<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, 1999

                         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 17, 2000 (based on the closing sale price for such shares as reported
by the National Association of Securities Dealers Automated Quotation System):
$931,270,144. Common Stock outstanding as of March 17, 2000: 54,166,260 shares.

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's definitive proxy statement for its 2000 annual
meeting of stockholders are incorporated by reference into Part III of this
report.

<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL OVERVIEW

      The Company 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 seven products that have received regulatory approval for sale, of
which five are currently being marketed. Additionally, the Company has four
products in registration or clinical trials and several products in pre-clinical
development. The Company distributes its 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. The Company seeks
both broad markets for some of its products as well as specialized niche markets
for others where it can seek Orphan Drug status and potential marketing
exclusivity.

      The Company's approved products include 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; BIO-TROPIN(TM) (human growth hormone), which is currently being
marketed in Japan and in several countries in Europe, Latin America and the Far
East for the treatment of growth hormone deficiency in children; BIOLON(TM)
(sodium hyaluronate), which is currently marketed in the United States and in
several other countries in North and Latin America, Europe, Asia, Africa and the
Far East for the protection of the corneal endothelium during ophthalmic implant
surgery; DELATESTRYL(R) (injectable testosterone), which is currently marketed
in the United States for hypogonadism and delayed puberty; Mircette(TM), an oral
contraceptive dosing regimen that is currently being marketed in the United
States; SILKIS(R), a vitamin D derivative, which is currently approved in nine
European countries for the topical treatment of recalcitrant psoriasis; and
BIO-HEP-B(TM), a third generation recombinant vaccine against hepatitis B virus,
which is currently approved in Israel.

      The Company's principal products in registration or advanced stages of
clinical testing and development include recombinant insulin for diabetes;
FIBRIMAGE(TM), a thrombus imaging agent; BIO-HY(TM) (sodium hyaluronate) for
osteoarthritis; and OXSODROL(TM) (human superoxide dismutase) for the reduction
of asthma and as a neuro-protectant in premature infants.

      The Company's research and development focus includes FACTOREX(TM), a
cardiovascular thrombolytic adjunctive agent; PURICASE(TM) for
allopurinol-resistant gout patients; three potential anti-cancer drugs; and the
development of generic versions of biologics which will be going off patent.

      The Company was founded in 1980 to develop, manufacture and market novel
therapeutic products. The Company's overall administration, business
development, human clinical studies, marketing activities, quality assurance and
regulatory affairs are primarily coordinated at the Company's headquarters in
Iselin, New Jersey. Pre-clinical studies, research and development activities
and manufacturing of the Company's biotechnology-derived products are primarily
carried out through Bio-Technology General (Israel) Ltd. ("BTG-Israel"), the
Company's wholly-owned subsidiary in Rehovot, Israel.

PRODUCTS AND APPLICATIONS

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


                                       1
<PAGE>

<TABLE>
<CAPTION>
               PRODUCT                           INDICATION/APPLICATION                        Status
-------------------------------------------------------------------------------------------------------------------
PRODUCTS UNDER COMMERCIALIZATION:
---------------------------------
<S>                                             <C>                             <C>
OXANDRIN                                        Involuntary weight loss         Commercial sales
(oxandrolone)                                                                     (United States and various other
                                                                                  countries)
-------------------------------------------------------------------------------------------------------------------
BIO-TROPIN                                      Growth hormone deficiency in    Commercial sales
(human growth hormone)                          children                          (Japan, Europe and various
                                                                                  other countries)
-------------------------------------------------------------------------------------------------------------------
BIOLON                                          Injectable viscous solution     Commercial sales  (Worldwide)
(sodium hyaluronate)                            for ophthalmic 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          Approved for sale (Nine European
(vitamin D derivative)                          dermatitis agent/other skin     countries)
                                                disorders
-------------------------------------------------------------------------------------------------------------------
BIO-HEP-B                                       Hepatitis-B vaccine             Approved for sale (Israel)
===================================================================================================================

<CAPTION>
PRODUCTS IN REGISTRATION AND CLINICAL TRIALS:
---------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                             <C>
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
-------------------------------------------------------------------------------------------------------------------
BIO-HY                                          Osteoarthritis                  Phase III clinical trials (Germany)
-------------------------------------------------------------------------------------------------------------------
OXSODROL                                        Reduction of asthma and         Phase II clinical trials
(human superoxide dismutase)                    neuro protectant in premature
                                                infants
===================================================================================================================

<CAPTION>
PRODUCTS IN LABORATORY AND PRE-CLINICAL RESEARCH:
-------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                             <C>
Generic versions of biologic                                                    Research
pharmaceutical products
-------------------------------------------------------------------------------------------------------------------
FACTOREX                                        Anti-coagulant                  Pre-clinical development
-------------------------------------------------------------------------------------------------------------------
PURICASE                                        Gout                            Pre-clinical development
-------------------------------------------------------------------------------------------------------------------
Cancer Therapies                                Cancer                          Research
===================================================================================================================
</TABLE>


                                       2
<PAGE>

      OXANDRIN (OXANDROLONE)

      The Company'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. The
Company estimates 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 condition 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 the
Company 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. The Company
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 all disease-related weight loss
other than starvation. G.D. Searle & Company Limited ("Searle"), which
originally developed and obtained FDA approval of OXANDRIN and now licenses
OXANDRIN to, and contract manufactures OXANDRIN for, the Company, ceased
offering OXANDRIN in the 1980s. 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. Sales of OXANDRIN commenced in
December 1995 to the Company's exclusive distributor in the United States,
Gentiva Health Services ("Gentiva") (formerly known as Olsten Health Services),
for all indications under the FDA approval.

      Since the Company's launch of OXANDRIN in December 1995, a significant
portion of its 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 is 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


                                       3
<PAGE>

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; and
(ii) the use of OXANDRIN for the promotion of weight gain in patients suffering
from weight loss due to chronic obstructive pulmonary disease. A manuscript for
the first study has been accepted for publication and the second study has been
published. Clinical trials currently being conducted at leading institutions
include studies of: (i) OXANDRIN for the promotion of weight gain in
malnourished patients with inoperable non-small cell lung cancer; and (ii)
OXANDRIN for the promotion of weight gain and shortened recovery time in
patients who have undergone liver transplants.

      In January 1994, the Company 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, the product was approved in Israel for the treatment of
chronic obstructive pulmonary disease.

      The product has been approved in South Korea, Russia and Azerbaijan. BTG
is currently evaluating the opportunity to commercialize OXANDRIN in those
countries.

      In February 1999, the Company was granted a U.S. patent directed to the
use of oxandrolone in the treatment of chronic obstructive pulmonary disease.
Patent applications directed to other uses of OXANDRIN 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. The Company estimates that current annual
worldwide sales of hGH for the treatment of growth hormone deficiency are
approximately $1.5 billion. Geographic distribution of worldwide sales of human
growth hormone is estimated by the Company to be approximately 25% in North
America and 30% in Europe, with the balance in Japan and other countries.

      The Company's scientists first produced hGH by recombinant DNA methods
in the early 1980s. As a result of a seven-year Orphan Drug status
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, the Company was until
January 2000 precluded from marketing BIO-TROPIN in the United States,
despite the fact that the FDA approved BIO-TROPIN for marketing in the United
States in May 1995. In January 2000, the District Court invalidated
Genentech's patent, which would have otherwise expired in 2003, and vacated
the preliminary injunction. Genentech has appealed the District Court's
decision and requested an expedited appeal and an injunction. BTG cannot
market BIO-TROPIN in the United States pending the appellate court's decision
on Genentech's request for an expedited appeal and an injunction. In
September 1999 the FDA approved BTG's supplemental application for a new
expression system for biosynthesis of BIO-TROPIN, which BTG believes would
not violate Genentech's patent if it were reinstituted on appeal. The
Company's human growth hormone is currently being marketed by third parties
in Japan and several European and Latin American countries and by the Company
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. JCR has also completed a
clinical trial to test the efficacy of the Company's hGH


                                       4
<PAGE>

for treating Turner syndrome, a condition in which girls born with
non-functioning ovaries do not develop secondary sexual characteristics and are
shorter than normal, and filed for regulatory approval in January 1994. In
November 1999 the First Committee on Drugs of the Central Pharmaceutical Affairs
Council's ("CPAC"), which is currently functioning in an advisory capacity to
the Japanese Ministry of Health, recommended approval, although there can be no
assurance such approval will be received. In January 1995, the Company 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 1998 Sumitomo was the leading distributor of hGH in Japan.

      In November 1992, the Company entered into an exclusive distribution
agreement with the Ferring Group ("Ferring") for the marketing of the Company's
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 the Company's hGH is
now approved in 17 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, the Company 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, BTG and Teva amended their
agreement to grant Teva exclusive marketing rights for hGH in the United
States as of July 1, 2000. While BTG contends that its agreement with Serono
does not preclude Teva from selling hGH, BTG expects Serono to disagree. If
Teva's launch of hGH is delayed by Serono's dispute with BTG, then BTG will
compensate Teva for the delay. See "--Sales and Distribution" and "Item 3.
Legal Proceedings."

      The Company's human growth hormone is also being sold by third-party
distributors in several countries in South America and the Far East. The product
was approved in Canada and Cyprus in 1997, and in Colombia in 1998. 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.

      The Company's human growth hormone product is currently being marketed by
Ferring in Europe and JCR in Japan in conjunction with a needleless delivery
device. BTG has licensed exclusive rights to this delivery device in the United
States for use with any human growth hormone product distributed by BTG.

      BIOLON (sodium hyaluronate)

      Sodium hyaluronate is a high-viscosity, gel-like fluid. The Company has
developed a 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.

      Product 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


                                       5
<PAGE>

approved as a medical device by mdc, a notified body of the European Economic
Community. As a result, a CE mark granted to the product and appearing on the
product box allows the Company's partners to freely market BIOLON throughout
Europe. The Company licensed exclusive BIOLON distribution rights in the United
States to Akorn, Inc. 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 also be marketed under Ciba's private label. See "--Sales and
Distribution."

      The Company has 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.

      DELATESTRYL (TESTOSTERONE ENANTHATE)

      DELATESTRYL is the Company'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.
The Company believes 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 BTG
believes is a treatable condition in approximately 30,000 boys in the United
States. The Company acquired the approved NDA and trademark from Bristol-Myers
Squibb Company ("Bristol"), which contract manufactures DELATESTRYL for BTG on a
purchase order basis, and BTG pays Bristol a fee based on its sales of
DELATESTRYL. The Company began the sale and distribution of DELATESTRYL in
mid-1992. See "--Risk Factors--Dependence on Third-Party Suppliers."

      MIRCETTE (ORAL CONTRACEPTIVE DOSING REGIMEN)

      The Company has acquired an exclusive license to a patented oral
contraceptive dosing regimen. This new approach to oral contraception 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
the Company's patented oral contraceptive dosing regimen and has developed a
product using this regimen with the progestogen desogestrel. Organon filed a New
Drug Application ("NDA") with the FDA in April 1997 and, following receipt of
approval in April 1998, began to commercialize the product under the name
MIRCETTE in the third quarter of 1998. The license agreement with Organon
provides for milestone payments and provides for 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 reported
higher incidence of thromboembolic disease than competing levonorgestrel oral
contraceptive regimens.

      In 1997, the Company licensed the oral contraceptive dosing regimen to
Gynetics Inc. for future use with any one or more progestins other than
desogestrel. The license agreement with Gynetics provides for an upfront license
fee, milestone payments in shares of Gynetics common stock, and royalties on
sales.


                                       6
<PAGE>

      SILKIS (VITAMIN D DERIVATIVEh)

      The Company 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, the Company 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. The Company 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. Notification of preliminary approval in several European
countries, including France and Germany, has been received, and Galderma has
informed BTG that it intends to begin marketing the product in 2001 in the
European countries for which approval has been received upon completion of the
construction of a manufacturing facility for SILKIS.

      BIO-HEP-B (HEPATITIS-B VACCINE)

      The Company has genetically engineered a third generation vaccine against
the hepatitis-B virus. The Company's 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. The Company believes the high
immunogenicity and initial faster rate of response of its BIO-HEP-B vaccine will
provide it 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. The Company
believes, however, that these countries desire an alternative to the
plasma-derived vaccine because of fears of viral transmission, but cannot
currently replace the plasma-derived vaccine because the second generation
recombinant vaccine is too expensive. The Company believes the cost of its
BIO-HEP-B vaccine will be affordable by these less developed countries. 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.

      The Company'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, will allow the
Company and its licensees to initiate the registration process in many countries
worldwide.

      The Company has 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. The
Company and SciGen have completed clinical trials in several countries. In
December 1997, BTG granted SciGen a license to use the technical information
provided by BTG to establish a manufacturing facility to produce BIO-HEP-B in
India, China or Australia.

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


                                       7
<PAGE>

      The Company has licensed marketing rights for South Africa and certain
other African countries to Afrovax Biological Limited.

      The Company has 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 the Company's 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."

      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, the Company entered into a technology transfer and
license agreement with Akzo Nobel's wholly owned subsidiary, Diosynth b.v., for
the Company's 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.

      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 will collaborate in 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. The Company 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. The Company 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, worldwide
rights to the polypeptide were licensed 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")

                                       8
<PAGE>

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.

      BIOHY

      BIOHY is a sodium hyaluronate composition developed by the Company for
intra-articular injection. Such treatments are likely to reduce arthritic pain.
The Company is conducting a clinical evaluation of its BIOHY versus the market
leader to examine the product's efficacy in treating the pain of osteoarthritis.
The clinical trial is expected to be completed in the second half of 2000 and
European approval is expected thereafter, although there can be no assurance
that such approval will be obtained in this time frame or at all.

      OXSODROL (human superoxide dismutase)

      The Company 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 the earlier Phase I investigations suggested a delayed neuroprotective
effect in neonates treated with OXSODROL. As a result, the Company, in
consultation with the FDA, continued the current 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 significant
reduction in the incidence of reactive airways (i.e., asthma) in the OXSODROL
treated babies. BTG is in the processing of finalizing plans for additional
clinical trials, focused on the reactive airways indication.

      In January 1995, OXSODROL was licensed to JCR for the treatment of BPD
in Japan and, in August 1997, BTG licensed to Ares Trading S.A., a member of
The Ares-Serono Group ("Serono"), 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. BTG and Serono are in discussions regarding Serono's
interest in continuing the BPD indication or in participating in the reactive
airways indication.

