UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-K



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|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended June 30, 2000.

or



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|[   ] | 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 0-18443

MEDICIS PHARMACEUTICAL CORPORATION

(Exact name of registrant as specified in its
charter)


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|Delaware
	(State of other jurisdiction of
	Incorporation or organization)            |  | 52-1574808
	(I.R.S. Employer
	Identification No.)
|8125 North Hayden Road, Scottsdale, Arizona
	(Address of principal executive office) |  | 85258-2463
	(Zip Code)                           

Registrants telephone number, including area
code:  (602) 808-8800

Securities registered pursuant to Section 12(b) of the
Act:  Class A Common Stock, $0.014 par value

Preference Share Purchase Rights

(Title of each Class)


Securities registered pursuant to Section 12(g) of the
Act:  NONE

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
 to such filing requirements for the past
90 days.  Yes [X]  No 
[   ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
 herein, and will not be contained, to the best of the
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form or any amendment to this
Form 10-K [   ].

The aggregate market value of the voting stock held on
September 20, 2000 by non-affiliates of the registrant was
$1,351,210,993 (calculated by excluding all shares held by
executive officers, directors and holders known to the registrant
 of five percent or more of the voting power of the
registrants Common Stock, without conceding that such
persons are affiliates of the Registrant for purposes
 of the federal securities laws). As of September 20, 2000,
there were 29,996,140 outstanding shares of Class A Common
Stock $0.014 par value and 422,962 shares of Class B Common
Stock $0.014 par value.

Documents incorporated by reference:


Portions of the Proxy Statement for the Registrants 2000
Annual Meeting of Shareholders are incorporated herein by
reference in Part III of this Form 10-K to the extent
stated herein.



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PART I

This Annual Report on Form 10-K (Form 10-K)
 contains forward-looking statements which involve risks and
uncertainties. The actual results of Medicis Pharmaceutical
Corporation (together with its wholly-owned subsidiaries, the
Company or Medicis) could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set
forth below in Item 1 in this Form 10-K under the
heading Additional Factors That May Affect Future
Results and in the Companys other Securities and
Exchange Commission filings.

Item 1:  Business

Medicis is a specialty pharmaceutical company and the leading
independent pharmaceutical company in the United States focusing
primarily on the treatment of dermatological conditions. The
Company offers prescription products and an over-the-counter
(OTC) product, emphasizing the clinical
effectiveness, quality, affordability and cosmetic elegance of
its products. Medicis develops and markets leading products for
major segments within dermatology, including acne, rosacea,
antifungals, eczema, hyperpigmentation, pediculosis (head lice),
psoriasis, seborrheic dermatitis, and cosmesis (improvement in
the texture and appearance of skin). Medicis has built its
business by successfully executing a four-part growth strategy.
The Companys growth strategy includes: (1) expanding
sales of existing brands; (2) launching new products from
intensive research and development efforts; (3) acquiring
complementary strategic products, businesses and technologies;
and (4) collaborating with other companies.

Medicis derives a majority of its revenue from sales of its
DYNACIN®, TRIAZ®, LIDEX®, LUSTRA®,
LUSTRA-AF, LOPROX® and TOPICORT® products (the
Key Products).

PRINCIPAL PRODUCTS AND PRODUCT LINES

The Companys primary products include the prescription
brands DYNACIN® (minocycline HCl), TRIAZ® (benzoyl
peroxide), LOPROX® (ciclopirox), LUSTRA® and
LUSTRA-AF (hydroquinone), OVIDE® (malathion),
PLEXION (sodium sulfacetamide/sulfur), LIDEX®
(fluocinonide), SYNALAR® (fluocinolone acetonide),
TOPICORT® (desoximetasone), BUPHENYL (sodium
phenylbutyrate), a prescription product indicated in the
treatment of Urea Cycle Disorder, and the over-the-counter brand
ESOTERICA®.

PRESCRIPTION PHARMACEUTICALS

The Company primarily focuses its pharmaceutical sales efforts on
 prescription products for the treatment of acne, acne-related
conditions, rosacea, fungal infections, psoriasis, seborrheic
dermatitis and skin hyperpigmentation. The Companys
principal branded pharmaceutical products are described below.

DYNACIN® is an oral, systemic antibiotic, available
in 50-mg., 75-mg. and 100-mg. dosage forms, and is prescribed as
an adjunctive therapy in the treatment of severe acne.
DYNACIN® is the number one brand of minocycline prescribed
for the treatment of severe acne. The most commonly prescribed
systemic acne treatments are tetracycline and its derivatives,
minocycline and doxycycline. Minocycline, the active ingredient
in DYNACIN®, is widely prescribed for the treatment of acne
for several reasons. It has a more convenient schedule of one or
two doses per day as compared to other forms of tetracycline,
which can require up to four doses per day. Other forms of
tetracycline require ingestion on an empty stomach and may
increase patient sensitivity to sunlight, creating a greater risk
 of sunburn. Moreover, the other forms of tetracycline, including
 doxycycline, have been reported to often cause gastric
irritation. In addition, resistance to several commonly used
antibiotics, including erythromycin, clindamycin, doxycycline and
 tetracycline, by the primary bacterial organism responsible for
acne has been documented. Studies suggest that bacterial
resistance to erythromycin, doxycycline and tetracycline exceeds
50%, while the bacteria showed virtually no resistance to
minocycline. The Company believes the retail price of
DYNACIN® products is approximately 30% lower than the
average reported retail price of a competing branded minocycline
product, Minocin®, while selling at approximately 25% to 30%
 higher than the average reported retail price of generic
minocycline. DYNACIN® was launched in the second quarter of
the fiscal year ended June 30, 1993 with 50-mg.

