<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, 2003

                                       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.

                       13,943,581 shares as of May 9, 2003
<PAGE>
PART 1.

Item 1.  FINANCIAL STATEMENTS

DUSA PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                     March 31,
                                                                                                       2003            December 31,
                                                                                                    (Unaudited)            2002
                                                                                                   ------------        ------------
<S>                                                                                                <C>                 <C>
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                                       $  5,706,890        $  7,064,596
   United States government securities                                                               42,549,850          45,814,947
   Accrued interest receivable                                                                          560,281             699,664
   Accounts receivable                                                                                   55,110              36,720
   Inventory                                                                                          1,134,346           1,188,659
   Prepaids and other current assets                                                                    722,559             915,704
                                                                                                   ------------        ------------
      Total current assets                                                                           50,729,036          55,720,290
   Property and equipment, net                                                                        4,962,203           5,229,683
                                                                                                   ------------        ------------
TOTAL ASSETS                                                                                       $ 55,691,239        $ 60,949,973
                                                                                                   ============        ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                                $    217,079        $    552,891
   Accrued payroll                                                                                      165,160             476,602
   Other accrued expenses                                                                             1,287,314           2,070,150
   Current maturities of long-term debt                                                                 270,000             270,000
   Deferred revenue                                                                                      19,800               5,100
                                                                                                   ------------        ------------
     Total current liabilities                                                                        1,959,353           3,374,743
   Long-term debt, net of current                                                                     1,450,000           1,517,500
                                                                                                   ------------        ------------
TOTAL LIABILITIES                                                                                     3,409,353           4,892,243
                                                                                                   ------------        ------------
COMMITMENTS AND CONTINGENCIES (NOTE 12)
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; and                        95,527,688          95,490,561
      40,000 junior Series A preferred shares. Issued and outstanding:
      13,910,831 (2002: 13,887,612) shares of common stock, no par
   Additional paid-in capital                                                                         2,015,586           2,015,586
   Accumulated deficit                                                                              (47,648,900)        (44,082,927)
   Accumulated other comprehensive income                                                             2,387,512           2,634,510
                                                                                                   ------------        ------------
TOTAL SHAREHOLDERS' EQUITY                                                                           52,281,886          56,057,730
                                                                                                   ------------        ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                         $ 55,691,239        $ 60,949,973
                                                                                                   ============        ============
</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 Ended March 31,
                                                                            -------------------------------------
                                                                                 2003                     2002
                                                                             (Unaudited)              (Unaudited)
                                                                            ------------             ------------
<S>                                                                         <C>                      <C>
REVENUES
   Product sales and rental income                                          $    143,370             $     50,527
   Research grant and milestone revenue                                               --                  495,834
   Research revenue earned under collaborative agreement                              --                  779,137
                                                                            ------------             ------------
TOTAL REVENUES                                                                   143,370                1,325,498
                                                                            ------------             ------------
OPERATING COSTS
   Cost of product sales and royalties                                           753,304                  678,769
   Research and development                                                    1,516,391                3,281,724
   Marketing and sales                                                           530,512                       --
   General and administrative                                                  1,475,271                1,006,975
                                                                            ------------             ------------
TOTAL OPERATING COSTS                                                          4,275,478                4,967,468
                                                                            ------------             ------------
LOSS FROM OPERATIONS                                                          (4,132,108)              (3,641,970)
                                                                            ------------             ------------
OTHER INCOME
   Interest income                                                               566,135                  774,419
                                                                            ------------             ------------
NET LOSS                                                                    $ (3,565,973)            $ (2,867,551)
                                                                            ============             ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE                                 $      (0.26)            $      (0.21)
                                                                            ============             ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                          13,892,514               13,865,390
                                                                            ============             ============
</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,
                                                                                       --------------------------------
                                                                                           2003                2002
                                                                                       (Unaudited)          (Unaudited)
                                                                                       -----------          -----------
<S>                                                                                    <C>                  <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
   Net loss                                                                            $(3,565,973)         $(2,867,551)
   Adjustments to reconcile net loss to net cash used in operating
     activities
   Amortization of premiums and accretion of discounts on U.S. government                   18,099               72,524
     securities available for sale, net
   Depreciation and amortization expense                                                   300,704              441,935
   Amortization of deferred revenue                                                             --             (495,834)
   Changes in other assets and liabilities impacting cash flows from
     operations:
     Accrued interest receivable                                                           139,383              140,159
     Accounts receivable                                                                   (18,390)             (70,193)
     Receivable under co-development program                                                    --               85,397
     Inventory                                                                              54,313              108,295
     Deferred charges                                                                           --             (100,000)
     Prepaids and other current assets                                                     193,145             (168,479)
     Accounts payable                                                                     (335,812)             539,754
     Accrued payroll and other accrued expenses                                         (1,057,151)            (553,850)
     Deferred revenue                                                                       14,700             (124,284)
                                                                                       -----------          -----------
Net cash used in operating activities                                                   (4,256,982)          (2,992,127)
                                                                                       -----------          -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
   Purchases of United States government securities                                             --           (5,075,100)
   Proceeds from maturing United States government securities                            3,000,000            4,918,568
   Purchases of property and equipment                                                     (33,224)          (1,474,648)
                                                                                       -----------          -----------
Net cash provided by (used in) investing activities                                      2,966,776           (1,631,180)
                                                                                       -----------          -----------
CASH FLOWS USED IN FINANCING ACTIVITIES
     Payments of long-term debt                                                            (67,500)                  --
                                                                                       -----------          -----------
Net cash used in financing activities                                                      (67,500)                  --
                                                                                       -----------          -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                               (1,357,706)          (4,623,307)
                                                                                       -----------          -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         7,064,596            7,568,500
                                                                                       -----------          -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                             $ 5,706,890          $ 2,945,193
                                                                                       ===========          ===========
</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, 2003, Condensed
Consolidated Statements of Operations for the three months ended March 31, 2003
and 2002, and Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2003 and 2002 of DUSA Pharmaceuticals, Inc. (the
"Company") 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
management of the Company believes to be necessary for fair presentation of the
periods presented. The results of the Company's operations for any interim
period are not necessarily indicative of the results of the Company's operations
for any other interim period or for a full year.