      The Company holds a U.S. patent relating to intratracheal delivery of
copper/zinc SOD to protect human lungs from injury due to hyperoxia and
hyperventilation and is the exclusive licensee of a U.S. patent directed to the
DNA encoding copper/zinc SOD. A U.S. patent assigned to the Company, 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, 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. An Israeli patent application assigned to
Chiron, which relates to copper/zinc SOD, is being opposed by the Company. See
"--Risk Factors--Risk of Pending Patent Litigation" and "--Uncertainty of
Protection of Patents and Proprietary Rights" and "Item 3. Legal Proceedings."


                                       9
<PAGE>

      Generic Products

      Pursuant to a strategic relationship entered into with Teva Pharmaceutical
Industries Ltd., BTG will develop and produce several recombinant human
therapeutic proteins chosen by Teva which 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."

      FACTOREX (ANTI-COAGULANTh)

      A highly selective anti-coagulant, a recombinant protein Factor Xa
inhibitor, trademarked FACTOREX, is being developed by BTG for cardiovascular
applications. The blood coagulation process is a multi-step, complex cascade of
reactions which ultimately lead to the formation of fibrin as an integral
component of the clot. Factor Xa catalyzes the conversion of prothrombin to
thrombin, which, in turn, converts fibrinogen into fibrin. By inhibiting Factor
Xa, thus blocking the catalytic conversion of prothrombin, FACTOREX inhibits
formation and deposition of fibrin in clots and permits tighter control of
pathogenic thrombus generation than currently available products. The Company
believes that, like other leech-derived peptides, FACTOREX should have very low
immunogenicity in man, facilitating multiple administration. The product is
manufactured via recombinant DNA technology in E. coli and is biochemically
configured in a proprietary process to its active configuration. It has been
shown to possess Factor Xa inhibitory activity in vitro and in pre-clinical
analysis in animal models. Potential indications include prevention of deep vein
thrombosis and arterial reocclusion and restenosis, as well as an adjunct to
thrombolytic agents. Pre-clinical studies have been completed, and the Company
has initiated process development of clinical grade material for toxicology
studies. In 1998, the Company was awarded two U.S. patents relating to the DNA
encoding its FACTOREX, expression of the FACTOREX polypeptide and its use. In
January 1999 two more U.S. patents issued directed to the FACTOREX polypeptide.
Additionally, the Company holds an exclusive license to other issued U.S. and
European Patent Office patents relating to a Factor Xa inhibitor. Parallel
patent applications owned or licensed by the Company have been granted in
Australia, New Zealand and Israel and are pending in many other countries.

      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 the Company licensed exclusive worldwide rights from Duke
University ("Duke") of North Carolina and Mountain View Pharmaceuticals, Inc.
("MVP"), a California company, to technology relating to polyethylene glycol
("PEG") conjugates of uricase (urate oxidase). The Company and MVP have since
received a grant to develop the product from the U.S.-Israeli Binational
Research and Development ("BIRD") Foundation.

      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 the Company, and the Company will produce
PEG conjugates of uricase, undertake clinical trials and commercialize the
product. The Company believes that it could receive Orphan


                                       10
<PAGE>

Drug designation for the use of this product in allopurinol-resistant gout
patients and others for whom current treatment is ineffective or
contraindicated.

      CANCER THERAPIES

      The Company is evaluating three different approaches for cancer therapy.
These approaches include:

      o an angiogenic inhibitor, which prevents the formation of blood vessels
within tumor mass. Blocking of the blood vessels reduces the availability of
nutrients essential for tumor cell proliferation and metastasis. A polypeptide,
plasminogen related peptide ("PRP"), which is derived from the amino terminus of
plasminogen, was discovered by Dr. L. Weissbach of Massachusetts General
Hospital ("MGH"). BTG licensed rights to PRP from MGH and expressed the PRP in
E. coli. Tumor size and volume have been significantly reduced upon injection of
purified recombinant PRP into Lewis lung carcinoma bearing mice.

      o human monoclonal antibodies that specifically bind to acute myeloid
leukemia ("AML") cells for targeting of chemotherapeutic toxic agents.
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 exploited the combination of a
human single chain Fv ("scFv") antibody library and flow cytometry for isolation
of AML cell-specific antibodies. The efficacy of these scFv antibodies coupled
to a toxic chemotherapeutic agent to specifically kill AML cells is being
evaluated in-vitro and in pre-clinical animal models.

      o active anti-cancer immunization with peptide-based tumor vaccines for
transitional cell carcinoma ("TCC") of the bladder. BTG has identified several
immunogenic short peptides derived from TCC tumor specific antigens that elicit
cytolytic T cell ("CTL") activity upon activation of peripheral blood
lymphocytes obtained from TCC patients. These peptides will be further developed
for TCC immunotherapy in terms of effective mode of delivery and appropriate
combination with adjuvant and/or cytokine therapy.

      ANDROTAB-SL (SUBLINGUAL TESTOSTERONEh)

      Androtab-SL is the Company's sublingual testosterone product for the
treatment of hypogonadism. Hypogonadism is associated with diminished libido and
sexual function, loss of muscle mass, bone loss and other conditions. In 1999
the Company determined not to continue to pursue FDA approval of Androtab-SL
because of the duration and cost of the additional clinical development that
would be needed to obtain FDA approval of the product.

SALES AND DISTRIBUTION

      The Company markets its products primarily on a direct basis in the United
States and Israel and grants exclusive marketing or distribution rights to third
parties for sales in most other countries. The Company's sales and marketing
team in the United States, which was established in the second half of 1995,
consisted of 39 people at February 1, 2000. 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 9 other companies, covering more than 30
countries, for the sale of BIO-TROPIN and 19 companies, covering more than 70
countries, for the sale of BIOLON.


                                       11
<PAGE>

      In substantially all of the Company's product distribution agreements, the
Company 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, the Company 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 the Company or by its
distributors, depending on the product, the territory and the terms of the
commercial agreement. The Company 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--Dependence on Third-Party Licensees."

      BTG has an agreement with Gentiva, a provider of home health care services
and products for chronic and acute care, which serves as BTG's exclusive
wholesale and retail distributor of BTG's OXANDRIN and DELATESTRYL products, in
the United States. Gentiva also offers patient reimbursement assistance for
OXANDRIN. Sales of OXANDRIN in 1997, 1998 and 1999 were primarily to Gentiva.
See "--Risk Factors--Dependence on OXANDRIN."

      In September 1999, the Company and Teva entered into a Development and
Distribution Agreement pursuant to which BTG granted Teva exclusive
distribution rights in the United States for the Company's hGH product
effective July 1, 2003 and exclusive worldwide distribution rights for up to
three generic biologic pharmaceutical products chosen by Teva. 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, and BTG will receive up to an additional
$10 million in milestone payments and a royalty based on Teva's net sales of
product.

      In 1988 and 1995, respectively, the Company 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 the Company's hGH sales have been to JCR. See "Item 3. Legal
Proceedings."

      In November 1992, the Company entered into an exclusive distribution
agreement with Ferring for marketing of the Company's 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.

      The Company 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 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, through the Company's distribution
channel with 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. The Company
expects it will be required to refund substantially all commissions received
in respect of Serono's sales of its human growth hormone to Gentiva because
the Company expects that Gentiva will return most of the

                                       12
<PAGE>

human growth hormone product to Serono as it is anticipated that most of the
product will have expired before it is sold. 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-compete is applicable, it expires in
June 2000. 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-compete. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations".

RESEARCH AND DEVELOPMENTh

      The Company conducts research on potential products for which it has
retained future rights for its own account and on behalf of its partners for
which it receives certain current revenues and, if successful, future revenues
in the form of royalties or manufacturing rights. At February 1, 2000, the
Company's research and development organization comprised 90 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. 25 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.

      The Company 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 the Company will be able to continue to secure additional funds from the
Chief Scientist at the same levels or at all. The Company 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, the Company completed payment of its entire obligation for
royalties to the Chief Scientist for funding of its human growth hormone
development. The State of Israel has indicated its intention to reexamine
certain of its policies relating to research and development grants and that
funding for research and development grants may be reduced in the future.

MANUFACTURING AND SUPPLY AGREEMENTSh

      The Company currently operates a GMP certified facility in Israel for
production of its bulk human growth hormone, BIOLON, BIO-HEP-B, OXSODROL,
FACTOREX and insulin products, as well as the genetically-engineered portion of
the FIBRIMAGE product. The Company also operates a modern filling suite for its
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, the Company's bulk human growth hormone is
formulated, filled and packed in vials in Germany by Dr. Madaus GmbH, the
Company's subcontractor for manufacturing the packaged product. In addition,
sterilization of the BIOLON syringe is performed by Mediplast Israel Ltd., the
Company's subcontractor for these purposes. The Company believes that it
operates its facilities under, and is in compliance with, FDA good laboratory
and manufacturing practices.

      In April 1999, the Company purchased an existing building located
approximately 20 miles south of its current facility in Israel. A modern
production facility meeting FDA GMP requirements for drugs, biologics and
devices is now being designed. The new facility is designed to allow the Company
to meet all current regulatory requirements and currently foreseeable
manufacturing


                                       13
<PAGE>

capacity needs. It is anticipated that initial production will be operational by
early 2001, although there can be no assurance that completion of the new
facility will not be delayed.

      The Company's OXANDRIN product is currently being manufactured for BTG by
Searle, which originally developed the product. The agreement with Searle
provides that Searle will produce and exclusively sell to BTG all of BTG's
OXANDRIN requirements. The agreement requires that BTG purchase all of its
OXANDRIN bulk requirements exclusively from Searle through April 1999 and 80% of
its bulk requirements for the subsequent two-year period. 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
had 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 certain regulatory approvals. To date SPA has
been unable to gain such approvals and BTG and SPA are negotiating the
termination of this agreement. As a result, in February 1999, the Company
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. It is anticipated that supply by
GRL will begin prior to termination of the current Searle agreement. 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. 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 not
bound by the non-compete and free to sell oxandrolone to a generic drug
manufacturer. See "--Risk Factors--Dependence on Third-Party Suppliers" and
"Item 3. Legal Proceedings."

      Bristol has manufactured DELATESTRYL for the Company 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 the Company's purchase orders
or that the Company's 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. 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.

GOVERNMENTAL REGULATION

      Regulation by governmental authorities in the United States and other
countries is a significant factor affecting the timing of the commercialization
of the Company's products and its ongoing research and development activities.
The Company's policy is to conduct its research and development activities in
compliance with current United States National Institutes of Health


                                       14
<PAGE>

Guidelines for Research Involving Recombinant DNA Molecules, and with comparable
guidelines in Israel and other countries where the Company may be conducting
clinical trials or other developmental activities. See "--Risk Factors--Effect
of Government 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 IND, human clinical trials and approval
of an NDA. European countries generally follow the same procedures. The EEC has
established a unified filing system administered by the Committee for
Proprietary Medicinal Products ("CPMP") designed to reduce the administrative
burden of prosecuting 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 the Company's biotechnology products.

      In addition to the foregoing, the Company'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

      The Company's scientific staff and consultants are actively working in
various areas of biotechnology to develop techniques, microorganisms, processes
and products to achieve the Company's commercial aims. It is the Company's
policy to protect its intellectual property rights in this work by a variety of
means, including filing patent applications in the United States and major
industrialized countries. The Company 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--Uncertainty of Protection of Patents and Proprietary Rights."

      As of February 1, 2000, approximately 470 granted patents, owned or
exclusively licensed by the Company, are being maintained worldwide, including
63 patents granted in the United States, 17 patents granted by the European
Patent Office ("EPO"), which in turn resulted in the grant of 190 national
patents in Europe, and 20 patents granted in Israel. Additionally, approximately
150 patent applications owned or exclusively licensed by the Company 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. The Company believes
that important legal issues remain to be resolved as to the extent and scope of
patent protection, and the Company expects that in certain cases litigation may
be necessary to determine the validity and scope of its and others' proprietary
rights. Such litigation may consume substantial resources. See "--Risk
Factors--Uncertainty of Protection of Patents and Proprietary Rights" and "Item
3. Legal Proceedings."


                                       15
<PAGE>

      The Company is aware of patent applications filed by, or patents issued
to, other entities with respect to technology potentially useful to the Company
and, in some cases, related to products and processes being developed by the
Company. The Company cannot presently assess the effect, if any, that these
patents may have on its 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 the Company or
would force the Company to obtain licenses from others is currently unknown. See
"--Risk Factors--Uncertainty of Protection of Patents and Proprietary Rights."

      To date, the Company has been, or currently is, party to several
administrative and legal proceedings relating to its technologies, products and
patents and the patents of others. See "--Risk Factors--Risk of Pending Patent
Litigation" and "Item 3. Legal Proceedings."

INSTITUTIONAL AND GOVERNMENTAL RELATIONSHIPS

      The Company believes its relationships with research institutions in the
United States, Europe and Israel and with the Government of Israel to be
important in its research and product development efforts. The Company believes
that these relationships greatly enhance its research and product development
efforts, and the Company intends to develop and maintain relationships with
leading universities and research institutions even as it continues to expand
its capability to conduct research and product development at its own
facilities. See "--Risk Factors--Risk of Operations in Israel."

      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. The Company's research and
development activities in Israel through BTG-Israel enable it to take advantage
of these programs. There can be no assurance, however, that such programs will
continue.

OPERATIONS IN ISRAEL

      The Company'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 the Company's employees and
executives, may be called up. To date, the Company has been able to continue its
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.

      Because BTG-Israel is involved in a technological industry and is an
exporter of Israeli goods, the Company 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 the Company has
focused its efforts. Significant competition comes from independent, dedicated
biotechnology companies as well as from large, established pharmaceutical
companies. In addition, the Company's products may compete against products
developed by non-recombinant techniques. The primary competitive factors in this
field are the ability to attract and retain highly qualified scientists and
technicians,


                                       16
<PAGE>

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. The Company's competitive position in the
industry varies on a product-by-product and country-by-country basis depending
upon the efficacy of the Company's products as compared to competing products,
the scope of patent protection in each country for the Company's products as
compared to competing products, whether the Company's product is the first such
product to be commercialized and, where there are a number of similar products,
the price of the Company's product as compared to its competitors' products, and
the relative strength of the Company's partner in said territory.

      Many of the Company's current competitors have significantly greater
financial and organizational resources than the Company. Since technological
developments are expected to continue at a rapid pace in the biotechnology
industry, the successful development of the Company's products will be dependent
upon its ability to maintain a competitive position with respect to its
technology. See "--Risk Factors--Competition."

