<PAGE>
                                    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     March  31, 2002
                                         -----------------------

                                     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.)


                                 25 Upton Drive
                         Wilmington, Massachusetts 01887
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (978) 657-7500
              (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.

                       13,865,390 shares as of May 9, 2002

<PAGE>


PART 1.
ITEM 1.  FINANCIAL STATEMENTS

DUSA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                  MARCH 31,      DECEMBER 31,
                                                                                    2002             2001
                                                                                 (Unaudited)
                                                                                ------------     ------------
<S>                                                                             <C>              <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                    $  2,945,193     $  7,568,500
   United States government securities                                            56,429,372       57,141,125
   Accrued interest receivable                                                       783,300          923,459
   Accounts receivable                                                               191,473          121,280
   Receivable under co-development program                                           779,137          864,534
   Inventory                                                                       2,224,785        2,333,080
   Other current assets                                                            1,423,429        1,254,950
                                                                                ------------     ------------
      TOTAL CURRENT ASSETS                                                        64,776,689       70,206,928
   Property and equipment, net                                                     4,580,362        3,384,286
   Deferred charges                                                                1,378,770        1,593,708
   Deferred royalty                                                                  664,206          679,299
                                                                                ------------     ------------
TOTAL ASSETS                                                                    $ 71,400,027     $ 75,864,221
                                                                                ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                             $    854,643     $    314,889
   Accrued payroll                                                                   189,643          681,190
   Other accrued expenses                                                          1,703,008        1,718,293
   Deferred revenue                                                                  149,074          273,358
   Due to licensor                                                                    15,774           62,792
                                                                                ------------     ------------
     TOTAL CURRENT LIABILITIES                                                     2,912,142        3,050,522
   Deferred revenue                                                               21,816,664       22,312,498
   Other deferred reimbursement                                                      499,996          666,664
                                                                                ------------     ------------
TOTAL LIABILITIES                                                                 25,228,802       26,029,684
                                                                                ------------     ------------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
SHAREHOLDERS' EQUITY
   Capital Stock
      Authorized: 100,000,000 shares; 40,000,000 shares designated as common
      stock, no par, and 60,000,000 shares issuable in series or classes
      Issued and outstanding: 13,865,390 (2001: 13,865,390) shares of common
      stock, no par                                                               95,440,561       95,440,561
   Additional paid-in capital                                                      2,015,586        2,015,586
   Accumulated deficit                                                           (52,712,996)     (49,845,445)
   Accumulated other comprehensive income                                          1,428,074        2,223,835
                                                                                ------------     ------------
TOTAL SHAREHOLDERS' EQUITY                                                        46,171,225       49,834,537
                                                                                ------------     ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $ 71,400,027     $ 75,864,221
                                                                                ============     ============
</TABLE>


See the accompanying Notes to the Condensed Consolidated Financial Statements.


                                       2
<PAGE>
DUSA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            Three Months       Three Months
                                                           Ended March 31,    Ended March 31,
                                                                2002               2001
                                                            (Unaudited)        (Unaudited)
                                                           ---------------    ---------------
<S>                                                         <C>               <C>
REVENUES
   Product sales and rental income                           $     50,527      $    213,961
   Research grant and milestone revenue                           495,834           495,834
   Research revenue earned under collaborative agreement          779,137           480,165
                                                             ------------      ------------
TOTAL REVENUES                                                  1,325,498         1,189,960
                                                             ------------      ------------
OPERATING COSTS
   Cost of product sales and royalties                            678,769           655,029
   Research and development                                     3,281,724         1,826,828
   General and administrative                                   1,006,975         1,062,941
                                                             ------------      ------------
TOTAL OPERATING COSTS                                           4,967,468         3,544,798
                                                             ------------      ------------
LOSS FROM OPERATIONS                                           (3,641,970)       (2,354,838)
                                                             ------------      ------------

OTHER INCOME
   Interest income                                                774,419         1,102,778
                                                             ------------      ------------
NET LOSS                                                     $ (2,867,551)     $ (1,252,060)
                                                             ============      ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE                  $       (.21)     $       (.09)
                                                             ============      ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING           13,865,390        13,746,982
                                                             ============      ============
</TABLE>



See the accompanying Notes to the Condensed Consolidated Financial Statements.


                                       3
<PAGE>
DUSA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                      Three Months Ended March 31,
                                                                                     ------------------------------
                                                                                          2002              2001
                                                                                      (Unaudited)       (Unaudited)
                                                                                     ------------      ------------
<S>                                                                                  <C>               <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
   Net loss                                                                          $ (2,867,551)     $ (1,252,060)
   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, net                                                    72,524          (104,142)
   Depreciation and amortization expense                                                  441,935           196,660
   Amortization of deferred revenue                                                      (495,834)         (495,834)
   Changes in other assets and liabilities impacting cash flows from operations:
     Accrued interest receivable                                                          140,159           121,449
     Accounts receivable                                                                  (70,193)          503,497
     Receivable under co-development program                                               85,397          (480,165)
     Inventory                                                                            108,295          (496,305)
     Deferred charges                                                                    (100,000)               --
     Other current assets                                                                (168,479)         (556,264)
     Accounts payable                                                                     539,754           432,117
     Accrued payroll and other accrued expenses                                          (506,832)         (979,019)
     Due to licensor                                                                      (47,018)         (417,004)
     Deferred revenue                                                                    (124,284)          186,175
                                                                                     ------------      ------------
NET CASH USED IN OPERATING ACTIVITIES                                                  (2,992,127)       (3,340,895)
                                                                                     ------------      ------------