      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. Certain
amounts for 2002 have been reclassified to conform to the current year
presentation. Such reclassifications had no impact on the net loss or
shareholders' equity for any period presented. These condensed consolidated
financial statements should be read in conjunction with the Company's December
31, 2002 audited consolidated financial statements and notes thereto.

      The Company believes that it has sufficient capital resources to proceed
with its current research, development, manufacturing and marketing programs for
Levulan(R) PDT, and to fund operations and capital expenditures for the
foreseeable future. The Company has invested its funds in liquid investments, so
that it 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 may seek
to expand or enhance its business by using its resources to acquire by license,
purchase or other arrangements, businesses, new technologies, or products,
especially in PDT-related areas. However, at this time, the Company intends to
focus primarily on increasing the sales of its dermatology products, and on
seeking a partner to help develop and market Levulan(R) PDT for the treatment of
dysplasia in patients with Barrett's esophagus.

2)    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, 2003, ranging from 3.96% to 7.32% and maturity
dates ranging from April 30, 2003 to February 17, 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>
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3)    INVENTORY

      Inventory consisted of the following:


<TABLE>
<CAPTION>
                                               March 31, 2003        December 31,
                                                 (Unaudited)             2002
                                               --------------        ------------
<S>                                            <C>                   <C>
Finished goods                                   $  959,720           $1,047,941
Raw materials                                       174,626              140,718
                                                 ----------           ----------
                                                 $1,134,346           $1,188,659
                                                 ==========           ==========
</TABLE>


4)    OTHER ACCRUED EXPENSES

      Other accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                       March 31,
                                                          2003       December 31,
                                                      (Unaudited)        2002
                                                      -----------    ------------
<S>                                                   <C>            <C>
Accrued research and development costs                 $  293,504     $  473,543
Accrued marketing and sales costs                         255,907             --
Accrued product related costs                              78,925        463,340
Accrued license milestone                                      --        500,000
Accrued legal and other professional fees                 304,192        297,966
Accrued employee benefits                                 242,682        207,833
Other accrued expenses                                    112,104        127,468
                                                       ----------     ----------
                                                       $1,287,314     $2,070,150
                                                       ==========     ==========
</TABLE>


5)    LONG-TERM DEBT

      Long-term debt consisted of the following:


<TABLE>
<CAPTION>
                                                   March 31,
                                                      2003         December 31,
                                                  (Unaudited)          2002
                                                  -----------      ------------
<S>                                               <C>               <C>
Secured term loan promissory note                 $ 1,720,000       $ 1,787,500
Less: Current maturities                             (270,000)         (270,000)
                                                  -----------       -----------
                                                  $ 1,450,000       $ 1,517,500
                                                  ===========       ===========
</TABLE>

      In May 2002, DUSA entered into a secured term loan promissory note
("Note") with Citizens Bank of Massachusetts to fund the construction of its
manufacturing facility and borrowed $1,900,000. The Note currently bears
interest at a 360-day LIBOR-based rate of 4%. Prior to expiration of the 360-day
LIBOR-based rate for each year of the loan, DUSA can either continue to choose a
LIBOR-based rate at that time, execute a one-time conversion to a fixed rate

                                       6
<PAGE>
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

loan, or repay the loan balance. Approximately $3,000,000 of the Company's
United States government securities are pledged as collateral to secure the
loan.

6)    SHAREHOLDERS' EQUITY

      On March 13, 2003, the Company issued 23,219 shares of restricted common
stock at a closing price of $1.599 per share to its Chief Executive Officer,
reflecting payment of the after-tax portion of his 2002 bonus compensation.

7)    MARKETING AND SALES

      In 2003, as a result of the 2002 termination of the Company's marketing
and development collaboration with its former marketing partner, the Company
commenced certain marketing and sales initiatives associated with having full
rights and responsibilities of its product. In addition, the Company has
reassigned resources that were previously functioning in research and
development roles to its marketing and sales function. Prior to the Company's
termination of its marketing and development collaboration, all rights and
activities associated with marketing and sales of its products were solely the
responsibility of its former partner. Activities included in marketing and sales
expense for 2003 consist of trade show expenses, advertising, resources assigned
to marketing and sales activities, and other marketing and promotional
activities. All such costs are expensed as incurred.

8)    ACCOUNTING FOR STOCK BASED COMPENSATION

      SFAS No. 123, "Accounting for Stock-Based Compensation," addresses the
financial accounting and reporting standards for stock or other equity-based
compensation arrangements. The Company has elected to continue to use the
intrinsic value-based method to account for employee stock option awards under
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and to provide disclosures based on the fair value
method in the Notes to the Consolidated Financial Statements as permitted by
SFAS No. 123. Stock or other equity-based compensation for non-employees must be
accounted for under the fair value-based method as required by SFAS No. 123 and
Emerging Issues Task Force ("EITF") No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services" and other related interpretations.
Under this method, the equity-based instrument is valued at either the fair
value of the consideration received or the equity instrument issued on the date
of grant. The resulting compensation cost is recognized and charged to
operations over the service period, which is generally the vesting period.