EMPLOYEES

      As of February 1, 2000 the Company had 298 employees, most of whom are
engaged in research, development, manufacturing, quality assurance and marketing
activities, including 35 who hold Ph.D. or M.D. degrees. In addition, the
Company has consulting arrangements with scientists at various institutions and
universities in the United States and Israel.

      The Company'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 the Company's employees is represented by a labor union and the
Company has experienced no work stoppages. The Company believes its relations
with its employees are good and has experienced a low turnover rate among its
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 the
Company'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. Such
forward looking statements are inherently uncertain, and stockholders must
recognize that 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, BTG cannot
assess the effect of each factor on the Company's 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.


                                       17
<PAGE>

      DEPENDENCE ON OXANDRIN. Sales of OXANDRIN in 1997, 1998 and 1999 amounted
to approximately $27.9 million, $40.5 million and $24.9 million, respectively,
representing 52%, 59% and 40%, respectively, of the Company's total product
sales in those periods. Approximately 96% and 87% of the increase in the
Company's product sales in 1997 and 1998, respectively, resulted from increasing
sales of OXANDRIN, which the Company relaunched in the United States in December
1995. Sales of OXANDRIN declined in 1999 because Gentiva Health Services, Inc.
("Gentiva"), BTG's distributor for OXANDRIN in the United States, reduced the
amount of OXANDRIN inventory it was carrying as a result of a slowing of the
rate of increase of OXANDRIN prescriptions.

      OXANDRIN is facing increasing competition from other products, including
human growth hormone, and there can be no assurance that such sales increases
will continue. 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 the Company 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 weight loss associated with burns, non-healing wounds, chronic obstructive
pulmonary disease and cancer, there can be no assurance that the Company will be
successful in its efforts. Additionally, there are no patents covering OXANDRIN
and there can be no assurance that others will not introduce an oxandrolone
product. Additionally, there can be no assurance that Gentiva will not determine
to further reduce its OXANDRIN inventory levels.

      DEPENDENCE ON THIRD-PARTY SUPPLIERS. The Company is dependent on third
parties for the manufacture of OXANDRIN and DELATESTRYL and the filling and
vialing of its BIO-TROPIN product. Although the Company is a party to an
exclusive supply arrangement with Searle, covering the supply of OXANDRIN to BTG
through the year 2003, and an agreement with GRL to supply thereafter, there can
be no assurance that Searle will continue, or that GRL will be able, to provide
the Company with sufficient supplies of OXANDRIN to satisfy its future needs.
Bristol has manufactured DELATESTRYL for the Company pursuant to an agreement
which expired in December 1997. There can be no assurance that Bristol will
continue to honor the Company's purchase orders or that the Company's 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. The need to find a new manufacturer could affect the availability
of DELATESTRYL. In addition, the Company is dependent on Dr. Madaus GmbH ("Dr.
Madaus") to fill and vial the Company's BIO-TROPIN product. Any failure of
Searle, GRL, Bristol or Dr. Madaus to fulfill its obligations to the Company
could have a material adverse effect on the business, results of operations and
financial condition of the Company. There can be no assurance that the Company
would be able to find an alternative supplier for any of Searle, GRL, Bristol or
Dr. Madaus if they were unable or unwilling to fulfill their obligations to the
Company. See "--Manufacturing and Supply Agreements."

      DEPENDENCE ON THIRD PARTY LICENSEES. The Company has derived, and expects
to continue to derive over the next several years, revenues from existing and
new licensing, research and development and marketing agreements. These
agreements typically provide the Company's licensees with certain rights,
subject to an obligation to pay royalties to the Company based on any future
product sales or to purchase product from the Company, to manufacture and market
specified products developed using the Company's proprietary technology. Certain
of these agreements provide for funding by licensees of research activities
performed on their behalf by the Company. Continued funding and participation by
these licensees will depend not only on the timely achievement of milestones,
which cannot be assured, but also on each licensee's own financial, competitive,
marketing and strategic considerations. Such considerations 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 the Company 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 the
Company believes its licensees have an economic motivation to


                                       18
<PAGE>

commercialize their products, the Company will have no effective control over
the licensees' commercialization efforts.

      RISK OF PENDING PATENT LITIGATION. To date, the Company has been, or
currently is, party to several administrative and legal proceedings relating
to its technologies, products and patents and the patents of others.
Genentech has alleged that the Company's human growth hormone ("hGH") product
infringes various Genentech patents and in 1995 obtained a preliminary
injunction prohibiting the commercial introduction of the Company's human
growth hormone in the United States. In a trial held in January 2000, the
U.S. District Court for the Southern District of New York found that the one
remaining unexpired Genentech patent was invalid and vacated the preliminary
injunction. Genentech has appealed the District Court's decision, and has
requested an expedited appeal and injunctive relief. BTG cannot market
BIO-TROPIN in the United States pending the appellate court's decision on
Genentech's request for an expedited appeal and an injunction. There can be
no assurance that the District Court's decision will be upheld. There can be
no assurance that Genentech will not be successful in prosecuting similar
infringement claims in one or more other countries in which BTG's human
growth hormone product is being sold. If the Company's hGH is found to
infringe certain Genentech patents in one or more other countries, the
Company and/or its distributor(s) may be obligated to pay damages, and would
need to obtain a license from Genentech in order to continue sales of hGH.
There can be no assurance that such a license will be granted by Genentech,
or that the Company's distributor(s) will not be required to stop selling the
Company's hGH. BTG is obligated to indemnify these distributors for expenses
incurred and damages suffered by the distributors as a result of any
infringement of third party patents.

      Additionally, BTG's patent covering a method for producing enzymatically
active human copper/zinc superoxide dismutase ("SOD") in bacteria is currently
the subject of an interference action with Chiron Corp. ("Chiron") in the United
States Patent Office Board of Patent Appeals and Interferences. An additional
interference action has been declared between an application owned by BTG and a
U.S. patent issued to Chiron for a bacterially produced form of recombinant
human copper/zinc SOD. Unless BTG is able to prevail in these actions or reach a
settlement with Chiron, BTG may be unable to commercialize its OXSODROL product
in the United States. Biogen has sued BTG-Israel for allegedly infringing
Biogen's Israeli patent, which patent expired in December 1999, by virtue of its
preparation of BIO-HEP-B vaccine for use in clinical trials. See "Item 3. Legal
Proceedings."

      UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS. The patent
positions of pharmaceutical and biotechnology companies are highly uncertain and
involve complex legal and factual questions. Patent disputes are frequent and
costly, can preclude the commercialization of products and could subject BTG to
significant liabilities to third parties. Many biotechnology companies have
employed intellectual property litigation as a way to gain a competitive
advantage.

      The Company 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 the Company's 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 the Company. The
Company's success depends in part on its ability to continue to obtain patent
protection in the United States and other countries for its technologies and the
products, if any, resulting from such technologies. Patent applications in the
United States are maintained in secrecy until a patent issues, and the Company
cannot be certain that others have not filed patent applications for technology
covered by the Company's pending applications or that the Company was the first
to file patent applications for such technology. The Company also relies on
trade secrets, proprietary know-how and technological innovation which 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 the Company will have


                                       19
<PAGE>

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 the Company 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 the
Company's 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
the Company'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 the
Company's 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. As more patents are issued to third parties, the
risk that the Company'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.

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

      UNPREDICTABILITY OF RESEARCH AND DEVELOPMENT. 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: they may be found to be ineffective or to have
harmful side effects in preclinical or clinical testing; they may fail to
receive necessary regulatory approvals; they may turn out to be uneconomical
because of manufacturing costs or other factors; or they may be precluded from
commercialization by the proprietary rights of others or by competing products
for the same indication. 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. A number
of biotechnology companies, including BTG, have recently suffered significant
setbacks in advanced clinical trials, even after experiencing promising results
in preclinical and early human testing.

      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 the Company's 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.

      LIMITED MANUFACTURING CAPACITY. The manufacture of the Company's products
involves a number of technical steps and requires meeting stringent quality
control specifications imposed by governmental regulatory bodies and by the
Company itself. Further, such products can only be manufactured in facilities
approved by the applicable regulatory authorities. As a result, the Company may
not be able to quickly and efficiently replace its manufacturing capacity in the
event


                                       20
<PAGE>

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 the Company 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 the Company.

      The Company is dependent on third parties to manufacture all or a portion
of certain of its products. See "--Dependence on Third-Party Suppliers."

      LIMITED MARKETING CAPABILITY AND EXPERIENCE. The Company 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, the Company does not yet
have an established sales force and relies on third parties to market its
products. There can be no assurance that the Company's marketing strategy will
be successful. The Company'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 "--Dependence on Third-Party Licensees."

      LIMITED COMMERCIAL PRODUCTS. The Company's principal activities since its
formation in 1980 have been the research and development of products with
commercial potential. Commercialization of the Company's products is subject to
successful clinical testing and governmental approvals, the timing of which is
not within the control of the Company and has taken and may continue to take
longer than anticipated. Acceptance by the medical community of the Company's
products is also necessary for their successful commercialization.

      ACQUISITIONS. The Company 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. The Company 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.
Further, recent proposed accounting changes to eliminate "pooling-of-interests"
accounting treatment could result in any acquisition having a negative impact on
BTG's results of operations due to the amortization of goodwill charges
associated with the acquisition.

      VARIABILITY OF OPERATING RESULTS. Revenue has in the past and may in the
immediate future continue to display significant variations due to the level of
sales of existing products, the introduction of new products and new research
and development contracts and licensing arrangements, the completion or
termination of those contracts and arrangements, the timing and amounts of
milestone payments and the timing of regulatory approvals of products. Because
many of the Company's expenses are fixed, particularly in the short-term, any
decrease in revenues will adversely affect the Company's earnings until revenues
can be increased or expenses reduced. In 1999, the Company'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. The Company's continued profitability will be
dependent on its success in developing, obtaining regulatory approvals for and
effectively marketing its products. The annual cash flows of the Company have
fluctuated significantly due to the impact of net income and losses, capital
spending, working capital requirements and


                                       21
<PAGE>

issuances of Common Stock and other financings. The Company expects that cash
flow in the near future will be primarily determined by the levels of net
income, working capital requirements and financings, if any, undertaken by the
Company. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."

      CAPITAL NEEDS. The development and commercialization of products requires
a substantial amount of funds. The Company's 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 the
Company's cash requirements. The Company believes that its current cash
resources, 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 the Company's 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, or that unanticipated events requiring the
expenditure of funds will not occur.

      The satisfaction of the Company's future cash requirements will depend in
large part on the status of commercialization of the Company's products, the
Company's ability to enter into additional research and development and
licensing arrangements, and the Company's ability to obtain additional equity
investments, if necessary. There can be no assurance that the Company 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 the Company, dilution to existing stockholders may result.
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.

      EFFECT OF GOVERNMENTAL REGULATION. The Company is subject to regulation 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 the Company's products,
manufacturing processes and facilities require governmental licensing or
approval prior to commercial use. The approval process applicable to products of
the type being developed by the Company usually takes five to seven years from
the commencement of human clinical trials and typically requires substantial
expenditures. The Company 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, the Company 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 the Company's control. In addition,
the Company 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 the Company's or its licensees'
products. Failure to obtain requisite governmental approvals, or failure to
obtain approvals of the scope requested, could delay or preclude the Company or
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 the Company and thereby have a
material adverse effect on the Company's results of operations, liquidity and
financial condition. Even after regulatory approval


                                       22
<PAGE>

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 the Company's products and its ongoing research and development activities.
The timing of regulatory approvals is not within the Company's control. To date,
the length of time required to obtain regulatory approval of
genetically-engineered products has been significantly longer than expected,
both for the Company and the biotechnology industry in general. These delays
have had and, if they continue, could have a material adverse effect on the
results of operations and financial condition of the Company. The Company
believes that these delays have in the past negatively impacted its ability to
attract funding and that, as a result, the terms of such financings have been
less favorable to the Company than they might otherwise have been had the
Company's product revenues provided sufficient funds to finance the large costs
of taking a product from discovery through commercialization. As a result, the
Company 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 the Company's
products.

      UNCERTAINTY OF HEALTHCARE REIMBURSEMENT. The Company's ability to
successfully commercialize human therapeutic products may depend 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 the Company 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 the Company's 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 the Company.
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 the Company's 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 the Company's investment in its products or
even cover the Company's manufacturing costs for such product.

      RISK OF TECHNICAL OBSOLESCENCE; HIGHLY COMPETITIVE INDUSTRY. Biotechnology
has undergone rapid and significant technological change. The Company expects
that this technology will continue to develop rapidly, and the Company's future
success will depend, in large part, on its ability to maintain a competitive
position. Rapid technological development may result in


                                       23
<PAGE>

products or processes becoming obsolete before marketing of these products or
before the Company recovers a significant portion of the research, development
and commercialization expenses incurred with respect to those products. Numerous
companies, including well-known pharmaceutical and biotechnology companies, are
engaged in the business of researching and developing products similar to those
of the Company. Many of these companies have substantially greater capital
resources and larger research and development staffs and facilities than the
Company. Such companies may succeed in their research, developing on a more
timely basis products that may be more effective than any which may be developed
by the Company. These companies may also be more successful than the Company in
the production and marketing of such products. These companies also compete with
BTG to attract qualified personnel and to attract third parties for
acquisitions, joint ventures or other collaborations. Other competitive factors
that could affect the Company's business include the timing of FDA approval, if
any, of competitive products, pricing decisions of the Company and its
competitors, the degree of patent protection afforded to particular products,
the rate of market penetration of competing products and the increasing use and
development of alternate therapies.

      RETENTION OF KEY PERSONNEL. The Company is dependent upon the efforts of
its officers, scientists and other employees. The loss of certain of these key
employees could materially and adversely affect the Company's business. There is
a great deal of competition for the limited number of scientists with expertise
in the area of the Company's operations. The business of the Company is
dependent upon its ability to attract and retain qualified research and
managerial personnel. The Company does not maintain, and has no current
intention of obtaining, "key man" life insurance on any of its employees.

      RISK OF OPERATIONS IN ISRAEL. The Company'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. The Company manages its Israeli operations with the object 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 the Company'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 dollar. The
rate of inflation (as measured by the consumer price index) was approximately
7% in 1997, 9% in 1998 and 1% in 1999, while the Shekel was devalued by
approximately 9%, 18% and 0%, respectively. As a result, for those expenses
linked to the Israeli Shekel, such as salaries and rent, this resulted in
1997 and in 1998 in corresponding decreases in these costs in U.S. dollars.
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.

