and moved for a stay of the license,
which was granted EX PARTE pending hearings with both parties. The hearings took
place in December 1996 and Biogen's motion was denied in January 1997; however,
the EX PARTE stay was left in force pending Biogen's appeal to the Supreme Court
and maintained by the Supreme Court pending the decision by the District Court
on the merits of Biogen's appeal. The District Court heard the appeal in early
March 1997, and in June 1997 the District Court denied


                                       34
<PAGE>

Biogen's appeal and subsequent motion for a stay pending Biogen's appeal of the
District Court decision to the Supreme Court on the merits. The compulsory
license then became effective and permitted BTG-Israel to produce the vaccine in
Israel upon receipt of regulatory approval and to export the vaccine to
countries in which neither Biogen nor others have been granted a blocking
patent. In March 1998 the Supreme Court granted Biogen the right to appeal the
District Court's decision and determined that the appeal proceedings would be in
the form of written submissions. BTG and Biogen concluded their respective
submissions and replies at the end of 1999. Biogen's Israeli patent, however,
expired in December 1999 and with it, the compulsory license, prior to any
decision by the Supreme Court. The Supreme Court is expected to still rule on
the issuance of the compulsory license because of the existence of the parallel
infringement proceedings discussed below.

         In August 1992, Biogen sued BTG-Israel for allegedly infringing its
Israeli patent (which was the subject of the compulsory license) by virtue of
its preparation of BTG's BIO-HEP-B vaccine for use in clinical trials, and
applied for an interlocutory injunction restraining BTG-Israel from continuing
research and development activities and clinical trials. In June 1993, the
District Court of Tel Aviv, Israel denied Biogen's application for an
interlocutory injunction in connection with research and development and
clinical trials, but enjoined BTG-Israel from commercial marketing of its
BIO-HEP-B vaccine unless permitted by Biogen or its exclusive licensee, until a
compulsory license is obtained, or until the patent expires or is revoked. With
the grant of the compulsory license, Biogen and BTG agreed to suspend the
infringement suit until a decision is rendered on Biogen's appeal to the Supreme
Court of the grant of the compulsory license. Biogen has notified the District
Court that if the compulsory license is upheld by the Supreme Court, it will
withdraw the infringement suit. If, however, the infringement proceedings
continue, there can be no assurance that the outcome of these proceedings will
be favorable to BTG. Nevertheless, the expiry in December 1999 of the Biogen
patent and in consequence thereof the compulsory licence, may reduce the
significance of these proceedings. Also, an amendment to the Israel Patent Law,
which came into effect in February 1998, provides that genuine experimental
research in respect of a patented invention is not considered an infringement.
As a result of the expiration of the patent, BTG cannot be precluded from
manufacturing or selling BIO-HEP-B in Israel. See "Item 1. Business -- Products
and Applications -- Hepatitis-B Vaccine."

         We have been advised by SciGen, our BIO-HEP-B licensee in certain
countries in the Far East, that in April 1993 Biogen initiated suit against
SciGen in Singapore asserting that SciGen's conduct of clinical trials in
Singapore with respect to our hepatitis-B vaccine constitutes infringement of
Biogen's patent rights in Singapore and claiming rights in the data obtained by
SciGen through its clinical trials in Singapore and that an interlocutory
hearing was held in September 1993. SciGen notified BTG that the application for
the injunction was dismissed by the High Court in September 1994, but Biogen has
not withdrawn its case against SciGen in Singapore. Biogen's Singapore patent
rights are based on the registration of its corresponding U.K. patents, and the
validity of patents in Singapore depends on the validity of the corresponding
U.K. patents. Biogen's broad U.K. patent was invalidated by the U.K. Court of
Appeals in October 1994. This decision was upheld by the House of Lords in
October 1996, although Biogen had claims of a more limited scope allowed to the
same patent. Additionally, three claims of a narrower U.K. patent were upheld.
We believe that none of these claims will affect commercialization of our
vaccine, although there can be no assurance of this. We are aware of certain
other patents that have been granted or are pending and which, if granted, may
prevent us from selling our vaccine in the United States, Europe and certain
other countries. BTG's failure to obtain any needed license, or a determination
that its vaccine infringes the patent rights of Biogen or others, would
substantially limit, if not prohibit, the commercialization of the BIO-HEP-B
vaccine in those countries in which Biogen or others have a patent until such
patent is revoked or expires. Our ability to secure any necessary licenses or
sublicenses to these patents or applications cannot be predicted.

         Additionally, in 1984 an Israeli patent application of Biogen which
relates to expression vectors was accepted; BTG is opposing the grant of this
patent. There can be no assurance that BTG will be successful in its opposition
to the grant of this patent. If BTG is unsuccessful in its


                                       35
<PAGE>

opposition in Israel, and the patent issues, it will expire in April 2001. Until
then, BTG may be unable to manufacture certain of its products in Israel.

         We follow the patent applications of our competitors that might affect
our products and projects and, where appropriate, we contest the grant of such
applications. The outcome of such proceedings cannot be predicted with certainty
and will likely not be determined for several years.

         We are aware of patent applications filed by, or patents issued to,
other entities with respect to technology potentially useful to us and, in some
cases, related to products and processes being developed by us. We cannot
presently assess the effect, if any, that these patents may have on our
operations. The extent to which efforts by other researchers have resulted or
will result in patents and the extent to which the issuance of patents to others
would have a materially adverse effect on BTG or would force BTG to obtain
licenses from others is currently unknown. See "Item 1. Business--Risk
Factors--We depend upon proprietary technology, which may be difficult to
protect."

         In 1999, Solchem, a former affiliate and manufacturing arm of SPA,
filed a declaratory judgment action against BTG in the United States District
Court of New Jersey seeking a determination that it is not a party to BTG's
agreement with SPA, which binds affiliates of SPA, and therefore not bound by
the non-compete and free to sell oxandrolone to Mutual Pharmaceutical, a generic
drug manufacturer. BTG has counterclaimed against Solchem and Mutual, although
the claims against Mutual were dismissed. The litigation with Solchem is
ongoing. If BTG does not prevail, then Solchem will be free to supply
oxandrolone to Mutual, which will allow Mutual to market an oxandrolone product
in the United States which competes with OXANDRIN.

         BTG is currently in a dispute with Serono Laboratories, Inc. ("Serono
Labs") relating to a 1998 co-promotion agreement pursuant to which BTG undertook
to promote in the United States to Gentiva Serono Labs' recombinant human growth
hormone, SAIZEN, for the treatment of children with growth failure due to
inadequate levels of growth hormone. The agreement proved to be commercially
infeasible and BTG terminated the agreement in June 1999. Serono is contesting
BTG's termination of that agreement in 1999 and asserting that a non-compete
provision, which BTG maintains expired in mid-2000 and in any case should not
apply to Teva, if it is applicable at all, should continue until April 30, 2002.
In March 2000, BTG filed a lawsuit in New Jersey to confirm BTG's position on
these issues. Serono Labs has commenced an action against BTG in Massachusetts
to enforce the agreement. The New Jersey court denied Serono Labs' motion to
dismiss the New Jersey action and enjoined Serono Labs from pursuing its action
in Massachusetts. The New Jersey court also denied BTG's motion for summary
judgment. If Serono Labs prevails in the litigation, BTG could be precluded from
distributing BTG's hGH in the United States until after April 30, 2002. In 1999
BTG accrued approximately $1,485,000 of commissions received by it from Gentiva
in respect of SAIZEN which BTG will have to return because Gentiva was unable to
sell most of the product before it expired. BTG will return these commissions at
the time the product is returned. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."

         In 2000, Duramed Pharmaceuticals, Inc. filed an Abbreviated New Drug
Application ("ANDA") with the FDA seeking approval of a generic version of
MIRCETTE. Pursuant to its license agreement with Organon, BTG has commenced a
patent infringement suit against Duramed. Duramed is contesting validity and
infringement. If the patent is held to be invalid, Organon will no longer be
required to pay BTG royalties on the sale of MIRCETTE.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None


                                       36
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         BTG's common stock is quoted on the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") National Market under the symbol
BTGC. The following table sets forth, for the periods indicated, the high and
low sale prices per share of BTG's common stock from January 1, 1999 through
December 31, 2000 as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>

                                                               HIGH                  LOW
                                                               ----                  ---

         <S>                                                   <C>                 <C>
         1999
         ----
         First Quarter......................................... $7.75               $ 5.50
         Second Quarter........................................  8.06                 5.62
         Third Quarter......................................... 11.38                 6.91
         Fourth Quarter........................................ 17.88                 9.50

         2000
         ----
         First Quarter.........................................$21.00               $13.00
         Second Quarter........................................ 17.19                 8.44
         Third Quarter......................................... 14.06                 7.44
         Fourth Quarter........................................ 11.38                 6.38

</TABLE>

         The number of stockholders of record of our common stock on March 16,
2001 was approximately 1,300.

         We have never declared or paid a cash dividend on our common stock, and
we do not expect that cash dividends will be paid to the holders of our common
stock in the foreseeable future.



                                       37
<PAGE>



ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                     For the year ended December 31,
                                        ------------------------------------------------------------
                                         1996(1)(2)         1997        1998        1999     2000(3)
                                        ------------------------------------------------------------
                                                     (in thousands except per share data)


<S>                                        <C>          <C>         <C>         <C>         <C>

STATEMENT OF OPERATIONS DATA:

Total revenues.........................    $ 47,738     $ 65,335    $ 76,855    $ 85,320    $ 84,944
Total expenses.........................      36,798       44,152      52,106      66,561      64,574
Income before cumulative effect
  of change in accounting principle....      22,915       14,478      17,739      13,862      15,895
Cumulative effect of change
  in accounting principle..............           -            -           -           -       8,178
Net income.............................      22,915       14,478      17,739      13,862       7,717
Earnings per common share:
 Basic:
  Income before cumulative
    effect of change in accounting
    principle..........................      $ 0.52       $ 0.31      $ 0.37      $ 0.26      $ 0.29
 Cumulative effect of change
    in accounting principle............         -            -          -           -           0.15
                                             ------       ------      ------      ------      ------
 Net income............................      $ 0.52       $ 0.31      $ 0.37      $ 0.26      $ 0.14
                                             ------       ------      ------      ------      ------
                                             ------       ------      ------      ------      ------
 Diluted:
  Income before cumulative effect
    of change in accounting
    principle..........................      $ 0.47       $ 0.28      $ 0.36       $0.26      $ 0.28
 Cumulative effect of change
    in accounting principle............         -            -           -           -          0.14
                                             ------       ------      ------      ------      ------
 Net income............................      $ 0.47       $ 0.28      $ 0.36      $ 0.26      $ 0.14
                                             ------       ------      ------      ------      ------
                                             ------       ------      ------      ------      ------
Weighted average shares
  outstanding:
 Basic:................................      44,195       46,767      48,184      52,348      54,320
 Diluted...............................      48,259       51,916      49,848      54,191      56,885
</TABLE>

<TABLE>
<CAPTION>

                                                              As of December 31,
                                              -------------------------------------------------------
                                               1996         1997        1998        1999        2000
                                              -------------------------------------------------------
                                                             (in thousands)
<S>                                        <C>         <C>          <C>         <C>        <C>
BALANCE SHEET DATA:

Working capital........................    $ 40,626    $  68,271    $110,359    $119,456   $ 153,344
Total assets...........................      73,575       95,413     142,595     164,645     213,225
Long-term liabilities..................       3,927        3,975       3,818       4,333      24,593
Stockholders' equity...................      60,558       82,858     122,977     141,884     159,353
</TABLE>
-------------------------------------

(1)  Expenses include a write-off of $1,383,000 of previously capitalized legal
     fees and market launch preparation costs relating to BTG's human growth
     hormone product in the United States. See "Item 3. Legal Proceedings." In
     1996, BTG reduced the valuation allowance recorded against its deferred
     income tax assets by $18,587,000, which resulted in an $11,975,000, or
     $0.24 per share, increase in net income.

                                       38
<PAGE>


(2)  The share and per share information has been restated to reflect share and
     per share information in accordance with Statement of Financial Accounting
     Standards No. 128, "Earnings per Share."

(3)  Effective January 1, 2000, BTG adopted Staff Accounting Bulletin 101 ("SAB
     101") issued by the Securities and Exchange Commission in December 1999. As
     a result of adopting SAB 101, BTG changed the way it recognizes revenue
     from contract fees for the license of marketing and distribution rights
     where the consideration is a one-time nonrefundable payment. Prior to the
     issuance of SAB 101, BTG recorded revenue from the license of marketing and
     distribution rights when the rights were licensed and/or when these
     payments were received. Effective January 1, 2000, BTG recorded a
     cumulative effect of a change in accounting principle related to contract
     revenues recognized in prior years in the amount of $12,558,000, net of
     income taxes of $4,380,000, of which $853,000 was recognized as contract
     fee revenue in 2000. The related revenues are now being recognized over the
     term of the related agreements.



         The following table sets forth BTG's PRO FORMA results of operations as
if SAB 101 had been in effect since January 1, 1996. Because the Company adopted
SAB 101 as of January 1, 2000, there is no difference between BTG's actual and
PRO FORMA results of operations for the year ended December 31, 2000.