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and 100-mg. dosage forms available. The Company launched
DYNACIN® in 75-mg. dosage form in the fourth quarter of the
fiscal year ended June 30, 1999 (fiscal 1999).
The Company has a manufacturing and supply agreement with Schein
Pharmaceutical, Inc. (Schein) for the supply of
DYNACIN®.

TRIAZ® is an internally developed, patented, topical
therapy prescribed for the treatment of all forms and varying
degrees of acne, and is available as a gel or cleanser in three
concentrations. The combined sales of topically applied
prescription acne products were in excess of $500 million in the
United States in 1996. TRIAZ® is currently the leading
branded prescription benzoyl peroxide product in dermatology.
While other topical acne treatments including Cleocin-T® and
 Benzamycin® are generally effective, TRIAZ® offers
advantages over each product, including improved stability,
greater convenience of use, reduced cost and fewer side effects.
The Company believes the average reported retail price of
TRIAZ® is less than that of either Cleocin-T® or
Benzamycin®. TRIAZ® products are manufactured using the
 active ingredient benzoyl peroxide in a patented vehicle
containing glycolic acid and zinc lactate. Studies conducted by
third parties have shown that benzoyl peroxide is the most
efficacious agent available for eradicating the bacteria that
cause acne with no reported resistance. Glycolic acid is believed
 by the Company to enhance the effectiveness of benzoyl peroxide
by exfoliating the outer layer of the skin, and zinc lactate is
believed by the Company to act to reduce the appearance of
inflammation and irritation often associated with acne.
TRIAZ® was developed by the Companys research and
development department and was introduced in the second quarter
of the fiscal year ended June 30, 1996. The Company has
patents and certain licensed patent rights covering varying
aspects of TRIAZ®. TRIAZ® products are manufactured to
the Companys specifications on a purchase order basis by
West Pharmaceutical Services Lakewood, Inc. (West
Pharmaceutical Services) and in accordance with a supply
agreement with Contract Pharmaceuticals, Limited (Contract
Pharmaceuticals).

LUSTRA® and LUSTRA-AF are internally
developed, patented, topical therapies prescribed for the
treatment of ultra-violet induced skin discolorations and
hyperpigmentation usually associated with the use of oral
contraceptives, pregnancy, hormone replacement therapy, sun
damage and superficial trauma. Both LUSTRA® and
LUSTRA-AF contain 4% hydroquinone in a patented vehicle
containing glycolic acid in an anti-oxidant complex. LUSTRA®
 is second in market share only to LUSTRA-AF, the leading
prescription topical treatment for dyschromia and
hyperpigmentation. In controlled clinical trials sponsored by the
 Company in 1998, LUSTRA® demonstrated a reduction in
pigmented lesions in a two-week period with statistically
significant performance over the competing brands Solaquin
Forte® and Melanex®. The Company started shipping
LUSTRA® to wholesalers in February 1998.
LUSTRA-AF, a line extension of LUSTRA®, containing
broad-spectrum UVA and UVB sunscreen agents, was introduced to
the market in the fourth quarter of fiscal 1999. LUSTRA® and
 LUSTRA-AF are manufactured in accordance with a
manufacturing agreement with Contract Pharmaceuticals.

LOPROX® cream 0.77% and lotion 0.77% are both
broad-spectrum prescription antifungal agents indicated for the
topical treatment of tinea pedis, tinea corporis, tinea cruris,
tinea versicolor and cutaneous candidiasis. In the second quarter
 of fiscal 2000, the Company received FDA approval to market
LOPROX® Gel (0.77% ciclopirox) for the treatment of
seborrheic dermatitis and fungal infections. Currently,
LOPROX® Gel is the only gel approved in the United States
for seborrheic dermatitis. Currently, LOPROX® is the only
hydroxypyridone antifungal agent available in the United States.
LOPROX® works with a unique mode of action that has been
shown to have fungistatic and fungicidal properties, and enhanced
 penetration. The Company believes this unique mode of action
makes LOPROX® an appropriate choice for topical treatment
alone, or as concomitant treatment with an oral antifungal. For
these reasons, the Company believes LOPROX® may be a better
product to manage the often-complicated mix of organisms involved
 in tinea infections. In clinical trials, LOPROX® was shown
to produce clinical improvement of 82% to 93% of subjects after a
 single week of treatment across the range of cutaneous mycoses.
The Company believes it is among the lowest priced branded
prescription topical antifungals. The United States market for
topical antifungal pharmaceuticals reached $367.7 million in
1996. The overall market for antifungals in the United States is
approximately $800 million annually. The most frequently
prescribed topical antifungal products in addition to
LOPROX® include Spectazole®, Nizoral®,
Oxistat® and Lotrisone® (steroid/antifungal
combination). LOPROX® was acquired from Aventis Pharma
(Aventis) as successor-in-interest to Hoechst Marion
Roussell (HMR) in November 1998 and re-launched
by Medicis in the third quarter of fiscal 1999. LOPROX®
products are manufactured to the Companys specifications
and supplied under an agreement with HMR.

