<PAGE>   1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
       THE SECURITIES EXCHANGE ACT OF 1934
       For the quarterly period ended   June 30, 1997
                                      ------------------

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
       THE SECURITIES EXCHANGE ACT OF 1934
       For the transition period from                 to
                                      ---------------     ------------

Commission file number 0-19777

                           DUSA Pharmaceuticals, Inc.
             (Exact name of registrant as specified in its charter)

         New Jersey                                    22-3103129 
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                    Identification No.)

                        181 University Avenue, Suite 1208
                         Toronto, Ontario M5H 3M7 CANADA
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (416) 363-5059
              (Registrant's telephone number, including area code)


      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 month (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
                   ---------                      ---------

              APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


      Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court.

                Yes                             No
                   -------                        -------

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

                     9,355,950 shares as of August 11, 1997
<PAGE>   2
                                    PART I.
ITEM 1 - FINANCIAL STATEMENTS

DUSA PHARMACEUTICALS, INC.
(a development stage company)

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                             JUNE 30,        DECEMBER 31,
                                                              1997               1996
                                                           (UNAUDITED)
<S>                                                        <C>              <C>
ASSETS
CURRENT ASSETS
    Cash (interest bearing)                                $  3,062,418     $  1,686,090
    U.S. government securities available for sale, at
        market (cost-$13,282,997 and $18,061,432
        respectively)                                        13,264,750       18,033,406
    Accrued interest receivable                                 119,789          208,970
    Other current assets                                        118,675           78,367
                                                           ------------     ------------
                                                             16,565,632       20,006,833
FIXED ASSETS                                                    142,003          122,424
                                                           ------------     ------------
                                                           $ 16,707,635     $ 20,129,257
                                                           ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                       $    593,564     $    867,068
    Accrued charges                                             166,885          160,399
                                                           ------------     ------------
                                                                760,449        1,027,467
                                                           ------------     ------------


SHAREHOLDERS' EQUITY
    Common stock, no par, 20,000,000 shares authorized,
         9,355,950 issued and outstanding                    36,710,743       36,710,743
    Deficit accumulated during the development stage        (20,745,310)     (17,580,927)
    Net unrealized loss on U.S. government securities
         available for sale                                     (18,247)         (28,026)
                                                           ------------     ------------
                                                             15,947,186       19,101,790
                                                           ------------     ------------
                                                           $ 16,707,635     $ 20,129,257
                                                           ============     ============
</TABLE>

See the accompanying notes to the Consolidated Financial Statements


                                       -2-
<PAGE>   3
DUSA PHARMACEUTICALS, INC.
(a development stage company)

CONSOLIDATED STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                                                     CUMULATIVE
                                                                                                                     PERIOD FROM
                                                                                                                     FEBRUARY 21,
                                                    THREE MONTHS    THREE MONTHS     SIX MONTHS     SIX MONTHS      1991 (DATE OF
                                                       ENDED            ENDED           ENDED          ENDED        INCORPORATION)
                                                      JUNE 30,        JUNE 30,        JUNE 30,        JUNE 30,       TO JUNE 30,
                                                        1997            1996            1997            1996             1997
                                                    (UNAUDITED)      (UNAUDITED)    (UNAUDITED)     (UNAUDITED)      (UNAUDITED)