                                       7
<PAGE>
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

      Had the Company used the fair value method to measure compensation, the
Company's pro forma net loss, and pro forma net loss per share for the three
months ending March 31, would have been as follows:

<TABLE>
<CAPTION>
                                                                                 2003                     2002
                                                                             (Unaudited)              (Unaudited)
                                                                            -------------            -------------
<S>                                                                         <C>                      <C>
NET LOSS
     As reported                                                            $  (3,565,973)           $  (2,867,551)
     Effect on net loss if fair value method had been used                       (587,209)              (1,303,245)
                                                                            -------------            -------------
     Proforma                                                               ($  4,153,182)           ($  4,170,796)
                                                                            =============            =============

BASIC AND DILUTED NET LOSS PER COMMON SHARE
     As reported                                                            $       (0.26)           $       (0.21)
     Effect on net loss per common share if fair value method
     had been used                                                                  (0.04)                   (0.09)
                                                                            -------------            -------------
     Proforma                                                               $       (0.30)           $       (0.30)
                                                                            =============            =============
</TABLE>




9)    401(k) PROFIT SHARING PLAN

      Effective January 1, 1996, the Company adopted a tax-qualified employee
savings and retirement 401(k) Profit Sharing Plan (the "401(k) Plan"), covering
all qualified employees. Participants may elect a salary deferral of at least 1%
as a contribution to the 401(k) Plan, up to the statutorily prescribed annual
limit for tax-deferred contributions. Effective February 1, 2003, the Company
will match a participant's contribution up to 1.25% of a participant's salary
(the "Match"), subject to certain limitations of the 401(k) Plan. Participants
will vest in the Match at a rate of 25% for each year of service to the Company.
The Match is not expected to have a material impact on the Company's financial
position or results of operations.

10)   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, 2003, and 2002, stock options and warrants totaling
approximately 2,661,000 and 2,486,000 shares, respectively, have been excluded
from the computation of diluted net loss per share.




                                       8

<PAGE>
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

11)   COMPREHENSIVE LOSS

      For the three months ended March 31, 2003 and 2002, comprehensive loss
consisted of the following:

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                       March 31, (Unaudited)
                                                   ----------------------------
                                                       2003             2002
                                                   -----------      -----------
<S>                                                <C>              <C>
NET LOSS                                           $(3,565,973)     $(2,867,551)
   Net unrealized losses on United States
      securities available for sale                   (246,998)        (795,761)
                                                   -----------      -----------
COMPREHENSIVE LOSS                                 $(3,812,971)     $(3,663,312)
                                                   ===========      ===========
</TABLE>


12)   COMMITMENTS AND CONTINGENCIES

      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.
As a consequence of this action, Queen's University has assigned the Australian
patent to the Company so that DUSA may participate directly in this litigation.
The Company has filed an answer setting forth its defenses and a related
countersuit alleging that PhotoCure's activities infringe the patent. The case
is in its earliest stages so the Company is unable to predict the outcome at
this time.

      In March 2003, the Company received notice that its Dutch patent is being
formally challenged by an anonymous agent. DUSA has filed a formal response to
the opposition. At this point in time, it is too early to assess the merits of
the allegations. The potential impact in The Netherlands is minimal; however,
the Company does plan to defend its patent at this time.

13)   RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB SFAS
No. 123, "Accounting for Stock-Based Compensation" to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect on the method
used on reported results. The Company

                                       9
<PAGE>
DUSA PHARMACEUTICALS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

has determined that it will continue to account for stock-based compensation to
employees using the intrinsic value method under the provisions of APB Opinion
No. 25 and will make all required disclosures in its financial reports to comply
with SFAS 148.

      In December 2002, the EITF reached conclusion on EITF Issue No. 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables." This consensus
provides guidance in determining when a revenue arrangement with multiple
deliverables should be divided into separate units of accounting, and, if
separation is appropriate, how the arrangement consideration should be allocated
to the identified accounting units. The provisions of EITF No. 00-21 are
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. The Company will evaluate multiple element arrangements in
accordance with this EITF upon its effective date for new arrangements into
which it enters.



                                       10
<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

OVERVIEW

      DUSA is a pharmaceutical company engaged primarily in the research,
development, and marketing 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 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 unit. Our products are used together to provide PDT for the treatment of
non-hyperkeratotic actinic keratoses, or AKs, of the face or scalp.

      We have primarily devoted our resources to funding research and
development in order to advance the Levulan(R) PDT/PD technology platform and,
as a result, we have experienced significant operating losses. As of March 31,
2003, we had an accumulated deficit of approximately $47,649,000. Achieving our
goal of becoming a profitable operating company is dependent upon the market
penetration of our products, acceptance of our therapy by the medical and
consumer constituencies, and our ability to develop new products. We believe
that as doctors become more familiar with the benefits of Levulan(R) PDT, and if
improved reimbursement for physicians is attained, more widespread adoption of
our technology should occur over time.

      We expect to continue to incur operating losses until the successful
market penetration of our first products occurs. As a result of the termination
of our former dermatology collaboration arrangement in 2002, we reevaluated our
expenses and are minimizing research and development and related general and
administrative expenditures that are not directly related to our core objectives
for 2003. At this time, we intend to focus primarily on increasing the sales of
our dermatology products, formulating our own development program, which could
lead to a broader AK indication, and on seeking a partner to help develop and
market Levulan(R) PDT for the treatment of dysplasia in patients with Barrett's
esophagus. As of March 31, 2003, our staff included 42 full-time employees as
compared to 43 at the end of 2002, in support of all activities including
marketing, production, maintenance, customer support, and financial operations
for our products, as well as the research and development programs for
dermatology and internal indications. We expect to slightly increase our staff
in 2003 as we focus on marketing activities and customer support associated with
our AK products, and research and development programs for dermatology and
internal indications. While our financial position is strong, we cannot predict
when product sales along with interest and/or other income may offset the cost
of these efforts.