<TABLE>
<CAPTION>

                                                         For the year ended December 31,
                                                ------------------------------------------------
                                                 1996          1997           1998         1999
                                                ------------------------------------------------
                                                     (in thousands except per share data)

<S>                                          <C>            <C>            <C>           <C>
Total revenues.........................      $ 47,816       $ 64,355       $ 76,210      $ 75,742
Total expenses.........................        36,798         44,152         52,106        66,561

Net income.............................        22,964         13,860         17,018         7,828
Earnings per common share:
 Basic.................................        $ 0.52         $ 0.30         $ 0.35        $ 0.15
                                               ------         ------         ------        ------
                                               ------         ------         ------        ------

 Diluted...............................        $ 0.47         $ 0.27         $ 0.34        $ 0.14
                                               ------         ------         ------        ------
                                               ------         ------         ------        ------
Weighted average shares
  outstanding:
 Basic.................................        44,195         46,767         48,184        52,348
 Diluted...............................        48,259         51,916         49,848        54,191

</TABLE>

                                       39
<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K CONCERNING BTG'S BUSINESS
OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES,
EXPENSES OR OTHER FINANCIAL ITEMS; INTRODUCTIONS AND ADVANCEMENTS IN DEVELOPMENT
OF PRODUCTS, AND PLANS AND OBJECTIVES RELATED THERETO; AND STATEMENTS CONCERNING
ASSUMPTIONS MADE OR EXPECTATIONS AS TO ANY FUTURE EVENTS, CONDITIONS,
PERFORMANCE OR OTHER MATTERS, ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS
DEFINED UNDER THE FEDERAL SECURITIES LAWS. FORWARD-LOOKING STATEMENTS ARE
SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. SUCH RISKS,
UNCERTAINTIES AND FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES AND DELAYS IN
PRODUCT DEVELOPMENT PLANS AND SCHEDULES, CHANGES AND DELAYS IN PRODUCT APPROVAL
AND INTRODUCTION, CUSTOMER ACCEPTANCE OF NEW PRODUCTS, CHANGES IN PRICING OR
OTHER ACTIONS BY COMPETITORS, PATENTS OWNED BY BTG AND ITS COMPETITORS, CHANGES
IN HEALTHCARE REIMBURSEMENT, RISK OF OPERATIONS IN ISRAEL, RISK OF PRODUCT
LIABILITY, GOVERNMENTAL REGULATION, DEPENDENCE ON THIRD PARTIES TO MANUFACTURE
PRODUCTS AND COMMERCIALIZE PRODUCTS AND GENERAL ECONOMIC CONDITIONS, AS WELL AS
OTHER RISKS DETAILED IN OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING THIS ANNUAL REPORT ON FORM 10-K. SEE "ITEM 1. BUSINESS--RISK FACTORS."

OVERVIEW

         We are is engaged in the research, development, manufacture and
marketing of biopharmaceutical products. Through a combination of internal
research and development, acquisitions, collaborative relationships and
licensing arrangements, BTG has developed a portfolio of therapeutic products,
including eight products that have received regulatory approval for sale, of
which seven are currently being marketed, four products that are in registration
or clinical trials and several products that are in pre-clinical development. We
pursue the development of both products with broad markets as well as products
with specialized niche markets where we can seek Orphan Drug designation and
potential marketing exclusivity.

         BTG was founded in 1980 to develop, manufacture and market novel
therapeutic products. BTG's overall administration, licensing, human clinical
studies, marketing activities, quality assurance and regulatory affairs are
primarily coordinated at our headquarters in Iselin, New Jersey. Pre-clinical
studies, research and development activities and manufacturing of BTG's
genetically engineered products are primarily carried out through its
wholly-owned subsidiary in Rehovot, Israel.

         Effective January 1, 2000, BTG adopted Staff Accounting Bulletin 101
("SAB 101") issued by the Securities and Exchange Commission in December 1999.
As a result of adopting SAB 101, BTG changed the way it recognizes revenue from
contract fees for the license of marketing and distribution rights where the
consideration is a one-time nonrefundable payment. Prior to the issuance of SAB
101, BTG recorded revenue from the license of marketing and distribution rights
when the rights were licensed and/or when these payments were received.
Effective January 1, 2000, BTG recorded a cumulative effect of a change in
accounting principle related to contract revenues recognized in prior years in
the amount of $12,558,000, net of income taxes of $4,380,000, of which $853,000
was recognized as contract fee revenue in 2000. The related revenues are now
being recognized over the term of the related agreements.

ACQUISITION OF MYELOS CORPORATION

         On March 19, 2001, we acquired Myelos Corporation, a privately-held
biopharmaceutical company focused on the development of novel therapeutics to
treat diseases of the nervous system. Under the terms of the acquisition
agreement, BTG paid Myelos shareholders $35 million in a combination of cash
and stock ($14 million in cash and $21 million through the issuance of
approximately 2,344,700 shares of our common stock (based on a value of
$8.9564, representing the average

                                       40
<PAGE>


closing price of BTG's common stock for the 20 trading day period ending
one day prior to the February 21, 2001 date the acquisition agreement was
executed).

         In the event that (i) BTG publicly announces that it will file a New
Drug Application ("NDA") related to the use of PROSAPTIDE to treat neuropathic
pain or neuropathy, (ii) BTG receives FDA minutes stating that the clinical data
possessed by BTG is sufficient for an NDA filing for the use of PROSAPTIDE to
treat neuropathic pain or neuropathy without requiring any further testing or
(iii) BTG initiates preparation of an NDA for PROSAPTIDE for the treatment of
neuropathic pain or neuropathy (the date the earliest of the foregoing occurs
being the "Payment Trigger Date"), then BTG shall pay to the Myelos shareholders
an additional $30 million, at least approximately $14 million of which shall be
paid in shares of BTG common stock, valued at the average of the closing prices
of BTG common stock during the 20 trading days ending on the Payment Trigger
Date, and the remainder shall be paid in cash, shares of BTG common stock, or a
combination thereof, as determined by BTG in its sole discretion.

         In addition, in the event that the FDA approves the sale of PROSAPTIDE
for the treatment of neuropathic pain or neuropathy, BTG will pay the Myelos
shareholders 15% of the net sales of PROSAPTIDE for the treatment of neuropathic
pain or neuropathy during the 12 month period beginning on the earlier of (i)
the 25th full month after commercial introduction of PROSAPTIDE in the United
States for the treatment of neuropathic pain or neuropathy and (ii) April 1,
2010. At least 50% of this payment must be paid in shares of BTG common stock,
valued at the average of the closing prices of BTG common stock during the 20
days ending one day prior to the payment, and the remainder shall be paid in
cash, shares of BTG common stock, or a combination thereof, as determined by BTG
in its sole discretion.

         In no event will BTG be obligated to issue in aggregate to the Myelos
shareholders more than 10,962,000 shares of BTG common stock. Any amount of the
contingent payments that cannot be paid in shares of BTG common stock shall
instead be paid in shares of BTG's preferred stock. The preferred stock will be
non-voting, non-convertible, non-transferable, non-dividend paying (except to
the extent a cash dividend is paid on the BTG common stock), with no mandatory
redemption for a period of 20 years and one day from the closing date of the
acquisition, and a right to share in proceeds in liquidation, up to the
liquidation amount.

         The transaction will be treated as a "purchase" for accounting
purposes. BTG anticipates that an amount in excess of the purchase price paid
at closing will be written off as "in process research and development",
because the technology acquired in the acquisition was not fully commercially
developed and had no alternative future use at the time of the acquisition.
This non-cash charge will adversely affect our results of operations for the
first quarter and full year of 2001.

                                       41
<PAGE>


RESULTS OF OPERATIONS

         The following table sets forth for the fiscal periods indicated the
percentage of our revenues represented by certain items reflected on our
consolidated statements of operations on both a historical and PRO FORMA basis
as if SAB 101 had been in effect since January 1, 1998. Because BTG adopted SAB
101 as of January 1, 2000, there is no difference between BTG's actual and PRO
FORMA results of operations for the year ended December 31, 2000.

<TABLE>
<CAPTION>

                                                                  HISTORICAL                    PRO FORMA
                                                             ---------------------------    ----------------
                                                             1998       1999        2000    1998        1999
                                                             ----       ----        ----    ----        ----

<S>                                                         <C>        <C>         <C>        <C>         <C>
Revenues:
  Product sales...................................           88.8%      73.1%       73.2%      89.6%       82.3%

  Contract fees...................................            3.5       17.4        12.0        2.7         7.0

  Royalties ......................................            2.8        2.1         3.7        2.8         2.3

  Other revenues..................................            1.0        2.0         2.3        1.0         2.3

  Interest........................................            3.9        5.4         8.8        3.9         6.1
                                                             ----       ----        ----       ----        ----

         Total revenues...........................           100%       100%        100%       100%        100%
                                                             ----       ----        ----       ----        ----
                                                             ----       ----        ----       ----        ----

Expenses:
  Research and development........................          24.0%      24.8%       26.3%      24.2%       27.9%

  Cost of product sales...........................           14.0       13.2        11.6       14.1        14.8

  General and administrative......................           11.1       16.4        14.9       11.2        18.5

  Marketing and sales.............................           17.3       19.4        20.8       17.5        21.9

  Commissions and royalties.......................            1.2        3.8         2.2        1.2         4.3

  Finance.........................................            0.2        0.4         0.2        0.2         0.5
                                                             ----       ----        ----       ----        ----

         Total expenses...........................           67.8       78.0        76.0       68.4        87.9
                                                             ----       ----        ----       ----        ----

Income before income taxes........................           32.2       22.0        24.0       31.6        12.1

Income tax expense................................            9.1        5.7         5.3        9.3         1.8
                                                             ----       ----        ----       ----        ----
Income before cumulative effect of change in
   accounting principle...........................           23.1       16.3        18.7       22.3        10.3
                                                             ----       ----        ----       ----        ----
                                                             ----       ----        ----       ----        ----

Cumulative effect of change in accounting
    principle.....................................            --         --          9.6      --          --
                                                             ----       ----        ----       ----        ----

Net income........................................           23.1%      16.3%        9.1%      22.3%       10.3%
                                                             ----       ----        ----       ----        ----
                                                             ----       ----        ----       ----        ----

</TABLE>

         BTG has historically derived its revenues from product sales as well as
from collaborative arrangements with third parties, under which BTG may earn
up-front contract fees, may receive funding for additional research (including
funding from the Chief Scientist of the State of Israel ("Chief Scientist")), is
reimbursed for producing certain experimental materials, may be entitled to
certain milestone payments, may sell product at specified prices and may receive
royalties on sales of product. We anticipate that product sales will constitute
the majority of our revenues in the future. Revenues have in the past displayed
and will in the immediate future continue to display significant variations due
to changes in demand for our products, new product introductions by BTG and its
competitors, the obtaining of new research and development contracts and
licensing arrangements, the completion or termination of such contracts and
arrangements, the timing and amounts of milestone payments, and the timing of
regulatory approvals of products.


                                       42
<PAGE>


         The following table summarizes BTG's sales of its commercialized
products as a percentage of total product sales for the periods indicated:

<TABLE>
<CAPTION>

                                        ------------------------------------------
                                                 Year ended December 31,
                                        ------------------------------------------
                                        1998             1999                2000
                                        ----             ----                ----


         <S>                               <C>              <C>                 <C>
         OXANDRIN...........               59%              40%                 52%

         BIO-TROPIN.........                25               29                  33

         DELATESTRYL........                 4               16                   4

         BIOLON.............                10               14                  10

         Other..............                 2                1                   1
                                          ----             ----                ----

           Total............               100%             100%                100%
                                          ----             ----                ----
                                          ----             ----                ----

</TABLE>


We believe that our product mix will change significantly as we continue to
focus on: (i) increasing market penetration of our existing products; (ii)
expanding into new markets; and (iii) commercializing additional products.

         The following table summarizes BTG's United States and international
product sales as a percentage of total product sales for the periods indicated:

<TABLE>
<CAPTION>
                                        --------------------------------------------------
                                                    Year ended December 31,
                                        --------------------------------------------------
                                         1998                1999                    2000
                                        ------              ------                  ------
            <S>                            <C>                  <C>                     <C>
         Domestic............           64%                  56%                     56%

         Foreign.............            36                   44                     44%
                                        ------              ------                  ------
              Total..........          100%                 100%                    100%
                                        ------              ------                  ------
                                        ------              ------                  ------
</TABLE>

Domestic sales as a percentage of total product sales has fluctuated due
primarily to a reduction in purchases of OXANDRIN by BTG's distributor in the
U.S. from April 1999 through May 2000.


COMPARISON OF YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

         REVENUES. Revenues decreased slightly in 2000 to $84,944,000 from
$85,320,000 in 1999, which represented an 11% increase over 1998 revenues of
$76,855,000. Product sales decreased slightly in 2000 to $62,149,000 from
$62,332,000 in 1999, which itself was a 9% decrease from 1998 product sales of
$68,246,000. The changes in revenues and product sales between 1998, 1999 and
2000 were primarily driven by the decision in April 1999 of Gentiva Health
Services, Inc. ("Gentiva"), BTG's wholesale distributor for OXANDRIN, to reduce
its purchases of OXANDRIN in order to reduce the amount of OXANDRIN inventory it
carried as a result of a slowing in the rate of increase of OXANDRIN
prescriptions. Gentiva finished this inventory reduction in May 2000, and is now
purchasing, on a monthly basis, an amount of OXANDRIN equal to the average
end-user (I.E., wholesaler) sales during the preceding three months. The change
in revenues between 1998, 1999 and 2000 was also influenced by contract fees
received by BTG, which were significantly higher in 1999 than in 1998 or 2000,
primarily as a result of BTG's establishment of a strategic alliance with Teva
Pharmaceutical Industries Ltd. focusing on the development and global
commercialization of several generic recombinant therapeutic products and the
license of distribution rights in the United States for the Company's hGH and
the adoption by BTG in 2000 of SAB 101, which requires that BTG recognize
upfront nonrefundable license payments over the term of the related agreements
rather than upon receipt. On a PRO FORMA basis as if SAB 101 had been in effect
since January 1, 1998, revenues in 2000 would have increased approximately 12%
to $84,944,000 from $75,742,000, which represented a less than 1% decrease from
1998 revenues of $76,210,000.