CASH FLOWS USED IN INVESTING ACTIVITIES
   Purchases of United States government securities                                    (5,075,100)       (8,261,923)
   Proceeds from maturing United States government securities                           4,918,568         5,999,063
   Purchases of property and equipment                                                 (1,474,648)         (646,997)
   Deposits on equipment                                                                       --          (186,858)
                                                                                     ------------      ------------
NET CASH USED IN INVESTING ACTIVITIES                                                  (1,631,180)       (3,096,715)
                                                                                     ------------      ------------
 CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
     Proceeds from exercise of options and warrants                                            --           198,821
                                                                                     ------------      ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                                      --           198,821
                                                                                     ------------      ------------
NET DECREASE IN CASH                                                                   (4,623,307)       (6,238,789)
                                                                                     ------------      ------------
CASH AT BEGINNING OF PERIOD                                                             7,568,500        16,441,114
                                                                                     ------------      ------------
CASH AT END OF PERIOD                                                                $  2,945,193      $ 10,202,325
                                                                                     ============      ============
</TABLE>


See the accompanying Notes to the Condensed Consolidated Financial Statements.


                                       4
<PAGE>
DUSA PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1)   BASIS OF PRESENTATION

     The Condensed Consolidated Balance Sheet as of March 31, 2002, Condensed
Consolidated Statements of Operations for the three months ended March 31, 2002
and 2001, and Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2002 and 2001 have been prepared in accordance with
accounting principles generally accepted in the United States of America. These
condensed consolidated financial statements are unaudited but include all normal
recurring adjustments which the management of DUSA Pharmaceuticals, Inc. ("DUSA"
or the "Company") believes to be necessary for fair presentation of the periods
presented.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. These condensed
financial statements should be read in conjunction with the Company's December
31, 2001 audited consolidated financial statements and notes thereto.

2)   PRINCIPLES OF CONSOLIDATION

     The Company's condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, DUSA Pharmaceuticals
New York, Inc., which was formed on March 3, 1994 to be the research and
development center for the Company. All intercompany balances and transactions
have been eliminated.

3)   UNITED STATES GOVERNMENT SECURITIES AVAILABLE FOR SALE

     The Company's United States government securities available for sale
consist of securities of the United States government and its agencies, with
current yields, as of March 31, 2002, ranging from 4.14% to 7.13% and maturity
dates ranging from April 30, 2002 to January 3, 2007.

     Accumulated other comprehensive income consists of net unrealized gains or
losses on United States government securities available for sale, which is
reported as part of shareholders' equity in the Condensed Consolidated Balance
Sheets.


                                       5
<PAGE>

4)   INVENTORY

     Inventory consisted of the following:
<TABLE>
<CAPTION>


                                MARCH 31, 2002    DECEMBER 31,
                                  (UNAUDITED)         2001
                                --------------    ------------
<S>                               <C>              <C>
     Finished goods               $1,822,584       $2,013,799
     Raw materials                   402,201          319,281
                                  ----------       ----------
                                  $2,224,785       $2,333,080
                                  ==========       ==========
</TABLE>


5)   OTHER CURRENT ASSETS

     Other current assets consisted of the following:
<TABLE>
<CAPTION>
                                                               MARCH 31, 2002     DECEMBER 31,
                                                                  (UNAUDITED)          2001
                                                               --------------     ------------
<S>                                                                <C>               <C>
     Prepaid expenses and deposits                                 $533,434          $447,520
     Commercial light sources under lease or rental                 847,502           764,025
     Other current assets                                            42,493            43,405
                                                                 ----------        ----------
                                                                 $1,423,429        $1,254,950
                                                                 ==========        ==========
</TABLE>


6)   DEFERRED CHARGES AND ROYALTIES

     Deferred charges and royalties, which include costs paid in advance to
third parties under various agreements, are being amortized on a straight-line
basis over their expected terms (1 1/2 - 12 years).

     Deferred charges, which are being amortized over 18 months and 4 1/2 years,
respectively, are as follows:
<TABLE>
<CAPTION>
                                                               MARCH 31, 2002        DECEMBER 31,
                                                                 (UNAUDITED)             2001
                                                               --------------        ------------
<S>                                                               <C>                  <C>
     Facilities underutilization costs                            $774,998             $933,333
     Facilities reimbursement costs                                603,772              660,375
                                                                ----------           ----------
                                                                $1,378,770           $1,593,708
                                                                ==========           ==========
</TABLE>


       Prepaid royalties to PARTEQ are being amortized over 12 1/2 years.


                                       6
<PAGE>

DUSA PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

7)   DEFERRED REVENUE

     Deferred revenue associated with the Company's milestone payments,
unrestricted research grants, and the sale of commercial light sources consisted
of the following:
<TABLE>
<CAPTION>
                                                               MARCH 31, 2002         DECEMBER 31,
                                                                 (UNAUDITED)             2001
                                                               --------------         ------------
<S>                                                              <C>                  <C>
       Milestone and unrestricted grant payments                 $21,816,664          $22,312,498
       Sale of commercial light sources                              149,074              273,358
                                                                 -----------          -----------
                                                                 $21,965,738          $22,585,856
                                                                 ===========          ===========
</TABLE>


8)   SHAREHOLDERS' EQUITY

     On January 17, 2002, the Company extended the term of 300,000 Class B
warrants from January 29, 2002 to January 29, 2007 that were issued to the Chief
Executive Officer of the Company. 50,000 of the Class B warrants lapsed.