<S>                                                 <C>             <C>             <C>             <C>             <C>
REVENUE
   Interest income                                  $   239,758     $   311,566     $   490,904     $   580,268     $  4,505,426
   Gain (loss) on foreign currency exchange               1,763            (140)            240          (1,834)          18,457
   Gain on sale of U.S. government securities                 -               -               -               -          322,659
   Unrealized loss on U.S. government securities
        available for sale                                    -               -               -             (62)         (62,832)
                                                    -----------     -----------     -----------     -----------     ------------
                                                        241,521         311,426         491,144         578,372        4,783,710
                                                    -----------     -----------     -----------     -----------     ------------
RESEARCH AND DEVELOPMENT COSTS                        1,427,676       1,808,571       2,764,006       2,759,098       18,576,776
                                                    -----------     -----------     -----------     -----------     ------------
OPERATING COSTS
   General and administration                           529,181         381,554         865,518         801,963        6,907,340
   Depreciation and amortization                         12,360           6,379          26,003          12,561          107,736
                                                    -----------     -----------     -----------     -----------     ------------
                                                        541,541         387,933         891,521         814,524        7,015,076
                                                    -----------     -----------     -----------     -----------     ------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE                       (1,727,696)     (1,885,078)     (3,164,383)     (2,995,250)     (20,808,142)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE                                          -               -               -               -           62,832
                                                    -----------     -----------     -----------     -----------     ------------
NET LOSS                                            $(1,727,696)    $(1,885,078)    $(3,164,383)    $(2,995,250)    $(20,745,310)
                                                    ===========     ===========     ===========     ===========     ============
NET LOSS PER COMMON SHARE                           $     (0.18)    $     (0.21)    $     (0.34)    $     (0.34)    $      (3.60)
                                                    ===========     ===========     ===========     ===========     ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING                                    9,355,950       9,095,892       9,355,950       8,819,267        5,765,906
                                                    ===========     ===========     ===========     ===========     ============
</TABLE>


See the accompanying notes to the Consolidated Financial Statements

                                       -3-
<PAGE>   4
DUSA PHARMACEUTICALS, INC.
(a development stage company)

CONSOLIDATED STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                               CUMULATIVE
                                                                                               PERIOD FROM
                                                                                              FEBRUARY 21,
                                                                                              1991 (DATE OF
                                                                SIX MONTHS     SIX MONTHS    INCORPORATION)
                                                                  ENDED          ENDED             TO
                                                                 JUNE 30,       JUNE 30,        JUNE 30,
                                                                   1997           1996            1997
                                                               (UNAUDITED)    (UNAUDITED)      (UNAUDITED)

<S>                                                          <C>              <C>             <C>
CASH FLOWS USED IN OPERATING ACTIVITIES
   Net loss                                                  $ (3,164,383)    $(2,995,250)    $(20,745,310)
   Adjustments to reconcile net loss to net cash used in
     operating activities
     Amortization of premiums and accretion of
        discounts on U.S. government securities
        available for sale and investment securities, net         (70,559)         (3,944)         101,985
     Depreciation and amortization                                 26,003          12,561          107,736
     Loss (gain) on foreign currency exchange                        (240)          1,834          (18,457)
     Loss (gain) on sale of U.S. government  securities
        available for sale                                              -              62         (322,659)
     Unrealized loss on U.S. government  securities
        available for sale                                              -               -           62,832
     Cumulative effect of change in accounting principle                -               -          (62,832)
     Write-off of intangible assets                                     -               -          307,519
     Compensation expense  resulting from extension of
        outstanding stock options terms                                 -               -          557,260
     Changes in other assets and liabilities impacting
        cash flows from operations:
        Accrued interest receivable                                89,181         (21,673)        (119,789)
        Other current assets                                      (40,308)        (86,665)        (118,675)
        Accounts payable                                         (273,504)        816,305          593,564
        Accrued charges                                             6,486          34,261          166,885
        License agreement obligations                                   -               -          (12,203)
                                                             ------------     -----------     ------------
NET CASH USED IN OPERATING ACTIVITIES                          (3,427,324)     (2,242,509)     (19,502,144)
                                                             ------------     -----------     ------------

CASH FLOWS PROVIDED BY (USED IN)
   INVESTING ACTIVITIES
   Advances by Draxis Health Inc.                                       -               -       (2,867,900)
   Repayment of advances by Draxis Health Inc.                          -               -        2,867,900
   Purchases of U.S. government securities available for
     sale and investment securities                            (6,636,006)     (6,742,890)     (96,733,441)
   Proceeds from maturing U.S. government securities
     available for sale and investment security                         -       3,300,000       18,410,000
   Proceeds from sale of U.S. government securities
     available for sale                                        11,485,000          99,938       65,261,118
   Intangible assets                                                    -               -         (193,022)
   Purchases of fixed assets                                      (45,582)         (7,240)        (232,818)
                                                             ------------     -----------     ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES             4,803,412      (3,350,192)     (13,488,163)
                                                             ------------     -----------     ------------
</TABLE>