                                       43
<PAGE>


         Sales of OXANDRIN in 2000, 1999 and 1998 were approximately
$32,186,000, $24,935,000, and $40,521,000, respectively, representing 52%, 40%
and 59%, respectively, of BTG's total product sales in those periods. Sales of
OXANDRIN to Gentiva in 2000, 1999 and 1998 were $30,666,000, $22,708,000 and
$40,353,000, respectively, representing 95%, 91% and 99%, respectively, of BTG's
total sales of OXANDRIN. In 2000 sales of OXANDRIN increased $7,251,000, or 30%,
as Gentiva completed the reduction in the amount of OXANDRIN inventory it
carries in May 2000. Sales of OXANDRIN in 1999 decreased $15,586,000, or 38%,
from 1998 levels as Gentiva began in April 1999 to reduce the amount of OXANDRIN
inventory it was carrying as a result of a slowing of the rate of increase of
OXANDRIN prescriptions. Although sales of OXANDRIN to Gentiva declined in 1999,
end-user sales of OXANDRIN by Gentiva increased by 25% and prescriptions
increased by 27% in 1999 compared to 1998. End-user sales of OXANDRIN by Gentiva
increased by 24% and prescriptions increased by 2% compared to 1999. The
decrease in sales to Gentiva in 1999 was partially offset by $2,228,000 of sales
of OXANDRIN to third parties for distribution overseas.

         Sales of hGH in 2000, 1999 and 1998 were approximately $20,585,000,
$18,004,000 and $17,316,000, respectively, representing 33%, 29% and 25%,
respectively, of BTG's total product sales in those periods. Sales of human
growth hormone increased in 2000 by $2,581,000, or 14%, over 1999 sales, which
itself was an increase of $688,000, or 4%, over 1998 hGH sales. The increase in
sales of hGH in 2000 was due in part to seasonal variations in orders from BTG's
licensees. Sales of hGH to JCR in 2000, 1999 and 1998 were approximately
$12,975,000, $10,507,000 and $11,056,000, respectively, representing 21%, 17%
and 16%, respectively, of BTG's total product sales in those periods and 63%,
58% and 64%, respectively, of BTG's total hGH sales in those periods. Sales of
hGH to the Ferring Group were approximately $4,812,000, $3,619,000 and
$3,823,000 in 2000, 1999 and 1998, respectively, representing 8%, 6% and 6%,
respectively, of BTG's total product sales in those periods and 23%, 20% and
22%, respectively, of BTG's total hGH sales in those periods.

          Sales of DELATESTRYL and BIOLON in 2000 decreased $7,523,000 and
$2,443,000, or 74% and 29%, respectively, from 1999 levels. We had no sales of
DELATESTRYL in the second and third quarters of 2000. The decrease in sales of
DELATESTRYL relates to Gentiva's election to reduce its DELATESTRYL inventory in
response to its customers' reduction of their inventory. We believe that Gentiva
is contracting inventory in anticipation of the U.S. Food and Drug
Administration ("FDA") permitting the production of a competing injectable
testosterone product used to treat men with hypogonadism (testosterone
deficiency) which the FDA had previously stopped. DELATESTRYL sales in 1999 were
$7,287,000 higher than in 1998 primarily due to the FDA stopping production of
the competing injectable product. The decrease in sales of BIOLON in 2000 was
primarily the result of a halt in product shipments to the U.S. beginning in the
first quarter of 2000 pending FDA approval of a supplemental application
relating to an upgrade in BTG's manufacturing process to conform it to a higher
standard of quality implemented by BTG. BTG resumed shipments to the U.S. in the
first quarter of 2001. BIOLON sales increased $1,761,000 in 1999.

         For the years ended December 31, 2000, 1999 and 1998, contract fees,
which consist of licensing and option to license fees, amounting to $10,229,000,
$14,848,000 and $2,686,000, or 12%, 17% and 3%, respectively, of total revenues,
were earned from certain of BTG's collaborative partners. Of the contract fees
earned in 2000, $5,000,000, or 49% of total contract fees, was earned in respect
of BIO-HY, $2,500,000, or 24% of total contract fees, was earned as a milestone
payment under BTG's strategic alliance with Teva focusing on the development and
global commercialization of several generic recombinant therapeutic products and
the license of distribution rights in the United States for BTG's hGH, and
$1,475,000, or 14% of total contract fees, was earned in respect of the
BIO-HEP-B vaccine. Under SAB 101, contract fees in 2000 include $853,000 of
contract fees paid in prior periods, or 8% of total contract fees. Of the
contract fees earned in 1999, $10,000,000, or 67% of total contract fees, was
earned in respect of BTG's strategic alliance with Teva, and $4,197,000, or 28%
of total contract fees, was earned in respect of the license of distribution
rights for Insulin on a substantially worldwide basis. Of the contract fees


                                       44
<PAGE>


earned in 1998, $1,000,000, or 37% of total contract fees, was earned in
respect of the license of distribution rights of BIOLON in the United States,
and $900,000 and $493,000, or 34% and 18% of total contract fees,
respectively, were earned in respect of BTG's hepatitis-B vaccine and insulin
products, respectively. Approximately $1,114,000 and $10,114,000 of the
contract fees earned in 1998 and 1999, respectively, have been included in
the cumulative effect of change in accounting principle. On a PRO FORMA basis
as if SAB 101 had been in effect since January 1, 1998, contract fees in 1999
and 1998 would have been $5,270,000 and $2,041,000, respectively, or 7% and
3%, respectively, of total revenues.

         ROYALTIES in 2000 and 1999 consist of net royalties in respect of the
MIRCETTE product in the amount of $3,139,000 and $1,761,000. Royalties in 1998
consist of net royalties derived from a co-promotion agreement relating to
Serono's recombinant human growth hormone, SAIZEN, in the amount of $1,560,000
(see "--Commissions and Royalties" below).

         OTHER REVENUES consist primarily of funding from the Chief Scientist,
which represented 81%, 89% and 100% of other revenues in the years ended
December 31, 2000, 1999 and 1998, respectively.

         INTEREST INCOME was $7,496,000, $4,633,000 and $2,965,000 for the years
ended December 31, 2000, 1999 and 1998, respectively. The increase in interest
income in 2000 and 1999 was derived primarily from an increase in cash balances
resulting from option exercises and cash flow from operations in 2000 and 1999.

         RESEARCH AND DEVELOPMENT EXPENSE. Expenditures for research and
development were $22,360,000, $21,120,000 and $18,450,000 for the years ended
December 31, 2000, 1999 and 1998, respectively. The increase in research and
development expenditures in 2000 was mainly due to the increase in research and
development personnel and other expenses associated with these additional
personnel, partially offset by a decreased level of grants by BTG for clinical
studies. The increase in research and development expenditures in 1999 was
primarily related to the development of a new formulation for one of BTG's
existing products, partially offset by the termination in 1998 of our Phase III
clinical trial for superoxide dismutase which we are now conducting as a Phase
II trial.

         COST OF PRODUCT SALES. Cost of product sales was $9,887,000,
$11,224,000 and $10,744,000 in the years ended December 31, 2000, 1999 and 1998,
respectively. Cost of product sales in 2000 decreased, both in absolute terms
and as a percentage of revenues, primarily as a result of increased sales of
OXANDRIN and decreased sales of DELATESTRYL and BIOLON. Cost of product sales in
1999 increased, both in absolute terms and as a percentage of revenues,
primarily as a result of increased sales of DELATESTRYL and BIOLON and decreased
sales of OXANDRIN. Cost of product sales as a percentage of product sales was
16%, 18% and 16% in 2000, 1999 and 1998, respectively. OXANDRIN has a relatively
low cost of manufacture as a percentage of product sales, while BIOLON has the
highest cost to manufacture as a percentage of product sales. Cost of product
sales as a percentage of product sales varies from year to year and quarter to
quarter depending on the quantity and mix of products sold.

         GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
was $12,685,000, $14,035,000 and $8,504,000 in the years ended December 31,
2000, 1999 and 1998, respectively. The decrease in 2000 resulted mainly from the
fact that in 1999 we wrote off other assets relating to the development of
ANDROTAB-SL as a result of our decision not to continue to pursue FDA approval
of ANDROTAB-SL. The increase in 1999 derived mainly from that write-off and
legal fees resulting from the reactivation of the litigation with Genentech, as
well as increased compensation costs.

         MARKETING AND SALES EXPENSE. Marketing and sales expense was
$17,614,000, $16,583,000 and $13,312,000 in the years ended December 31, 2000,
1999 and 1998, respectively. These expenses primarily related to the sales and
marketing force in the United States that BTG


                                       45
<PAGE>


established principally in the second half of 1995 and during 1996 to promote
distribution of OXANDRIN in the United States. The increase in each year was
primarily due to additional marketing and sales expenses, primarily resulting
from increased personnel and increased advertising, promotional and market
research activities, arising from the growth of BTG's product sales.

         COMMISSIONS AND ROYALTIES. Commissions and royalties were $1,879,000,
$3,221,000 and $929,000 in the years ended December 31, 2000, 1999 and 1998,
respectively. These expenses consist primarily of royalties to entities from
which BTG licensed certain of its products and to the Chief Scientist. However,
the increase in 1999 resulted mainly from the accrual of $1,485,000, net, of
commissions received in respect of Serono's sales of its human growth hormone to
Gentiva, which commissions we expect we will be required to refund because
Gentiva was unable to sell most of Serono's human growth hormone product before
it expired. BTG will return these commissions at the time the product is
returned. BTG has given notice of termination of its agreement with Serono
pursuant to which it was co-promoting to Gentiva Serono's recombinant human
growth hormone product SAIZEN in the United States. Serono is disputing BTG's
ability to terminate the agreement.

         INCOME TAXES. Provision for income taxes for the years ended December
31, 2000, 1999 and 1998 was $4,475,000, $4,897,000 and $7,010,000, representing
approximately 22.0%, 26.1% and 28.3% of income before income taxes. BTG's
consolidated tax rate differs from the statutory rate because of Israeli tax
benefits, research and experimental tax credits, state and local taxes and
similar items that reduce the tax rate. We do not expect our effective
consolidated tax rate to continue to decrease.

         CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. Effective January
1, 2000, BTG adopted SAB 101. As a result of adopting SAB 101, BTG changed the
way it recognizes revenue from contract fees for the license of marketing and
distribution rights where the consideration is a one-time nonrefundable payment.
Prior to the issuance of SAB 101, BTG recorded revenue from the license of
marketing and distribution rights when the rights were licensed and/or when
these payments were received. Effective January 1, 2000, BTG recorded a
cumulative effect of a change in accounting principle related to contract
revenues recognized in prior years in the amount of $12,558,000, net of income
taxes of $4,380,000, of which $853,000 was recognized as contract fee revenue in
2000. The related revenues are now being recognized over the term of the related
agreements.


LIQUIDITY AND CAPITAL RESOURCES

         Our working capital at December 31, 2000, was $153,344,000 as compared
to $119,456,000 at December 31, 1999.

         Our cash flows have fluctuated significantly due to the impact of net
income, capital spending, working capital requirements, the issuance of common
stock and other financing activities. We expect that our cash flows in the near
future will be primarily determined by the levels of net income, working capital
requirements, and financings, if any, undertaken by BTG. Net cash increased by
$7,650,000, $9,272,000 and $102,000 in the years ended December 31, 2000, 1999
and 1998, respectively.

         Net cash provided by (used in) operating activities was $16,646,000,
$48,980,000 and $(6,898,000) in the years ended December 31, 2000, 1999 and
1998, respectively. Net income was $7,717,000, $13,862,000 and $17,739,000 in
the same periods, respectively. In 2000 net cash provided by operating
activities was greater than net income, mainly due to the cumulative effect of
the accounting change resulting from the adoption of SAB 101 of $11,704,000 (net
of income



                                       46
<PAGE>

taxes) due to SAB 101 and depreciation and amortization of $2,861,000, partially
offset by an increase in deferred income taxes, inventories and accounts
receivable of $3,904,000, $1,256,000 and $944,000, respectively. In 1999 net
cash provided by operating activities was greater than net income, mainly due to
a decrease in accounts receivable of $28,450,000, depreciation and amortization
of $3,014,000, the write-off of other assets relating to the development of
Androtab-SL of $1,894,000 and an increase of accounts payable of $2,419,000,
partially offset by an increase in inventories of $3,646,000. In 1998 BTG used
cash in operating activities primarily because of an increase in accounts
receivable of $40,856,000 partially offset by a non-cash provision for deferred
income taxes of $5,160,000, depreciation and amortization of $3,125,000 and an
increase in accounts payable and other current liabilities of $7,220,000.

         Net cash used in investing activities was $38,780,000, $46,720,000 and
$16,649,000 in the years ended December 31, 2000, 1999 and 1998, respectively.
Net cash used in investing activities included capital expenditures of
$10,913,000, $11,432,000 and $3,594,000 in these periods, respectively,
consisting in 2000 and 1999 of approximately $8,610,000 and $9,461,000,
respectively, for the purchase and reconstruction of a new manufacturing
facility, with the remainder in all periods primarily for laboratory and
manufacturing equipment and infrastructure. The remainder of the net cash used
in investing activities was primarily for purchases and sales of short-term
investments.

         Net cash provided by financing activities was $29,784,000, $7,012,000
and $23,649,000 in the years ended December 31, 2000, 1999 and 1998,
respectively. Cash flows from financing activities in 2000 were primarily
affected by long-term borrowings of $20,000,000 and proceeds from the issuance
of common stock of $9,784,000. Cash flows from financing activities in 1999 and
1998 were primarily affected by net proceeds from issuances of common stock of
$7,012,000 and $22,649,000 (including $17,221,000 from the exercise of warrants
which expired on December 31, 1998), in these periods, respectively. Net
proceeds from the sale of common stock resulted mainly from option and warrant
exercises.

         In April 1999, BTG purchased a manufacturing facility in Israel for
approximately $6,250,000. BTG will initially locate its production activities
for FIBRIMAGE at this new facility, and will thereafter move the remainder of
its production activities to this facility. We expect that construction will be
completed in the second half of 2001. Following completion of construction we
will begin the validation process, which we currently expect will take
approximately six to nine months for all products. We expect it will cost
approximately $40,000,000 to complete the production facility (excluding the
cost of purchasing the facility), of which approximately $18,072,000 had been
expended through December 31, 2000. At December 31, 2000, BTG had outstanding
commitments of $17,499,000 related to completion of this facility.