9)   BASIC AND DILUTED NET LOSS PER SHARE

     Basic net loss per common share is based on the weighted average number of
shares outstanding during each period. Stock options and warrants are not
included in the computation of the weighted average number of shares outstanding
for dilutive net loss per common share during each of the periods presented in
the Statements of Operations, as the effect would be antidilutive. For the three
months ended March 31, 2002, and 2001, stock options and warrants totaling
approximately 2,486,000, and 2,449,000 shares, respectively, have been excluded
from the computation of diluted net loss per share.


                                       7
<PAGE>
DUSA PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

10)  COMPREHENSIVE LOSS

     For the three months ended March 31, 2002 and 2001, comprehensive loss
consisted of the following:
<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                        March 31, (Unaudited)
                                                    ----------------------------
                                                        2002             2001
                                                    -----------      -----------
<S>                                                 <C>              <C>
     NET LOSS                                       $(2,867,551)     $(1,252,060)
        Net unrealized gains (losses) on United
           States securities available for sale        (795,761)         573,066
                                                    -----------      -----------
COMPREHENSIVE LOSS                                  $(3,663,312)     $  (678,994)
                                                    ===========      ===========
</TABLE>


11)  COMMITMENTS AND CONTINGENCIES

     Kerastick(R) Manufacturing Line - Following the amendments to the Company's
agreement with North Safety Products, Inc. that will lead to the expiration of
the Company's current Kerastick(R) manufacturing arrangement on or before June
30, 2003, and the Company's commitment to Schering AG through its Marketing,
Development and Supply Agreement, as amended, the Company commenced the
construction of a Kerastick(R) manufacturing facility at its Wilmington office.
Construction started in January 2002, and is expected to be completed during
2002. As of March 31, 2002, the Company has expended $1,682,000 for certain
equipment, construction and pre-construction activities, which have been
classified as construction work-in-progress in property and equipment in the
Consolidated Balance Sheet.

     Legal Matters - On April 12, 2002, the Company received notice that one of
the patents licensed to the Company by PARTEQ Research & Development
Innovations, the technology transfer arm of Queen's University at Kingston,
Ontario is being challenged by PhotoCure ASA. PhotoCure ASA has filed a lawsuit
in Australia alleging that Australian Patent No. 624985, which is one of the
patents relating to the Company's 5-aminolevulinic acid technology, is invalid.
DUSA is evaluating the situation with Queen's and PARTEQ, as PARTEQ has an
obligation to diligently maintain its patents under its license agreement with
DUSA.


12)  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment of Disposal of Long-lived Assets." This statement supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived


                                       8
<PAGE>
DUSA PHARMACEUTICALS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

Assets to Be Disposed Of." SFAS 144 establishes a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be disposed
of by sale, and resolves implementation issues related to SFAS 121. SFAS No. 144
is effective for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. On January 1, 2002, the Company adopted this
statement, which had no effect on its financial position or results of
operations.

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
SFAS No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after September 30, 2001 and that the use of the
pooling-of-interest method is no longer permitted. SFAS No. 142 requires that
upon adoption, amortization of goodwill will cease and instead, the carrying
value of goodwill will be evaluated for impairment on an annual basis.
Identifiable intangible assets will continue to be amortized over their useful
lives and reviewed for impairment in accordance with SFAS No. 121. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001. On January 1,
2002, the Company adopted these statements, which had no effect on its financial
position or results of operations.


13)  SUBSEQUENT EVENTS

     Manufacturing Facilities Loan - On May 13, 2002, the Company entered into a
commercial loan agreement to borrow up to $2,700,000 under a secured term loan
promissory note ("Note") with Citizens Bank of Massachusetts to fund the
construction of its manufacturing facility. Until June 30, 2002, the Note will
bear interest at the bank's prime commercial lending rate. At that time, DUSA,
at its option, may select a fixed rate or a rate at the LIBOR interest rate plus
1 3/4%, for varying periods. At the end of such LIBOR rate period, DUSA may
select the then current LIBOR rate or convert, one time only, to a fixed rate
loan at any time during the first year of the term. The Company must borrow on
this financing instrument by June 30, 2002 and will make monthly principal plus
interest payments on this instrument, with the final principal and interest
payment due on June 30, 2009. Certain of its United States Government Securities
secure the loan.

     Third-party Leasing Agreement - On April 18, 2002, the Company engaged
Auric Capital Corp., a leasing company, to complete the rental transactions of
its BLU-U(R) brand light source to physicians, including coordinating payment
plans with the physicians. DUSA will sell the BLU-U(R) to the leasing company,
and will be paid for the units by the leasing company after the renter makes its
initial rental payment. The leasing company will rent the BLU-U(R) to physicians
for a 36-month period with payments by the physician deferred until the seventh
month of the term. Revenues and costs from BLU-U(R) rentals will be recognized
over the last 30 months of the rental period. In the event a physician does
cancel a rental agreement, DUSA has agreed to repurchase the unit from the
leasing company at an agreed upon price.