                                       -4-
<PAGE>   5
DUSA PHARMACEUTICALS, INC.
(a development stage company)

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                        CUMULATIVE
                                                                                       PERIOD FROM
                                                                                       FEBRUARY 21,
                                                                                      1991 (DATE OF
                                                          SIX MONTHS    SIX MONTHS    INCORPORATION)
                                                            ENDED          ENDED            TO
                                                           JUNE 30,      JUNE 30,        JUNE 30,
                                                             1997          1996            1997
                                                         (UNAUDITED)    (UNAUDITED)    (UNAUDITED)

<S>                                                      <C>           <C>             <C>
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES
  Stock offering costs                                   $        -    $  (637,062)    $ (5,048,255)
  Issuance of common stock and underwriters' options              -      5,805,211       43,366,566
  Payment received on note receivable from director               -         14,614           68,047
  Redemption of Draxis Option                                     -              -       (2,250,000)
  Receipt of Section 16(b) common stock profits                   -              -           17,125
  Payment on license agreement obligations                        -              -         (119,215)
                                                         ----------    -----------     ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                         -      5,182,763       36,034,268
                                                         ----------    -----------     ------------
EFFECT OF EXCHANGE RATES ON CASH                                240         (1,834)          18,457
                                                         ----------    -----------     ------------
NET INCREASE (DECREASE) IN CASH                           1,376,328       (411,772)       3,062,418
CASH AT BEGINNING OF PERIOD                               1,686,090      1,197,030                -
                                                         ----------    -----------     ------------
CASH AT END OF PERIOD                                    $3,062,418    $   785,258     $  3,062,418
                                                         ==========    ===========     ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW
  INFORMATION
  Issuance of common stock for promissory note from
     Draxis Health Inc.                                                                $    150,000
                                                                                       ============
  License agreement obligations incurred in the
     acquisition of an intangible asset                                                $    131,418
                                                                                       ============
  Deferred stock offering costs offset against common
     stock                                                             $   637,062     $  5,048,255
                                                                       ===========     ============
  Note receivable from director originating upon
     exercise of options for common stock                                              $     68,047
                                                                                       ============
  Interest paid                                                                        $     12,594
                                                                                       ============
</TABLE>


There were no income tax payments made during the periods.

See the accompanying notes to the Consolidated Financial Statements

                                       -5-
<PAGE>   6
DUSA PHARMACEUTICALS, INC.
(a development stage company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.        The Consolidated Balance Sheets as of June 30, 1997, and December 31,
      1996, the Consolidated Statements of Operations for the three and six
      month periods ended June 30, 1997, and 1996 and for the period from
      February 21, 1991(date of incorporation) to June 30, 1997, and the
      Consolidated Statements of Cash Flows for the six month periods ended June
      30, 1997, and 1996 and for the period from February 21, 1991 (date of
      incorporation) to June 30, 1997, have been prepared by the Company,
      without audit. In the opinion of management, all adjustments (which
      include only normal recurring adjustments) necessary to present fairly the
      financial position, results of operations and changes in cash flows as of
      June 30, 1997, and for all periods presented have been made.

      Certain information and footnote disclosures normally included in
      financial statements prepared in accordance with generally accepted
      accounting principles have been condensed or omitted. These financial
      statements should be read in conjunction with the Company's December 31,
      1996 audited consolidated financial statements and notes thereto.

      The consolidated financial statements include the accounts of the Company
      and its wholly-owned subsidiary, DUSA Pharmaceuticals New York, Inc. All
      significant intercompany accounts have been eliminated on consolidation.
      The Company was formerly a subsidiary of Draxis Health Inc.

2.        The Company's United States government securities available for sale
      consist of securities of the United States government, and its agencies,
      with interest rates and yields ranging from 5.08% to 6.62%, and maturity
      dates ranging from August 14, 1997 to August 10, 1999.