      RISK OF PRODUCT LIABILITY. The testing and marketing of the Company's
products entail risk of product liability. Although the Company 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 the Company for other of the Company's products or that such
companies will, if obligated to do so, have adequate resources to fulfill their
indemnity agreements. Further, to the extent the Company elects to test or
market products independently, it will bear the risk of product liability
directly. The Company presently has $15,000,000 of product liability insurance
coverage in place. Any successful product liability claim made against the
Company could substantially reduce or eliminate any stockholders' equity the
Company may have and could have a significant adverse impact on the future of
the Company.


                                       24
<PAGE>

      VOLATILITY OF SHARE PRICE. The market prices for securities of
biotechnology companies, including the Company, have been volatile, and it is
likely that the price of the Common Stock will fluctuate in the future. Factors
such as announcements of technological innovations or new commercial products by
the Company or its competitors, announcements by the Company 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 the Common Stock. In addition, the market price of the
Common Stock could be adversely affected by future exercises of outstanding
options and the issuance of Common Stock in acquisitions. At December 31, 1999
options to purchase an aggregate of approximately 7,487,000 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 for resale under the Securities Act of 1933, as amended,
and, accordingly, when issued will be freely tradable without restriction. In
addition, the Company may issue additional stock, warrants and/or options to
raise capital or complete acquisitions in the future. The Company 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 the Company 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, the Company'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."


                                       25
<PAGE>

EXECUTIVE OFFICERS OF THE COMPANY

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

Name                          Age   Positions
---------------------------  -----  --------------------------------------------
Sim Fass ..................   58    Chairman of the Board, Chief Executive
                                    Officer and Treasurer; President of BTG-
                                    Israel; Director
Virgil Thompson............   60    President, Chief Operating Officer; Director
Norman Barton, M.D., Ph.D..   52    Senior Vice President--Chief Medical
                                    Officer
Zvi Ben-Hetz...............   54    Vice President--Operations and Logistics,
                                    BTG-Israel
Leah Berkovits.............   51    Vice President--Administration and
                                    Corporate Communications
Lawrence Brown.............   41    Vice President--Business Development
Meir Fischer, Ph.D.........   59    Vice President--Process Development,
                                    BTG-Israel
Donald Fishbein............   45    Vice President--Marketing
Marian Gorecki, Ph.D.......   59    Senior Vice President--Chief Technical
                                    Officer
Dov Kanner, Ph.D...........   46    Senior Vice President; General Manager,
                                    BTG-Israel
Ernest Kelly, Ph.D.........   50    Senior Vice President--Quality Assurance,
                                    Quality Control and Regulatory Affairs
Ronit Koren, Ph.D..........   49    Vice President--Clinical Research, BTG-
                                    Israel
Avigdor Levanon, Ph.D......   53    Vice President--Research, BTG-Israel
John Librie................   42    Vice President--National Sales
Rachel Perlman-Schoen .....   49    Vice President--Human Resources, BTG-
                                    Israel
Robert Shaw................   46    Senior Vice President--General Counsel
Ronald Simko...............   49    Vice President--Manufacturing
Yehuda Sternlicht..........   45    Vice President--Finance, Chief Financial
                                    Officer
Yehuda Zelig...............   47    Vice President--Manufacturing, BTG-Israel

----------

      Sim Fass has served as Chief Executive Officer of the Company 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 the
Company 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


                                       26
<PAGE>

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 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.

      Virgil Thompson joined the Company in May 1999 as President and Chief
Operating Officer, and has been a director of the Company since June 1994.
Prior to joining the Company, Mr. Thompson served as President and Chief
Executive Officer of Cytel Corporation from January 1996 to May 1999. From
1994 to 1996 he was President and Chief Executive Officer of CIBUS
Pharmaceutical, Inc. He held various positions at Syntex Laboratories,
serving as President from 1991 through 1993, as Chief Operating Officer from
1990 to 1991, and as Executive Vice President from 1986 to 1991.

      Norman Barton, M.D., Ph.D. joined the Company 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. Prior to joining the
Company, from 1985 to 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 the Company 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 the Company 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. Prior to joining the
Company, between 1978 and 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 the Company in October 1998 in the newly created
position of Vice President--Business Development. Prior to joining the Company,
Mr. Brown was employed by Centocor, Inc. from April 1987 to October 1998 in
several capacities, most recently as Director, Business Development.

      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.


                                       27
<PAGE>

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

      Marian Gorecki, Ph.D. has served as Senior Vice President--Chief Technical
Officer of the Company since June 1992 and as Managing Director of BTG-Israel
from May 1998 until December 1999. Prior to becoming Senior Vice
President--Chief Technical Officer, he served as Vice President and Chief
Technical Officer of BTG-Israel from 1986 and as Vice President, Research and
Development of BTG-Israel since August 1981. Prior to that, he was on the staff
of the Weizmann Institute of Science for twelve years, during which time he was
an associate professor for two years. Dr. Gorecki received his Ph.D. in
biochemistry from the Weizmann Institute of Science in 1972. He has broad
experience in the fields of molecular biology and genetic engineering as well as
in peptide protein chemistry. Dr. Gorecki served as a director of the Company
from June 1992 through December 1994.

      Dov Kanner, Ph.D. was appointed Senior Vice President 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 the Company in February 1996 in the newly
created position of Senior Vice President--Quality Assurance, Quality Control
and Regulatory Affairs. Prior to joining the Company, 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.

      Ronit Koren, Ph.D. joined BTG-Israel as a staff Scientist in March 1986.
Dr. Koren developed the Clinical and Biometrics department in Israel. In 1994
she was appointed Senior Director, Clinical Research, and in July 1998, was
appointed Executive Director, Clinical Research. In October 1999 she was
promoted to Vice President--Clinical Research. Dr. Koren obtained her Ph.D. in
the field of biochemistry from the Weizmann Institute of Science in 1983 and
subsequently did post-doctoral research at Brown University, Providence, RI.

      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.


                                       28
<PAGE>

      Rachel Perlman-Schoen joined the Company 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 the Company, Mrs. Perlman-Schoen
served as Patent Administrator in the Weizmann Institute from 1974 through 1982.

      Robert Shaw joined the Company in April 1998 as Vice President--General
Counsel and was appointed Senior Vice President--General Counsel in June 1999.
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 the Company 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 the Company. In June
1995, he was appointed Vice President--Finance and Chief Financial Officer of
the Company. From 1988 until he joined BTG-Israel, he 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.

      Yehuda Zelig joined BTG-Israel in March 1983 as 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

      The Company's administrative offices are located in Iselin, New Jersey,
where the Company 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, the Company 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. The
Company'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 $1,080,000. The lease term expires in December 2002. BTG
also leases 5,000 square feet of warehouse space near its research and
manufacturing facility. Although the Company believes its space is suitable and
adequate for its current activities, the Company has determined that it will
require a new, larger manufacturing facility in Israel within the next several
years to meet anticipated increased demand for its products and increased
regulatory requirements. Accordingly, in April 1999 the Company purchased a
building in Israel for approximately $6.25 million. A modern production facility
meeting FDA GMP requirements for drugs, biologics and devices is now being
designed. The Company will initially locate its production activities for BIO-
HEP-B and FIBRIMAGE at this new facility, and will thereafter move the remainder
of its


                                       29
<PAGE>

production activities to this facility. The Company expects the initial
production facility will be ready by early 2001.

ITEM 3. LEGAL PROCEEDINGS

      On March 16, 1993, Genentech filed a complaint with the United States
International Trade Commission (the "ITC") alleging, among other things, that
BTG's importation of hGH into the United States violates Section 337 of the
Tariff Act of 1930 because of the existence of certain claims in U.S. patents of
Genentech. Genentech sought an immediate investigation and an order that BTG
cease and desist from importing hGH into the United States. The ITC trial was
held in April 1994. In January 1995, the ITC issued a final decision dismissing
the complaint with prejudice as a sanction for Genentech's conduct which
resulted in an incomplete record and violated the due process rights of BTG and
Novo-Nordisk A/S, another respondent in the proceeding. The ITC also found no
violation by BTG of Section 337 of the Tariff Act of 1930. Genentech appealed
the ITC decision to the United States Court of Appeals for the Federal Circuit
("CAFC"). The appeal was heard in 1995, and in August 1997 the CAFC reversed the
ITC decision and remanded the investigation to the ITC. However, Genentech then
withdrew its complaint, the result of which is that Genentech is barred from
asserting the patents at issue, regarding hGH, against BTG in the ITC.

      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 as well as damages resulting from
Genentech's actions in the ITC proceedings. 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 action. In
April 1996, the CAFC rejected BTG's appeal of the grant of the preliminary
injunction. In May 1996, the CAFC rejected BTG's request for a rehearing and a
rehearing en banc. BTG filed a petition for a writ of certiorari with the United
States Supreme Court, which was denied in October 1996.

      Two of the Genentech patents originally at issue have since expired, and
only a third patent of Genentech, expiring in July 2003, remained in issue. The
action in the District Court was tried in January 2000 and the District Court
found that the remaining Genentech patent was invalid and vacated the
preliminary injunction. Genentech has appealed the District Court's decision to
the CAFC. BTG cannot market BIO-TROPIN in the United States pending the CAFC's
decision on Genentech's request for an expedited appeal and an injunction.
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 on appeal. If the Genentech patent is ultimately found valid and BTG is
found to infringe Genentech's patent, BTG likely will be precluded in the United
States from selling its current hGH product during the remaining life of this
Genentech patent, although this may not preclude BTG from marketing hGH
(manufactured using a new expression system) for which BTG obtained FDA approval
in the latter half of 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 these
patents. Two of these patent applications expired during 1998 without ever being
granted. The third, which will expire in June 2000, corresponds to the remaining
U.S. patent that was invalidated by the District Court in New York in January
2000. Hearings before the Israel Registrar of Patents took place during 1999.
The Registrar of Patents has given directions for filing of summations, and a
decision is expected during 2000. There can be no assurance that BTG will be
successful in its opposition to the grant


                                       30
<PAGE>

of this patent. If BTG is unsuccessful in its opposition in Israel, Genentech
may sue for infringement and if this occurs before the patent expires in June
2000 then BTG may be unable to manufacture its current hGH product in Israel
until June 2000, although this may not preclude BTG from marketing hGH made with
another clone.

      In September 1993, JCR received a letter from attorneys representing
Genentech and its licensee, Kabi Pharmacia, claiming that JCR's sale of the
Company's hGH infringed certain Genentech patents and patent applications and
demanding that JCR cease the sale of the Company'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. The Company does not believe that it is infringing or has
ever infringed any valid Genentech patent or patent application, but there can
be no assurance that BTG's 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 would expire
April 2001 (subject to extension under certain circumstances). If the Company's
hGH is found to infringe certain Genentech patents in Japan, JCR and/or the
Company 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 the Company's hGH in
Japan until expiration of these patents. Sales of hGH to JCR in 1997, 1998 and
1999 were approximately $10.1 million, $11.1 million and $10.5 million,
respectively, representing 19%, 16% and 17%, respectively, of the Company's
total product sales in those periods and 60%, 64% and 58%, respectively, of the
Company'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 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.

      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 licence 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. A
strict timetable of directions leading to a full trial towards the end of 2000
has been set down by the Patent Office. If the rulings are not reversed at the
final hearing, then BTG should prevail in the first interference, but neither
BTG nor Chiron will be entitled to


                                       31
<PAGE>

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, the Company received a letter from Biogen stating that
it believed that the Company's recombinant surface antigen of the hepatitis-B
virus, which is an active ingredient of the Company's BIO-HEP-B vaccine, or the
Company's intermediates for the process of making such antigen, falls within the
claims of one or more of Biogen's patents and/or patent applications. The
Company made inquiries of Biogen and SmithKline Beecham (the exclusive licensee
of all of Biogen's hepatitis-B patents except those in Japan) requesting that
the Company 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 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. The Company 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


                                       32
<PAGE>

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
on February 26, 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."

      The Company has been advised by SciGen, its 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 the Company's 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 the Company
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 recently had
claims of a more limited scope allowed to the same patent. Additionally, three
claims of a narrower U.K. patent were upheld. The Company believes that none of
these claims will affect commercialization of the Company's vaccine, although
there can be no assurance of this. The Company is aware of certain other patents
that have been granted or are pending and which, if granted, may prevent the
Company from selling its vaccine in the United States, Europe and certain other
countries. The Company'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. The ability of the Company 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 opposition in Israel,
and the patent issues, it will expire in 2001. Until then, BTG may be unable to
manufacture certain of its products in Israel.

      The Company follows the patent applications of its competitors that might
affect the Company's products and projects and, where appropriate, the Company
contests the grant of such applications. The outcome of such proceedings cannot
be predicted with certainty and will likely not be determined for several years.

      The Company is aware of patent applications filed by, or patents issued
to, other entities with respect to technology potentially useful to the Company
and, in some cases, related to products and processes being developed by the
Company. The Company cannot presently assess the effect, if any, that these
patents may have on its 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 the
Company or would force the Company to obtain licenses from others is currently
unknown. See "Item 1. Business--Risk Factors--Uncertainty of Protection of
Patents and Proprietary Rights."


                                       33
<PAGE>

      While BTG and SPA are negotiating the termination of their OXANDRIN supply
agreement, 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 the BTG SPA
agreement, 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. The
litigation 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.

      Serono Laboratories has notified BTG that if BTG markets hGH in the
United States prior to April 2002, it intends to sue BTG and seek an
injunction. BTG and Serono entered into a co-promotion agreement in April
1998 pursuant to which BTG undertook to promote in the United States, through
the Company's distribution channel with Gentiva, Serono's 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
has disputed BTG's right to terminate and has asserted that a non-competition
provision runs until April 30, 2002. BTG disputes this and believes that even
if the non-compete applies, it expires in June 2000. 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-compete. If BTG is unsuccessful in resolving this dispute and if Serono
prevails in the litigation, BTG could be precluded from selling hGH in the
United States until after April 30, 2002. The Company expects it will be
required to refund substantially all commissions received in respect of
Serono's sales of its human growth hormone to Gentiva because the Company
expects that Gentiva will return most of the human growth hormone product to
Serono as it is anticipated that most of the product will have expired before
it is sold. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations"

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

            None


                                       34
<PAGE>

                                     PART II

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

      The Company'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 the Company's common stock from January 1,
1998 through December 31, 1999 as reported by the Nasdaq National Market.