                                       9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

     The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements for the year ended December 31, 2001 and its Condensed Consolidated
Financial Statements and Notes to the Condensed Consolidated Financial
Statements for the three month periods ended March 31, 2002 and 2001. DUSA is
engaged primarily in the research and development, and commercialization of a
drug named 5-aminolevulinic acid, or ALA, used in combination with appropriate
light devices in order to detect or treat a variety of medical conditions. The
trademark for our brand of ALA is Levulan(R). When Levulan(R) is used and is
followed with exposure to light to produce a therapeutic effect, the technology
is called photodynamic therapy, or PDT. When Levulan(R) is used and followed
with exposure to light to detect medical conditions, the technology is called
photodetection, or PD. Our first products, which were launched in September 2000
in the United States, are Levulan(R) 20% topical solution using our Kerastick(R)
brand applicator, and our BLU-U(R) brand light source, producing photodynamic
therapy for treatment of non-hyperkeratotic actinic keratoses (AKs) of the face
or scalp.

     We have devoted substantial resources to funding research and development
in order to advance the Levulan(R) PDT/PD technology platform, and as a result,
have experienced significant operating losses. As of March 31, 2002, we had an
accumulated deficit of approximately $52,713,000. Achieving our goal of becoming
a profitable operating company is dependent upon the market penetration of our
products in the United States by Schering AG, our worldwide dermatology
marketing partner (except Canada), and Berlex Laboratories, Inc. (Berlex), the
United States affiliate of Schering AG, acceptance of our therapy by the medical
and consumer constituencies, and our ability to develop and/or acquire new
products. As of March 31, 2002, 328 BLU-U(R) brand light units were in place, an
increase of 33 units as compared to the end of 2001. We primarily rent or lease
the BLU-U(R) to physicians, medical institutions and academic centers throughout
the country. Berlex has advised us that during this quarter, end-user
Kerastick(R) sales totaled 1800, similar to the average quarterly sales during
2001, but lower than the 2448 units sold to end-users in the fourth quarter of
2001.

     Up to this point, market acceptance has unfortunately been far below our
original expectations. Although we have been encouraged by positive responses
from many physicians and patients who have used our therapy, we recognize that
the therapy has not yet been widely accepted as a routine therapy for AKs. At
this time, Berlex is continuing to market the therapy, but we cannot determine
when, or if, significant sales increases will occur. Under our Marketing,
Development and Supply Agreement with Schering AG, dated November 1999, Schering
AG has the right to terminate the agreement on twelve (12) months prior written
notice, which it could exercise at any time. Should Schering AG decide to
terminate the agreement, DUSA would have to market the products itself or enter
into arrangements with other third parties at significant expense. In addition,
if Schering AG should decide to terminate the agreement, DUSA would


                                       10
<PAGE>
have to evaluate certain items on its Consolidated Balance Sheets for
impairment including inventories, commercial light sources under lease or
rental, and deferred charges and royalties, as well as any unamortized deferred
revenue related to previously received milestone payments received under the
agreement (See Note 7 to the Company's Notes to the Consolidated Condensed
Financial Statements.) Furthermore, if Schering AG fails to adequately fund
marketing efforts or develop, train and manage a sufficiently large sales
force, the demand for our product would be limited and our royalties from
Schering AG on sales of the Kerastick(R), our income from our light device, and
our revenue on supply fees on the Kerastick(R) would be adversely affected
until we substituted other marketing initiatives. Under our agreement with
Schering AG, Schering AG has an obligation to launch the Kerastick(R) in Brazil
where regulatory approval was granted in March 2002 within certain time
parameters. Regulatory approval of the BLU-U(R) in Brazil is pending. Schering
AG has informed DUSA that its launch date will be dependent upon sales progress
in the United States, and will not be made before its 2003 marketing budget is
determined in the fall of 2002. Should Schering AG not launch the product
within the time frame provided for in our agreement, the rights to market the
product in Brazil would revert to DUSA.

     We expect to continue to incur operating losses as we continue to invest in
our research and development programs and until product sales increase
significantly. DUSA's research and development efforts are continuing, both in
dermatology (in partnership with Schering AG), and in our internal indication
development program for Barrett's esophagus dysplasia. As of March 31, 2002, our
staff included 56 full-time employees as compared to 55 at the end of 2001, in
support of all activities including production, maintenance, customer support,
and financial operations for our products, as well as the research and
development programs for dermatology and internal indications. While our
financial position is strong, DUSA cannot predict when royalties and supply fees
that we are entitled to under our Schering AG agreement, along with interest
and/or other income, may offset the cost of these efforts.

     On January 11, 2002, we paid $100,000 to National Biological Corporation
("NBC"), the manufacturer of our BLU-U(R) light source, to compensate NBC to
cover certain overhead costs. We had previously agreed to reimburse NBC for such
costs if we did not ordered a certain number of BLU-U(R) brand units by January
2, 2002 for delivery in 2002. In consideration for this payment, NBC agreed to
maintain its BLU-U(R) manufacturing capabilities in a state of readiness during
2002 with the capability of producing BLU-U(R) units in accordance with
established procedures. DUSA has reported the payment in deferred charges, which
is being recognized in cost of product sales on a straight-line basis during
2002.