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OVIDE® (malathion) Lotion, 0.5% is a topical
pediculicide indicated for the treatment of pediculus humanus
capitis, or head lice, and their ova and is available in 2-ounce
bottles. Head lice products accounted for $170 million in sales
in 1998 in the United States. Approximately 10 to 12 million
Americans, mostly school-age children, are infested with head
lice each year, and a growing body of evidence indicates
significant levels of head lice that are resistant to currently
available OTC treatments like NIX® and RID®. The
Company believes OVIDE® is a prescription alternative to the
 OTC treatments, offering both an excellent kill rate and ovicial
 activity. In addition, in controlled clinical studies,
OVIDE® demonstrated residual activity with 90.4% of patients
 still lice-free 7 days after treatment. Until OVIDE®,
the only prescription pediculicide available was lindane. Because
 of CNS toxicity potential, the FDA required a labeling change
recommending lindanes use only for patients who have either
 failed to respond to adequate doses, or are intolerant of other
approved therapies. Used as directed, the Company believes
OVIDE® provides safe and effective control of head lice and
their ova. The Company introduced OVIDE® during the fourth
quarter of fiscal 1999. OVIDE® is manufactured for the
Company by West Pharmaceutical Services on a purchase order
basis.

PLEXION is a topical cleanser prescribed for the
treatment of rosacea, a chronic skin condition causing
inflammation and redness of the face usually on the nose and
cheeks, and occasionally on the chin and forehead. Rosacea
affects about 13 million Americans each year and typically
affects fair-skinned adults between the ages of 30 and 50.
PLEXION is appropriate for this population and is designed
to be used in conjunction with other prescription rosacea
therapies. The active ingredients in PLEXION are sodium
sulfacetamide and sulfur. Sales of products to treat rosacea in
the United States in 1999 were approximately $96 million.
PLEXION, the first and only prescription cleanser indicated
 for the treatment of rosacea, was launched by Medicis in the
fourth quarter of fiscal 2000 and is available in 6- and
12-ounce sizes. The product competes with other topical acne
rosacea treatments such as MetroGel®, MetroCream® and
MetroLotion®. The Company believes PLEXION is priced
comparably to competing brands. The Company has a manufacturing
and supply agreement with Contract Pharmaceuticals for the
production of PLEXION.

LIDEX® is a high-potency topical corticosteroid brand
 prescribed for the treatment of inflammatory and
hyperproliferative skin diseases such as eczema, psoriasis,
atopic dermatitis, poison ivy and other inflammatory skin
conditions. Competing steroid brands in the high-potency category
 include Halog®, Elocon®, and Cyclocort®.
LIDEX® was introduced more than 20 years ago and the Company
 believes it is among the most widely accepted topical steroid
treatments available. Topical corticosteroid treatments represent
 a significant portion of dermatological product sales, with
estimated market sales of $593 million in 1999. The active
ingredient in LIDEX®, fluocinonide, works to alleviate
inflammations of the skin by reducing swelling and pain,
relieving itching and constricting blood vessels in the skin. The
 LIDEX® product line consists of various strengths and
cosmetically elegant formulations, including gels, ointments,
creams, solutions and emollient creams. The Company believes this
 broad product line allows dermatologists to prescribe the most
appropriate product based on the severity and location of a
patients condition, as well as the thickness of a
patients skin. With the exception of the LIDEX®-E
Cream, the various forms of LIDEX® are preservative-free,
and the active ingredient is fully dissolved in the vehicle of
the medication, resulting in better absorption of the medication
into the skin. The Company believes LIDEX® is priced
comparably to other branded corticosteroid products, but
significantly higher than the average reported retail price of
generic products containing fluocinonide. The Company acquired
the rights to LIDEX® in the United States and Canada from
Syntex (U.S.A.) Inc. and Syntex Pharmaceuticals International
Limited, respectively, (Syntex) in the third quarter
of the fiscal year ended June 30, 1997 (fiscal
1997). The Company has a manufacturing and supply agreement
 with Patheon, Inc. (Patheon) for the production of
LIDEX® and also uses West Pharmaceutical Services to
manufacture one LIDEX® product on a purchase order basis.

SYNALAR® is a mid- to low-potency topical
corticosteroid brand prescribed for the treatment of less severe
forms of inflammatory and hyperproliferative skin diseases such
as eczema, psoriasis, poison ivy, atopic dermatitis and other
inflammatory skin conditions. The active ingredient in
SYNALAR®, fluocinolone acetonide, works to alleviate
inflammations of the skin by reducing swelling and pain,
relieving itching and constricting blood vessels in the skin. The
 SYNALAR® product line consists of various strengths and
cosmetically elegant formulations, including ointments, creams,
emollient creams and solutions. The Company believes this
flexibility allows physicians to prescribe the most appropriate
product based upon the severity and location of a patients
condition, as well as the thickness of a patients skin.
Competing steroid brands in the mid- and low-potency

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categories include Aristocort®, Cutivate® and
Valisone®. SYNALAR® is priced comparably to other
branded corticosteroid products but higher than the average
reported price of generic products containing fluocinolone
acetonide. The Company acquired the rights to SYNALAR® in
the United States and Canada from Syntex in the third quarter of
fiscal 1997. The Company has a manufacturing and supply agreement
 with Patheon for the production of SYNALAR®.