                                                             High       Low
                                                             ----       ---

            1998
            First Quarter..............................     $13.75    $ 7.81
            Second Quarter.............................       9.19      7.00
            Third Quarter..............................       8.31      4.50
            Fourth Quarter.............................       7.50      5.62

            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

            The number of stockholders of record of the Company's common stock
on March 17, 2000 was approximately 1,700.

            The Company has never declared or paid a cash dividend on its common
stock, and it is not expected that cash dividends will be paid to the holders of
common stock in the foreseeable future.


                                       35
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

                      (in thousands except per share data)

<TABLE>
<CAPTION>
                                               For the year ended December 31,
                                ----------------------------------------------------------
                                1995(1)(2)    1996(3)       1997(4)     1998       1999
                                ----------------------------------------------------------
<S>                             <C>           <C>           <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:

Total revenues ..............   $ 27,960      $ 47,738      $ 65,335   $ 76,855   $ 85,320
Total expenses ..............     24,544        36,798        44,152     52,106     66,561
Extraordinary gain ..........      1,363            --            --         --         --
Net income ..................      4,779        22,915        14,478     17,739     13,862
Extraordinary gain per share        0.03            --            --         --         --
Net income per share:(4)
  Basic .....................       0.11          0.52          0.31       0.37       0.26
  Diluted ...................       0.11          0.47          0.28       0.36       0.26
Weighted average shares
  outstanding:(4)
Basic .......................     43,174        44,195        46,767     48,184     52,348
Diluted .....................     43,784        48,259        51,916     49,848     54,191

                                                       As of December 31,
                                ----------------------------------------------------------
                                  1995          1996          1997       1998       1999
                                ----------------------------------------------------------

BALANCE SHEET DATA:

Working capital .............   $ 15,309      $ 40,626      $ 68,271   $110,359   $119,456
Total assets ................     33,679        73,575        95,413    142,595    164,645
Long-term liabilities .......      3,641         3,927         3,975      3,818      4,333
Stockholders' equity ........     25,689        60,558        82,858    122,977    141,884
</TABLE>

----------

(1)   In 1995, BTG terminated its research and development financing arrangement
      with Bio-Cardia Corporation ("Bio-Cardia"), entered into in December 1993,
      pursuant to which BTG had licensed rights to certain products to
      Bio-Cardia and Bio-Cardia had engaged BTG to perform research and
      development services with respect to such products. In connection with the
      termination of the relationship, BTG reacquired all rights licensed to
      Bio-Cardia. The relationship with Bio-Cardia had a significant effect on
      the Company's financial results in 1995, as follows: (i) revenues include
      $3,004,000 of research and development revenues under collaborative
      agreements resulting from the receipt by the Company of warrants to
      purchase 2,670,000 shares of the Company's Common Stock issued by BTG in
      connection with the financing with Bio-Cardia which were subsequently
      obtained by Bio-Cardia from its defaulted stockholders in partial
      satisfaction of amounts owed by Bio-Cardia to BTG for research and
      development; and (ii) expenses include research and development financing
      expenses of $806,000, representing the net funds provided to Bio-Cardia by
      BTG in respect of an exchange offer and the deferred revenues received
      from Bio-Cardia prior to such exchange offer.

(2)   Net income and net income per share include an extraordinary gain of
      $1,363,000 and $0.03, respectively, resulting from the early
      extinguishment of debt incurred in connection with BTG's purchase of all
      rights to human growth hormone previously licensed to The DuPont Merck
      Pharmaceutical Company, together with all rights to all data generated in
      clinical studies and encompassed in filings with the United States Food
      and Drug Administration, for the treatment of human growth
      hormone-deficient children.


                                       36
<PAGE>

(3)   Expenses include a write-off of $1,383,000 of previously capitalized legal
      fees and market launch preparation costs relating to the Company's human
      growth hormone product in the United States. See "Item 3. Legal
      Proceedings." In 1996, the Company 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.

(4)   The share and per share information for the years ended December 31, 1995
      and 1996 have been restated to reflect share and per share information in
      accordance with Statement of Financial Accounting Standards No. 128,
      "Earnings per Share." See Note 1 of Notes to Consolidated Financial
      Statements.


                                       37
<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 THE COMPANY'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 THE COMPANY 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 THE COMPANY'S FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THIS ANNUAL REPORT ON FORM 10-K.
SEE "ITEM 1. BUSINESS--RISK FACTORS."

OVERVIEW

      The Company 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 seven products that have received regulatory approval for sale, of
which five are currently being marketed, four products that are in registration
or clinical trials and several products that are in pre-clinical development.
The Company seeks both broad markets for its products as well as specialized
markets where it can seek Orphan Drug status and potential marketing
exclusivity.

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


                                       38
<PAGE>

RESULTS OF OPERATIONS

      The following table sets forth for the fiscal periods indicated the
percentage of revenues represented by certain items reflected on the Company's
statement of operations.

                                         1997         1998         1999
                                         ----         ----         ----
Revenues:
  Product sales..................        82.2%        88.8%        73.1%
  Contract fees..................        12.8          3.5         17.4
  Royalties .....................          --          2.8          2.1
  Other revenues.................         2.3          1.0          2.0
  Interest.......................         2.7          3.9          5.4
                                         ----         ----         ----
         Total revenues..........         100%         100%         100%
                                         ====         ====         ====
Expenses:
  Research and development.......        24.4%        24.0%        24.8%
  Cost of product sales..........        13.0         14.0         13.2
  General and administrative.....        13.0         11.1         16.4
  Marketing and sales............        14.2         17.3         19.4
  Commissions and royalties......         2.5          1.2          3.8
  Interest and finance...........         0.4          0.2          0.4
                                         ----         ----         ----
         Total expenses..........        67.5         67.8         78.0
                                         ----         ----         ----

Income before income taxes.......        32.5         32.2         22.0

Income tax expense...............        10.3          9.1          5.7
                                         ----         ----         ----

Net income ......................        22.2%        23.1%        16.3%
                                         ====         ====         ====

      The Company has historically derived its revenues from product sales as
well as from collaborative arrangements with third parties, under which the
Company 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. The Company
anticipates that product sales will constitute the majority of its 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 its
products, new product introductions by the Company 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.


                                       39
<PAGE>

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

                                                     Year ended December 31
                                                 -------------------------------
                                                 1997         1998         1999
                                                 ----         ----         ----
OXANDRIN ................................          52%          59%          40%
BIO-TROPIN ..............................          31           25           29
DELATESTRYL .............................           3            4           16
BIOLON ..................................          13           10           14
Other ...................................           1            2            1
                                                 ----         ----         ----
   Total ................................         100%         100%         100%
                                                 ====         ====         ====

The Company believes that its product mix will change significantly as it
continues to focus on: (i) increasing market penetration of its existing
products; (ii) expanding into new markets; and (iii) commercializing additional
products.

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

                                                  Year ended December 31,
                                           -------------------------------------
                                           1997            1998            1999
                                           ----            ----            ----
Domestic .......................             54%             64%             56%
Foreign ........................             46              36              44
                                           ----            ----            ----
     Total .....................            100%            100%            100%
                                           ====            ====            ====

The Company's product mix on a percentage basis has shifted significantly since
the Company became profitable in 1995 as OXANDRIN sales have outpaced sales
growth of other products. Domestic sales have also increased as a percentage of
total product sales due to the introduction of OXANDRIN in the United States in
December 1995.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

      REVENUES. Revenues increased 11% in 1999 to $85,320,000 from $76,855,000
in 1998, which itself represented an 18% increase over 1997 revenues of
$65,335,000. Product sales decreased by 9% in 1999 to $62,332,000 from
$68,246,000 in 1998, following a 27% increase in 1998 from $53,723,000 in 1997.
The increase in product sales in 1998 was primarily driven by increased sales of
OXANDRIN in the United States, which accounted for approximately 87% of the
increase in product sales in 1998. The increase in OXANDRIN sales resulted
primarily from the Company's increased marketing efforts and growing awareness
of the product. However, sales of OXANDRIN decreased $15,586,000, or 38%, in
1999 because Gentiva Health Services, Inc. ("Gentiva"), BTG's distributor for
OXANDRIN in the United States, reduced 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. The decrease in sales to Gentiva was partially offset
by $2,228,000 of sales of OXANDRIN to third parties for distribution overseas,
as well as a $7,287,000, $688,000 and $1,761,000 increase in sales of
DELATESTRYL, human growth hormone and BIOLON, respectively. The increase in
sales of DELATESTRYL, which is also distributed on behalf of the Company by
Gentiva, is primarily the result of the U.S. Food and Drug Administration
stopping production of a competing injectable testosterone product currently
used to treat men with hypogonadism (testosterone deficiency).


                                       40
<PAGE>

      Sales of OXANDRIN in 1999, 1998 and 1997 were approximately $24,935,000,
$40,521,000 and $27,904,000, respectively, representing 40%, 59% and 52%,
respectively, of the Company's total product sales in those periods. Sales of
OXANDRIN to Gentiva in 1999, 1998 and 1997 were $22,708,000, $40,353,000 and
$27,613,000, respectively, representing 91%, 99% and 99%, respectively, of the
Company's total sales of OXANDRIN. Sales of hGH in 1999, 1998 and 1997 were
approximately $18,004,000, $17,316,000 and $16,745,000, respectively,
representing 29%, 25% and 31%, respectively, of the Company's total product
sales in those periods. Sales of hGH to JCR in 1999, 1998 and 1997 were
approximately $10,507,000, $11,056,000 and $10,095,000, respectively,
representing 17%, 16% and 19%, respectively, of the Company's total product
sales in those periods and 58%, 64% and 60%, respectively, of the Company's
total hGH sales in those periods. Sales of hGH to the Ferring Group, were
approximately $3,619,000, $3,823,000 and $4,520,000 in 1999, 1998 and 1997,
respectively, representing 6%, 6% and 8%, respectively, of the Company's total
product sales in those periods and 20%, 22% and 27%, respectively, of the
Company's total hGH sales in those periods.

      For the years ended December 31, 1999, 1998 and 1997, contract fees, which
consist of licensing and option to license fees, amounting to $14,848,000,
$2,686,000 and $8,369,000, or 17%, 3% and 13%, respectively, of total revenues,
were earned from certain of the Company's collaborative partners. Of the
contract fees earned in 1999, $10,000,000, or 67% of total contract fees, was
earned in respect 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. Of the remainder, $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 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 the Company's hepatitis-B vaccine and insulin products, respectively.
Of the contract fees earned in 1997, $3,000,000 represents an initial licensing
fee received in connection with the licensing of worldwide distribution rights
(other than the United States, Canada, Israel and Japan) for the Company's
superoxide dismutase ("SOD") product for bronchopulmonary dysplasia and other
respiratory indications to Ares Trading S.A. ("Serono"), $1,500,000 represents
fees from the grant to SciGen Pte Ltd of a license to use BTG's technical
information to establish a manufacturing facility for BIO-HEP-B and $3,000,000
represents fees from the grant of an exclusive right to a third party to
evaluate one of the Company's products under development. This third party
subsequently determined not to pursue a license of the product for reasons that
the Company believes do not relate to the safety and efficacy of the product.

      ROYALTIES in 1999 consist of net royalties in respect of the MIRCETTE
product in the amount of $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, substantially all of which
the Company anticipates will have to be returned (see "--Commissions and
Royalties" below).

      OTHER REVENUES consist primarily of funding from the Chief Scientist,
which represented 89%, 100% and 99% of other revenues in the years ended
December 31, 1999, 1998 and 1997, respectively.

      INTEREST INCOME was $4,633,000, $2,965,000 and $1,719,000 for the years
ended December 31, 1999, 1998 and 1997, respectively. The increase in interest
income in 1999 and 1998 was derived primarily from an increase in cash balances
resulting from option and warrant exercises and cash flow from operations in
1999 and 1998.

      RESEARCH AND DEVELOPMENT EXPENSE. Expenditures for research and
development were $21,120,000, $18,450,000 and $15,946,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. The increase in research and
development expenditures in 1999 was primarily


                                       41
<PAGE>

related to the development of a new formulation for one of its existing
products, partially offset by the termination in 1998 of the Company's Phase III
clinical trial for its superoxide dismutase which is now being conducted as a
Phase II trial. The increase in research and development expenditures in 1998
was primarily due to certain research and development activities as well as
Phase III and post approval Phase IV clinical studies relating to OXSODROL and
OXANDRIN, respectively, which studies began mainly in 1997.

      COST OF PRODUCT SALES. Cost of product sales was $11,224,000, $10,744,000
and $8,493,000 in the years ended December 31, 1999, 1998 and 1997,
respectively. 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. The increase in 1998 was
primarily attributable to increased product sales. Cost of product sales as a
percentage of product sales was 18%, 16% and 16% in 1999, 1998 and 1997,
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
$14,035,000, $8,504,000 and $8,509,000 in the years ended December 31, 1999,
1998 and 1997, respectively. The increase in 1999 derived mainly from the write
off of other assets relating to the development of Androtab-SL resulting from
the Company's decision not to continue to pursue FDA approval of Androtab-SL and
legal fees resulting from the reactivation in the fourth quarter of 1998 of the
Company's declaratory judgment action against Genentech in respect of the
Company's hGH in the United States, as well as increased compensation costs.

      MARKETING AND SALES EXPENSE. Marketing and sales expense was $16,583,000,
$13,312,000 and $9,290,000 in the years ended December 31, 1999, 1998 and 1997,
respectively. These expenses primarily related to the sales and marketing force
in the United States that the Company 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 the Company's product sales.

      COMMISSIONS AND ROYALTIES. Commissions and royalties were $3,221,000,
$929,000 and $1,650,000 in the years ended December 31, 1999, 1998 and 1997,
respectively. These expenses consist primarily of royalties to entities from
which the Company 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 the Company expects it will be required to
refund because the Company expects that Gentiva will return most of the human
growth hormone product to Serono because it is anticipated that most of the
product will have expired before it is sold. BTG has given notice of termination
of its agreement with Serono pursuant to which it was co-promoting, through the
Company's distribution channel with 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,
1999, 1998 and 1997 was $4,897,000, $7,010,000 and $6,705,000, representing
approximately 26.1%, 28.3% and 31.7% of income before income taxes. The
Company'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.