     In July 2001, we revised our agreement with our Kerastick(R) manufacturer,
North Safety Products ("North"), covering the period from the execution of this
amendment through December 31, 2002. In accordance with this amendment, we paid
North $1,200,000 in up-front underutilization fees during 2001, and have agreed
to make additional payments totaling $200,000 in 2002. DUSA has reported the
total commitment of $1,400,000 in deferred charges, which is being recognized in
cost of product sales on a straight-line basis over the term of the amendment.
In consideration for the underutilization fees, North has agreed to maintain its
Kerastick(R) manufacturing capabilities in a state of readiness through December
31, 2002, with the capability of producing at least 25,000 Kerastick(R) units
per month in accordance with established procedures. The term of the agreement

                                       11
<PAGE>

ends on December 31, 2002 unless DUSA exercises an option to extend the term
through June 30, 2003. If DUSA should decide to extend the term, North will be
entitled to payment of additional underutilization fees of up to $500,000,
prorated based on the level of Kerastick(R) units produced from July 1, 2001
through June 30, 2003. The Company has not determined if we will need to extend
the term of this agreement.

     In September 2001, in accordance with an amendment to our agreement with
Schering AG, Schering AG reimbursed DUSA $1,000,000 of the costs incurred to
modify our manufacturing agreement with North. This amount has been reported in
deferred liabilities and is being recognized as an offset to cost of product
sales on a straight-line basis over the term of the agreement with North.

     We incur certain fixed costs resulting in under-absorbed overhead, which
are included in cost of product sales. We expect that the development of our own
facility will enable us to better manage and control the costs of production;
however, our unit cost per Kerastick(R) will initially increase as compared to
our unit cost under our agreement with North, until product sales increase
significantly. DUSA commenced the construction of its Kerastick(R) manufacturing
facility during January 2002. The cost to build and complete testing of such
manufacturing capabilities, including equipment, is estimated to be
approximately $2,700,000. This cost also includes all costs of calibration,
validation testing and equipment, and any related FDA fees. As of March 31,
2002, the Company has expended $1,682,000 for certain equipment, construction
and pre-construction activities. The initial build-out is expected to be
completed by mid-2002, followed by facility and drug stability testing, which is
expected to take approximately six months. FDA inspection is expected to occur
within six months following the construction and testing stages, or
approximately eighteen (18) months from the start of the construction process.
This new facility will serve to replace our current Kerastick(R) manufacturer.

RESULTS OF OPERATIONS

     Revenues - Revenues recognized for the three-month period ended March 31,
2002 were $1,325,000 as compared to $1,190,000 for the comparable period in
2001. Of these amounts, we earned significantly more research and development
revenue of $779,000 from Schering AG during the current three-month period as
compared to $480,000 in the comparable period in 2001 as our dermatology
co-development expenses were higher. Total revenues for both the current and
prior three-month periods include amortization of up-front milestone and
unrestricted grant payments of $496,000 from Schering AG.

     Also included in revenues during the current three-month period were
product sales of $51,000, as compared to $214,000 in the prior year period.
Product sales for the current period included royalty revenues of $28,000 earned
by DUSA for Kerastick(R) sales by Berlex to its distributor, and rental income
on BLU-U(R) units of $19,000. There were no direct sales of the Kerastick(R) to
Berlex during the current three-month period. Product sales for the three months
ended March 31, 2001 included $201,000 of direct sales of the Kerastick(R) to
Berlex, and rental income on BLU-U(R) units of $10,000. There were minimal
Kerastick(R) sales by Berlex to its

                                       12
<PAGE>

distributor for the quarter ended March 31, 2001. Based on Berlex's current
forecast, we have met Berlex's Kerastick(R) supply needs through 2002 and do not
expect any direct Kerastick(R) sales until demand for our product increases or
the current inventory expires.

     Under a BLU-U(R) marketing program launched in September 2001, revenues and
costs from BLU-U(R) rentals will be recognized over the last 30 months of the
36-month term of the rental agreement. Under our previous marketing program, we
sold the BLU-U(R) to a medical device leasing company. We then engaged the
leasing company to complete the leasing and/or rental transactions, including
coordinating payment plans with the physicians. The leasing company had been
paying us for the units within 30 days after installation in the physicians'
offices. DUSA, Berlex and the leasing company will continue to support customers
that remain on this initial program; however, the majority of such customers
have converted to the new program. Under the original program, physicians have
the right to cancel their leases after periods of up to one year. Therefore,
payments received by DUSA upon sale of the BLU-U(R) to the original leasing
company are reported as deferred revenues until the physician's right to cancel
the lease has expired. Revenues and costs totaling $149,000 and $106,000,
respectively, related to the initial program have remained deferred as we
anticipate a complete transition away from the initial program. As of March 31,
2002, there were 328 BLU-U(R) units installed in physicians' offices of which
the majority, 263, are under the new marketing program with 114 customers having
converted from the initial program to the new program. 51 units leased or rented
by physicians remain under the initial program, and 14 units are in the field
based on direct sales and demonstration units. The converted units have been
repurchased from the leasing company and the corresponding deferred revenue and
cost has been reversed from the financial statements. Under the current program,
DUSA will sell the BLU-U(R) to the leasing company, and will be paid for the
units by the leasing company after the renter makes its initial rental payment.
The leasing company will rent the BLU-U(R) to physicians for a 36-month period
with payments by the physician deferred until the seventh month of the term. In
the event a physician does cancel a rental agreement, DUSA has agreed to
repurchase the unit from the leasing company at an agreed upon price. As of
March 31, 2002, a total of 63 units have been returned to DUSA since the product
launch in September 2000.