         In June 2000 BTG-Israel entered into a $20,000,000 revolving credit
facility with Bank Hapoalim B.M. to finance a portion of the cost of completing
its new manufacturing facility. Short-term borrowings under the facility are due
12 months from the date of borrowing and long-term borrowings are due five years
from the date of borrowing. Loans under the facility bear interest at the rate
of LIBOR plus 0.5% in the case of short-term borrowings and LIBOR plus 1% in the
case of long-term borrowings. Amounts repaid under the facility can be
reborrowed. The credit facility is secured by the assets of BTG-Israel and has
been guaranteed by the Company. At December 31, 2000, BTG had outstanding
long-term borrowings of $20,000,000 under the facility.

         We maintain our funds in money market funds, commercial paper and other
liquid debt instruments. See Note 1c and 1d of Notes to Consolidated Financial
Statements.

         BTG manages its Israeli operations with the objective of protecting
against any material net financial loss in U.S. dollars from the impact of
Israeli inflation and currency devaluations on its non-U.S. dollar assets and
liabilities. The cost of BTG's operations in Israel, as expressed in dollars, is
influenced by the extent to which any increase in the rate of inflation in
Israel is not offset (or is offset on a lagging basis) by a devaluation of the
Israeli Shekel in relation to the U.S. dollar. The


                                       47
<PAGE>

rate of inflation (as measured by the consumer price index in Israel) was
approximately 9% in 1998 and 1% in 1999, while the Shekel was devalued by
approximately 18% and less than 1%, respectively, in these periods. In 2000
there was no change in the consumer price index and the Shekel's value in
relation to the U.S. dollar increased by approximately 3%. As a result, for
those expenses linked to the Israeli Shekel, such as salaries and rent, this
resulted in corresponding decreases in these costs in U.S. dollars in 1998, but
an increase in these costs in U.S. dollar terms in 1999 and in 2000. To the
extent that expenses in Shekels exceed BTG's revenues in Shekels (which to date
have consisted primarily of research funding from the Chief Scientist and
product sales in Israel), the devaluations of Israeli currency have been and
will continue to be a benefit to BTG's financial condition. However, should
BTG's revenues in Shekels exceed its expenses in Shekels in any material
respect, the devaluation of the Shekel will adversely affect BTG's financial
condition. Further, to the extent the devaluation of the Shekel with respect to
the U.S. dollar does not substantially offset the increase in the costs of local
goods and services in Israel, BTG's financial results will be adversely affected
as local expenses measured in U.S. dollars will increase.

         We believe that our cash resources as of December 31, 2000, together
with anticipated product sales, scheduled payments to be made to BTG under its
current agreements with pharmaceutical partners and third parties and continued
funding from the Chief Scientist at current levels will be sufficient to fund
our ongoing operations for the foreseeable future. There can, however, be no
assurance that product sales will occur as anticipated, that scheduled payments
will be made by third parties, that current agreements will not be canceled,
that the Chief Scientist will continue to provide funding at current levels,
that we will not use a substantial portion of our cash resources to acquire
businesses, products and/or technologies, or that unanticipated events requiring
the expenditure of funds will not occur. The satisfaction of BTG's future cash
requirements will depend in large part on the status of commercialization of
BTG's products, BTG's ability to enter into additional research and development
and licensing arrangements, and BTG's ability to obtain additional equity and
debt financing, if necessary. There can be no assurance that BTG will be able to
obtain additional funds or, if such funds are available, that such funding will
be on favorable terms. BTG continues to seek additional collaborative research
and development and licensing arrangements, in order to provide revenue from
sales of certain products and funding for a portion of the research and
development expenses relating to the products covered, although there can be no
assurance that the Company will be able to obtain such agreements. See "Item 1.
Business--Risk Factors --We may be unable to obtain any additional capital
needed to operate and grow our business" and "--We expect our quarterly results
to fluctuate, which may cause volatility in our stock price."


NEW ACCOUNTING PRONOUNCEMENT

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
("SFAS No. 133"), as amended, which is effective for all quarterly financials of
the fiscal year beginning after June 15, 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging securities.
BTG expects that the adoption of SFAS No. 133 will not have a material impact on
its consolidated financial position, results of operations and cash flows.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk is the exposure to loss resulting from changes in interest
rates, foreign currency exchange rates, commodity prices and equity prices. To
date our exposure to market risk has been limited and we are not currently
hedging any market risk, although we may do so in the future. We do not hold or
issue any derivative financial instruments for trading or other speculative
purposes.

                                       48
<PAGE>

         Our obligations under our $20,000,000 revolving credit facility bear
interest at floating rates and, therefore, we are impacted by changes in
prevailing interest rates. A 100 basis point increase in market interest
rates on the $20,000,000 outstanding under this facility at December 31, 2000
would result in an increase in our annual interest expense of $200,000.
Because these borrowings relate to the construction of our new facility,
interest expense is currently being capitalized.

         Our material interest bearing assets consist of cash and cash
equivalents and short-term investments consisting primarily of investments in
U.S. Treasury bonds, short-term corporate bonds and mutual funds which invest in
short-term bonds. Our interest income is sensitive to changes in the general
level of interest rates, primarily U.S. interest rates.

         As discussed above under "--Liquidity and Capital Resources," we manage
our Israeli operations with the objective of protecting against any material net
financial loss in U.S. dollars from the impact of Israeli inflation and currency
devaluations on its non-U.S. dollar assets and liabilities. All of BTG's
revenues are in U.S. dollars except for payments from the Chief Scientist and
sales of our products in Israel, which are denominated in Israeli Shekels.



                                       49
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Index to Consolidated Financial Statements


<TABLE>
<CAPTION>
                                                                                                Page


<S>                                                                                            <C>
         Report of Independent Public Accountants...............................................51

         Consolidated Financial Statements:

         Consolidated Balance Sheets as of
         December 31, 1999 and 2000.............................................................52

         Consolidated Statements of Operations for the
         years ended December 31, 1998, 1999 and 2000...........................................53

         Consolidated Statements of Changes in
         Stockholders' Equity for the years
         ended December 31, 1998, 1999 and 2000.................................................54

         Consolidated  Statements  of Cash Flows for
         the years ended December 31, 1998, 1999 and 2000.......................................55

         Notes to Consolidated Financial Statements.............................................56
</TABLE>













                                       50
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To the Board of Directors and Stockholders of
Bio-Technology General Corp.:

We have audited the accompanying consolidated balance sheets of
Bio-Technology General Corp. (a Delaware corporation) and subsidiary as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the
three years in the period ended December 31, 2000. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bio-Technology General Corp.
and subsidiary as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States.

As discussed in Note 1k, the Company changed its method of accounting for
revenue recognition.


ARTHUR ANDERSEN LLP






New York, New York
February 21, 2001 (except
with respect to the matters
discussed in Note 12, as to
which the date is March 19, 2001)





                                       51
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)


<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                                              -----------
                                                                                        1999              2000
                                                                                        ----              ----
<S>                                                                                    <C>             <C>
ASSETS
Current Assets:
  Cash and cash equivalents........................................................    $18,703         $ 26,353
  Short-term investments...........................................................     68,547           93,217
  Accounts receivable .............................................................     37,504           39,188
  Inventories......................................................................      8,624            9,880
  Deferred income taxes............................................................      4,286            2,445
  Prepaid expenses and other.......................................................        220              989
                                                                                    -----------       ---------
     Total current assets..........................................................    137,884          172,072

Accounts receivable - trade  ......................................................      2,443            1,703
Severance pay funded...............................................................      2,369            2,321
Deferred income taxes..............................................................          -            5,745
Property and equipment, net........................................................     18,938           27,819
Intangibles, net of accumulated amortization of $5,186
  in 1999 and $5,639 in 2000.......................................................        993              540
Patents, net of accumulated amortization of $643 in 1999
  and $499 in 2000.................................................................        429              260
Other assets.......................................................................      1,589            2,765
                                                                                     ---------        ---------
     Total assets..................................................................  $ 164,645         $213,225
                                                                                     =========        =========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable.................................................................   $  7,257          $ 6,420
  Deferred revenues................................................................         --            1,153
  Other current liabilities........................................................     11,171           11,155
                                                                                     ---------        ---------
     Total current liabilities.....................................................     18,428           18,728
                                                                                     ---------        ---------

Long-term debt.....................................................................       -              20,000
                                                                                     ---------        ---------
Deferred revenues..................................................................       -              10,551
                                                                                     ---------        ---------
Severance pay......................................................................      4,333            4,593
                                                                                     ---------        ---------

Commitments and contingent liabilities

Stockholders' Equity:
  Preferred stock - $.01 par value; 4,000,000
     shares authorized; no shares issued ..........................................         --               --
  Common stock - $.01 par value; 150,000,000
     shares authorized; issued - 53,280,000 and outstanding
     - 53,197,000 in 1999 and issued and outstanding
     - 54,765,000 in 2000..........................................................        533              547
Additional paid in capital.........................................................    168,743          179,586
  Accumulated deficit..............................................................   (22,534)         (14,817)
  Treasury stock at cost (83,000 shares)...........................................      (340)                -
  Accumulated other comprehensive loss.............................................    (4,518)          (5,963)
                                                                                     ---------        ---------
    Total stockholders' equity.....................................................    141,884          159,353
                                                                                     ---------        ---------

     Total liabilities and stockholders' equity....................................  $164,645          $213,225
                                                                                     =========        =========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.



                                       52
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                       Year Ended December 31,

                                                                    Historical                    Pro Forma*
                                                      -----------------------------------    ------------------
                                                        1998          1999          2000       1998       1999
                                                      --------      -------       -------    -------    -------
<S>                                                   <C>           <C>           <C>        <C>        <C>
Revenues:
     Product sales..........................           $68,246      $62,332      $ 62,149    $68,246    $62,332
     Contract fees..........................             2,686       14,848        10,229      2,041      5,270
     Royalties..............................             2,160        1,761         3,139      2,160      1,761
     Other revenues.........................               798        1,746         1,931        798      1,746
     Interest...............................             2,965        4,633         7,496      2,965      4,633
                                                      --------      -------       -------    -------    -------
                                                        76,855       85,320        84,944     76,210     75,742
                                                      --------      -------       -------    -------    -------

Expenses:
     Research and development...............            18,450       21,120        22,360     18,450     21,120
     Cost of product sales..................            10,744       11,224         9,887     10,744     11,224
     General and administrative.............             8,504       14,035        12,685      8,504     14,035
     Marketing and sales....................            13,312       16,583        17,614     13,312     16,583
     Commissions and royalties..............               929        3,221         1,879        929      3,221
     Finance................................               167          378           149        167        378
                                                      --------      -------       -------    -------    -------
                                                        52,106       66,561        64,574     52,106     66,561
                                                      --------      -------       -------    -------    -------

Income before income taxes..................            24,749       18,759        20,370     24,104      9,181
Income tax expense..........................             7,010        4,897         4,475      7,086      1,353
                                                      --------      -------       -------    -------    -------

Income before cumulative effect of
  change in accounting principle............            17,739       13,862        15,895     17,018      7,828
Cumulative effect of change in accounting
  principle, net of income taxes of $4,380..                 -            -         8,178          -          -
                                                      --------      -------       -------    -------    -------
Net income..................................           $17,739      $13,862        $7,717    $17,018     $7,828
                                                      ========      =======       =======    =======    =======
Earnings per common share:

Basic:
  Income before cumulative
    effect of change in accounting
    principle...............................            $ 0.37       $ 0.26        $ 0.29     $ 0.35     $ 0.15
 Cumulative effect of change
    in accounting principle.................                 -            -          0.15          -          -
                                                      --------      -------       -------    -------    -------
  Net income................................            $ 0.37       $ 0.26        $ 0.14     $ 0.35     $ 0.15
                                                      ========      =======       =======    =======    =======
Diluted:
  Income before cumulative effect
    of change in accounting principle.......            $ 0.36        $0.26        $ 0.28      $0.34      $0.14
 Cumulative effect of change
    in accounting principle.................                 -            -          0.14          -          -
                                                      --------      -------       -------    -------    -------
  Net income................................            $ 0.36       $ 0.26        $ 0.14     $ 0.34     $ 0.14
                                                      ========      =======       =======    =======    =======

Weighted average number of common and common
  equivalent shares:

     Basic..................................            48,184       52,348        54,320     48,184     52,348
                                                      ========      =======       =======    =======    =======
     Diluted................................            49,848       54,191        56,885     49,848     54,191
                                                      ========      =======       =======    =======    =======
</TABLE>


* See Note 1k
 The accompanying notes are an integral part of these consolidated statements.