        LICENSE AND SUPPLY AGREEMENTS - In December 2002, we entered into a
license and development agreement with Photonamic GmbH & Co. KG, a subsidiary of
medac GmbH, a


                                       11
<PAGE>
German pharmaceutical company, and a supply agreement for the licensed
formulation with medac. These agreements provide for the licensing to us of
Photonamic's proprietary technology related to ALA for systemic dosing in the
field of brain cancer. The technology provides us with access to a systemic
formulation of ALA, and a significant amount of pre-clinical data, both of which
could also be useful and are licensed to us for certain other indications.
Photonamic is currently conducting a European Phase III clinical trial in which
ALA-induced fluorescence is used to guide surgical tumor resection in patients
suffering from the most aggressive form of adult brain tumor, glioblastoma
multiforme. This clinical trial is expected to continue through late 2004, at a
minimum. Our license covers both this primary clinical indication as well as
other brain cancers. In January 2003, based on the license agreement, DUSA paid
Photonamic a non-refundable $500,000 milestone payment. This amount was charged
to research and development costs in 2002, when the obligation was incurred.

      We will also be obligated to pay certain regulatory milestones and
royalties on net sales of a brain cancer product under the terms of the license
and development agreement and will purchase product under the supply agreement
for mutually agreed upon indications. Should Photonamic's clinical study be
successful, we will be obligated to proceed with development of the product in
the United States in order to retain the license for the use of the technology
to treat brain cancer. We are unable to determine at this time whether these
obligations will mature.

      401(K) PROFIT SHARING PLAN - Effective January 1, 1996, we adopted a
tax-qualified employee savings and retirement 401(k) Profit Sharing Plan (the
"401(k) Plan"), covering all qualified employees. Participants may elect a
salary deferral of at least 1% as a contribution to the 401(k) Plan, up to the
statutorily prescribed annual limit for tax-deferred contributions. Effective
February 1, 2003, DUSA will match a participant's contribution up to 1.25% of a
participant's salary (the "Match"), subject to certain limitations of the 401(k)
Plan. Participants will vest in the Match at a rate of 25% for each year of
service to DUSA. The Match is not expected to have a material impact on our
financial position or results of operations.


      CRITICAL ACCOUNTING POLICIES

      Our accounting policies are disclosed in Note 2 to the Notes to the
Consolidated Financial Statements in our Annual Report on Form 10-K for the year
ended December 31, 2002. Since all of these accounting policies do not require
management to make difficult, subjective or complex judgments or estimates, they
are not all considered critical accounting policies. We have discussed these
policies and the underlying estimates used in applying these accounting policies
with our audit committee. We consider the following policies and estimates to be
critical to our financial statements.

      REVENUE RECOGNITION - Revenues on product sales of the Kerastick(R) are
recognized when persuasive evidence of an arrangement exists, the price is fixed
and final, delivery has occurred, and there is reasonableness of collection.
Research revenue earned under collaborative agreements consisted of
non-refundable research and development funding from our former dermatology


                                       12
<PAGE>
collaboration partner. Research revenue generally compensated us for a portion
of agreed-upon research and development expenses and is recognized as revenue at
the time the research and development activities are performed under the terms
of the related agreements and when no future performance obligations existed.
Milestone or other up-front payments are typically recorded as deferred revenue
upon receipt and recognized as income on a straight-line basis over the term of
an agreement. Although we make every effort to assure the reasonableness of our
estimates, significant unanticipated changes in our estimates due to business,
economic, or industry events could have a material impact on our results of
operations.

      INVENTORY - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories are continually
reviewed for slow moving, obsolete and excess items. Inventory items identified
as slow-moving are evaluated to determine if an adjustment is required.
Additionally, our industry is characterized by regular technological
developments that could result in obsolete inventory. Although we make every
effort to assure the reasonableness of our estimates, any significant
unanticipated changes in demand, technological development, or significant
changes to our business model could have a significant impact on the value of
our inventory and our results of operations. We use sales projections to
estimate the appropriate level of inventory that should remain on the
Consolidated Balance Sheet. Management believes that the level of remaining
inventory is reasonable in light of our current sales forecasts and
uncertainties relating to the timing of FDA approval of our manufacturing
facility. Should we be unable to achieve the forecasted sales, additional
adjustments may be recorded to cost of goods sold.

      VALUATION OF LONG-LIVED AND INTANGIBLE ASSETS - We review long-lived and
intangible assets, comprised of property, plant and equipment for impairment
whenever events or changes in business circumstances indicate that the carrying
amount of assets may not be fully recoverable or that the useful lives of these
assets are no longer appropriate. Factors considered important which could
trigger an impairment review include significant changes relative to: (i)
projected future operating results; (ii) the use of the assets or the strategy
for the overall business; (iii) business collaborations; and (iv) industry,
business, or economic trends and developments. Each impairment test is based on
a comparison of the undiscounted cash flow to the recorded value of the asset.
When it is determined that the carrying value of long-lived or intangible assets
may not be recoverable based upon the existence of one or more of the above
indicators of impairment, the asset is written down to its estimated fair value
on a discounted cash flow basis. In 2002 and again as of March 31, 2003, we
concluded that the termination of our former dermatology collaboration
arrangement in September 2002 and current business events have not caused any
impairment to our manufacturing facility under construction. At March 31, 2003,
our total property, plant and equipment had a carrying value of $4,962,000,
including $2,642,000 associated with our manufacturing facility, and we had no
intangible assets recorded as of that date.