TOPICORT® gels, creams, and ointments are
Class II, high-potency corticosteroids indicated for topical
 use on corticosteroid-responsive inflammatory skin conditions,
including psoriasis, contact dermatitis, seborrheic dermatitis,
stasis dermatitis, rhus dermatitis, atopic dermatitis and more.
The fourth product in the line is TOPICORT® LP cream, a
Class III corticosteroid. Class II, or high-potency
steroids, offer effective treatment without the risks commonly
associated with super-potent, Class I products. Unlike
Class I steroids, TOPICORT® has no dosing
restrictions, and minimizes the hypothalamic-pituitary-adrenal
(HPA) suppression commonly seen with Class I use. The
Company believes TOPICORT® cream and gel have long been
regarded as preferable to other available creams and gels because
 of their excellent cosmetic qualities. They do not contain
propylene glycol (solvent), parabans (preservatives), or added
fragrances that may cause irritation to patients with sensitive
skin. Each of the TOPICORT® products is available in 15- and
 60-gram tubes. Topical corticosteroid treatments represent a
significant portion of dermatological product sales, with
estimated market sales of $593 million in 1999. The Company
acquired the rights to TOPICORT® in the United States from
Aventis during the second quarter of fiscal 1999. The Company has
 a manufacturing and supply agreement with Aventis for the
production of TOPICORT®.

BUPHENYL is an orphan drug that was approved by the
FDA in 1986 as an adjunctive therapy for the treatment of
hyperammonemia in patients with Urea Cycle Disorder. The product
provides an alternative pathway to ureagenesis for waste nitrogen
 disposal and helps maintain nitrogen homeostasis. Urea cycle
disorder is a rare genetic defect that effects the hepatic urea
cycle, which is responsible for protein metabolism. Protein is
normally broken down to nitrogen and excreted as urea. However,
patients with deficiencies have either absent or significantly
reduced synthesis of urea that prevents normal nitrogen
homeostasis, causing ammonia and other nitrogenous compounds to
accumulate in the blood. The Company acquired this product when
it purchased the company, Ucyclyd Pharma, Inc.
(Ucyclyd), in April 1999. The Company has a
supply agreement with Pharmaceutics International Inc.
(PII) for the production of BUPHENYL.

NON-PRESCRIPTION PRODUCT

The Company derived revenue from sales of an OTC product,
ESOTERICA®, and from contract revenue in fiscal 2000. A
description of the Companys non-prescription product
follows.

ESOTERICA®, the leading fade cream line in the United
 States, is a line of topical creams used to treat minor skin
discoloration conditions such as age spots, uneven skin tones,
dark patches, blotches and freckles. ESOTERICA® is available
 in five formulations, consisting of four creams containing
various concentrations of the active ingredient hydroquinone and
a body lotion. The Company believes hydroquinone is the only
agent proven to reduce hyperpigmentation and the only product
legally sold in the United States for this purpose. Competing OTC
 products used to treat minor skin discolorations include
Porcelana® and AMBI®, which are sold in a variety of
creams, gels and lotions. The Company has a manufacturing
agreement for the production of ESOTERICA® with Contract
Pharmaceuticals.

PRODUCTS IN DEVELOPMENT

Medicis has developed and obtained rights to certain
pharmaceutical agents in various stages of development. The
Company has a variety of products under development, ranging from
 new products to existing product line extensions to
reformulations of existing products. The Companys strategy
involves the rapid evaluation and formulation of new therapeutics
 by obtaining preclinical safety and efficacy data, when
possible, followed by rapid safety and efficacy testing in
humans. While development periods vary, the Company generally
selects products for internal development with the objective of
proceeding from formulation to product launch within a two-year
period. With the Companys increasing financial strength,
Medicis has begun adding long-term projects to its development
pipeline and may add longer-term projects with greater risk in
the future.

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The Company directs the efforts of contract laboratory research
facilities to perform formulation and research work on active
ingredients, as well as to conduct preclinical studies and
clinical trials. All products and technologies under development
require significant commitments of personnel and financial
resources. Several products require extensive clinical evaluation
 and premarketing clearance by the United Stated Food and Drug
Administration (FDA) and comparable agencies in other
 countries prior to commercial sale. Certain of the products and
technologies under development have been licensed from third
parties. The failure of the Company to meet its obligations under
 one or more of these agreements could result in the termination
of the Companys rights under such agreements and other
liabilities. In addition, the Company regularly reevaluates its
product development efforts. On the basis of these reevaluations,
 the Company has, in the past, and may in the future, abandon
development efforts for particular products. There can be no
assurance that any product or technology under development will
result in the successful introduction of any new product.

The Companys research and development costs for
Company-sponsored and unreimbursed co-sponsored pharmaceutical
projects for fiscal 2000, 1999 and 1998 were $4,903,000,
$3,396,000, and $2,885,000 respectively. The Company has in the
past supplemented, and may in the future supplement, its research
 and development efforts by entering into research and
development agreements with other pharmaceutical and
biotechnology companies to defray certain costs and risks of
product development.

In July 1997, the Company entered into an agreement with
Abbott Laboratories (Abbott) for the development,
manufacture and marketing of a branded dermatological product.
Abbott is responsible for the development and eventual
manufacture of the product. The Company has agreed to pay certain
 development expenses estimated to be approximately $1,000,000.
There can be no assurance that this collaboration will result in
the successful introduction of any new product or technology or
that the Company will continue the development of the product in
the future.

In November 1998, the Company acquired the right to
manufacture, market and sell the LOPROX®, TOPICORT® and
 A/T/S® products from Aventis. The acquisition of these
products also included several in-process research and
development projects, including the newly launched LOPROX®
Gel. Although the Company intends to continue such development
projects, there can be no assurance that any technology
previously under development by Aventis will result in the
successful introduction of any additional new line extensions, or
 that the Company will continue the development of any such
projects in the future.