                                       53
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                       COMMON STOCK
                                     --------------    Additional                         Accumulated other     Total
                                               Par      Paid In    Accumulated  Treasury    comprehensive   Stockholders'
                                     Shares   Value     Capital      Deficit      Stock      income (loss)     Equity
                                     ------- --------  ----------  -----------  ---------   --------------  -------------
<S>                                  <C>     <C>       <C>         <C>          <C>         <C>             <C>
BALANCE, DECEMBER 31, 1997            47,304    $473    $136,662     $(54,135)     $(340)          $198           $82,858
Comprehensive income:
    Net income                                                         17,739                                      17,739
    Unrealized loss on marketable
        securities, net                                                                          (2,168)           (2,168)
                                                                                                                   -------
Total comprehensive income                                                                                         15,571
                                                                                                                   -------
Issuance of common stock                  60       1         324                                                      325
Tax benefit derived from exercise
  of stock options                                           420                                                      420
Exercise of stock options                660       6       2,718                                                    2,724
Exercise of warrants                   3,910      39      21,040                                                   21,079
                                     -------    ----     -------   ----------   -------        -----------        --------
BALANCE, DECEMBER 31, 1998            51,934     519     161,164      (36,396)     (340)         (1,970)          122,977
Comprehensive income:
    Net income                                                         13,862                                      13,862
    Unrealized loss on marketable
         securities, net                                                                         (2,548)           (2,548)
                                                                                                                   -------
Total comprehensive income                                                                                         11,314
                                                                                                                   -------
Issuance of common stock                 259       3       1,380                                                    1,383
Tax benefit derived from exercise
  of stock options                                           521                                                      521
Exercise of stock options              1,087      11       5,678                                                    5,689
                                     -------    ----   ---------   ----------  --------        ----------        ---------
BALANCE, DECEMBER 31, 1999            53,280     533     168,743      (22,534)     (340)         (4,518)          141,884
Comprehensive income:
    Net income                                                          7,717                                       7,717
    Unrealized loss on marketable
        securities, net                                                                          (1,445)           (1,445)
                                                                                                                   -------
Total comprehensive income                                                                                          6,272
                                                                                                                   -------
Issuance of common stock                 345       3       1,926                                                    1,929
Cancellation of treasury stock           (83)     (1)       (339)                   340                                --
Tax benefit derived from exercise
  of stock options                                         1,353                                                    1,353
Exercise of stock options              1,223      12       7,903                                                    7,915
                                     -------  ------    --------   ----------   -------        -----------        --------
BALANCE, DECEMBER 31, 2000            54,765  $  547    $179,586     $(14,817)  $   -           $(5,963)         $159,353
                                     =======  ======    ========   ==========   =======        ===========        ========
</TABLE>



The accompanying notes are an integral part of these consolidated statements.






                                       54
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                             -----------------------------------------
                                                                                 1998          1999           2000
                                                                             ------------   -----------   ------------
<S>                                                                          <C>            <C>           <C>
Cash flows from operating activities:
  Net income..........................................................           $17,739       $13,862       $7,717
  Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
     Cumulative effect of accounting change, net......................                 -             -        8,178
     Deferred income tax expense .....................................             5,160         1,121          331
     Depreciation and amortization....................................             3,125         3,014        2,861
     Write-off of other assets........................................                 -         1,894            -
     Provision for severance pay......................................              (157)          515          260
     deferred revenues................................................                 -             -         (853)
     (Gain) loss on disposal of property and equipment ...............                 3            (4)         (29)
     (Gain) loss on sales of short-term investments, net..............               (92)          441          446
     Common stock as payment for services.............................                59            60           60
     Changes in:
       accounts receivable ...........................................           (40,856)       28,450         (944)
       inventories....................................................               423        (3,646)      (1,256)
       prepaid expenses and other current assets......................                58           124         (769)
       accounts payable...............................................             4,134         2,419          660
       other current liabilities......................................             3,506           730          (16)
                                                                             ------------   -----------   ------------
  Net cash provided by (used in) operating activities.................            (6,898)       48,980       16,646
                                                                             ------------   -----------   ------------

Cash flows from investing activities:
  Purchases of short-term investments.................................           (27,742)      (53,501)     (48,738)
  Capital expenditures................................................            (3,594)      (11,432)     (10,913)
  Intangibles.........................................................                 -          (150)           -
  Severance pay funded................................................               202          (136)          48
  Other assets........................................................               348          (931)      (1,253)
  Change in patents...................................................              (144)         (181)        (180)
  Proceeds from sales of short-term investments.......................            14,243        19,567       22,177
  Proceeds from sales of property and equipment.......................                38            44           79
                                                                             ------------   -----------   ------------
  Net cash used in investing activities...............................           (16,649)      (46,720)     (38,780)
                                                                             ------------   -----------   ------------

Cash flows from financing activities:
  Proceeds from issuances of common stock.............................            23,649         7,012        9,784
  Proceeds from long-term loan........................................                 -             -       20,000
                                                                             ------------   -----------   ------------
  Net cash provided by financing activities...........................            23,649         7,012       29,784
                                                                             ------------   -----------   ------------

  Net increase in cash and cash equivalents...........................               102         9,272        7,650
  Cash and cash equivalents at beginning of year......................             9,329         9,431       18,703
                                                                             ------------   -----------   ------------
  Cash and cash equivalents at end of year............................            $9,431       $18,703      $26,353
                                                                             ============   ===========   ============

SUPPLEMENTARY INFORMATION

Other information:
  Interest paid.......................................................            $    2       $    11       $  269
  Income taxes paid...................................................              $515        $3,518       $4,567
  Tax benefit derived from exercise of stock options..................              $420       $   521       $1,353
</TABLE>


The accompanying notes are an integral part of these consolidated statements.



                                       55
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Bio-Technology General Corp. ("BTG") and its wholly-owned subsidiary,
Bio-Technology General (Israel) Ltd. ("BTG-Israel"), were formed in 1980 to
research, develop, manufacture and market products through the application of
genetic engineering and related biotechnologies.

         a.       Basis of consolidation:

         The consolidated financial statements include the accounts of BTG and
BTG-Israel, hereinafter collectively referred to as the "Company". All material
intercompany transactions and balances have been eliminated. Certain prior year
amounts have been reclassified to conform with current year presentation.

         b.       Translation of foreign currency:

         The functional currency of BTG-Israel is the U.S. dollar. Accordingly,
its accounts are remeasured in dollars, and translation gains and losses (which
are immaterial) are included in the statements of operations.

         c.       Cash and cash equivalents:

         At December 31, 1999 and 2000, cash and cash equivalents included cash
of $3,202,000 and $9,504,000, respectively, and money market funds, commercial
paper and other liquid short-term debt instruments (with maturities at date of
purchase of ninety days or less) of $15,501,000 and $16,849,000, respectively.

         d.       Short-term investments:

         Short-term investments consist primarily of investments in mutual funds
and U.S. Treasury and corporate bonds that have been classified as
"available-for-sale securities". At December 31, 1999 and 2000, the cost of the
securities was $73,067,000 and $99,180,000, respectively.

         e.       Inventories:

         Inventories are stated at the lower of cost or market. Cost is
determined by using the weighted average method. At December 31, 1999 and 2000,
inventories include raw materials of $951,000 and $1,324,000, work-in-process of
$1,223,000 and $1,499,000, and finished goods of $6,450,000 and $7,057,000,
respectively.

         f.       Long-term accounts receivable-- trade:

         Long-term accounts receivable -- trade consists of amounts owed to
the Company by one customer for which collection is expected in part by
December 31, 2001 and for the remainder by December 31, 2002. The amount does
not bear interest and as such a discount has been recorded in the
consolidated financial statements for the periods ended December 31, 1999 and
2000.

                                       56
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

         g.       Property and equipment, net of accumulated depreciation and
                  amortization:

         Property and equipment are stated at cost. Depreciation has been
calculated using the straight-line method over the estimated useful lives of the
assets, ranging from 5 to 17 years. Leasehold improvements are amortized over
the lives of the respective leases, which are shorter than the useful life. The
cost of maintenance and repairs is expensed as incurred.

         Land, building and construction-in-progress represents building under
construction and is stated at cost. This includes cost of construction under the
construction contracts, plant and equipment, capitalized interest, labor and
other direct costs. Capitalized interest is included under the provision of SFAS
No. 34 and totaled approximately $339,000 at December 31, 2000.
Construction-in-progress is not depreciated until such time as the relevant
assets are completed and put into operational use.

         h.       Intangibles:

         Intangibles consist of repurchased rights to one of the Company's
products previously licensed to a third party, and are amortized, using the
straight-line method over the shorter of the life of the related revenue stream
or seven years, commencing with the initial sale of the related product.

         i.       Patents:

         Patent costs related to products approved by any regulatory agency
worldwide or being sold have been capitalized. Amortization has been calculated
using the straight-line method over 17 years commencing on the date of grant
with respect to each project.

         j.       Long-lived assets:

         The Company's policy is to record long-lived assets at cost, amortizing
these costs over the expected useful lives of related assets. In accordance with
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", these assets are reviewed on a periodic
basis for impairment whenever events or changes in circumstances indicate that
the carrying amounts of the assets may not be recoverable. Management of the
Company believes that no such event or change has occurred.

         k.       Revenue recognition:

         Product sales are recognized when the product is shipped and
collectability is probable.

         Contract fees consist mainly of license of marketing and distribution
rights and research and development projects. Effective January 1, 2000, the
Company adopted Staff Accounting Bulletin 101 ("SAB 101") issued by the
Securities and Exchange Commission in December 1999. As a result of adopting SAB
101, the Company changed the way it recognizes revenue from contract fees for
the license of marketing and distribution rights where the consideration is a
one-time nonrefundable payment. Prior to the issuance of SAB 101, the Company
recorded revenue from the license of marketing and distribution rights when the
rights were licensed and/or when these payments were received. In accordance
with SAB 101, the related revenues are now being recognized over the term of the
related agreements. Effective January 1, 2000, the Company recorded a cumulative
effect of change in accounting principle related to contract revenues



                                       57
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

recognized in prior years in the amount of $12,558,000, net of income taxes of
$4,380,000, of which $853,000 was recognized as contract fee revenue in 2000.

         Revenue related to performance milestones is recognized based upon the
achievement of the milestone, as defined in the respective agreements, and when
collectability is probable. Advance payments received in excess of amounts
earned are included in deferred revenue.

         Royalties are recognized once agreement exists, the sale is made and
the royalty is earned.

         Other revenues represent funds received by the Company for research and
development projects that are partially funded by collaborative partners and the
Chief Scientist of the State of Israel, respectively. The Company recognizes
revenue upon performance of such funded research. In general, these contracts
are cancelable by the Company's collaborative partners at any time.

         The PRO FORMA results of operations of the Company have been prepared
as if the Company adopted SAB 101 in all periods presented.

         l.       Stock-based compensation:

         The Company grants stock options for a fixed number of shares to
employees. The Company accounts for stock option grants in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees".

         m.       Research and development:

         All research and development costs are expensed as incurred.

         n.       Income taxes:

         Deferred income taxes are recognized for the tax consequences of
temporary differences by applying the enacted statutory tax rates to differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities.

         BTG-Israel files separate income tax returns and provides for taxes
under Israeli regulations.

         o.       Other comprehensive income (loss):

         Other comprehensive income (loss) consists of unrealized gains (losses)
on marketable securities.

         p.       Earnings per common share:

         Net earnings per common share amounts ("basic EPS") are computed by
dividing net earnings by the weighted average number of common shares
outstanding and exclude any potential dilution. Net earnings per common share
amounts assuming dilution ("diluted EPS") are computed by reflecting potential
dilution from the exercise of stock options and warrants.

         A reconciliation between the numerators and denominators of the basic
and diluted EPS computations for net earnings is as follows:




                                       58
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                             Year Ended December 31, 1998       Year Ended December 31, 1999
                                         ------------------------------------ ---------------------------------
                                                                                                          Per
                                           Income       Shares      Per Share   Income       Shares      Share
                                         (Numerator) (Denominator)   Amounts  (Numerator) (Denominator) Amounts

                                         ----------- -------------  --------- ----------- ------------- -------
<S>                                      <C>         <C>            <C>       <C>         <C>           <C>
(In thousands, except per share data)

NET EARNINGS.........................       $17,739                             $13,862
BASIC EPS
Net earnings attributable to common
stock................................        17,739        48,184      $0.37     13,862        52,348    $0.26
EFFECT OF DILUTIVE SECURITIES
Stock options........................                       1,090                              1,843
Stock warrants.......................                         574                                  -
                                                     -------------                        -------------
DILUTED EPS
Net earnings attributable to common
stock and assumed option and warrant
exercises............................       $17,739        49,848      $0.36    $13,862       54,191    $0.26
                                         =========== =============  ========= =========== ============= =======
</TABLE>

<TABLE>
<CAPTION>
                                              Year Ended December 31, 2000
                                       -----------------------------------------
                                         Income       Shares           Per
                                       (Numerator) (Denominator)  Share Amounts
                                       ----------- -------------  --------------
<S>                                    <C>           <C>             <C>
(In thousands, except per share data)

NET EARNINGS.........................    $7,717
BASIC EPS
Net earnings attributable to common
stock................................     7,717         54,320          $0.14
EFFECT OF DILUTIVE SECURITIES
Stock options........................                   2,565
Stock warrants.......................                       -
                                                   -------------
DILUTED EPS
Net earnings attributable to common
stock and assumed option and warrant
exercises............................    $7,717        56,885          $0.14
                                       =========== =============  ==============
</TABLE>








                                       59
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

         Options to purchase 1,970,000, 697,000 and 732,000 shares of common
stock out of the total number of options outstanding as of December 31, 1998,
1999 and 2000, respectively, are not included in the computation of diluted EPS
because of their anti-dilutive effect.

         q.       Use of estimates in preparation of financial statements:

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.

         r.       Fair value of financial instruments:

         The carrying amounts of cash, short-term investments, accounts
receivable and accounts payable approximate fair value due to the short-term
maturity of these instruments. The carrying amount of the long-term debt
approximates fair value as the borrowing rates are currently available for debt
with similar terms and maturities.

         s.       Concentration of credit risk:

         Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
short term investments and accounts receivable. The Company places its cash
investments with high quality financial institutions and limits the amount of
credit exposure to any one institution. Concentration of credit risk with
respect to accounts receivable is discussed in Note 10. Generally, the Company
does not require collateral from its customers; however, collateral or other
security for accounts receivable may be obtained in certain circumstances when
considered necessary.

         t.       New accounting pronouncement:

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
("SFAS No. 133"), as amended, which is effective for all quarters of the fiscal
year beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging securities. The Company
expects that the adoption of SFAS No. 133 will not have a material impact on the
Company's consolidated financial position, results of operations and cash flows.