      STOCK-BASED COMPENSATION - We have elected to continue to use the
intrinsic value-based method to account for employee stock option awards under
the provisions of Accounting Principles Board Opinion No. 25, and to provide
disclosures based on the fair value method in the Notes to the Consolidated
Financial Statements as permitted by Statement of Financial Accounting Standards
("SFAS") No. 123. Stock or other equity-based compensation for non-employees is
accounted for


                                       13
<PAGE>
under the fair value-based method as required by SFAS No. 123 and Emerging
Issues Task Force ("EITF") No. 96-18, "Accounting for Equity Instruments That
Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services" and other related interpretations. Under this
method, the equity-based instrument is valued at either the fair value of the
consideration received or the equity instrument issued on the date of grant. The
resulting compensation cost is recognized and charged to operations over the
service period, which, in the case of stock options, is generally the vesting
period. As we utilize stock and stock options as one means of compensating
employees, consultants, and others, a change in accounting for stock-based
compensation would, under certain circumstances, result in a material effect on
our results of operations, but would not affect cash flow based on our current
stock option plan.

RESULTS OF OPERATIONS - THREE MONTHS ENDING MARCH 31, 2003 VERSUS MARCH 31, 2002

      REVENUES - Total revenues for the three months ended March 31, 2003 were
$143,000 as compared to $1,325,000 in 2002. Revenues for 2003 were totally
comprised of product sales reflecting direct Kerastick(R) sales from our
distributor, Moore Medical Corporation, to physicians, as compared to product
sales of $51,000 in 2002, primarily reflecting rental income on the BLU-U(R) and
royalties from our former marketing partner on direct Kerastick(R) sales to
end-user sales. The increase in 2003 product sales reflects 100% of revenues on
Kerastick(R) sales to end-users as compared to approximately 30% that we
received as a royalty under our former collaboration agreement. In 2002,
revenues also included research grant and milestone revenues of $496,000, and
research and development reimbursement of $779,000 that we earned based on our
collaboration agreement with our former marketing and development partner.

      Excluding BLU-U(R) units installed at clinical trial sites or sold to our
former partner, 324 BLU-U(R) units were in place, as of March 31, 2003, down
slightly from the 329 units at December 31, 2002, as BLU-U(R) units placed
during the current quarter were 13 as compared to returns of 18. Kerastick(R)
sales to end-users were 1,842 for the three months ended March 31, 2003 as
compared to 1,722 in the comparable 2002 period.

      As of March 1, 2003, a new national reimbursement code for Medicare and
other third-party payors for the BLU-U(R) application procedure, and for the
costs of the Levulan(R) Kerastick(R), became effective. Doctors can also bill
for any applicable visit fees. With implementation of the new code, the charge
for our drug product was bundled into the new code. Some physicians have
suggested that the new reimbursement levels still do not fully reflect the
required efforts to routinely execute our therapy in their practices. In
addition, others have reported problems prior to March 1, 2003 of getting
reimbursed at the former level indicated, or at all. These issues have affected
the economic competitiveness of our products with other AK therapies and hence
have hindered the adoption of our therapy in many cases. Accordingly, we are
continuing to support efforts to improve reimbursement levels to physicians,
work with the major private insurance carriers to reimburse our therapy, and to
resolve related billing and payment issues, which we believe could significantly
improve physician adoption. We are hopeful that the recent changes to
reimbursement, plus future improvements, along with our education and marketing
programs, will help make Levulan(R) PDT a


                                       14
<PAGE>
common therapy for AKs over time. However, if reimbursement levels do not
adequately reimburse physicians based on their level of cost and service to
administer our unique therapy, we believe that adoption of our therapy may
continue to suffer.

      COST OF PRODUCT SALES AND ROYALTIES - Cost of product sales and royalties
for the three months ended March 31, 2003 were $753,000 as compared to $679,000
in 2002. A summary of the components of cost of product sales and royalties is
provided below:

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31,
                                                                 (UNAUDITED)
                                                                 -----------
                                                                                  INCREASE
COST OF PRODUCT SALES AND ROYALTIES                   2003           2002        (DECREASE)
                                                      ----           ----        ----------
<S>                                                <C>            <C>            <C>
Product costs including internal
manufacturing costs (e.g. customer
service, quality assurance, purchasing,
and other product support operations)
assigned to products                               $ 563,000      $ 304,000      $ 259,000
Costs incurred to ship, install and
service the BLU-U(R) in physicians
offices including depreciation                       173,000        210,000        (37,000)
Royalty and supply fees (1)                           17,000         16,000          1,000
Net underutilization costs (2)                            --         92,000        (92,000)
Amortization of deferred charges (3)                      --         57,000        (57,000)
                                                   ---------      ---------      ---------
   Total cost of  product sales and royalties      $ 753,000      $ 679,000      $  74,000
                                                   =========      =========      =========
</TABLE>

1)    Royalty and supply fees are paid to our licensor, PARTEQ Research and
      Development Innovations, the licensing arm of Queen's University,
      Kingston, Ontario.

2)    Underutilization costs commenced in 2001 and were fully amortized as of
      December 31, 2002 based on agreements with our thirty-party manufacturers
      due to orders falling below certain previously anticipated levels.

3)    Amortization of deferred charges reflects consideration paid by us in 2000
      to amend our Supply Agreement with Sochinaz SA, the manufacturer of the
      bulk drug ingredient used in Levulan(R). Such deferred charges were fully
      amortized in 2002.

      Prior to September 2002, inventory costs related to the BLU-U(R) units
under rental or lease were deferred until the BLU-U(R) was no longer returnable
to us by the physician, which was one year under our initial marketing program.
As of March 31, 2003 and December 31, 2002, BLU-U(R) units have been included in
property, plant and equipment amounted to approximately $387,000 and $473,000,
net of depreciation of $541,000 and $473,000, respectively.