MARKETING AND SALES

Medicis believes that its prescription pharmaceutical marketing
and sales organization is one of the most productive in the
dermatology sector. The Companys marketing efforts are
focused on assessing and meeting the needs of dermatologists,
podiatrists and other specialties that treat conditions of the
skin. The Companys prescription sales team, consisting of
71 members at July 20, 2000, regularly calls on
dermatologists, focusing on the approximately 3,200
dermatologists who are responsible for 80% of all prescriptions
written by dermatologists in the United States. Additionally, the
 Company also calls on high-prescribing podiatrists. The Company
believes it has created an attractive incentive program based
upon goals in market-share growth and market-share maintenance.
The Company focuses on cultivating relationships of trust and
confidence with the specialists themselves. In addition, the
Company uses a variety of marketing techniques to promote its
products including: sampling, journal advertising, promotional
materials, specialty publications, rebate coupons, money-back or
product replacement guarantees, a leadership position in
educational conferences and exposure of its products on the
Internet.

The Companys OTC product is promoted to retailers and
wholesalers by manufacturers representatives who also
support a substantial number of products of other manufacturers.
The Company also markets its OTC product through internally
developed trade promotions, radio and print advertising,
couponing and by increasing consumer awareness.

WAREHOUSING AND DISTRIBUTION

Medicis utilizes an independent national warehousing corporation
to store and distribute its products from primarily two regional
warehouses in Nevada and Georgia, as well as an additional
warehouse in Maryland. Upon

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the receipt of a purchase order through electronic data input
(EDI), phone, mail or facsimile, the order is
processed into the Companys inventory systems. An inventory
 picking sheet is then automatically placed via EDI to the most
efficient warehouse location for shipment, usually within 24
hours, to the customer placing the order. Upon shipment, the
warehouse sends back to the Company via EDI the necessary
information to automatically process the invoice in a timely
manner. Any change, delay or interruption in the process could
have a material effect on the Companys business, financial
condition and results of operations.

CUSTOMERS

The Companys customers include the nations leading
wholesale pharmaceutical distributors, such as McKesson HBOC,
Inc. (McKesson), Bergen Brunswig Corporation
(Bergen Brunswig), Cardinal Health, Inc.
(Cardinal), Bindley Western Industries, Inc.
(Bindley), Quality King Distributors (Quality
King) and other major drug chains. During fiscal 2000,
Cardinal, McKesson, Quality King and Bergen Brunswig accounted
for 21.0%, 18.1%, 11.3% and 10.2%, respectively of the
Companys net revenues. During fiscal 1999, McKesson and
Cardinal accounted for 18.0% and 14.1% respectively, of the
Companys net revenues. During fiscal 1998, McKesson, Bergen
 Brunswig and Cardinal accounted for 16.9%, 13.2% and 12.6%,
respectively, of the Companys net revenues. The
distribution network for pharmaceutical products has, in recent
years, been subject to increasing consolidation. As a result, a
few large wholesale distributors control a significant share of
the market. In addition, the number of independent drug stores
and small chains has decreased as retail consolidation has
occurred. Further consolidation among, or any financial
difficulties of, distributors or retailers could result in the
combination or elimination of warehouses which may result in
product returns to the Company, cause a reduction in the
inventory levels of distributors and retailers, or otherwise
result in reductions in purchases of the Companys products,
 any of which could have a material adverse impact on the
Companys business, financial condition and results of
operations. Additionally, the loss of, or deterioration in, any
of these customer accounts could have a material adverse effect
on the Companys business, financial condition and results
of operations.

MANUFACTURING

Medicis currently contracts for all of its manufacturing needs
and is required by the FDA to contract only with manufacturers
that comply with current Good Manufacturing Practices
(cGMP) regulations and other applicable laws and
regulations. The Company typically enters into short-term
manufacturing contracts with third-party manufacturers. Whether
or not such contracts exist, there can be no assurance that the
Company will be able to obtain adequate supplies of its products
in a timely fashion, on acceptable terms, or at all.

Schein manufactures the Companys DYNACIN® product line
 in compliance with the Companys specifications and quality
 standards pursuant to a supply agreement. Under the agreement,
Schein manufactures DYNACIN® for sale in the branded market
exclusively for the Company, but may manufacture and sell
minocycline for itself or others as a generic product. Schein
currently manufactures minocycline for the generic market under
its own label. The Companys supply agreement expires in
December 2003, but is subject to automatic renewal for
successive two-year periods if neither party gives timely notice
of termination. It may also be terminated by either party without
 cause upon 12 months notice to the other party.
Schein may also terminate the exclusivity portion of the
agreement if its profit margin on sales of DYNACIN® products
 falls below a specified level. The agreement also provides that
the Company will purchase all of its requirements for minocycline
 from Schein but may purchase some of its requirements from
another manufacturer if Schein fails to meet certain cost
standards or fails to provide the Company with all of its
requirements for two of four consecutive quarters. In addition,
the Company may use alternative sources if Schein terminates the
Companys exclusive rights to purchase branded minocycline
based upon the Companys failure to meet the specified
profit margins, as defined. Either party may terminate the
agreement if one party cannot perform under the agreement for a
period of three months or longer for certain reasons beyond its
control. The Company believes that it has alternative sources of
supply and that it would be able to use these alternative sources
 to preserve an adequate supply of DYNACIN®. However, the
inability of Schein to fulfill the Companys supply
requirements for DYNACIN®, the Companys
largest-selling product, in a timely fashion, could have a
material adverse effect on the Companys business, financial
 condition and results of operations.