     Cost of Product Sales and royalties - Cost of product sales and royalties
for the current three-month period ended March 31, 2002 were $679,000 as
compared to $655,000 for the same period in 2001. The current three-month period
included internal operations costs of $304,000 for resources assigned to support
product, $54,000 incurred to ship and install the BLU-U(R) in physicians
offices, $16,000 in royalty and supply fees due to DUSA's licensor, $56,000 in
amortization of deferred charges, and $4,000 in depreciation on BLU-U(R) rental
units. The current period also included a reserve of $100,000 on BLU-U(R)
inventory as we assess the carrying value of such inventories based on current
and projected levels of placement. Also included in the current three-month
period is $92,000 in net underutilization costs due to current orders falling
below certain previously anticipated levels. As anticipated and previously
reported, there were no product sales to Berlex in the current three-month
period. The comparable prior-year period included $201,000 in direct
Kerastick(R) related product costs, $204,000 in underutilization costs, $56,000
in amortization of deferred charges, $48,000 in costs incurred for shipping and
installing the BLU-U(R) in physicians offices, and personnel costs of $176,000
assigned to support product.

                                       13
<PAGE>

     The higher cost of product sales and royalties as compared to revenues from
product sales is a result of the lower than anticipated level of Kerastick(R)
sales, coupled with overhead attributed to the payment of underutilization costs
to our Kerastick(R) supplier, as noted above, and the allocation of personnel to
product sales operations. Management expects that such costs per unit will
initially increase in our own facility but would be covered by product revenue
if the level of Kerastick(R) sales significantly increases, which is dependent
upon the market penetration of our products.

     Inventory costs related to the BLU-U(R) commercial light sources under
rental or lease are deferred and recorded in other current assets until the
BLU-U(R) is no longer returnable to DUSA by the physician, which is one year
under the initial marketing program. Under the new marketing program, the
BLU-U(R) is rented to physicians and returnable at any point during the rental
period. The costs of BLU-U(R) inventory under the new program will be recognized
over the last 30 months of the term of the rental. As of March 31, 2002 and
December 31, 2001, deferred inventory costs were approximately $848,000 and
$764,000, respectively.

     Research and Development Costs - Total research and development costs for
the three-month period ended March 31, 2002 were $3,282,000, as compared to
$1,827,000 for the three-month period ended March 31, 2001. This increase was
mainly attributed to higher third-party expenditures in support of FDA mandated
Phase IV clinical studies of our existing product, demonstrating feasibility in
other dermatological indications; as well as, to fund our research and
development efforts on various internal indications.

     In the dermatology pipeline, a recent review of interim data from DUSA's
Phase I/II clinical study using Levulan(R) PDT in the treatment of persistent
plantar warts showed encouraging results. In warts treated with Levulan(R) PDT,
52% of lesions showed a greater than 50% reduction in surface area at 16 weeks
follow-up, vs. 33% of the vehicle and light treated lesions. Although the final
data will not be available until later this year, and this study was not
designed to be statistically significant, DUSA believes that this data, combined
with published independent results, is sufficient to justify continued
development of this indication. Further development plans will not be finalized
until this fall when the full results are available. Initial results from the
Phase I/II onychomycosis (nail fungus) study are also expected this fall.

     DUSA also intends to start a study in the near future to explore the
application of Levulan(R) PDT using the Kerastick(R) and the BLU-U(R) for the
treatment of actinic keratosis over the entire face, whereas the currently
approved indication only allows application to scattered individual lesions. We
believe that full development and approval of this indication, which we term
Broad Area AKs (BAAKs), could enhance the usefulness of the therapy.

     DUSA has also been conducting Phase I/II studies in the treatment of
high-grade and low-grade dysplasia associated with Barrett's esophagus, and
preliminary analyses are currently underway. These results, when available, will
be used to consider future development.

                                       14
<PAGE>

     General and Administrative Costs - General and administration expenses for
the current three-month period were $1,007,000, as compared to $1,063,000 for
the same period in 2001. General and administrative costs are expected to remain
stable for the remaining 2002 periods as compared to 2001 as staffing levels for
these functions have been established.

     Interest Income - Interest income for the three-month period ended March
31, 2002 decreased approximately $329,000, to $774,000, as compared to
$1,103,000 for the same period in 2001. This decrease is mainly attributed to
lower investable cash balances as we used cash in support of DUSA's operating
activities and the development of our new Kerastick(R) manufacturing facility,
and due to lower yields. Interest income will continue to decline as our
investable cash balances are reduced to support DUSA's operating activities.

     Net Losses - The Company incurred a net loss of $2,868,000, or $0.21 per
share, for the three-month period ended March 31, 2002, as compared to a net
loss of $1,252,000, or $0.09 per share for the three-month period ended March
31, 2001. These losses were within management's expectations, and are expected
to continue unless market penetration of our first products increases
significantly.


LIQUIDITY AND CAPITAL RESOURCES

     We are in a strong cash position to continue to expand our research and
development activities for our Levulan(R) PDT/PD platform. Our total assets were
$71,400,000 as of March 31, 2002, compared to $75,864,000 as of December 31,
2001. This decrease is mainly the result of net operating activities during the
quarter.

     As of March 31, 2002, we had inventory of $2,225,000, representing finished
goods, and raw materials, as compared to $2,333,000 as of December 31, 2001.
Also, at the end of the current quarter we had net fixed assets of $4,580,000,
compared to $3,384,000 as of December 31, 2001, due mainly to the development of
our Kerastick(R) manufacturing facility. We expect to make additional capital
expenditures of approximately $1,000,000 during 2002 to complete the development
of this facility.