3.        Net loss per common share is based on the weighted average number of
      shares outstanding during each period. Certain common stock issuances
      (2,200,000) were made at prices less than the initial public offering
      price. Accordingly, the associated shares are included in the calculation
      of net loss per share as if they were outstanding for the entire period.
      Stock options are not included in the computation of the weighted average
      number of shares outstanding during the period as the effect would be
      antidilutive.

4.        On February 13, 1997, the Company granted, subject to regulatory
      requirements, incentive and non-qualified stock options to one consultant
      and seven employees of the Company, to purchase 41,000 shares of common
      stock at $7.25 per share pursuant to the terms of the 1996 Omnibus Plan.
      The exercise price of such options is the closing stock market price on
      the date of grant.

      On March 13, 1997 the Company conditionally granted non-qualified stock
      options to Lumenetics, Inc., a consultant to the Company, to purchase
      100,000 shares of common stock at $6.125 per share. These options have
      been granted on the condition that the parties conclude a revised
      development agreement on certain terms and conditions. In addition, the
      Company granted stock options to a consultant to the Company, to purchase
      15,000 shares of common stock at $6.125 per share as part of a consulting
      agreement. The exercise price of such options is the closing market price
      of the Company's common stock on the date of grant.

      On June 5, 1997 at the Annual Meeting of Shareholders, the shareholders
      approved an amendment to the 1996 Omnibus Plan, providing that the stock
      options granted automatically to directors of the Company, after the date
      of adoption of the amendment, would immediately vest on the date of the
      grant. Under the

                                       -6-
<PAGE>   7
      terms of the 1996 Omnibus Plan each person who is a continuing director
      following the Annual Meeting of Shareholders automatically receives 10,000
      non-qualified stock options. Consequently on June 6, 1997 the Company
      granted a total of 50,000 non-qualified stock options to the directors to
      purchase the common stock of the Company at $6.25 per share. The exercise
      price of such options is the closing market price of the Company's common
      stock on the date of grant.

5.        The Company has entered into a series of agreements for research
      projects and clinical studies. As of June 30, 1997, future payments to be
      made pursuant to these agreements, under certain terms and conditions,
      total $1,222,228 for the remainder of 1997, and $143,125 for 1998.

6.        On August 11, 1997, the Company entered into a new lease agreement for
      larger office space in Valhalla, New York. Future minimum payments under
      the new lease will total approximately $25,600 for the remainder of 1997,
      $104,100 in 1998, $110,600 in 1999, $115,100 in 2000, $121,000 in 2001,
      and $103,400 in 2002.


                                       -7-
<PAGE>   8
ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The following discussion should be read in conjunction with the
Company's Consolidated Financial Statements and Notes to Consolidated Financial
Statements for the year ended December 31, 1996 and for the three and six-month
periods ended June 30, 1997, and June 30, 1996, respectively. The Company is a
development-stage pharmaceutical company engaged primarily in the development of
photodynamic therapy ("PDT") and photodetection ("PD") utilizing Levulan(R) for
various medical indications. The Company has raised funds through its initial
public offering of the Company's common stock in January 1992, private
placements, and public offerings in December 1995 and May 1996.

         The Company's wholly-owned subsidiary, DUSA Pharmaceuticals New York,
Inc., currently located in Tarrytown, New York, is the Company's center for its
research and development activities. This center will relocate to larger
facilities in Valhalla, New York in October, 1997 under the terms of a new
five-year lease. The Company's Tarrytown lease expired in August, 1997 and the
Company will remain in its current facility on a month-to-month basis. The
expanded facilities will comprise approximately 5,200 square feet of space.
Lease payments will total approximately $25,600 for the remainder of 1997,
$104,100 in 1998, $110,600 in 1999, $115,100 in 2000, $121,000 in 2001, and
$103,400 in 2002. The Company believes that this space will accommodate
anticipated increases in personnel and operations necessary for preparing its
regulatory submissions.