The majority of the Companys LIDEX® and SYNALAR®
products are manufactured primarily by Patheon in accordance with
 a manufacturing and supply agreement assumed by Medicis when it
acquired the LIDEX® and

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SYNALAR® products. Under the terms of an agreement with the
Company, F. Hoffman-La Roche, Ltd. supplies, at cost, active
ingredients necessary for manufacturing the LIDEX® and
SYNALAR® products. The Patheon manufacture and supply
agreement expires in January 2001; however, the Company will
 extend this agreement through an automatic one year extension.
The extension is available each year by contract unless either
party gives timely notice of termination.

The Companys LOPROX® and TOPICORT® products are
manufactured by HMR in accordance with a supply agreement entered
 into by the Company in connection with the acquisition of
LOPROX® and TOPICORT®. The HMR supply agreement expires
 in November 2001, but is subject to renewal.

The Companys ESOTERICA®, LUSTRA®,
LUSTRA-AF, PLEXION and TRIAZ® products are
manufactured by Contract Pharmaceuticals pursuant to
manufacturing agreements expiring in July 2001.

The Companys BUPHENYL products are manufactured by
PII pursuant to a supply agreement that expires in
August 2004, but is subject to renewal.

If any of the manufacturers should be unable or fail to timely
fulfill the Companys supply requirements for any product
covered by a manufacturing and supply agreement, such
circumstances could have a material adverse effect on the
Companys business, financial condition and results of
operations.

CERTAIN LICENSE AND ROYALTY AGREEMENTS

Pursuant to license agreements with third parties, Medicis has
acquired rights to manufacture, use or market certain of its
products, as well as many of its other proposed products and
technologies. Such agreements contain provisions requiring the
Company to use its best efforts or otherwise exercise diligence
in pursuing market development for such products in order to
maintain the rights granted under the agreements and may be
canceled upon the Companys failure to perform its payment
or other obligations. In addition, the Company has entered into
agreements to license certain rights to manufacture, use and sell
 certain of its technologies outside the United States and Canada
 to various licensees.

There can be no assurance that the Company will fulfill its
obligations under its license agreements due to insufficient
resources, lack of successful product development, lack of
product acceptance or other reasons. The failure to satisfy the
requirements of any such agreements may result in the loss of the
 Companys rights under that agreement or under related
agreements and other liabilities. The inability of the Company to
 continue to license these products or to license other necessary
 products for use with its products or substantial increases in
royalty payments under third-party licenses could have a material
 adverse effect on the Companys business, financial
condition and results of operations. In addition, the effective
implementation of the Companys strategy depends upon the
successful integration of these licensed products with the
Companys products. Therefore, any flaws or limitations of
such licensed products may prevent or impair the Companys
ability to market and sell the Companys products, delay new
 product introductions, and/or adversely affect the
Companys reputation. Such problems could have a material
adverse effect on the Companys business, financial
condition and results of operations. In addition, there can be no
 assurance that licensees will fulfill their obligations under
various license agreements. A licensees failure could have
a material adverse effect on the Companys business,
financial condition and results of operations.

On September 21, 1999, the Company purchased VECTRIN®,
a branded minocycline HCl product line, and ownership of its
Abbreviated New Drug Application (ANDA) from Warner
Chilcott, plc (Warner Chilcott). The Company is
making royalty payments and may be obligated to make additional
milestone payments conditioned upon the occurrence of certain
events.

In November 1998, the Company entered into a license
agreement with Aventis. The license is for a term of three years
with an option to purchase the products at the end of the term.
The products licensed from Aventis include LOPROX®,
TOPICORT® and A/T/S®.

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TRADEMARKS

The Company believes that trademark protection is an important
part of establishing product and brand recognition. The Company
owns more than 100 registered trademarks and trademark
applications and has acquired the rights to several trademarks by
 license. United States federal registrations for trademarks
remain in force for 10 years and may be renewed every
10 years after issuance, provided the mark is still being
used in commerce. There can be no assurance that any such
trademark or service mark registrations will afford the Company
adequate protection, or that the Company will have the financial
resources to enforce its rights under any such trademark or
service mark registrations. The inability of the Company to
protect its trademarks or service marks from infringement could
result in the impairment of any goodwill which may be developed
in such trademarks or service marks. Moreover, the Companys
 inability to use one or more of its trademarks or service marks,
 because of successful third-party claims to such marks, could
have a material adverse effect on the Companys business,
financial condition and results of operations.

From time to time, the Company receives communications from
parties who allege that their trademark or service mark interests
 may be damaged either by the Companys use of a particular
trademark or service mark or its registration of such trademark
or service mark, and, on occasion, the Company also sends such
communications to third parties. In general, the Company seeks to
 resolve such conflicts before an actual opposition to
registration or suit for infringement is filed. There can,
however, be no assurance that such actions will not be filed or
that, if filed, they will not have a material adverse effect upon
 the Companys business, financial condition or results of
operations.

PATENTS AND PROPRIETARY RIGHTS

The Company is pursuing several United States patent
applications. There can be no assurance that patents will be
issued with respect to any of these applications. The Company has
 acquired rights under certain patents and patent applications
from third-party licensors. The Company has obtained patents on
some of its products directed to aspects of certain of its
products, including a United States patent expiring in
October 2015 covering various formulations of its
TRIAZ® product line, and a United States patent expiring in
August 2017 covering its LUSTRA® and LUSTRA-AF
products. The Company has recently acquired from certain of its
consultants and principals an assignment of their rights to
certain United States patents or patent applications. Certain of
such patents and patent applications may be subject to claims of
rights by third parties by reason of existing relationships with
the party who filed such patents or patent applications. There
can be no assurance that the Company will be able to obtain any
rights under such patents or patent applications as a result of
such conflicting claims, or that any rights that the Company may
obtain will be sufficient for the Company to market products that
 may be the subject of such patents or patent applications. The
Company may be required to obtain licenses and/or pay royalties
to obtain the rights it acquires under such patents or patent
applications. There can be no assurance that the Company will be
able to obtain rights under such patents or patent applications
on terms acceptable to the Company, or at all.