NOTE 2 - SEVERANCE PAY

         BTG-Israel participates in a defined contribution pension plan and
makes regular deposits with a pension fund to secure pension rights on behalf of
some of its employees. The custody and management of the amounts so deposited
are independent of the Company and accordingly such amounts funded (included in
expenses on an accrual basis) and related liabilities are not reflected in the
balance sheets. The Company's obligation for severance pay, in addition to the
amount funded, is included within long-term liabilities in the accompanying
consolidated balance sheets.

         In respect of its other employees, BTG-Israel purchases individual
insurance policies intended to cover its severance obligations. The amount
funded in the insurance policy and its



                                       60
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

obligation for severance pay to those employees are reflected in the
consolidated balance sheets as severance pay funded and severance pay,
respectively.

         The liability of the Company for severance pay is calculated on the
basis of the latest salary paid to its employees and the length of time they
have worked for the Company. The liability is covered by the amounts deposited,
including accumulated income thereon, as well as by the unfunded liability.

         The expense related to severance and pension pay for the years ended
December 31, 1998, 1999 and 2000, was $715,000, $1,039,000 and $1,434,000,
respectively.


NOTE 3 - PROPERTY AND EQUIPMENT, NET

<TABLE>
<CAPTION>

                                                                                             DECEMBER 31,
                                                                                  -------------------------------
                                                                                     1999                 2000
                                                                                  ----------            ---------
                                                                                           (in thousands)
<S>                                                                               <C>                  <C>
    Laboratory and manufacturing equipment.................................         $15,704              $19,250
    Office equipment.......................................................           3,872                3,922
    Air conditioning and other.............................................           2,306                2,951
    Leasehold improvements.................................................           7,621                7,631
                                                                                  ----------            ---------
                                                                                     29,503               33,754
    Land, building and construction in progress(1)                                    9,518               15,806
                                                                                  ----------            ---------
                                                                                     39,021               49,560
    Accumulated depreciation and amortization..............................         (20,083)             (21,741)
                                                                                  ----------            ---------
        Total..............................................................         $18,938              $27,819
                                                                                  ==========            =========
</TABLE>

------------
    (1) The related asset has not been placed in service and therefore no
        depreciation and amortization has been accumulated as of December 31,
        2000. Includes $717,000 and $104,000 of capitalized interest, labor and
        other expenses as of December 31, 2000 and 1999, respectively.

    Depreciation and amortization expense was approximately $1,617,000,
$1,896,000 and $1,982,000 for the years ended December 31, 1998, 1999 and 2000,
respectively.


NOTE 4 - LONG-TERM DEBT

         In June 2000 the Company entered into a $20,000,000 revolving credit
facility with Bank Hapoalim B.M. to finance a portion of the cost of completing
its new production facility. Short-term borrowings under the facility are due 12
months from the date of borrowing and long-term borrowings are due five years
from the date of borrowing. Loans under the facility bear interest at the rate
of LIBOR plus 0.5% in the case of short-term borrowings and LIBOR plus 1% in the
case of long-term borrowings. Amounts repaid under the facility can be
reborrowed. The credit facility is secured by the assets of BTG-Israel and has
been guaranteed by the Company. At December 31, 2000 the Company had long-term
borrowings of $20,000,000 outstanding under the facility. As at December 31,
2000, the loans are at an average interest rate of 7.75% and the principal is
payable as follows: in 2002 - $1,111,000; in 2003 - $6,667,000; in 2004 -
$6,667,000 and in 2005 - $5,555,000.





                                       61
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 5 - STOCKHOLDERS' EQUITY

         In the year ended December 31, 1998, the Company issued 3,910,000
shares of the Company's common stock upon the exercise of outstanding warrants
and received proceeds of $21,079,000.

         In the years ended December 31, 1998, 1999 and 2000, the Company issued
660,000 shares, 1,087,000 shares and 1,223,000 shares, respectively, of the
Company's common stock upon the exercise of outstanding stock options and
received proceeds of $2,724,000, $5,689,000 and $7,915,000, respectively.

         In April 1998, the Company adopted the 1998 Employee Stock Purchase
Plan (the "1998 ESPP"). The 1998 ESPP is qualified as an employee stock purchase
plan under Section 423 of the Internal Revenue Code of 1986, as amended. The
total number of shares reserved for issuance under the 1998 ESPP is 3,000,000
shares.

         All full-time employees of the Company are eligible to participate in
the 1998 ESPP. From time to time, the Board of Directors may fix a date or a
series of dates on which the Company will grant rights to purchase shares of
common stock under the 1998 ESPP ("Rights") at prices not less than 85% of the
lesser of (i) the fair market value of the shares on the date of grant of such
Rights or (ii) the fair market value of the shares on the date such Rights are
exercised. Rights granted under the 1998 ESPP will run for a maximum of 27
months. No employee may be granted a Right that permits such employee to
purchase shares under the 1998 ESPP having a fair market value that exceeds
$25,000 (determined at the time such Right is granted) for each calendar year in
which such Right is outstanding, and no Right granted to any participating
employee may cover more than 12,000 shares. In 1998, 1999 and 2000 the Company
issued 52,000 shares, 251,000 shares and 339,000 shares, respectively, of common
stock under the 1998 ESPP.

         In 1998 the Company adopted a stockholder rights plan intended to deter
hostile or coercive attempts to acquire the Company. Under the plan, if any
person or group acquires more than 20% of the Company's common stock without
approval of the Board of Directors under specified circumstances, the Company's
other stockholders have the right to purchase shares of the Company's common
stock, or shares of the acquiring company, at a substantial discount to the
public market price. The stockholder rights plan continues the Company's
commitment to ensuring fair value to all stockholders in the event of an
unsolicited takeover offer.


NOTE 6 - STOCK OPTIONS

         The Company's Stock Option Plan (the "Plan") permits the granting of
options to purchase up to an aggregate of 3,900,000 shares of the Company's
common stock to employees, consultants and directors of the Company. Under the
Plan, the Company may grant either incentive stock options, at an exercise price
of not less than 100% of the fair market value of the underlying shares ("market
value") on the date of grant, or restricted stock options, at an exercise price
of not less than the lower of (i) 50% of the book value per share of the
Company's common stock, or (ii) 50% of the market value on the date of grant.
Options generally become exercisable ratably over a four-year period, with
unexercised options expiring after the earlier of 10 years or shortly after
termination of employment. Terminated options are available for reissuance. No
options have been granted under the Plan in the past three years and no
additional options can be granted under the Plan.




                                       62
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

         In 1992, the Company adopted the Bio-Technology General Corp. 1992
Stock Option Plan (the "1992 Stock Option Plan"). The 1992 Stock Option Plan
permits the granting of options to purchase up to an aggregate of 12,000,000
shares of the Company's common stock to key employees (including employees who
are directors) and consultants of the Company. Under the 1992 Stock Option Plan,
the Company may grant either incentive stock options, at an exercise price of
not less than 100% of the fair market value of the underlying shares on the date
of grant, or non-qualified stock options, at an exercise price not less than the
par value of the common stock on the date of grant. Options generally become
exercisable ratably over a four-year period, with unexercised options expiring
after the earlier of 10 years or shortly after termination of employment.
Terminated options are available for reissuance.

         The Company also established a Stock Option Plan for New Directors (the
"New Director Plan") that, upon an individual's initial election or appointment
to the Board of Directors, provides for the grant of an option to purchase
20,000 shares of common stock at an exercise price equal to the market value of
the common stock on the date of grant. Options become exercisable over a
three-year period.

         In June 1997 the Company adopted the Bio-Technology General Corp. 1997
Stock Option Plan for Non-Employee Directors (the "Directors Plan"). The
Directors Plan provides that each non-employee director will automatically
receive an option to purchase 7,500 shares of the Company's common stock on each
date such person is re-elected a director of the Company. The exercise price of
each option is equal to the market value of the common stock on the date of
grant. Options become exercisable over a three-year period. An aggregate of
500,000 shares of common stock has been reserved for issuance under the
Directors Plan.

         The Company accounts for all plans under APB Opinion No. 25, under
which no compensation cost has been recognized as all options granted during
1998, 1999 and 2000 were granted at the fair market value of the Company's
common stock. Had compensation cost for these plans and the Company's 1998 ESPP
been determined in accordance with SFAS No. 123, the Company's net income and
EPS would have been reduced as follows:

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED DECEMBER 31,
                                                                                       -----------------------
                                                                                    1998        1999        2000
                                                                                    ----        ----        ----
                                                                                        (in thousands except
                                                                                           per share data)
<S>                                                                                <C>          <C>        <C>
 Net income (loss):        As reported      ................................       $17,739      $13,862    $7,717
                           Pro forma        ................................         9,810        4,305    (3,874)

 Basic EPS:                As reported      ................................         $0.37        $0.26     $0.14
                           Pro forma        ................................          0.20         0.08     (0.07)

 Diluted EPS:              As reported      ................................         $0.36        $0.26     $0.14
                           Pro forma        ................................          0.20         0.08     (0.07)
</TABLE>


         Under SFAS No. 123, the fair value of each option is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in 1998, 1999 and 2000: (i)
expected life of option of seven years; (ii) dividend yield of 0%; (iii)
expected volatility of 56%, 58% and 59%; and (iv) risk-free interest rate of
5.46%, 5.66% and 5.62%, respectively.



                                       63
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES


         Transactions under the Plan, the 1992 Stock Option Plan, the New
Director Plan, the Directors Plan and other plans during 1998, 1999 and 2000
were as follows:

<TABLE>
<CAPTION>
                                                                       Year ended December 31,
                                                  -------------------------------------------------------------------------
                                                          1998                         1999                    2000
                                                  ----------------------       --------------------  ----------------------
                                                              Weighted                    Weighted    Weighted
                                                              Average                     Average     Average
                                                    Shares    Exercise          Shares    Exercise     Shares     Exercise
                                                   ('000s)      Price          ('000s)     Price      ('000s)       Price
                                                  ---------  -----------       --------  ----------  ----------   ---------
<S>                                               <C>        <C>               <C>       <C>          <C>         <C>
Options outstanding at beginning of year.......      5,400      $8.40            6,332     $7.33        7,487       $7.38
Granted........................................      1,874       7.49            2,752      6.78        1,506       11.85
Exercised......................................       (660)      4.13           (1,087)     5.23       (1,223)       6.47
Terminated.....................................       (282)      9.10             (510)     8.10         (733)       8.39
                                                  ---------                    --------              ----------
Options outstanding at end of year.............      6,332       7.33            7,487      7.38        7,037        8.39
                                                  =========                    ========              ==========
Exercisable at end of year ....................      2,714                       2,804                  2,706
                                                  =========                    ========              ==========
Weighted average fair value of
    options granted............................                  4.71                       4.34                     7.62
                                                             ===========                 ==========               =========
Weighted average fair value of
    options repriced...........................                  3.96(1)
                                                             ===========
</TABLE>

(1)      On June 15, 1998 1,398,000 previously granted options were repriced.
         The additional compensation cost in respect thereof is reflected in the
         PRO FORMA disclosures for the year ended December 31, 1998.

          Of the 7,037,000 options outstanding as of December 31, 2000:

                  - 2,325,000 have exercise prices between $2.37 and $7.19 with
          a weighted average exercise price of $5.67 and a weighted average
          remaining contractual life of 6.87 years. Of these 2,325,000 options,
          751,000 are exercisable; their weighted average exercise price is
          $4.75.

                  - 2,680,000 options have exercise prices between $7.41 and
          $8.45 with a weighted average exercise price of $7.86 and a weighted
          average remaining contractual life of 6.89 years. Of these 2,680,000
          options, 1,473,000 are exercisable; their weighted average exercise
          price is $7.96.

                  - 2,032,000 options have exercise prices between $8.50 and
          $20.44 with a weighted average exercise price of $12.20 and a weighted
          average remaining contractual life of 8.66 years. Of these 2,032,000
          options, 482,500 are exercisable; their weighted average exercise
          price is $12.97.

          As of December 31, 2000 there were 1,061,000 shares available for the
 grant of options under the 1992 Stock Option Plan. Subsequent to December 31,
 2000, no material amount of options have been exercised.


                                       64
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

 NOTE 7 - FOREIGN OPERATIONS

         The Company's operations are treated as one operating segment as it
         only reports profit and loss information on an aggregate basis to chief
         operating decision makers of the Company. Information about the
         Company's operations in the United States and Israel is presented
         below:






                                       65
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                                              U.S.        ISRAEL      ELIMINATIONS       CONSOLIDATED
                                                              ----        ------      ------------       ------------
                                                                 (IN THOUSANDS OF U.S. DOLLARS)
<S>                                                         <C>        <C>             <C>
Year ended December 31, 1998:
    Revenues.........................................      (S) 66,810     10,045                            76,855
    Intercompany transactions........................           4,363      1,599           (5,962)
    Reimbursement of subsidiary's expenses...........                     10,770          (10,770)
    Depreciation and amortization....................           1,989      1,136                             3,125
    Interest income..................................           2,870         95                             2,965
    Income tax expense...............................           7,010                                        7,010
    Net income.......................................          17,223      3,404           (2,888)          17,739
    Identifiable assets+.............................         140,290     20,330          (17,944)         142,676
    Foreign liabilities+ ............................                    ++5,939                             5,939
    Investment in subsidiaries (cost basis)+.........           5,797                      (5,797)

Year ended December 31, 1999:
    Revenues.........................................      (S) 73,250     12,070                            85,320
    Intercompany transactions........................             800      2,290           (3,090)
    Reimbursement of subsidiary's expenses...........                     10,795          (10,795)
    Depreciation and amortization....................           1,601      1,413                             3,014
    Interest income..................................           4,561         72                             4,633
    Income tax expense...............................           4,609        288                             4,897
    Net income.......................................           9,545      3,262            1,055           13,862
    Identifiable assets+.............................         160,408     28,640          (24,403)         164,645
    Foreign liabilities+.............................                    ++7,027                             7,027
    Investment in subsidiaries (cost basis)+.........          15,310                     (15,310)

Year ended December 31, 2000:
    Revenues.........................................      (S) 69,908     15,036                            84,944
    Intercompany transactions........................           1,272      4,009           (5,281)
    Reimbursement of subsidiary's expenses...........                     12,712          (12,712)
    Depreciation and amortization....................           1,389      1,472                             2,861
    Interest income..................................           7,425         71                             7,496
    Income tax expense...............................           4,205        270                             4,475
    Net income.......................................             641      6,557              519            7,717
    Identifiable assets+.............................         179,011     45,730          (11,516)         213,225
    Foreign liabilities+ ............................                   ++28,034                            28,034
    Investment in subsidiaries (cost basis)+.........          15,298                     (15,298)
</TABLE>

---------------------------
(S)   Includes export sales of $27,723,000, $27,645,000 and $27,515,000 in
1998, 1999 and 2000, respectively.
+     At year end.
++    Excludes liability to parent.