      RESEARCH AND DEVELOPMENT COSTS - Research and development costs for the
three months ended March 31, 2003 were $1,516,000 as compared to $3,282,000 for
2002, of which $779,000 was reimbursed to us by our former marketing partner.
The reduction in research and development costs for 2003 as compared to 2002
reflects the absence of certain costs incurred in 2002 for co-sponsored
projects, including Phase I/II studies using Levulan(R) PDT in the treatment of
persistent plantar warts and onychomycosis (nail fungus), that were being
developed in collaboration with our former marketing and development partner.
Such projects have been delayed as we concentrate on


                                       15
<PAGE>
formulating our own development program, which may include a broad area actinic
keratoses (BAAK) treatment. The currently approved Levulan(R) Kerastick(R) only
allows application of Levulan(R) to individual lesions using the Kerastick(R),
but we are considering a revised protocol that will apply Levulan(R) to the
entire face and/or scalp in a BAAK treatment. We are developing the protocol for
our treatment allowing the use of the BLU-U(R) for the BAAK indication after a
much shorter drug incubation time. With regards to BAAK indication, we met with
the FDA during the quarter to discuss AK-related Phase III clinical trials that,
if successful, would make the therapy more practical, and expand the medical
indications for use. We believe that, should development of this indication be
successful, the market penetration of the therapy could be significantly
enhanced. Our near-term development program also includes completing an
FDA-mandated Phase IV long-term AK tracking study, which should be completed in
2003, and funding of various investigator studies involving the Kerastick(R) in
support of formulating our development program. This strategy should keep us in
a strong financial position as we continue to implement activities to increase
revenues from the current product. Under our former marketing and dermatology
development agreement, $779,000 of the agreed upon dermatology research and
development expenses were reimbursed to us for the three months ended March 31,
2002.

      We have also been conducting Phase I/II studies in the treatment of
high-grade and low-grade dysplasia associated with Barrett's esophagus. Results
of the high-grade dysplasia (HGD) study as of January 2003, with 12 months of
follow up in 4 patients, and 6 months in 1 patient, showed a continued absence
of dysplasia (i.e. complete ablation), no strictures, and no signs of mucosal
overgrowth. While limited studies in the high-grade dysplasia indication are
still being funded, we do not expect to fund full Phase II or III clinical
trials for this indication on our own. Therefore, we have begun soliciting
potential partners for this indication, with the goal of completing a
partnership during 2003; however, there can be no assurance that we will be able
to consummate any collaboration, or whether we will be able to obtain terms
acceptable to us.

      MARKETING AND SALES COSTS - Marketing and sales costs for the three months
ended March 31, 2003 were $531,000. In the prior year period ended March 31,
2002, there were no marketing and sales expenses incurred by us as all rights
and activities associated with marketing and sales of its products were the sole
responsibility of its former partner. In late 2002, following the termination of
our collaboration with our former marketing partner, we commenced marketing
initiatives associated with having full rights and responsibilities for its
products. In addition, as of January 1, 2003, we reassigned resources that were
functioning in research and development roles to its marketing and sales
function.

      DUSA is considering limited regional test marketing during the second half
of 2003. If such a program is implemented and successful, our goal would be to
develop a small, dedicated Levulan(R) PDT sales team in 2004.

      GENERAL AND ADMINISTRATIVE COSTS - General and administrative costs for
the three months ended March 31, 2003 increased to $1,475,000 as compared to
$1,007,000 for 2002. This increase is mainly attributable to higher legal
expenses of $684,000 incurred in 2003 as compared to


                                       16
<PAGE>
$356,000 in 2002, due primarily to patent defense costs. It is expected that
legal expenses will remain at elevated levels as long as the patent dispute
continues. In April 2002, we received a copy of a notice issued by PhotoCure ASA
to Queen's University at Kingston, Ontario, alleging that Australian Patent No.
624985, which is one of the patents licensed by PARTEQ to us, relating to
5-aminolevulinic acid technology, is invalid. As a consequence of this action,
Queen's University has assigned the Australian patent to us so that we may
participate directly in this litigation. We have filed an answer setting forth
our defenses and a related countersuit alleging that PhotoCure's activities
infringe the patent. The case is in its earliest stages so we are unable to
predict the outcome at this time.

      In March 2003, we received notice that our Dutch patent is being formally
challenged by an anonymous agent. We filed a formal response to the opposition.
At this point in time, it is too early to assess the merits of the allegations.
Although we believe that the potential impact in The Netherlands would be
minimal regardless of the outcome of the case, we plan to defend our patent at
this time.

      INTEREST INCOME - Interest income for the three months ended March 31,
2003 decreased to $566,000, as compared to $774,000 in 2002. This decrease was
attributable to a decrease in investable cash balances as we used cash to
support our operating activities, and lower yields. Interest income will
continue to decline as our investable cash balances are reduced to support our
operating activities. During the three months ended March 31, 2003, we incurred
interest expense of $17,000 on borrowings associated with the construction of
our new Kerastick(R) manufacturing facility, which has been capitalized in
property and equipment in the Condensed Consolidated Balance Sheet as of March
31, 2003. There was no interest incurred in the comparable period in 2002.

      NET LOSSES - The Company incurred a net loss of $3,566,000, or $0.26 per
share, for the three months ended March 31, 2003, as compared to a net loss of
$2,868,000 or $0.21 per share for the comparable period in 2002. This increase
is due in part to the loss of revenue from our former collaborative partner,
offset by savings realized through cost reductions. 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 fund our current research
and development activities for our Levulan(R) PDT/PD dermatology platform. Our
total assets were $55,691,000 as of March 31, 2003 compared to $60,950,000 as of
December 31, 2002. This decrease is attributable to the funding of operating
activities during 2003.