     As of March 31, 2002, we had accounts receivable of $191,000, representing
net sales associated with product sales, compared to $121,000 at the end of
2001. In addition, based on our co-development program with Schering AG, a
receivable of approximately $779,000 has been recorded during the current
quarter for reimbursable research and development costs as compared to $864,000
as of December 31, 2001.

     As of March 31, 2002, we had current liabilities of $2,912,000, compared to
$3,051,000 as of December 31, 2001. On May 13, 2002, we secured a seven-year
term loan to finance the construction of our Kerastick(R) manufacturing facility
in DUSA's Wilmington headquarters (see "Contractual Obligations and Other
Commercial Commitments -- Manufacturing Facility Loan" below and Note 13 to the
Notes to the Consolidated Condensed Financial Statements.)

                                       15
<PAGE>

     We invest our cash in United States government securities, which are
classified as available for sale. As of March 31, 2002, we held securities with
an aggregate cost of $55,001,000 and a current aggregate market value of
$56,429,000, resulting in a net unrealized gain on securities available for sale
of $1,428,000, which has been included in shareholders' equity. As of December
31, 2001, DUSA held securities with an aggregate cost of $54,917,000 and a
current aggregate market value of $57,141,000 resulting in a net unrealized gain
on securities available for sale of $2,224,000. Due to fluctuations in interest
rates and depending upon the timing of our need to convert government securities
into cash to meet our working capital requirements, some gains or losses could
be realized. These securities currently have yields ranging from 4.14% to 7.13%
and maturity dates ranging from April 30, 2002 to January 3, 2007.

     We believe that we have sufficient capital resources to proceed with our
current development program for Levulan(R) PDT/PD, and to fund operations and
capital expenditures for the foreseeable future. We have invested our funds in
liquid investments, so that we will have ready access to these cash reserves, as
needed, for the funding of development plans on a short-term and long-term
basis. DUSA is actively seeking to expand or enhance its business by using its
resources to acquire by license, purchase or other arrangements, businesses,
technologies, or products. We also plan to continue to actively seek
relationships with pharmaceutical or other suitable organizations to help
develop and/or market some of our potential non-dermatology products and
technologies.

     As of March 31, 2002, we had deferred revenues of $21,965,000, compared to
$22,586,000 at December 31, 2001. At the end of the current quarter, deferred
revenues reflected unamortized milestone and unrestricted grant payments
received from Schering AG in 1999 and 2000 of $21,817,000, and the deferral of
$149,000 in BLU-U(R) product sales. Commencing with our product launch in
September 2000, we began to amortize the Schering AG milestone and unrestricted
grant payments over approximately 12 1/2 years, the term of the Schering AG
agreement, based upon current revenue recognition principles.

     While the net proceeds of the January 1999 and March 2000 offerings coupled
with payments received from Schering AG will enable us to maintain our current
research program as planned and support the commercialization of Levulan(R) PDT
for AKs for the foreseeable future, in order to maintain and expand continuing
research and development programs, DUSA may need to raise additional funds in
the future through corporate alliances, financings, or other sources, depending
upon the amount of revenues we receive from our first product.

     We have not made any material capital expenditures for environmental
control facilities. However, as we are in the process of developing a production
line for Kerastick(R) manufacturing, we expect that environmental laws will
govern our facility. We have estimated that the capital costs to develop this
facility, including equipment will be $2,700,000 (see "Contractual Obligations
and Other Commercial Commitments" below). There can be no assurance, however,
that we will not be required to incur significant additional costs to comply
with environmental laws and regulations in the future, or that our operations,
business or assets will not be materially adversely affected by current or
future environmental laws or regulations.


                                       16
<PAGE>

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

     Kerastick(R) Manufacturing Line - DUSA has commenced the development of a
Kerastick(R) manufacturing facility at our Wilmington, Massachusetts location.
Construction started in January 2002. The initial build-out is expected to be
completed by mid-2002, followed by facility and drug stability testing, which is
expected to take approximately six months. FDA inspection is expected to occur
within approximately six months following the construction and testing stages.
The Company has estimated that the cost to construct this facility, including
equipment, is approximately $2,700,000. This cost includes estimates to build
the facility and all costs of calibration, validation testing and equipment, and
any related FDA approval costs. As of March 31, 2002, the Company has expended
$1,682,000 for certain pre-construction activities.

     Manufacturing Facility Loan - On May 13, 2002, the Company entered into a
commercial loan agreement to borrow up to $2,700,000 under a secured term loan
promissory note ("Note") with Citizens Bank of Massachusetts to fund the
construction of its manufacturing facility. Until June 30, 2002, the Note will
bear interest at the bank's prime commercial lending rate. At that time, DUSA,
at its option, may select a fixed rate or a rate at the LIBOR interest rate plus
1 3/4%, for varying periods. At the end of such LIBOR rate period, DUSA may
select the then current LIBOR rate or convert, one time only, to a fixed rate
loan at any time during the first year of the term. The Company must borrow on
this financing instrument by June 30, 2002 and will make monthly principal plus
interest payments on this instrument, with the final principal and interest
payment due on June 30, 2009. Certain of its United States Government Securities
secure the loan.