                                       66
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 8 - COMMITMENTS AND CONTINGENT LIABILITIES

         a. The Company has leased approximately 23,000 square feet of office
space in New Jersey for its executive office, having an average annual rental
expense of approximately $415,000. The lease expires in October 2003. In
addition, the Company is obligated to pay its proportional share of any annual
increase in taxes and operating expenses. The Company also leases approximately
2,000 square feet in New York City, primarily for its investor and public
relations activities, having an average annual rental expense of $100,000 and
expiring in September 2003. BTG-Israel currently leases approximately 95,000
square feet of space for its research, development and production facilities in
Israel, having an average annual rental expense of $1,110,000. The lease of
substantially all of this space will expire in December 2002; the lease for the
remainder of the space will expire in 2003. BTG-Israel also leases 5,000 square
feet of warehouse space near its research and manufacturing facility pursuant to
a lease that expires in December 2001.

         Rent expense was approximately $1,684,000, $1,679,000 and $1,787,000
for the years ended December 31, 1998, 1999 and 2000, respectively.

         The future annual minimum rentals (exclusive of amounts for real estate
taxes, maintenance, etc.) for each of the next three years are as follows:
2001--$1,658,000; 2002--$1,625,000; and 2003--$475,000. There is also a bank
guarantee outstanding in favor of the lessor of the Israeli facility for
$758,000 secured by the assets of BTG-Israel.

         b. The Company is obligated, for products resulting from research and
development projects partially funded by the Chief Scientist, to pay royalties
to the Israeli government of 3%-5% on commercial sales, if any, of these
products if produced in Israel up to the amount so funded, or royalties of 4%-6%
if produced outside Israel up to 120%-300% of the amount so funded. As of
December 31, 2000, the Company is obligated to repay to the Chief Scientist, out
of revenue from future product sales, a minimum of $7,874,000 of research and
development funding for products that are currently being sold and a minimum of
$5,302,000 of research and development funding for products currently under
development if these products will be sold. During the years ended December 31,
1998, 1999 and 2000, the Company accrued approximately $385,000, $353,000 and
$529,000, respectively, as royalties to the Chief Scientist.

         The Company is also committed to pay royalties on future sales, if any,
of certain of its products to licensees from which the Company licensed these
products.

         c. The Company currently has employment agreements with five senior
officers. Under these agreements, the Company has committed to total aggregate
base compensation per year of approximately $1,361,000 plus other normal
customary fringe benefits and bonuses. These employment agreements generally
have a term of two years and are automatically renewed for successive two-year
periods unless either party gives the other notice of non-renewal.

         d. The Company has received notification of claims filed against
certain of its patents in the normal course of operations. Management believes
that these claims have no merit, and the Company intends to defend them
vigorously.




                                       67
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 9 - OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                       ---------------------------
                                                                                           1999               2000
                                                                                           ----               ----
                                                                                               (in thousands)
<S>                                                                                      <C>                <C>
Salaries and related expenses                                                            $3,312             $4,006
Accrued subcontracting payable                                                            3,830              3,077
Governmental and state agencies                                                             677                802
Legal and professional fees                                                                 700                657
Royalties and commissions                                                                 2,341              1,947
 Other                                                                                      311                666
                                                                                       --------           --------
                                                                                        $11,171            $11,155
                                                                                       ========           ========
</TABLE>


NOTE 10 - CONCENTRATIONS

         In 1998, 1999 and 2000, one customer for human growth hormone, located
solely in Japan, represented $11,056,000, $10,507,000 and $12,975,000, or 15%,
13% and 17% of revenues (exclusive of interest income), respectively. In 1998,
1999 and 2000, one customer for OXANDRIN and DELATESTRYL, located solely in the
United States, represented $43,171,000, $32,813,000 and $33,249,000, or 58%, 41%
and 44% of revenues (exclusive of interest income), respectively. In 1999, 12%
of revenues (exclusive of interest income) resulted from the license of product
distribution rights to a licensee. In 2000, the Company's product sales
consisted primarily of sales of OXANDRIN, human growth hormone, BIOLON and
DELATESTRYL in the amount of approximately $32,186,000, $20,585,000, $6,116,000
and $2,582,000, or 52%, 33%, 10% and 4% of total product sales, respectively.
One customer accounted for 53% and 59% of total accounts receivable-trade as of
December 31,1999 and 2000, respectively. As of December 31, 1999, an amount due
from a licensee accounts for 27% of total accounts receivable-trade. BTG
currently has one supplier for its OXANDRIN product and one supplier for its
DELATESTRYL product.


NOTE 11 - INCOME TAXES

         At December 31, 2000, BTG had a capital loss carry over of
approximately $887,000 available to offset future capital gains, which expires
at various times with respect to various amounts through 2005, and a research
and experimental ("R&E") credit carryover of approximately $2,816,000 available
to reduce future income taxes, which expires at various times with respect to
various amounts through 2019.

         Provision for income taxes has not been made for U.S. or additional
foreign taxes on undistributed earnings of BTG-Israel. Those earnings have been
and will continue to be permanently reinvested. It is not practicable to
determine the amount of additional tax that might be payable on the foreign
earnings. The cumulative amount of reinvested earnings was approximately
$9,000,000 at December 31, 2000.





                                       68
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

         The components of current and deferred income tax expense (benefit) are
as follows:

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                  --------------------------------------------
                                                                     1998               1999            2000
                                                                  ---------           -------        ---------
                                                                                   (in thousands)
<S>                                                                <C>                <C>              <C>
Current:
       State..................................................     $    336           $   332          $   183
       Federal................................................        1,514             3,066            3,662
       Foreign................................................           --               378              299
                                                                  ---------           -------        ---------
                                                                      1,850             3,776            4,144
                                                                  ---------           -------        ---------

Deferred:
       State..................................................          464                98               28
       Federal................................................        4,696             1,113              332
       Foreign................................................           --              (90)              (29)
                                                                  ---------           -------        ---------
                                                                      5,160             1,121              331
                                                                  ---------           -------        ---------

Total income tax expense......................................       $7,010            $4,897          $ 4,475
                                                                  =========           =======        =========
</TABLE>


         The domestic and foreign components of income before income taxes are
as follows:

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                  --------------------------------------------
                                                                     1998              1999             2000
                                                                  ---------         ---------         --------
                                                                                  (in thousands)
<S>                                                               <C>               <C>               <C>
       Domestic...............................................      $21,435           $15,045          $12,365
       Foreign................................................        3,314             3,714            8,005
                                                                  ---------         ---------         --------
                                                                    $24,749           $18,759          $20,370
                                                                  =========         =========         ========

</TABLE>




                                       69
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

       The components of deferred income tax expense (benefit) are:

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                     ------------------------------------------
                                                                       1998              1999             2000
                                                                     --------           --------        -------
                                                                                    (in thousands)
<S>                                                                  <C>                <C>             <C>
       R&E credit.............................................       $  (393)               $899        $ (437)
       Net operating loss ....................................         7,290                   -             -
       Alternate minimum tax credit...........................           (28)                  -             -
       Deferred revenues......................................             -                   -           232
       Accrued amounts........................................        (1,429)                229           174
       Depreciation and amortization..........................          (280)                 (7)          362
                                                                     --------           --------        -------
                                                                     $ 5,160              $1,121          $331
                                                                     ========           ========        =======
</TABLE>


         A reconciliation of income taxes between the statutory and effective
tax rates on income before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                    -------------------------------------------
                                                                      1998            1999              2000
                                                                    --------       ----------        ----------
                                                                                 (in thousands)
<S>                                                                  <C>               <C>              <C>
       Income tax at U.S. statutory rate......................       $9,853            $6,566           $7,129
       State and local income taxes (net of federal
         benefit).............................................          520               280              138
       Non-deductible expenses................................          619               761              333
       R&E credit.............................................       (1,189)             (772)            (720)
       Foreign income subject to a reduced
         rate of tax..........................................       (2,970)           (2,016)          (2,779)
       Other..................................................           177               78              374
                                                                    --------       ----------        ----------
       Income tax expense.....................................       $7,010            $4,897           $ 4,475
                                                                    ========       ==========        ==========
</TABLE>




                                       70
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

The components of deferred income tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                         -----------------------
                                                                                           1999          2000
                                                                                         --------      ---------
                                                                                              (in thousands)
<S>                                                                                       <C>          <C>
Capital loss carryforward.............................................                    $2,698       $    328
R&E credit............................................................                     2,379          2,816
Deferred revenues.....................................................                         -          4,148
Accrued amounts.......................................................                     2,193          1,874
                                                                                         --------      ---------
                                                                                           7,270          9,166
Depreciation and amortization.........................................                      (286)          (648)
                                                                                         --------      ---------
                                                                                           6,984          8,518
Valuation allowance...................................................                    (2,698)          (328)
                                                                                         --------      ---------
                                                                                          $4,286         $8,190
                                                                                         ========      =========
</TABLE>

The Company recorded a valuation allowance against its capital loss carryforward
as it is not likely to utilize it.

NOTE 12 - SUBSEQUENT EVENTS

Acquisition of Myelos Corporation

         On March 19, 2001, BTG acquired Myelos Corporation, a privately-held
biopharmaceutical company focused on the development of novel therapeutics to
treat diseases of the nervous system. Under the terms of the acquisition
agreement, BTG paid Myelos shareholders $35,000,000 in a combination of cash
and stock ($14,000,000 in cash and $21,000,000 through the issuance of
approximately 2,344,700 shares of the Company's common stock, based on a
value of $8.9564, representing the average closing price of BTG's common
stock for the 20 trading day period ending one day prior to February 21,
2001, the date the acquisition agreement was executed). In addition, BTG has
agreed to pay the Myelos shareholders an additional $30,000,000 if BTG is
able to file a New Drug Application with respect to Prosaptide to treat
neuropathic pain or neuropathy, of which at least $14,000,000 will be paid
through the issuance of shares of BTG common stock. The remaining $16,000,000
can be paid, at BTG's option, in cash, shares of BTG common stock or a
combination thereof. BTG has also agreed that if Prosaptide is approved by
the United States Food and Drug Administration for the treatment of
neuropathic pain or neuropathy, BTG will pay the Myelos shareholders 15% of
net sales of Prosaptide during the 12 month period beginning on the earlier
of (i) the 25th full month after commercial introduction of Prosaptide in the
United States for the treatment of neuropathic pain or neuropathy and (ii)
April 1, 2010. At least 50% of this payment must be in shares of BTG common
stock, with the remainder payable, at BTG's option, in cash, shares of BTG
common stock or a combination thereof. In no event is BTG required to issue
more than 10,962,000 shares of its common stock; any equity required to be
issued in excess of that amount will be issued in shares of BTG preferred
stock. The preferred stock would be non-voting, non-convertible,
non-transferable, non-dividend paying (except to the extent a cash dividend
is paid on the BTG common stock), with no mandatory redemption for a period
of 20 years and one day from the closing date of the acquisition, and a right
to share in proceeds in liquidation, up to the liquidation amount.

                                       71
<PAGE>

                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

         The transaction will be treated as a "purchase" for accounting
purposes. The purchase price for accounting purposes is approximately
$33,000,000, based on a value for the approximately 2,344,700 shares of
Company common stock issued in the acquisition of $8.1172, representing the
average closing price of the Company's common stock for the four day period
preceding the date the terms of the acquisition were agreed to (February 21,
2001). BTG anticipates that an amount in excess of the purchase price paid at
closing will be written off as "in process research and development", because
the technology acquired in the acquisition was not fully commercially
developed and has no alternative future use at the time of the acquisition.

Investment in Omrix Biopharmaceuticals, Inc.

         In January 2001, in order to obtain a period of exclusivity to
negotiate a possible strategic relationship with Omrix Biopharmaceuticals,
Inc., BTG loaned $2,500,000 to Omrix and agreed to convert the loan into, and
purchase an additional $2,500,000 of, shares of Omrix preferred stock if it
did not pursue a relationship. BTG has determined not to pursue a strategic
relationship with Omrix, and will convert the loan into, and purchase an
additional $2,500,000 of, shares of Omrix preferred stock, which is
convertible into approximately 4.5% of Omrix common stock (on a fully-diluted
basis). Omrix is a privately-held company that develops and markets a unique
surgical sealant and a number of immunology products based on blood plasma
processing technology. Omrix currently sells its products in Europe, South
America and the Middle East.