      As of March 31, 2003 we had inventory of $1,134,000, representing finished
goods and raw materials, as compared to $1,189,000 as of December 31, 2002.
Also, as of March 31, 2003, we had net property, plant and equipment of
$4,962,000, as compared to $5,230,000 as of December 31,


                                       17
<PAGE>
2003, representing construction costs associated with our manufacturing
facility, commercial light units in the field, and other property, plant and
equipment.

      As of March 31, 2003, we had accounts receivable of $55,000 as compared to
$37,000 as of December 31, 2003, representing net sales associated with
Kerastick(R) product sales.

      As of March 31, 2003, we had current liabilities of $1,959,000, as
compared to $3,375,000 as of December 31, 2002. Prior to 2002, we had no
long-term debt; however, in May 2002 we entered into a secured term loan
promissory note ("Note") with Citizens Bank of Massachusetts to fund the
construction of our manufacturing facility and borrowed $1,900,000. The Note
currently bears interest at a 360-day LIBOR-based rate of 4%. Prior to
expiration of the 360-day LIBOR-based rate for each year of the loan, we can
either continue to choose a LIBOR-based rate at that time, execute a one-time
conversion to a fixed rate loan, or repay the loan balance. As of March 31,
2003, the total outstanding loan balance is $1,720,000, of which $270,000 is
current. Approximately $3,000,000 of the Company's United States government
securities are pledged as collateral to secure the loan.

      We invest our excess cash in United States government securities, all of
which are classified as available for sale. These securities had an aggregate
cost of $40,162,000, and a current aggregate market value of $42,550,000 as of
March 31, 2003, resulting in a net unrealized gain on securities available for
sale of $2,388,000, which has been included in shareholders' equity. As of
December 31, 2002, government securities had an aggregate cost of $43,180,000
and an aggregate market value of $45,815,000, resulting in a net unrealized gain
of $2,635,000. 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. As of
March 31, 2003, these securities had interest rates ranging from 3.96% to 7.32%
and maturity dates ranging from April 30, 2003 to February 17, 2007. As of
December 31, 2002, these securities had interest rates and yields ranging from
3.95% to 7.21% and maturity dates ranging from January 21, 2003 to February 15,
2007.

      We believe that we have sufficient capital resources to proceed with our
current dermatology research, development, manufacturing, and marketing programs
for Levulan(R) PDT, and to fund operations and capital expenditures for the
foreseeable future, particularly with the current reduction in research and
development spending. 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.

      As a result of the termination of our former dermatology collaboration
arrangement, we have reevaluated our operations and are minimizing research and
development and related general and administrative expenditures that are not
directly related to our core objectives for 2003. We are concentrating on
formulating our own development program, which may include a BAAK treatment. We
also intend to invest in manufacturing, and marketing programs for Levulan(R)
PDT that support our efforts to penetrate the marketplace with our unique
Levulan(R) PDT therapy for AKs, and continue funding for various investigator
studies involving the Kerastick(R). In 2003, we are


                                       18
<PAGE>
establishing a marketing capability, which could become a significant expense.
We do not anticipate the level of expense to decrease over the balance of 2003.
We may seek to expand or enhance our business by using resources to acquire by
license, purchase or other arrangements, businesses, new technologies, or
products, especially in PDT-related areas. However, at this time, we intend to
focus primarily on increasing the sales of the Levulan(R) Kerastick(R) and the
BLU-U(R), and on seeking a partner to help develop and market Levulan(R) PDT for
the treatment of dysplasia in patients with Barrett's esophagus.

      We cannot accurately predict the level of revenues from sales of our
products. In order to maintain and expand continuing research and development
programs, we may need to raise additional funds through future corporate
alliances, financings, or other sources, depending upon the amount of revenues
we receive from our first product.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

      Kerastick(R) Manufacturing Line - We commenced the construction of a
Kerastick(R) manufacturing facility at our Wilmington, Massachusetts location in
January 2002, and the initial build-out was completed in June 2002. We completed
the facility qualification, process validation, and drug product stability
testing in March 2003, and submitted an NDA supplement to the FDA. FDA review
and approval is expected to take approximately 6 months, with an estimated
completion date in late 2003. The cost to build the facility includes all costs
of construction, calibration, validation testing and equipment. As of March 31,
2003, we have capitalized $2,642,000 for this facility, and do not expect to
incur any significant additional costs. Earlier this month, the FDA inspected
the facility, and we anticipate a response regarding the qualification of the
facility later in 2003.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB SFAS
No. 123, "Accounting for Stock-Based Compensation" to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect on the method
used on reported results. We have determined that we will continue to account
for stock-based compensation to employees under the provisions of APB Opinion
No. 25 and will make all required disclosures in our financial reports to comply
with SFAS 148.


                                       19
<PAGE>
      In December 2002, the EITF reached conclusion on EITF Issue No. 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables." This consensus
provides guidance in determining when a revenue arrangement with multiple
deliverables should be divided into separate units of accounting, and, if
separation is appropriate, how the arrangement consideration should be allocated
to the identified accounting units. The provisions of EITF No. 00-21 are
effective for revenue arrangements entered into in fiscal periods beginning
after June 15, 2003. We will evaluate multiple element arrangements in
accordance with this EITF upon its effective date for new arrangements into
which it enters.

INFLATION

      Although inflation rates have been comparatively low in recent years,
inflation is expected to apply upward pressure on our operating costs. We have
included an inflation factor in our 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.