The Company believes that its success will depend in part on its
ability to obtain and maintain patent protection for its own
inventions, and to obtain and maintain adequate licenses for the
use of patents licensed or sublicensed by third parties. There
can be no assurance that any patent issued to, or licensed by,
the Company will provide protection that has commercial
significance. In this regard, the patent position of
pharmaceutical compounds is particularly uncertain. There can be
no assurance that challenges will not be instituted against the
validity or enforceability of any patent owned by or licensed to
the Company or, if instituted, that such challenges will not be
successful. The cost of litigation to uphold the validity and
prevent infringement of patents can be substantial and require a
significant commitment of managements time. Furthermore,
there can be no assurance that others will not independently
develop similar technologies or duplicate the technology owned by
 or licensed to the Company or design around the patented aspects
 of such technology. The Company only conducts complete searches
to determine whether its products infringe upon any existing
patents as it deems appropriate. There can be no assurance that
the products and technologies the Company currently markets, or
may seek to market in the future, will not infringe patents or
other rights owned by others. A claim or finding of infringement
on one of the Companys products could have a material
adverse effect on the Companys business, financial
condition and results of operation.

The Company believes that obtaining and enforcing foreign patents
 may be more difficult than obtaining domestic patents because of
 differences in patent laws, and therefore, recognizes that its
patent position, if any, may

9



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be stronger in the United States than in Europe or elsewhere. In
addition, the protection provided by foreign patents once they
are obtained may be weaker than that provided by domestic
patents.

The Company relies and expects to continue to rely upon
unpatented proprietary know-how and continuing technological
innovation in the development and manufacture of many of its
principal products. The Companys policy is to require all
its employees, consultants and advisors to enter into
confidentiality agreements with the Company. There can be no
assurance, however, that these agreements will provide meaningful
 protection for the Companys trade secrets or proprietary
know-how in the event of any unauthorized use or disclosure of
such information. In addition, there can be no assurance that
others will not obtain access to or independently develop similar
 or equivalent trade secrets or know-how.

COMPETITION

The pharmaceutical industry is characterized by intense
competition, rapid product development and technological change.
Competition is intense among manufacturers of prescription
pharmaceuticals, such as for the Companys Key Products for
the treatment of dermatological conditions, as well as among
manufacturers in the OTC market for brands which compete with
ESOTERICA®. Most of the Companys competitors are
large, well-established pharmaceutical, chemical, cosmetic or
health care companies with considerably greater financial,
marketing, sales and technical resources than those available to
the Company. Additionally, many of the Companys present and
 potential competitors have research and development capabilities
 that may allow them to develop new or improved products that may
 compete with the Companys product lines. The
Companys products could be rendered obsolete or made
uneconomical by the development of new products to treat the
conditions addressed by the Companys products,
technological advances affecting the cost of production, or
marketing or pricing actions by one or more of the Companys
 competitors. Each of the Companys products competes for a
share of the existing market with numerous products that have
become standard treatments recommended or prescribed by
dermatologists.

DYNACIN® competes with Minocin®, a branded minocycline
product marketed by American Home Products (AHP) and
with generic minocycline products marketed by Schein, Barr
Laboratories, Inc. (Barr Labs) and ESI Lederle, Inc.
Other oral antibiotics utilized for the treatment of acne include
 erythromycin, doxycycline and tetracycline marketed in branded
and generic forms by a variety of companies. LIDEX®,
SYNALAR® and TOPICORT® compete with a number of
corticosteroid brands in the super-, high-, mid-, and low-potency
 categories for the treatment of inflammatory and
hyperproliferative skin conditions. Competing brands include
Halog® and Ultravate®, marketed by Bristol-Myers Squibb
 Company (Bristol-Myers); Elocon® and
Diprolene®, marketed by Schering-Plough Corporation
(Schering-Plough); Cyclocort and Aristocort, marketed
 by Fujisawa Healthcare, Inc.; Temovate® and Cutivate®,
 marketed by Glaxo Wellcome, Inc. (Glaxo Wellcome);
and Psorcon®, marketed by Dermik Laboratories, Inc.
(Dermik Labs). The Company believes that TRIAZ®
competes with Benzamycin®, marketed by Dermik Labs;
Cleocin-T®, marketed by Watson Pharmaceuticals, Inc.
(Watson); and Benzac®, marketed by Galderma
Laboratories, Inc. (Galderma) and with generic
products such as the prescription product clindamycin, marketed
by various manufacturers. The Company believes that its
LUSTRA® line primarily competes with Solaquin Forte®,
marketed by ICN Pharmaceuticals, Inc. and Melanex®, marketed
 by Neutrogena Dermatologics. ESOTERICA® primarily competes
with Porcelana®, marketed by Schwarzkopf & Dep,
Inc. and AMBI®, marketed by Kiwi Brands, a division of Sara
Lee Brands Corporation. The Company believes that LOPROX®
competes primarily with Lamisil®, marketed by Novartis
Pharmaceuticals Corporation; Nizoral®, marketed by Janssen
Pharmceutica, Inc. and Spectazole®, marketed by Ortho
Dermatological. The Company believes that OVIDE® primarily
competes with the OTC products NIX®, marketed by
Warner-Lambert Consumer Healthcare and RID®, marketed by
Pfizer, Inc. (Pfizer) and with generic products such
as the prescription product lindane, marketed by various
manufacturers.