NOTE 13 - QUARTERLY DATA (UNAUDITED)

         Following are the quarterly results of operations for the years ended
December 31, 2000 and 1999:




                                       72
<PAGE>


                  BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                             MARCH 31,               JUNE 30,                SEPTEMBER 30,         DECEMBER 31,
                                         ----------------      -------------------         ----------------     ------------------
                                          1999      2000        1999         2000           1999       2000     1999        2000
                                         ------    ------      -------      ------         ------    ------     ------      ------
                                                                     (In thousands except per share data)
<S>                                     <C>       <C>          <C>         <C>            <C>       <C>        <C>         <C>
Revenues
    Product sales                       $15,867   $12,507      $19,381     $14,082        $14,916   $18,206    $12,168     $17,354
    Contracts Fees                        2,906     1,838(1)     1,727       7,713(1)      10,176       213(1)      39         463
    Other                                 1,455     2,418        1,772       3,048          2,390     3,037      2,523       4,064
                                         ------    ------      -------      ------         ------    ------     ------      ------
                                         20,228    16,763       22,880      24,843         27,482    21,456     14,730      21,881
                                         ------    ------       ------      ------         ------    ------     ------      ------
 Expenses:
    Research and development              4,618     5,397        4,359       5,635          6,412     5,436      5,731       5,892
    Cost of product sales                 2,254     2,336        3,868       1,911          2,865     2,850      2,237       2,790
    General and administrative            2,664     3,446        3,231       3,182          2,927     3,531      5,213       2,526
    Marketing and sales                   4,559     3,256        3,765       5,315          3,442     4,365      4,817       4,678
    Other                                   324       684          453         281          1,988       299        834         764
                                         ------    ------       ------      ------         ------    ------     ------     -------
                                         14,419    15,119       15,676      16,324         17,634    16,481     18,832      16,650
                                         ------    ------       ------      ------         ------    ------     ------      ------
                                          5,809     1,644        7,204       8,519          9,848     4,975     (4,102)      5,231
 Income tax expense (benefit)             1,803       559(2)     2,104       2,922 (2)      3,059       555(2)  (2,068)        438
                                         ------    ------        -----      ------         ------    ------     -------     ------
                                          4,006     1,085        5,100       5,597          6,789     4,420     (2,034)      4,793
 Cumulative effect of change in
    accounting principle                     -      8,178            -           -              -         -          -           -
                                         ------    ------        -----      ------         ------    ------     -------     ------
 Net Income (loss)                      $ 4,006   $(7,093)     $ 5,100     $ 5,597         $6,789   $ 4,420    $(2,034)    $ 4,793
                                         ======    ======        =====      ======         ======    ======     ======      ======

 Earnings (loss) per common share:
    Basic                                $ 0.08    $(0.13)(3)  $ 0.10       $ 0.10(3)      $ 0.13    $ 0.08(3)  $(0.04)     $ 0.09
                                         ======    ======        =====      ======         ======    ======     ======      ======
    Diluted                              $ 0.08    $(0.12)(4)  $ 0.10       $ 0.10(4)      $ 0.12    $ 0.08(4)  $(0.04)     $ 0.09
                                         ======    ======        =====      ======         ======    ======     ======      ======
 Weighted average number of common
     and common equivalent shares:
    Basic                                51,940    53,748      52,086       54,303         52,483    54,493     52,891      54,729
                                         ======    ======        =====      ======         ======    ======     ======      ======
    Diluted                              52,652    57,373      53,358       57,015         54,701    56,993     55,690      55,779
                                         ======    ======        =====      ======         ======    ======     ======      ======

 (1)   As reported                                $ 2,475                  $ 7,500                   $    -
 Adjustment (see note 1k)                            (637)                     213                      213
                                                   ------                   ------                   ------
                                                   $1,838                  $ 7,713                   $  213
                                                   ======                   ======                   ======
 (2) As reported                                  $   796                  $ 2,843                   $  476
 Adjustment (see note 1k)                            (237)                      79                       79
                                                   -------                  ------                   ------
                                                  $   559                  $ 2,922                   $  555
                                                   =======                  ======                   ======
 (3) As reported                                   $ 0.03                  $  0.10                   $ 0.08
 Adjustment (see note 1k)                           (0.16)                     -                         -
                                                   -------                  ------                   ------
                                                  $ (0.13)                 $  0.10                    $0.08
                                                   =======                  ======                   ======
(4)       As reported                              $ 0.03                  $  0.10                   $ 0.08
 Adjustment (see note 1k)                           (0.15)                     -                        --
                                                   -------                  ------                   ------
                                                   $(0.12)                   $0.10                    $0.08
                                                   =======                  ======                   ======
</TABLE>



                                       73
<PAGE>



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

DIRECTORS

         The section entitled "Proposal No. 1 - Election of Directors" in the
Company's Proxy Statement for the Annual Meeting of Stockholders is incorporated
herein by reference.

EXECUTIVE OFFICERS

         See "Part I - Item 1. Business - Executive Officers of the Company".


ITEM 11.  EXECUTIVE COMPENSATION

   The section entitled "Executive Compensation" in the Company's Proxy
Statement for the Annual Meeting of Stockholders is incorporated herein by
reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The section entitled "Beneficial Ownership of Common Stock" in the Company's
Proxy Statement for the Annual Meeting of Stockholders is incorporated herein by
reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The sections entitled "Executive Compensation - Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" in the
Company's Proxy Statement for the Annual Meeting of Stockholders is incorporated
herein by reference.




                                       74
<PAGE>



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   Financial Statements

   (1) and (2) See "Index to Consolidated Financial Statements" at Item 8 of
this Annual Report on Form 10-K.

   (3) Exhibits

   Certain exhibits presented below contain information that has been granted or
is subject to a request for confidential treatment. Such information has been
omitted from the exhibit. Exhibit Nos. 10(a), (j), (k), (l), (p), (u), (v), (w),
(x), (y), (z) and (aa) are management contracts, compensatory plans or
arrangements.

<TABLE>
<CAPTION>
EXHIBIT NO.    DESCRIPTION
<S>            <C>

 2(a)          Agreement and Plan of Reorganization, dated as of February 21, 2001,
               by and among Bio-Technology General Corp., MYLS
               Acquisition Corp. and Myelos Corporation.*(1)

  3(a)         Certificate of Incorporation of the Registrant, as amended. *(2)

   (b)         By-laws of the Registrant, as amended.*(3)

 4(a)          Rights Agreement, dated as of October 7, 1998, by and between
               Bio-Technology General Corp. and American Stock Transfer & Trust
               Company, as Rights Agent, which includes the form of Certificate
               of Designations setting forth the terms of the Series A Junior
               Participating Cumulative Preferred Stock, par value $0.01 per
               share, as Exhibit A, the form of Right Certificate as Exhibit B
               and the Summary of Rights to Purchase Preferred Shares as Exhibit
               C.*(3)

  4(b)         Certificate of Designations of the Series A Junior Participating Cumulative Preferred Stock.*(3)

 10(a)         Bio-Technology General Corp. Stock Option Plan, as amended through May 29, 1991.*(4)

   (b)         Agreement,  dated January 25, 1981, between  Bio-Technology  General (Israel) Ltd. and Yeda
               Research and Development Co., Ltd. ("Yeda"). *(5)

   (c)         Letter from the Chief Scientist to Bio-Technology General (Israel) Ltd. *(5)

   (d)         Letter from the Company to Yeda relating to bGH and hSOD. *(6)

   (e)         Agreement,  dated January 20, 1984,  between  Bio-Technology  General  (Israel)  Ltd., and the
               Chief Scientist with regard to certain projects. *(7)

   (f)         Agreement, dated July 9, 1984, between the Company and Yeda. *(7)

   (g)         Agreement, dated as of January 1, 1984, between the Company and Yissum. *(8)

   (h)         Form of Indemnity Agreement between the Company and its directors and officers. *(9)

   (i)         Agreement, dated November 18, 1988, between the Company and Yeda. *(10)

   (j)         Employment Agreement, dated as of January 1, 1990, between the Company and Dr. Sim Fass.*(11)

   (k)         Bio-Technology  General Corp.  Stock  Compensation  Plan for Outside  Directors,  as amended
               through March 1991. *(4)
</TABLE>




                                       75
<PAGE>


<TABLE>
<CAPTION>
EXHIBIT NO.     DESCRIPTION
<S>             <C>
   (l)          Bio-Technology  General Corp.  Stock Option Plan for New Directors,  as amended through March 1991. *(4)

   (m)          Reacquisition  of Rights  Agreement,  effective  June 12, 1991  between the Company and The Du Pont
                Merck Pharmaceutical Company. *(12)

   (n)          Agreement,  dated as of November 9, 1992,  between the Company and SmithKline  Beecham Intercredit
                B.V. *(13)

   (o)          Exclusive  Distribution  Agreement,  dated as of November 9, 1992,  between the Company and Ferring
                B.V. *(13)

   (p)          Bio-Technology General Corp. 1992 Stock Option Plan, as amended.*(14)

   (q)          Purchase and Supply Agreement,  dated as of December 1, 1995, between  Bio-Technology General Corp.
                and Quantum Health Resources. *+(15)

   (r)          Support Services Agreement,  dated as of December 1, 1995, between Bio-Technology General Corp. and
                Quantum Health Resources. *+(15)

   (s)          Research  and  Development  Services  Agreement,  dated  as of  January  1,  1996  by  and between
                Bio-Technology General Corp. and Bio-Technology General (Israel) Ltd.*(16)

   (t)          Manufacturing  Services  Agreement,  dated as of  January 1, 1996,  by and  between Bio-Technology
                General Corp. and Bio-Technology General (Israel) Ltd.*(16)

   (u)          Employment  Agreement,  dated as of January 29, 1996,  between  Bio-Technology  General  Corp. and
                Ernest L. Kelly. *(15)

   (v)          Bio-Technology General Corp. 1997 Stock Option Plan for Non-Employee Directors.*(14)

   (w)          Bio-Technology General Corp. 1998 Employee Stock Purchase Plan.*(17)

   (x)          Employment Agreement,  dated as of July 23, 1999, by and between  Bio-Technology  General Corp. and
                Robert Shaw.*(18)

   (y)          Employment Agreement,  dated as of January 23, 2000, by and between  Bio-Technology  General Corp.,
                Bio-Technology General (Israel) Ltd. and Dov Kanner.*(20)

   (z)          Severance Agreement,  dated as of April 26, 1996, by and between  Bio-Technology  General Corp. and
                Norman Barton.*(21)

  (aa)          Second Amendment to Employment Agreement,  dated as of June 9, 1999, between Bio-Technology General
                Corp. and Sim Fass.*(20)

    21          Subsidiaries of Bio-Technology General Corp.

    23          Consent of Arthur Andersen LLP.
</TABLE>

                Exhibits have been included in copies of this Report filed with
 the Securities and Exchange Commission. Stockholders of the Company will be
 provided with copies of these exhibits upon written request to the Company.
 -------------------




                                       76
<PAGE>



+ Confidential treatment has been granted for portions of such document.

* Previously filed with the Commission as Exhibits to, and incorporated herein
by reference from, the following documents:

         (1)      Company's Current Report on Form 8-K, dated March 19, 2001.

         (2)      Company's Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1994.

         (3)      Company's Current Report on Form 8-K, dated October 7, 1998.

         (4)      Company's Annual Report on Form 10-K for the year ended
                  December 31, 1991.

         (5)      Registration Statement on Form S-1 (File No. 2-84690).

         (6)      Company's Annual Report on Form 10-K for the year ended
                  December 31, 1983.

         (7)      Registration Statement on Form S-1 (File No. 33-2597).

         (8)      Registration Statement on Form S-2 (File No. 33-12238).

         (9)      Company's Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1987.

         (10)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1988.

         (11)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1989.

         (12)     Registration Statement on Form S-3 (File No. 33-39018).

         (13)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1992.

         (14)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1997.

         (15)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1995.

         (16)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1998.

         (17)     Company's Registration Statement on Form S-8 (File No.
                  333-64541).

         (18)     Company's Quarterly Report on Form 10-Q for the quarter ended
                  June 30, 1999.

         (19)     Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1999.

         (20)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1999.

         (21)     Company's Annual Report on Form 10-K for the year ended
                  December 31, 1996.


         (b)      Reports on Form 8-K

         (c)      Exhibits

                  See (a) (3) above.

         (d)      Financial Statement Schedule

                  See "Index to Consolidated Financial Statements and
                  Supplemental Schedule" at Item 8 of this Annual Report on Form
                  10-K. Schedules not included herein are omitted because they
                  are not applicable or the required information appears in the
                  Consolidated Financial Statements or notes thereto.



                                       77
<PAGE>


                                   SIGNATURES

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

                                      Bio-Technology General Corp.
                                      (Registrant)

                                      By: /S/ SIM FASS
                                          --------------------------------------
                                          (Sim Fass)
                                          Chairman of the Board and CEO


March 28, 2001


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

<TABLE>
<CAPTION>
SIGNATURE                                         TITLE                                         DATE
<S>                                               <C>                                      <C>
/s/ SIM FASS                                      Chairman of the Board,                   March 28, 2001
------------------------------
(Sim Fass)                                        CEO and Director (Principal
                                                   Executive Officer)

/s/ HERBERT CONRAD                                Director                                 March 28, 2001
------------------------------
(Herbert Conrad)

/s/ CARL KAPLAN                                   Director                                 March 28, 2001
------------------------------
(Carl Kaplan)

/s/ ALLAN ROSENFIELD                              Director                                 March 28, 2001
------------------------------
(Allan Rosenfield)

/s/ DAVID TENDLER                                 Director                                 March 28, 2001
------------------------------
(David Tendler)

/s/ VIRGIL THOMPSON                               Director                                 March 28, 2001
------------------------------
(Virgil Thompson)

/s/  DAN TOLKOWSKY                                Director                                 March 28, 2001
-----------------------------
(Dan Tolkowsky)

/s/  FAYE WATTLETON                               Director                                 March 28, 2001
-------------------------------
(Faye Wattleton)
</TABLE>


                                       78
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE                                         TITLE                                         DATE
<S>                                               <C>                                      <C>

/s/ HERBERT WEISSBACH                             Director                                 March 28, 2001
------------------------------
(Herbert Weissbach)

/s/ YEHUNDA STERNLICHT                            Vice President-Finance and Chief         March 28, 2001
------------------------------
(Yehuda Sternlicht)                               Financial Officer (Principal
                                                   Financial and Accounting Officer)


</TABLE>


                                       79