ITEM 4.     CONTROLS AND PROCEDURES

      Our management is responsible for the preparation, integrity and
objectivity of the financial statements and other information presented in this
report. Such financial statements have been prepared in accordance with
generally accepted accounting principals and reflect certain estimates and
adjustments by management. Our management maintains a system of internal
accounting controls and disclosure controls and procedures which management
believes provide reasonable assurance that the transactions are properly
recorded and our assets are protected from loss or unauthorized use.

      The integrity of the accounting and disclosure systems are based on
written policies and procedures, the careful selection and training of qualified
financial personnel, a program of internal controls and direct management
review. Our disclosure control systems and procedures are designed to ensure
timely collection and evaluation of information subject to disclosure, to ensure
the selection of appropriate accounting policies and to ensure compliance with
our accounting policies and procedures. The Audit Committee is composed solely
of independent directors and meets


                                       20
<PAGE>
periodically with the independent auditors and management to discuss accounting,
financial reporting, auditing and internal auditing matters. The independent
auditors have direct and private access to the Audit Committee.

      As of March 31, 2003, an evaluation was performed under the supervision
and with the participation of our management, including the Chief Executive
Officer/Chief Financial Officer, regarding the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this evaluation,
our management, including the Chief Executive Officer/Chief Financial Officer,
believes that our disclosure controls and procedures are adequately designed to
ensure that the information that we are required to disclose in this report has
been accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding such required disclosure. There have been no significant
changes in our internal controls or in other factors that could significantly
affect internal controls subsequent to March 31, 2003.

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 statements regarding management's
goal of becoming profitable, beliefs regarding adoption of our therapy,
expectations for continuing operating losses, intention to focus on increasing
sales, formulating a development program and seeking a partner, expectations of
increasing staff, obligations regarding the Photonamic license, expectations
regarding the 401(k) plan matching funds, effects of unanticipated changes in
estimates and forecasts, factors which could trigger impairment review, effect
of an accounting change for stock-based compensation and intentions regarding
disclosures thereof, beliefs concerning the effect of improved reimbursement (or
failure to achieve it) and our education and marketing programs, intentions to
evaluate and pursue licensing and acquisition opportunities, intention regarding
a BAAK trial and the impact if the results are successful, expectations
regarding funding of Barrett's esophagus, development of a sales team, and
levels of legal expenses, belief regarding The Netherlands patent litigation,
requirements of cash resources, and potential impact on conversion of government
securities, need for additional funds for development, levels of interest income
and net losses, and sufficiency of our capital resources, expectations for
incurring costs relating to the manufacturing facility and for response from the
FDA regarding its inspection thereof, expectations regarding other accounting
pronouncements, inflation, market risks and controls and procedures. 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
and manufacture of our products, the maintenance of our patent portfolio and
ability to obtain competitive levels of reimbursement by third-party payors, and
other risks noted in our SEC filings from time to time, including our Form 10-K
for the period ending December 31, 2002, none of which can be assured.


                                       21
<PAGE>
                           PART II- OTHER INFORMATION

Items 1, and 3 through 5.

            None.

Item 2.  Changes in Securities and Use of Proceeds.

      i)    On March 13, 2003, DUSA issued 23,219 shares of its common stock to
            Dr. D. Geoffrey Shulman, the Company's President and Chief Executive
            Officer. These shares represent the after-tax portion of Dr.
            Shulman's bonus compensation for 2002. At the time of the issuance,
            DUSA's common stock had a fair market value of $1.60 per share. The
            issuance of these shares did not involve any public offering and
            were issued to Dr. Shulman in reliance on Section 4(2) of the
            Securities Act of 1933, as amended.

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

      i)    Exhibits

            a)    Exhibit 99.1 - Certification Pursuant to 18 U.S.C. Section
                  1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002.

            b)    Exhibit 99.2 - Press Release dated May 13, 2003

      ii)   Form 8-K

            a)    Form 8-K dated March 31, 2003 and filed April 1, 2003 noting
                  the interest in DUSA's product, Levulan(R) Photodynamic
                  Therapy ("PDT"), at the annual meeting of the American Academy
                  of Dermatology.


                                   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.

<TABLE>
<S>                                       <C>
                                          DUSA Pharmaceuticals, Inc.

                                          By: /s/ D. Geoffrey Shulman
                                              ---------------------------------
                                              D. Geoffrey Shulman
                                              President, Chief Executive
                                              Officer, and Chief Financial
                                              Officer (Principal Financial
                                              Officer)

Date:  May 13, 2003                       By: /s/ Peter M. Chakoutis
                                              ---------------------------------
                                              Peter M. Chakoutis
                                              Controller (Principal
                                              Accounting Officer)
</TABLE>


                                       22
<PAGE>
                   SARBANES-OXLEY SECTION 302(a) CERTIFICATION

I, D. Geoffrey Shulman, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of DUSA
      Pharmaceuticals, Inc.;

2.    Based on my knowledge, this quarterly report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial
      information included in this quarterly report, fairly present in all
      material respects the financial condition, results of operations and cash
      flows of the registrant as of, and for, the periods presented in this
      quarterly report;

4.    The registrant's other signing officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this
            quarterly report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this quarterly report (the "Evaluation Date"); and

      c)    presented in this quarterly report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other signing officer and I have disclosed, based on our
      most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other signing officer and I have indicated in this
      quarterly report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

<TABLE>
<S>                                             <C>
Date: May 13, 2003                              /s/ D. Geoffrey Shulman
                                                -------------------------------
                                                D. Geoffrey Shulman
                                                President, Chief Executive
                                                Officer (Principal
                                                Executive Officer), and
                                                Chief Financial Officer
                                                (Principal Financial Officer)
</TABLE>


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