                                       42
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      The Company's working capital at December 31, 1999, was $119,456,000 as
compared to $110,359,000 at December 31, 1998.

      The cash flows of the Company have fluctuated significantly due to the
impact of net income, capital spending, working capital requirements, the
issuance of common stock and other financing activities. The Company expects
that cash flow in the near future will be primarily determined by the levels of
net income, working capital requirements, and financings, if any, undertaken by
the Company. Net cash increased by $9,272,000, $102,000 and $2,324,000 in the
years ended December 31, 1999, 1998 and 1997, respectively.

      Net cash provided by (used in) operating activities was $48,459,000,
$(7,318,000) and $14,142,000 in the years ended December 31, 1999, 1998 and
1997, respectively. Net income was $13,862,000, $17,739,000 and $14,478,000 in
the same periods, 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 $1,898,000, partially offset
by an increase in inventory of $3,646,000. In 1998 the Company 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. In 1997, net
income and net cash provided by operating activities were approximately the
same, as income taxes of $6,297,000, depreciation and amortization of $2,636,000
and an increase in other current liabilities of $1,494,000 were completely
offset by a $9,267,000 increase in receivables and a $1,713,000 decrease in
accounts payable.

      Net cash used in investing activities was $46,720,000, $16,649,000 and
$17,672,000 in the years ended December 31, 1999, 1998 and 1997, respectively.
Net cash used in investing activities included capital expenditures of
$11,432,000, $3,594,000 and $3,134,000 in these periods, respectively,
consisting in 1999 of approximately $8,913,000 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 $7,533,000, $24,069,000 and
$5,854,000 in the years ended December 31, 1999, 1998 and 1997, respectively.
Cash flows from financing activities were primarily affected by net proceeds
from issuances of common stock of $7,533,000, $24,069,000 (including $17,221,000
from the exercise of warrants which expired on December 31, 1998), and
$5,872,000 in these periods, respectively. Net proceeds from the sale of common
stock result mainly from option and warrant exercises.

      In April 1999, the Company purchased a manufacturing facility in Israel
for approximately $6,250,000. The Company will initially locate its production
activities for BIO-HEP-B and FIBRIMAGE at this new facility, and will thereafter
move the remainder of its production activities to this facility. The Company
expects the initial production facility will be ready by early 2001. The Company
expects it will cost approximately $38,000,000 to complete the production
facility (excluding the cost of purchasing the facility), of which $3,268,000
had been expended at December 31, 1999.

      The Company maintains its funds in money market funds, commercial paper
and other liquid debt instruments. See Note 1c and 1e of Notes to Consolidated
Financial Statements.

      The Company 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


                                       43
<PAGE>

devaluations on its non-U.S. dollar assets and liabilities. The cost of the
Company'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 dollar. The rate of inflation (as measured by the consumer
price index) was approximately 7% in 1997, 9% in 1998 and 1% in 1999, while
the Shekel was devalued by approximately 9%, 18% and 0%, respectively. As a
result, for those expenses linked to the Israeli Shekel, such as salaries and
rent, this resulted in 1997 and in 1998 in corresponding decreases in these
costs in U.S. dollars. 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.

      At December 31, 1999, intangibles, net, consist mainly of $866,000 (net of
amortization) relating to the purchase of all rights to hGH previously licensed
to The Du Pont Merck Pharmaceutical Company, together with all rights to all
data generated in pharmacological, toxicological and clinical studies and
encompassed in the IND and NDA files then pending with the FDA for the treatment
of human growth hormone-deficient children.

      The Company believes that its remaining cash resources as of December 31,
1999, 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 the Company's 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, or that unanticipated events requiring the
expenditure of funds will not occur. The satisfaction of the Company's future
cash requirements will depend in large part on the status of commercialization
of the Company's products, the Company's ability to enter into additional
research and development and licensing arrangements, and the Company's ability
to obtain additional equity investments, if necessary. There can be no assurance
that the Company will be able to obtain additional funds or, if such funds are
available, that such funding will be on favorable terms. The Company 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 --Capital
Needs" and "--Variability of Operating Results."

      The Year 2000 problem (the "Year 2000 Problem" or "Year 2000") was to have
resulted from computer programs and devices that did not differentiate between
the year 1900 and the year 2000 because they were written using two digits
rather than four to define the applicable year; accordingly, computer systems
that have time-sensitive calculations potentially would not properly recognize
the year 2000. This could have resulted in system failures or miscalculations
causing disruptions of the Company's operations, including, without limitation,
manufacturing, distribution, clinical development, research and other business
activities. The Year 2000 Problem potentially affected substantially all of
BTG's business activities. The Company believes that as a result of its Year
2000 remediation and planning programs, the Year 2000 Problem has not, as of
March 15, 2000, had a material adverse effect on the operations or financial
results of the Company. As of December 31, 1999, the Company estimates that it
had incurred approximately $50,000 in its Year 2000 efforts, including without
limitation, outside consulting fees and computer systems upgrades, but excluding
internal staff costs, all of which has been expensed. It is possible that BTG
will experience Year 2000 related problems in the future, particularly with its
non-business


                                       44
<PAGE>

critical systems, which may result in failures or miscalculations resulting in
inaccuracies in computer output or disruptions of operations. However, BTG
believes that the Year 2000 Problem will not pose significant operational
problems for its business critical computer systems and equipment. The financial
impact of future remediation activities that may become necessary, if any,
cannot be known precisely at this time, but it is not expected to be material.


                                       45
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      Index to Consolidated Financial Statements

                                                                            Page

      Report of Independent Public Accountants..............................47

      Consolidated Financial Statements:

      Consolidated Balance Sheets as of
      December 31, 1998 and 1999............................................48

      Consolidated Statements of Operations for the
      years ended December 31, 1997, 1998 and 1999..........................49

      Consolidated Statements of Changes in
      Stockholders' Equity for the years
      ended December 31, 1997, 1998 and 1999................................50

      Consolidated  Statements  of Cash Flows for
      the years ended December 31, 1997, 1998 and 1999 .....................51

      Notes to Consolidated Financial Statements............................52


                                       46
<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 subsidiaries as of December 31, 1998
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, 1999. 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 subsidiaries as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.


                                                             ARTHUR ANDERSEN LLP

New York, New York
February 1, 2000


                                       47
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                               December 31,
                                                         -----------------------
                                                           1998         1999
                                                         ---------    ---------

ASSETS
Current Assets:
  Cash and cash equivalents ..........................   $   9,431    $  18,703
  Short-term investments .............................      37,602       68,547
  Other receivables ..................................      15,968          579
  Accounts receivable  - trade .......................      52,429       36,925
  Inventories ........................................       4,978        8,624
  Deferred income taxes (Note 10) ....................       5,407        4,286
  Prepaid expenses ...................................         344          220
                                                         ---------    ---------
     Total current assets ............................     126,159      137,884

Accounts receivable - trade ..........................          --        2,443
Severance pay funded (Note 2) ........................       2,233        2,369
Property and equipment, net (Note 3) .................       9,442       18,938
Intangibles, net of accumulated amortization of
  $4,303 in 1998 and $5,186 in 1999 ..................       1,728          993
Patents, net of accumulated amortization of $487
  in 1998 and $643 in 1999 ...........................         404          429
Other assets .........................................       2,629        1,589
                                                         ---------    ---------
     Total assets ....................................   $ 142,595    $ 164,645
                                                         =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term bank loans ..............................   $     288    $      20
  Accounts payable ...................................       5,359        7,257
  Other current liabilities (Note 8) .................      10,153       11,151
                                                         ---------    ---------
     Total current liabilities .......................      15,800       18,428
                                                         ---------    ---------

Long-term liabilities (Note 2) .......................       3,818        4,333
                                                         ---------    ---------

Commitments and contingent liabilities (Note 7)

Stockholders' Equity (Notes 4 and 5):
  Preferred stock - $.01 par value; 4,000,000
     shares authorized; no shares issued .............          --           --
  Common stock - $.01 par value; 150,000,000
     shares authorized; issued: 51,934,000 in 1998
     and 53,280,000 in 1999 ..........................         519          533
  Capital in excess of par value .....................     161,164      168,743
  Accumulated deficit ................................     (36,396)     (22,534)
  Treasury stock at cost (83,000 shares) .............        (340)        (340)
  Accumulated other comprehensive loss ...............      (1,970)      (4,518)
                                                         ---------    ---------
    Total stockholders' equity .......................     122,977      141,884
                                                         ---------    ---------

     Total liabilities and stockholders' equity ......   $ 142,595    $ 164,645
                                                         =========    =========

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


                                       48
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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

                                                   Year Ended December 31,
                                               ---------------------------------
                                                1997         1998         1999
--------------------------------------------------------------------------------
Revenues (Note 9):
     Product sales ......................      $53,723      $68,246      $62,332
     Contract fees ......................        8,369        2,686       14,848
     Royalties ..........................           --        2,160        1,761
     Other revenues .....................        1,524          798        1,746
     Interest ...........................        1,719        2,965        4,633
                                               -------      -------      -------
                                                65,335       76,855       85,320
                                               -------      -------      -------

Expenses:
     Research and development ...........       15,946       18,450       21,120
     Cost of product sales ..............        8,493       10,744       11,224
     General and administrative .........        8,509        8,504       14,035
     Marketing and sales ................        9,290       13,312       16,583
     Commissions and royalties ..........        1,650          929        3,221
     Interest and finance ...............          264          167          378
                                               -------      -------      -------
                                                44,152       52,106       66,561
                                               -------      -------      -------

Income before income taxes ..............       21,183       24,749       18,759
Income tax expense, net (Note 10) .......        6,705        7,010        4,897
                                               -------      -------      -------

Net income ..............................      $14,478      $17,739      $13,862
                                               =======      =======      =======

Earnings per common share:
     Basic ..............................      $  0.31      $  0.37      $  0.26
                                               =======      =======      =======

     Diluted ............................      $  0.28      $  0.36      $  0.26
                                               =======      =======      =======

Weighted average number of common
     and common equivalent shares:
     Basic ..............................       46,767       48,184       52,348
                                               =======      =======      =======
     Diluted ............................       51,916       49,848       54,191
                                               =======      =======      =======

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


                                       49
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                          Common Stock
                                                        ----------------      Capital in
                                                                     Par      Excess of    Accumulated    Treasury     Deferred
                                                        Shares      Value     Par Value      Deficit       Stock     Compensation
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>      <C>         <C>           <C>          <C>          <C>
BALANCE, DECEMBER 31, 1996                               45,682   $     457   $ 129,130     $ (68,613)   $    (340)   $     (76)
Comprehensive income:
      Net income for 1997                                                                      14,478
      Unrealized gain on marketable securities, net

Total comprehensive income

Issuance of common stock                                      4                      59
Issuance of common stock on series A and
   B note conversions (including capitalized
   interest) and on conversion of
   convertible debentures                                   133           1         550
Tax benefit derived from exercise
   of stock options                                                               1,066
Exercise of stock options                                 1,433          14       5,597
Exercise of warrants                                         52           1         260
Amortization of deferred compensation                                                                                        76
                                                         ------   ---------   ---------     ---------    ---------    ---------
BALANCE, DECEMBER 31, 1997                               47,304         473     136,662       (54,135)        (340)          --
Comprehensive income:
      Net income for 1998                                                                      17,739
      Unrealized loss on marketable securities, net

Total comprehensive income

Issuance of common stock                                     60           1         324
Tax benefit derived from exercise
   of stock options                                                                 420
Exercise of stock options                                   660           6       2,718
Exercise of warrants                                      3,910          39      21,040
                                                         ------   ---------   ---------     ---------    ---------    ---------
BALANCE, DECEMBER 31, 1998                               51,934   $     519   $ 161,164     $ (36,396)   $    (340)   $      --
Comprehensive income:
      Net income for 1999                                                                      13,862
      Unrealized loss on marketable securities, net

Total comprehensive income

Issuance of common stock                                    259           3       1,380
Tax benefit derived from exercise
   of stock options                                                                 521
Exercise of stock options                                 1,087          11       5,678
                                                         ------   ---------   ---------     ---------    ---------    ---------
BALANCE, DECEMBER 31, 1999                               53,280   $     533   $ 168,743     $ (22,534)   $    (340)   $      --
                                                         ======   =========   =========     =========    =========    =========

<CAPTION>
                                                       Accumulated other       Total
                                                         comprehensive     Stockholders'
                                                          income (loss)        Equity
----------------------------------------------------------------------------------------
<S>                                                        <C>               <C>
Balance, December 31, 1996                                 $      --        $   60,558
Comprehensive income:
      Net income for 1997                                                       14,478
      Unrealized gain on marketable securities, net              198               198
                                                                             ---------
Total comprehensive income                                                      14,676
                                                                             ---------
Issuance of common stock                                                            59
Issuance of common stock on series A and
   B note conversions (including capitalized
   interest) and on conversion of
   convertible debentures                                                          551
Tax benefit derived from exercise
   of stock options                                                              1,066
Exercise of stock options                                                        5,611
Exercise of warrants                                                               261
Amortization of deferred compensation                                               76
                                                           ---------         ---------
Balance, December 31, 1997                                       198            82,858
Comprehensive income:
      Net income for 1998                                                       17,739
      Unrealized loss on marketable securities, net           (2,168)           (2,168)
                                                                             ---------
Total comprehensive income                                                      15,571
                                                                             ---------
Issuance of common stock                                                           325
Tax benefit derived from exercise
   of stock options                                                                420
Exercise of stock options                                                        2,724
Exercise of warrants                                                            21,079
                                                           ---------         ---------
Balance, December 31, 1998                                 $  (1,970)        $ 122,977
Comprehensive income:
      Net income for 1999                                                       13,862
      Unrealized loss on marketable securities, net           (2,548)           (2,548)
                                                                             ---------
Total comprehensive income                                                      11,314
                                                                             ---------
Issuance of common stock                                                         1,383
Tax benefit derived from exercise
   of stock options                                                                521
Exercise of stock options                                                        5,689
                                                           ---------         ---------
Balance, December 31, 1999                                 $  (4,518)        $ 141,884
                                                           =========         =========
</TABLE>