Financial Condition

          The Company's total assets were $16,707,635 as of June 30, 1997,
compared to $20,129,257 as of December 1996. The decline of assets is expected
to continue as research and development activities proceed. The current rate of
decline is within managements' expectations. As of June 30, 1997, the Company
had outstanding current liabilities of $760,449 as compared to $1,027,467 as of
December 31, 1996. The decrease in current liabilities from December 31, 1996 is
due to timing of the payment of expenses. Since its inception the Company has
had no long-term debt. The Company held United States government securities at a
fair market value of $13,264,750 as of June 30, 1997, as compared to $18,033,406
as of December 31, 1996. In the three-month period ended June 30, 1997, the
Company incurred an operational loss of $1,727,696, compared to $1,885,078 for
the three-month period ended June 30, 1996. (See "Results of Operations"). The
Company's management believes it has sufficient capital resources to proceed
with its current Levulan(R) PDT/PD development program for the Company's lead

                                       -8-
<PAGE>   9
indications, actinic keratoses, and photodetection of bladder cancer, as well as
its secondary indications, including hair removal, endometrial ablation, and
acne. There can be no assurances, however, that such funds will be sufficient to
enable the Company to obtain regulatory marketing approval or to market any
product for any of the indications currently under development. As the
development program for Levulan(R) PDT/PD continues, the Company may adjust its
priorities on how its resources are to be allocated between current indications
and new potential indications. In addition, exact allocation of the proceeds for
such purposes and timing of the expenditures will be dependent on various
factors, including the progress of the Company's research and development
programs, the results of preclinical and clinical trials, the timing of
regulatory marketing approvals, competitive developments, and the availability
of additional financing.

         The Company's Levulan(R) PDT development program is most advanced for
the treatment of actinic keratoses (AKs). The Company is in the process of
conducting two Phase III AK clinical pivotal trials, anticipated to be completed
in the third quarter of 1997. Patient enrollment for this trial was completed in
May 1997. Each patient is followed after treatment for 3 months to determine
safety and efficacy, including a re-treatment, if necessary, after 8 weeks. Once
all patients have completed the follow-up procedures under the protocol, the
data will be collected and analyzed for incorporation into DUSA's first planned
filing of a New Drug Application (NDA) to the Food and Drug Administration
(FDA), expected to occur by late 1997 or early 1998. In a Phase II study, at
certain doses of drug and light, Levulan(R) PDT cleared 90 to 100% of clinically
typical AKs of the face and scalp. Based on these results and other Phase II
data, the Company is optimistic about the outcome of the current trials.

         During the second quarter, the Company signed an agreement with Richard
Wolf Medical Instruments Corp., to collaborate on the development of DUSA's
Levulan(R) Photodetection (Levulan(R) PD) process for enhanced detection of
bladder cancer. Under the agreement, Wolf will provide, at no cost to the
Company, proprietary non-laser light sources and cystoscopes, along with
technical and regulatory support, for the Company's Phase I/II clinical trials
for this indication commencing September 1997. The agreement allows the Company
and Wolf to co-operate in the marketing of the Levulan(R) PD system for bladder
cancer detection, once the appropriate approval has been received from the FDA,
with the intention that Wolf will retain revenues from sale of the light
devices, and the Company will retain revenues from the sale of Levulan(R). The
Company also has the right under the agreement to qualify other manufacturer's
light sources and/or cystoscopes with the FDA for use in Levulan(R) PD of
bladder cancer.

         Also, during the quarter, the Company entered into a license agreement
for exclusive and non-exclusive territories to develop and market an incoherent
or non-laser light source for possible use in its endometrial

                                       -9-
<PAGE>   10
ablation clinical program. The Company paid an execution fee of pound
sterling 10,000 ($16,421), and has agreed to pay royalties on sales ranging from
1.25% to 5% depending on the patent status and territory in which sales may
occur. The agreement shall remain in effect for twelve years, or until the last
of the patent rights has expired, subject to earlier termination only for breach
or insolvency. The Company is working on a prototype device but does not
anticipate sales of such device in the near future, as the device, once
developed and tested in clinical trials, would require FDA approval.

         There are numerous other potential therapeutic and diagnostic uses for
Levulan(R) PDT/PD, and the Company continues to support research in certain of
these areas as appropriate, with pilot trials, and investigator-sponsored
studies based on clinical, regulatory and marketing criteria predetermined by
the Company. Some of the investigator-sponsored studies currently supported by
the Company include Levulan(R) PDT/PD for cervical cancer, psoriasis, alopecia
areata, and basal cell carcinomas.