     Legal Matters- On April 12, 2002, the Company received notice that one of
the patents licensed to DUSA by PARTEQ Research & Development Innovations, the
technology transfer arm of Queen's University at Kingston, Ontario is being
challenged by PhotoCure ASA. PhotoCure ASA has filed a lawsuit in Australia
alleging that Australian Patent No. 624985, which is one of the patents relating
to DUSA's 5-aminolevulinic acid technology, is invalid. DUSA intends to evaluate
the situation with Queen's and PARTEQ, as PARTEQ has an obligation to diligently
maintain its patents under its license agreement with DUSA.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment of Disposal of Long-lived Assets." This statement supercedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS 144 establishes a single accounting model, based
on the framework established in SFAS 121, for long-lived assets to be disposed
of by sale, and resolves implementation issues related to SFAS 121. SFAS No. 144
is effective for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. On January 1, 2002, DUSA adopted this
statement, which had no effect on our financial position or results of
operations.

         In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after September 30, 2001 and that the
use of the pooling-of-interest method is no longer permitted. SFAS No. 142
requires that upon adoption, amortization of goodwill will cease and instead,
the carrying value of goodwill will be evaluated for impairment on an annual
basis. Identifiable intangible assets will continue to be amortized over their
useful lives and reviewed for impairment in accordance with SFAS No. 121. SFAS
No. 142 is effective for fiscal years beginning after December 15, 2001. On
January

                                       17
<PAGE>

1, 2002, DUSA adopted these statements, which had no effect on our financial
position or results of operations.


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. We have included an inflation factor in its cost estimates. However,
the overall net effect of inflation on our operations is expected to be minimal.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We hold fixed income U.S. government securities that are subject to
interest rate market risks. We do not believe that the risk is material at this
time as we have apportioned our investments in short-term and longer-term
instruments, up to five years, and we strive to match the maturity dates of
these instruments to our cash flow needs. A ten percent decline in the average
yield of these instruments would not have a material effect on our results of
operations or cash flows. As noted above, if significant, sudden fluctuations in
interest rates occur, losses could be realized. We do not hold derivative
securities. Accordingly, we do not believe that there is a material market risk
exposure with respect to derivative or other financial instruments that would
require disclosure under this item.


FORWARD-LOOKING STATEMENTS

     This report, including the Management's Discussion and Analysis, contains
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 which represent our expectations or beliefs concerning
future events, including, but not limited to

                                       18
<PAGE>
statements regarding management's goal of becoming profitable, impact on DUSA
should Schering AG terminate our agreement, rights to our product in Brazil,
expectations for continuing operating losses, North's entitlement to
under-utilization fees, expectations for completion of our manufacturing
facility and costs relating thereto, replacement of our current manufacturer,
support of our initial BLU-U(R) leasing arrangements, and terms under our newer
rental plan, absorption of overhead expenses and reduction of cost of product
sales, beliefs as to entitlement to reimbursement from Schering AG of
dermatology research and development expenses, expectations of Berlex's supply
needs, recognition of revenue from the distribution of our BLU-U(R), intentions
to evaluate and pursue licensing and acquisition opportunities, beliefs
regarding environmental compliance, expectations regarding the clinical trials
results for warts, onychomycosis, and Barrett's esophagus and intention to start
a BAAK trial, requirements of cash resources for our future liquidity, and
potential impact on conversion of government securities, expectations for future
strategic opportunities and research and development programs, need for
additional funds, increasing research and development expenses, stability of
administrative expenses, levels of interest income and net losses, and
sufficiency of our capital resources and expectations for capital expenditures,
evaluation of the legal proceeding between PhotoCure ASA and Queens University,
expectations regarding inflation and market risks. 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 and regulatory conditions,
actual clinical results of our trials, the impact of competitive products and
pricing, the timely development, FDA approval, and market acceptance of our
products, reliance on third parties for the production, manufacture, sales and
marketing of our products, the securities regulatory process, the maintenance of
our patent portfolio and levels of reimbursement by third-party payors, 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


                           PART II- OTHER INFORMATION

Items 1 through 5.

     None.


Item 6. Exhibits and Reports on Form 8-K.

     a)   Exhibits -

     i)   Exhibit 10.1 - Program Agreement between the Company and Auric Capital
          Corp. dated April 18, 2002 portions of which have been omitted
          pursuant to a request for confidential treatment under Rule 24(b) of
          the Securities Exchange Act of 1934, as amended.


                                       19
<PAGE>
     (ii) Exhibit 99.1 - Commercial Loan Agreement, Secured Term Loan Promissory
          Note and Pledge and Security Agreement between the Company and
          Citizens Bank of Massachusetts dated May 13, 2002.

     (iii)Exhibit 99.2 - Press Release dated May 14, 2002 issued by the Company
          regarding quarterly results for the period ended March 31, 2002.

     b)   i) Form 8-K dated January 22, 2002 announcing expectations for
          December 31, 2001 financial results, financial guidance for 2002, and
          updates on end-user sales and its research and development efforts.

          ii) Form 8-K dated April 15, 2002 noting that the Company had received
          notice on Friday, April 12, 2002 that PhotoCure ASA filed litigation
          against Queen's University alleging invalidity of one of the patents
          licensed to DUSA by PARTEQ Research & Development Innovations, the
          technology transfer arm of Queen's University at Kingston, Ontario.


                                   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.


DATE:  MAY 14, 2002                      BY: /S/JOHN E. MATTERN
       ---------------                       -----------------------------------
                                         JOHN E. MATTERN
                                         VICE PRESIDENT, FINANCE, AND
                                         CHIEF FINANCIAL OFFICER (Chief
                                         Financial and Chief Accounting Officer)


                                       20