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


                                       50
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                         --------------------------------
                                                                           1997        1998        1999
                                                                         --------    --------    --------
<S>                                                                      <C>         <C>         <C>
Cash flows from operating activities:
  Net income .........................................................   $ 14,478    $ 17,739    $ 13,862
  Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
     Deferred income tax expense .....................................      6,297       5,160       1,121
     Depreciation and amortization ...................................      2,636       3,125       3,014
     Write-off of other assets .......................................         --          --       1,894
     Provision for severance pay .....................................        326        (157)        515
     (Gain) loss on disposal of fixed assets .........................         (4)          3          (4)
     (Gain) loss on sales of short-term investments, net .............        (38)        (92)        441
     Common stock as payment for services ............................         59          59          60
     Changes in:
       accounts receivable ...........................................     (9,267)    (40,856)     28,450
       inventories ...................................................        (73)        423      (3,646)
       prepaid expenses and other current assets .....................        (53)         58         124
       accounts payable ..............................................     (1,713)      3,714       1,898
       other current liabilities .....................................      1,494       3,506         730
                                                                         --------    --------    --------
  Net cash provided by (used in) operating activities ................     14,142      (7,318)     48,459
                                                                         --------    --------    --------

Cash flows from investing activities:
  Purchases of short-term investments ................................    (22,107)    (27,742)    (53,501)
  Capital expenditures ...............................................     (3,134)     (3,594)    (11,432)
  Intangibles ........................................................         --          --        (150)
  Severance pay funded ...............................................       (117)        202        (136)
  Other assets .......................................................     (1,159)        348        (931)
  Change in patents ..................................................       (121)       (144)       (181)
  Proceeds from sales of short-term investments ......................      8,924      14,243      19,567
  Proceeds from sales of fixed assets ................................         42          38          44
                                                                         --------    --------    --------
  Net cash used in investing activities ..............................    (17,672)    (16,649)    (46,720)
                                                                         --------    --------    --------

Cash flows from financing activities:
  Proceeds from issuances of common stock (including tax
     benefit from exercise of stock options) .........................      5,872      24,069       7,533
  Other ..............................................................        (18)         --          --
                                                                         --------    --------    --------
  Net cash provided by financing activities ..........................      5,854      24,069       7,533
                                                                         --------    --------    --------

  Net increase in cash and cash equivalents ..........................      2,324         102       9,272
  Cash and cash equivalents at beginning of year .....................      7,005       9,329       9,431
                                                                         --------    --------    --------
  Cash and cash equivalents at end of year ...........................   $  9,329    $  9,431    $ 18,703
                                                                         ========    ========    ========

Supplementary Information
Non-cash investing and financing activities:
  Series A and B note conversions (including capitalized
  interest) and conversion of convertible debentures .................   $    551    $     --    $     --

Other information:
  Interest paid ......................................................   $     35    $      2    $     11
  Income taxes paid ..................................................   $    356    $    515    $  3,518
</TABLE>

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


                                       51
<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 substantial amount of
research and development activities has been conducted on behalf of the parent
by BTG-Israel.

      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, 1998 and 1999, cash and cash equivalents included cash of
$2,959,000 and $3,202,000, respectively, and money market funds, commercial
paper and other liquid short-term debt instruments (with maturities as at
acquisition of ninety days or less) of $6,472,000 and $15,501,000, respectively.

      d. Short-term investments:

      The Company applies Statement of Financial Accounting Standards ("SFAS")
No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
Under SFAS No. 115, marketable debt and equity securities are reported at fair
value, with unrealized gains and losses from those securities, which are
classified as "trading securities", included in net income and unrealized gains
and losses from those securities, which are classified as "available-for-sale
securities", reported as a separate component of stockholders' equity. Debt
securities classified as "held to maturity" are reported at amortized cost.

      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, 1998 and 1999, the aggregate
fair value of the securities was $37,602,000 and $68,547,000, with a cost of
$39,572,000 and $73,067,000, respectively.

      e. Other receivables:

      As of December 31, 1998, other receivables consist primarily of proceeds
due from the exercise of warrants, which proceeds were subsequently received by
the Company in January 1999.


                                       52
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

      f. Inventories:

      Inventories are stated at the lower of average cost or market on the
weighted average method. At December 31, 1998 and 1999, inventories include raw
materials of $1,063,000 and $951,000, work-in-process of $736,000 and
$1,223,000, and finished goods of $3,179,000 and $6,450,000, respectively.

      g. 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 subsequent to December
31, 2000. The related discount has been recorded in the consolidated financial
statements for the period ended December 31, 1999.

      h. Property and equipment, accumulated depreciation and amortization:

      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.

      i. 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.

      j. 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 the date of grant with
respect to each project.

      k. 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 quarterly
and annual basis for impairment whenever events or changes in circumstances
indicate that the carrying amounts of the assets may not be recoverable.
Furthermore, the assets are evaluated for continuing value and proper useful
lives by comparison with expected future cash flows.

      l. Revenue recognition:

      Product sales are recognized when the product is shipped. Contract fees
for grants of licenses and other rights are recognized when the relevant terms
of each contract have been performed by the Company. 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


                                       53
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

of such funded research. In general, these contracts are cancelable by the
Company's collaborative partners at any time.

      m. 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".

      The Company has not adopted the measurement requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation", for stock option grants to employees
and, accordingly, has made all of the required pro forma disclosures for the
years ended December 31, 1997, 1998 and 1999 in Note 5.

      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. Comprehensive income (loss):

      In 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income". This statement establishes rules for the reporting of comprehensive
income and its components. Other comprehensive income (loss) consists of
unrealized gains (losses) on marketable securities. In 1997 Other comprehensive
income was reported net of tax. In 1998 and 1999 any tax benefit recorded in
connection with Other comprehensive loss was offset by a valuation allowance due
to the uncertainty of future utilization.

      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. SFAS No. 128,
"Earnings Per Share" requires the presentation of both basic EPS and diluted EPS
on the face of the consolidated statements of operations.

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


                                       54
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                               Year Ended December 31, 1997                 Year Ended December 31, 1998
                                        -----------------------------------------    ------------------------------------------
                                           Income         Shares        Per Share        Income          Shares       Per Share
                                         (Numerator)   (Denominator)     Amounts      (Numerator)    (Denominator)     Amounts
                                        -----------------------------------------    ------------------------------------------
<S>                                       <C>               <C>           <C>            <C>             <C>             <C>
(In thousands, except per share
data)

NET EARNINGS...........................   $  14,478                                      $17,739

BASIC EPS
Net earnings attributable to common
stock..................................      14,478         46,767        $  0.31         17,739         48,184          $0.37

EFFECT OF DILUTIVE SECURITIES
Stock options..........................                      2,421                                        1,090
Stock warrants.........................                      2,728                                          574
                                                         ---------                                    ---------

DILUTED EPS
Net earnings attributable to common
stock and assumed option and
warrant exercises......................   $  14,478         51,916        $  0.28        $17,739         49,848          $0.36
                                          =========      =========        =======        =======      =========          =====

<CAPTION>
                                               Year Ended December 31, 1999
                                        ----------------------------------------
                                            Income        Shares       Per Share
                                         (Numerator)  (Denominator)     Amounts
                                        ----------------------------------------
<S>                                       <C>             <C>             <C>
(In thousands, except per share
data)

Net Earnings...........................   $13,862

Basic EPS
Net earnings attributable to common
stock..................................    13,862         52,348          $0.26

Effect of Dilutive Securities
Stock options..........................                    1,843
Stock warrants.........................                       --
                                                       ---------

Diluted EPS
Net earnings attributable to common
stock and assumed option and
warrant exercises......................   $13,862         54,191          $0.26
                                          =======      =========          =====
</TABLE>


                                       55
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

      Options to purchase 1,872,000, 1,970,000 and 697,000 shares of common
stock out of the total number of options outstanding as of December 31, 1997,
1998 and 1999, respectively, were 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. These assets and liabilities include BTG's marketing rights,
patents, prepaid and deferred expenses, fixed assets and severance accruals, as
management has made estimates as to their useful lives and realizability and
future obligations. Actual results could differ from those estimates.

NOTE 2 - LONG-TERM LIABILITIES

      Long-term liabilities mainly consist of provision for 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
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 obligation for severance pay to those
employees are reflected in the balance sheets as severance pay funded and
included in the provision for 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 provision.

      The expense related to severance and pension pay for the years ended
December 31, 1997, 1998 and 1999, was $936,000, $715,000 and $1,039,000,
respectively.


                                       56
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 3 - PROPERTY AND EQUIPMENT, NET
                                                               December 31,
                                                         ----------------------
                                                           1998          1999
                                                         --------      --------
                                                             (in thousands)
Cost:
Laboratory and manufacturing equipment .............     $ 14,446      $ 15,704
Land, buildings and construction in progress(1) ....           --         9,518
Office equipment ...................................        3,536         3,872
Air conditioning and other .........................        2,156         2,306
Leasehold improvements .............................        7,613         7,621
                                                         --------      --------
                                                           27,751        39,021

Accumulated depreciation and amortization ..........      (18,309)      (20,083)
                                                         --------      --------

    Total ..........................................     $  9,442      $ 18,938
                                                         ========      ========

----------
      (1)   The related asset has not been placed in service and, therefore, no
            depreciation and amortization has been accumulated as of December
            31, 1999.

      Depreciation and amortization expense was approximately $1,590,000,
$1,617,000 and $1,896,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.

NOTE 4 - STOCKHOLDERS' EQUITY

      In the years ended December 31, 1997 and 1998, the Company issued 52,000
shares and 3,910,000 shares, respectively, of the Company's common stock upon
the exercise of outstanding warrants having an aggregate purchase price of
$260,000 and $21,079,000, respectively.

      In the years ended December 31, 1997, 1998 and 1999, the Company issued
1,433,000 shares, 660,000 shares and 1,087,000 shares, respectively, of the
Company's common stock upon the exercise of outstanding stock options having an
aggregate purchase price of $5,611,000, $2,724,000 and $5,689,000, 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 which permits such employee to
purchase shares under the 1998 ESPP having a fair market value which 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.


                                       57
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 5 - 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 shortly after employment termination. Terminated
options are available for reissuance. No additional options can be granted under
the Plan.

      In 1992, the Company adopted the Bio-Technology General Corp. 1992 Stock
Option Plan (the "1992 Stock Option Plan"). The 1992 Stock Option Plan currently
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
shortly after employment termination. 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. In addition, the
Directors Plan provided that each person who was re-elected as a non-employee
director at the time the Directors Plan was adopted by the stockholders
automatically received an option to purchase 7,500 shares of the Company's
common stock on the date the Directors Plan was adopted. 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 1997,
1998 and 1999 have been granted at the fair market value of the Company's common
stock. Had compensation cost


                                       58
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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:

                                                  Year Ended December 31,
                                         -------------------------------------
                                           1997           1998           1999
                                           ----           ----           ----
                                                   (in thousands except
                                                       per share data)

 Net income:   As reported ............  $  14,478     $  17,739     $  13,862
               Pro forma ..............     10,361         9,810         4,305

 Basic EPS:    As reported ............  $    0.31     $    0.37     $    0.26
               Pro forma                      0.22          0.20          0.08

 Diluted EPS:  As reported ............  $    0.28     $    0.36     $    0.26
               Pro forma ..............       0.20          0.20          0.08

      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 1997, 1998 and 1999: (1)
expected life of option of seven years; (2) dividend yield of 0%; (3) expected
volatility of 64%, 56% and 58%; and (4) risk-free interest rate of 6.43%, 5.46%
and 5.66%, respectively.

      Because SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

      Transactions under the Plan, the 1992 Stock Option Plan, the New Director
Plan, the Directors Plan and other plans during 1997, 1998 and 1999 were as
follows:

<TABLE>
<CAPTION>
                                                                            Year ended December 31,
                                                  -------------------------------------------------------------------------
                                                           1997                      1998                      1999
                                                  ----------------------     -------------------      ---------------------
                                                                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 .....       4,933      $   4.79       5,400     $ 8.40         6,332      $  7.33
Granted ......................................       1,975         14.08       1,874       7.49         2,752         6.78
Exercised ....................................      (1,433)         3.92        (660)      4.13        (1,087)        5.23
Terminated ...................................         (75)         6.13        (282)      9.10          (510)        8.10
                                                   -------                    ------                   ------
Options outstanding at end of year ...........       5,400          8.40       6,332       7.33         7,487         7.38
                                                   =======                    ======                   ======
Exercisable at end of year ...................       2,333                     2,714                    2,804
                                                   =======                    ======                   ======
Weighted average fair value of options granted                      9.65                   4.71                       4.34
                                                                ========                 ======                    =======
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.


                                       59
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

      Of the 7,487,000 options outstanding as of December 31, 1999:

            - 2,460,000 have exercise prices between $2.37 and $5.94 with a
      weighted average exercise price of $5.22 and a weighted average remaining
      contractual life of 6.99 years. Of these 2,460,000 options, 1,085,000 are
      exercisable; their weighted average exercise price is $4.39.

            - 2,715,000 options have exercise prices between $6.28 and $7.56
      with a weighted average exercise price of $7.33 and a weighted average
      remaining contractual life of 8.23 years. Of these 2,715,000 options,
      631,000 are exercisable; their weighted average exercise price is $7.43.

            - 2,312,000 options have exercise prices between $7.84 and $14.12
      with a weighted average exercise price of $9.75 and a weighted average
      remaining contractual life of 7.60 years. Of these 2,312,000 options,
      1,088,000 are exercisable; their weighted average exercise price is $9.84.

      Subsequent to December 31, 1999, options to purchase an aggregate of
296,000 shares of common stock have been exercised, having an aggregate purchase
price of $1,724,000.

NOTE 6 - FOREIGN OPERATIONS

      The Company adopted SFAS No. 131, "Disclosure about Segments of an
      Enterprise and Related Information", at December 31, 1998. SFAS No. 131
      establishes annual and interim reporting standards for an enterprise's
      operating segments and related disclosures about its products, services,
      geographic areas and major customers. Under SFAS No. 131, 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:


                                       60
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                   Consol-
                                                    U.S.            Israel       Eliminations      idated
                                                    ----            ------       ------------      ------
                                                                (in thousands of U.S. dollars)
                                                                ------------------------------
<S>                                               <C>              <C>             <C>             <C>
Year ended December 31, 1997:
    Revenues ...............................      ss.61,834          3,501                          65,335
    Intercompany transactions ..............          1,143          7,730          (8,873)
    Reimbursement of subsidiary's expenses .                         9,946          (9,946)
    Depreciation and amortization ..........          1,438          1,198                           2,636
    Interest income ........................          1,611            108                           1,719
    Income tax expense .....................          6,705                                          6,705
    Net income .............................         13,448          1,538            (508)         14,478
    Identifiable assets o ..................         94,513          9,074          (8,174)         95,413
    Foreign liabilities o ..................                       ++4,334                           4,334
    Investment in subsidiaries (cost basis)o          5,797                         (5,797)

Year ended December 31, 1998:
    Revenues ...............................      ss.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 o ..................        140,290         20,330         (17,944)        142,676
    Foreign liabilities o ..................                       ++5,939                           5,939
    Investment in subsidiaries (cost basis)o          5,797                         (5,797)

Year ended December 31, 1999:
    Revenues ...............................      ss.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 o ..................        160,408         28,640         (24,403)        164,645
    Foreign liabilities o ..................                       ++7,027                           7,027
    Investment in subsidiaries (cost basis)o         15,310                        (15,310)
</TABLE>

----------

ss.   Includes export sales of, $24,713,000, $27,723,000 and $27,645,000 in
      1997, 1998 and 1999, respectively.
o     At year end.
++    Excludes liability to parent.