         There can be no assurance that any product will be successfully
developed, prove to be safe and effective in necessary pivotal clinical trials,
or receive applicable regulatory marketing approvals. Therefore, there is no way
to predict the timing or magnitude of the revenues from the marketing of the
Company's product or whether any such revenues will be realized. The Company
may, however, enter into joint development or licensing arrangements, both
domestically and internationally, with pharmaceutical companies. The Company
continues to discuss potential strategic alliance/marketing relationship with a
number of potential partners in the field of dermatology. In order to maintain
various current and future research and development programs, it may be
desirable or necessary in the future to raise additional funds through
financing, corporate alliances or other sources.

         The Company may also acquire, by license, purchase or other
arrangement, businesses, technologies, or products that enhance or expand the
Company's business.

Results of Operations

         The Company has had no sales to date. Interest income, earned primarily
on United States government securities, decreased to $239,758 for the
three-month period ended June 30, 1997, as compared to $311,566 for the
three-month period ended June 30, 1996, as the Company continues to expend funds
for ongoing research and development. This trend is expected to continue
throughout the Company's development stage. Interest income for the cumulative
period from February 21, 1991 (date of incorporation) to June 30, 1997 was
$4,505,426.


                                      -10-
<PAGE>   11
         Research and development costs for the three-month period ended June
30, 1997, were $1,427,676 down from $1,808,571 for the three-month period ended
June 30, 1996, primarily due to the significant preclinical expenditures on
Levulan(R) PD for bladder cancer which were incurred in the prior year. Research
and development costs are expected to increase, as scheduled, with the
increasing number of clinical studies and the hiring of additional research and
development personnel as necessary. Total research and development costs for the
cumulative period from February 21, 1991 (date of incorporation) to June 30,
1997 were $18,576,776. Costs and development fees associated with all agreements
for research projects and clinical studies commit the Company to make payments
of $1,222,228, for the remainder of 1997.

         Operating expenses were $541,541 and $387,933, respectively, for the
three-month periods ended June 30, 1997, and June 30, 1996. The increase in
operating expenses is due to hiring of additional personnel and expenses
incurred by the Company as a result of its relocation to new executive offices
in Toronto. Operating expenses are expected to increase in the future, as the
Company continues to hire additional financial and administrative personnel, as
required. The Company also expects to hire additional personnel at its research
and development offices in New York.

         The Company incurred a net loss of $3,164,383, or $0.34 per share, for
the six-month period ended June 30, 1997, as compared to a net loss of
$2,995,250, or $0.34 per share, for the six-month period ended June 30, 1996.
Net losses for the cumulative period from February 21, 1991 (date of
incorporation) to June 30, 1997 were $20,745,310, or $3.60 per share. Such
losses are consistent with the Company's expectations and the Company
anticipates that losses will continue throughout the development stage.

Liquidity and Capital Resources

         The Company's United States government securities available for sale
have an aggregate cost of $13,282,997 and a current aggregate market value of
$13,264,750 as of June 30, 1997, resulting in a net unrealized loss on
securities available for sale of $18,247, the provision for which has been
charged to shareholders' equity. The decline in the market value of the
Company's government securities was the result of fluctuating interest rates in
the United States from the time these securities were acquired. Some losses
could be realized, depending upon the timing of the Company's need to convert
government securities into cash to meet its working capital requirements. The
Company's securities currently have interest rates and yields ranging from 5.08%
to 6.62%, and maturity dates ranging from August 14, 1997 to August 10, 1999.
The Company believes it has sufficient capital resources to proceed with its
current development program for Levulan(R) PDT/ PD. Management is focusing
initial pivotal clinical trials on a

                                      -11-
<PAGE>   12
limited number of indications to enhance the Company's ability to complete the
regulatory process, but full development and testing of all potential
indications which are currently under development would require additional
funding (see "Financial Condition"). The Company has invested its funds in
liquid investments, so that it will have ready access to its cash reserves, as
needed, for the funding of its development plans on a short-term and long-term
basis.

         The foregoing Management Discussion and Analysis contains various
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1993 which represent the Company's expectations or beliefs concerning
future events, including, but not limited to statements regarding management's
expectations of regulatory approval and the commencement of sales, and the
sufficiency of the Company's cash flow for the Company's future liquidity and
capital resource needs. These forward-looking statements are further qualified
by important factors that could cause actual results to differ materially from
those in the forward-looking statements. These factors include, without
limitation, changing market conditions, availability of suitable light sources,
clinical results of its trials, the impact of competitive products and pricing,
and the timely development, FDA approval and market acceptance of the Company's
products, none of which can be assured. Results actually achieved may differ
materially from expected results included in these statements as a result of
these or other factors.

Inflation

         Although inflation rates have been comparatively low in recent years,
inflation is expected to apply upward pressure on the operating costs of the
Company. The Company has included an inflation factor in its cost estimates,
however, the overall net effect of inflation on the operations of the Company
should be minimal.

Effect of United States Statement of Financial Accounting Standards (SFAS)
Nos.130 and 131

         In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income". The Statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This Statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This Statement
requires that the Company (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a statement of financial position. The

                                      -12-
<PAGE>   13
Statement is effective for the Company's financial statements as of December 31,
1998.

         In June 1997, the FASB issued SFAS No. 131 "Disclosure About Segments
of an Enterprise and Related Information". The Statement establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and, major customers.
The Statement is effective for the Company's financial statements as of December
31, 1998.

         The Company does not anticipate that the implementation of these
Statements will have a material impact on the consolidated financial statements.


                                      -13-
<PAGE>   14
                           PART II- OTHER INFORMATION

Item 1-3.

      None.

Item 4.   Submission of Matters to a vote of Security Holders

      Matters submitted to a vote of security holders of the Corporation at the
      Annual Meeting of Shareholders held June 5, 1997 included (1) the election
      of five (5) directors; (2) ratification of the selection of Deloitte and
      Touche LLP as the independent auditors for the Corporation for 1997; (3)
      ratification of amendments to the 1996 Omnibus Plan.

(1)   The following persons were elected to serve as directors of the
      Corporation:

<TABLE>
<CAPTION>

                                                                 Broker
                              For          Against   Abstained  non-votes
                        --------------------------------------------------
<S>                        <C>             <C>       <C>        <C>
Dr. Geoffrey Shulman       7,304,547        9,876        0         0
Dr. John H. Abeles         7,304,647        9,776        0         0
James P. Doherty           7,304,647        9,776        0         0
Richard C. Lufkin          7,304,647        9,776        0         0
Jay Haft                   7,304,547        9,876        0         0
</TABLE>

(2)   Shareholders ratified the selection of Deloitte & Touche LLP as the
      independent auditors for the Corporation for 1996 as follows:


       Votes cast for                           7,289,844
       Vote cast against                           19,042
       Abstained                                    5,537
       Broker non-votes                                 0

(3)   Shareholders ratified amendments to the 1996 Omnibus Plan as follows:


       Votes cast for                           3,388,403
       Vote cast against                          549,267
       Abstained                                   74,586
       Broker non-votes                         3,302,168


                                      -14-
<PAGE>   15
Item 5.

      None

Item 6. Exhibits.

   a) Exhibits 27 - Financial Data Schedule, which is submitted electronically
      to the Securities and Exchange Commission for information only and not
      filed.


                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
      registrant has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.




                                         DUSA PHARMACEUTICALS, INC.



                                         /S/ D. GEOFFREY SHULMAN
                                         --------------------------------------
DATE: AUGUST 12, 1997                BY: D. GEOFFREY SHULMAN, MD, FRCPC
                                         PRESIDENT, CHIEF EXECUTIVE OFFICER AND
                                         CHIEF FINANCIAL OFFICER


                                      -15-
<PAGE>   16
                                  EXHIBIT INDEX


 Exhibit No.                           Description
    27            Financial Data schedule, which is submitted electronically to
                  the Securities and Exchange Commission for information only
                  and not filed.



                                      -16-