                                       61
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 7 - 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 $99,000 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 $1,080,000. 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 2000.

      Rent expense was approximately $1,609,000, $1,684,000 and $1,679,000 for
the years ended December 31, 1997, 1998 and 1999, respectively.

      The future consolidated annual minimum rentals (exclusive of amounts for
real estate taxes, maintenance, etc.) for each of the next four years are as
follows: 2000--$1,616,000; 2001--$1,594,000; 2002--$1,595,000; and
2003--$473,000. There is also a bank guarantee outstanding in favor of the
lessor for $719,000 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, 1999, the Company is obligated to repay to the Chief Scientist, out
of revenue from future product sales, a minimum of $3,392,000 of research and
development funding for products that are currently being sold and a minimum of
$9,706,000 of research and development funding for products currently under
development if these products will be sold. During the years ended December 31,
1997, 1998 and 1999, the Company accrued approximately $413,000, $385,000 and
$353,000, 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 seven senior
officers. Under these agreements, the Company has committed to total aggregate
base compensation per year of approximately $1,760,000 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.


                                       62
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

NOTE 8 - OTHER CURRENT LIABILITIES

                                                              December 31,
                                                         -----------------------
                                                           1998            1999
                                                         -------         -------
                                                              (in thousands)

Salaries and related expenses                            $ 2,295         $ 3,312
Accrued subcontracting payable                             4,558           3,830
Governmental and state agencies                            1,001             677
Legal and professional fees                                  265             700
Royalties and commissions                                  1,645           2,341
 Other                                                       389             291
                                                         -------         -------
                                                         $10,153         $11,151
                                                         =======         =======

NOTE 9 - CONCENTRATIONS

      In 1997, 1998 and 1999, one customer for human growth hormone, located
solely in Japan, represented $10,095,000, $11,056,000 and $10,507,000, or 16%,
15% and 13% of revenues (exclusive of interest income), respectively. In 1997,
1998 and 1999, one customer for OXANDRIN and DELATESTRYL, located solely in the
United States, represented $29,013,000, $43,171,000 and $32,813,000, or 46%, 58%
and 41% of revenues (exclusive of interest income), respectively. In 1999 one
licensee accounted for 12% of revenues (exclusive of interest income). In 1999,
the Company's product sales consisted primarily of sales of OXANDRIN, human
growth hormone, DELATESTRYL and BIOLON in the amount of approximately
$24,935,000, $18,004,000, $10,105,000 and $8,560,000, or 40%, 29%, 16% and 14%
of total product sales, respectively. One customer accounted for 74% and 53% of
total accounts receivable-trade as of December 31,1998 and 1999, respectively.
As of December 31, 1999 an amount due from a licensee accounts for 27% of total
accounts receivable-trade. As of December 31, 1998 another customer accounted
for 12% of total accounts receivable-trade. BTG currently has one supplier for
its OXANDRIN product and one supplier for its DELATESTRYL product.

NOTE 10 - INCOME TAXES

      At December 31, 1999, BTG has a capital loss carryover of approximately
$7,300,000 available to offset future capital gains, which expires in 2000, and
a research and experimental ("R&E") credit carryover of approximately $2,379,000
available to reduce future income taxes, which expires at various times with
respect to various amounts through 2018.

      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
$2,400,000 at December 31, 1999.


                                       63
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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

                                                    Year Ended December 31,
                                            -----------------------------------
                                             1997          1998          1999
                                            -------       -------       -------
                                                       (in thousands)
Current:
       State ........................       $    --       $   336       $   332
       Federal ......................           408         1,514         3,066
       Foreign ......................            --            --           378
                                            -------       -------       -------
                                                408         1,850         3,776
                                            -------       -------       -------

Deferred:
       State ........................         2,035           464            98
       Federal ......................         4,262         4,696         1,113
       Foreign ......................            --            --           (90)
                                            -------       -------       -------
                                              6,297         5,160         1,121
                                            -------       -------       -------

Total income tax expense ............       $ 6,705       $ 7,010       $ 4,897
                                            =======       =======       =======

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

                                                  Year Ended December 31,
                                         ---------------------------------------
                                          1997            1998            1999
                                         -------         -------         -------
                                                      (in thousands)

       Domestic ................         $19,663         $21,435         $15,045
       Foreign .................           1,520           3,314           3,714
                                         -------         -------         -------
                                         $21,183         $24,749         $18,759
                                         =======         =======         =======


                                       64
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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

                                                    Year Ended December 31,
                                                -------------------------------
                                                 1997        1998        1999
                                                -------     -------     -------
                                                         (in thousands)

       R&E credit ..........................    $(1,419)    $  (393)    $   899
       Net operating loss ..................      7,738       7,290          --
       Alternate minimum tax credit ........       (381)        (28)         --
       Accrued amounts .....................        793      (1,429)        229
       Depreciation and amortization .......       (434)       (280)         (7)
                                                -------     -------     -------
                                                $ 6,297     $ 5,160     $ 1,121
                                                =======     =======     =======

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

                                                      Year Ended December 31,
                                                  -----------------------------
                                                   1997       1998       1999
                                                  -------    -------    -------
                                                          (in thousands)

Income tax at U.S. statutory rate .............   $ 7,952    $ 9,853    $ 6,566
State and local income taxes (net of federal
  benefit) ....................................     1,222        520        280
Non-deductible expenses .......................       140        619        761
R&E credit ....................................    (1,419)    (1,189)      (772)
Foreign income subject to a reduced
  rate of tax .................................      (968)    (2,970)    (2,016)
Other .........................................      (222)       177         78
                                                  -------    -------    -------
Income tax expense ............................   $ 6,705    $ 7,010    $ 4,897
                                                  =======    =======    =======

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

                                                              December 31,
                                                       ------------------------
                                                         1998             1999
                                                       -------          -------
                                                            (in thousands)

Capital loss carryforward ....................         $ 2,632          $ 2,698
R&E credit ...................................           3,278            2,379
Accrued amounts ..............................           2,422            2,193
                                                       -------          -------
                                                         8,332            7,270
Depreciation and amortization ................            (293)            (286)
                                                       -------          -------
                                                         8,039            6,984
Valuation allowance ..........................          (2,632)          (2,698)
                                                       -------          -------
                                                       $ 5,407          $ 4,286
                                                       =======          =======


                                       65
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

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.


                                       66
<PAGE>

                                   BIO-TECHNOLOGY GENERAL CORP. AND SUBSIDIARIES

                                     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), (n), (q), (v), (w), (x), (y), (z), (aa), (bb), (cc), (dd), (ee) and (ff)
are management contracts, compensatory plans or arrangements.

Exhibit No.    Description
-----------    -----------

  3(a)         Certificate of Incorporation of the Registrant, as amended. *(1)

   (b)         By-laws of the Registrant, as amended.*(2)

  4.1          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.*(2)

   4.2         Certificate of Designations of the Series A Junior Participating
               Cumulative Preferred Stock.*(2)

 10(a)         Bio-Technology General Corp. Stock Option Plan, as amended
               through May 29, 1991.*(3)

   (b)         Agreement, dated January 25, 1981, between Bio-Technology General
               (Israel) Ltd. and Yeda Research and Development Co., Ltd.
               ("Yeda"). *(4)

   (c)         Letter from the Chief Scientist to Bio-Technology General
               (Israel) Ltd. *(4)

   (d)         Letter from the Company to Yeda relating to bGH and hSOD. *(5)

   (e)         Agreement, dated January 20, 1984, between Bio-Technology General
               (Israel) Ltd., and the Chief Scientist with regard to certain
               projects. *(6)

   (f)         Agreement, dated July 9, 1984, between the Company and Yeda. *(6)

   (g)         Agreement, dated as of January 1, 1984, between the Company and
               Yissum. *(7)


                                       67
<PAGE>

Exhibit No.    Description
-----------    -----------

   (h)         Form of Indemnity Agreement between the Company and its directors
               and officers. *(8)

   (i)         Agreement, dated November 18, 1988, between the Company and Yeda.
               *(9)

   (j)         Employment Agreement, dated as of January 1, 1990, between the
               Company and Dr. Sim Fass.*(10)

   (k)         Bio-Technology General Corp. Stock Compensation Plan for Outside
               Directors, as amended through March 1991. *(3)

   (l)         Bio-Technology General Corp. Stock Option Plan for New Directors,
               as amended through March 1991. *(3)

   (m)         Reacquisition of Rights Agreement, effective June 12, 1991
               between the Company and The Du Pont Merck Pharmaceutical Company.
               *(11)

   (n)         Employment Agreement, dated as of September 5, 1990, between Bio-
               Technology General (Israel) Ltd. and Marian Gorecki. *(12)

   (o)         Agreement, dated as of November 9, 1992, between the Company and
               SmithKline Beecham Intercredit B.V. *(12)

   (p)         Exclusive Distribution Agreement, dated as of November 9, 1992,
               between the Company and Ferring B.V. *(12)

   (q)         Bio-Technology General Corp. 1992 Stock Option Plan, as
               amended.*(13)

   (r)         Purchase and Supply Agreement, dated as of December 1, 1995,
               between Bio-Technology General Corp. and Quantum Health
               Resources. *+(14)

   (s)         Support Services Agreement, dated as of December 1, 1995, between
               Bio-Technology General Corp. and Quantum Health Resources.
               *+(14)

   (t)         Research and Development Services Agreement, dated as of January
               1, 1996 by and between Bio-Technology General Corp. and
               Bio-Technology General (Israel) Ltd.*(15)

   (u)         Manufacturing Services Agreement, dated as of January 1, 1996, by
               and between Bio-Technology General Corp. and Bio-Technology
               General (Israel) Ltd.*(15)

   (v)         Employment Agreement, dated as of January 29, 1996, between
               Bio-Technology General Corp. and Ernest L. Kelly. *(14)


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<PAGE>

Exhibit No.    Description
-----------    -----------

   (w)         Employment Agreement, dated as of April 24, 1995, between
               Bio-Technology General Corp. and William Pursley. *(16)

   (x)         Bio-Technology General Corp. 1997 Stock Option Plan for
               Non-Employee Directors.*(13)

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

   (z)         Employment Agreement, dated as of April 27, 1999, by and between
               Bio-Technology General Corp. and Virgil Thompson.*(18)

  (aa)         Employment Agreement, dated as of July 23, 1999, by and between
               Bio-Technology General Corp. and Robert Shaw.*(19)

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

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

  (dd)         Employment Agreement, dated as of April 27, 1999, by and among
               Bio-Technology General Corp., Bio-Technology General (Israel)
               Ltd. and Eli Admoni.*(18)

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

  (ff)         First Amendment to Employment Agreement, dated as of June 9,
               1999, between Bio-Technology General Corp. and Virgil Thompson.

    21         Subsidiaries of Bio-Technology General Corp.+(20)

    23         Consent of Arthur Andersen LLP.

    27         Financial Data Schedule.

            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.

----------

+ 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 Quarterly Report on Form 10-Q for the quarter ended June 30,
      1994.
 (2)  Company's Current Report on Form 8-K, dated October 7, 1998.


                                       69
<PAGE>

 (3)  Company's Annual Report on Form 10-K for the year ended December 31, 1991.
 (4)  Registration Statement on Form S-1 (File No. 2-84690).
 (5)  Company's Annual Report on Form 10-K for the year ended December 31, 1983.
 (6)  Registration Statement on Form S-1 (File No. 33-2597).
 (7)  Registration Statement on Form S-2 (File No. 33-12238).
 (8)  Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
      1987.
 (9)  Company's Annual Report on Form 10-K for the year ended December 31, 1988.
(10)  Company's Annual Report on Form 10-K for the year ended December 31, 1989.
(11)  Registration Statement on Form S-3 (File No. 33-39018).
(12)  Company's Annual Report on Form 10-K for the year ended December 31, 1992.
(13)  Company's Annual Report on Form 10-K for the year ended December 31, 1997.
(14)  Company's Annual Report on Form 10-K for the year ended December 31, 1995.
(15)  Company's Annual Report on Form 10-K for the year ended December 31, 1998.
(16)  Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
      1995.
(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 March 31,
      1999.
(19)  Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
      1999.
(20)  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.


                                       70
<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, 2000

      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.

Signature                   Title                                  Date
---------                   -----                                  ----


/s/ Sim Fass                Chairman of the Board,            March 28, 2000
-----------------------     CEO and Director
(Sim Fass)                  (Principal Executive
                            Officer)

/s/ Herbert Conrad          Director                          March 28, 2000
-----------------------
(Herbert Conrad)


/s/ Carl Kaplan             Director                          March 28, 2000
-----------------------
(Carl Kaplan)


/s/ Allan Rosenfield        Director                          March 28, 2000
-----------------------
(Allan Rosenfield)


/s/ David Tendler           Director                          March 28, 2000
-----------------------
(David Tendler)


                                       71
<PAGE>

Signature                   Title                                  Date
---------                   -----                                  ----


/s/ Virgil Thompson         Director                          March 28, 2000
-----------------------
(Virgil Thompson)


/s/ Dan Tolkowsky           Director                          March 28, 2000
-----------------------
(Dan Tolkowsky)


                            Director                          March __, 2000
-----------------------
(Faye Wattleton)


/s/ Herbert Weissbach       Director                          March 28, 2000
-----------------------
(Herbert Weissbach)


/s/ Yehuda Sternlicht       Vice President-Finance            March 28, 2000
-----------------------     and Chief Financial Officer
(Yehuda Sternlicht)         (Principal Financial and
                            Accounting Officer)


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