Several of the Companys products, including DYNACIN®,
LIDEX®, SYNALAR® and TOPICORT® compete with
generic (non-branded) pharmaceuticals, which claim to offer
equivalent therapeutic benefits at a lower cost. In some cases,
insurers and other third-party payors seek to encourage the use
of generic products making branded products less attractive, from
 a cost perspective, to buyers.

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GOVERNMENT REGULATION

The manufacture and sale of cosmetics and drugs are subject to
regulation principally by the FDA and state and local authorities
 in the United States, and by comparable agencies in certain
foreign countries. The Federal Trade Commission (FTC)
 and state and local authorities regulate the advertising of OTC
drugs and cosmetics. The Food and Drug Act and the regulations
promulgated thereunder, and other federal and state statutes and
regulations, govern, among other things, the testing,
manufacture, safety, effectiveness, labeling, storage, record
keeping, approval, advertising and promotion of the
Companys products. In general, products falling within the
FDAs definition of new drugs require
premarketing clearance by the FDA. Products falling within the
FDAs definition of cosmetics or of
drugs that are not new drugs and that are
 generally recognized as safe and effective do not
require premarketing clearance.

The steps required before a new drug may be marketed
in the United States include (i) preclinical laboratory and
animal testing, (ii) submission to the FDA of an
Investigational New Drug (IND) application, which
must become effective before clinical trials may commence,
(iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug,
(iv) submission to the FDA of a New Drug Application
(NDA) and (v) FDA approval of the NDA prior to
any commercial sale or shipment of the drug. In addition to
obtaining FDA approval for each product, each domestic
drug-manufacturing establishment must be registered with, and
approved by the FDA. Drug product manufacturing establishments
located in California also must be licensed by the State of
California in compliance with separate regulatory requirements.

Preclinical testing is generally conducted in laboratory animals
to evaluate the potential safety and the efficacy of a drug. The
results of these studies are submitted to the FDA as a part of an
 IND application, which must be approved before clinical trials
in humans can begin. Typically, clinical evaluation involves a
time consuming and costly three-phase process. In Phase I,
clinical trials are conducted with a small number of subjects to
determine the early safety profile, the pattern of drug
distribution and metabolism. In Phase II, clinical trials are
conducted with groups of patients afflicted with a specific
disease to determine preliminary efficacy, optimal dosages and
expanded evidence of safety. In Phase III, large-scale,
multi-center, comparative trials are conducted with patients
afflicted with a target disease to provide sufficient data to
demonstrate the efficacy and safety required by the FDA. The FDA
closely monitors the progress of each of the three phases of
clinical trials and may, at its discretion, re-evaluate, alter,
suspend or terminate the testing based upon the data that have
been accumulated to that point and its assessment of the
risk/benefit ratio to the patient.

In general, FDA approval is required before a new drug product
may be marketed in the United States. However, most OTC drugs are
 exempt from the FDAs premarketing approval requirements.
In 1972, the FDA instituted the ongoing OTC Drug Review to
evaluate the safety and effectiveness of OTC drug ingredients
then in the market. Through this process, the FDA issues
monographs that set forth the specific active ingredients,
dosages, indications and labeling statements for OTC drug
ingredients that the FDA will consider generally recognized as
safe and effective and therefore not subject to premarket
approval. OTC drug ingredients are classified by the FDA in one
of three categories: Category I ingredients which are deemed
 safe and effective for OTC use; Category II
ingredients which are deemed not generally recognized as
safe and effective for OTC use; and Category III
ingredients which are deemed possibly safe and effective
with studies ongoing. Based upon the results of these
ongoing studies, the FDA may reclassify all Category III
ingredients as Category I or Category II ingredients.
For certain categories of OTC drugs not yet subject to a final
monograph, the FDA usually permits such drugs to continue to be
marketed until a final monograph becomes effective, unless the
drug will pose a potential health hazard to consumers. Drugs
subject to final monographs, as well as drugs that are subject
only to proposed monographs, are subject to various FDA
regulations concerning, for example, cGMP, general and specific
OTC labeling requirements, prohibitions against promotion for
conditions other than those stated in the labeling, and
requirement that OTC drugs contain only suitable inactive
ingredients. OTC drug manufacturing facilities are subject to FDA
 inspection, and failure to comply with applicable regulatory
requirements may lead to administrative or judicially imposed
penalties.

The active ingredient in DYNACIN®, minocycline;
LOPROX®, ciclopirox; TOPICORT®, desoximetasone;
OVIDE® lotion, malathion; BUPHENYL powder and tablets,
 sodium phenylbutyrate; and LIDEX® and

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SYNALAR®, fluocinonide and fluocinolone acetonide,
respectively, have been approved by the FDA under an NDA. The
active ingredient in the TRIAZ® products has been classified
 as a Category III ingredient under a tentative final FDA
monograph for OTC use in treatment of labeled conditions. The FDA
 has requested, and a task force of the Non-Prescription Drug
Manufacturers Association (NDMA), a trade association
 of OTC drug manufacturers, has undertaken further studies to
confirm that benzoyl peroxide, an active ingredient in the
TRIAZ® products, is not a tumor promoter when tested in
conjunction with UV light exposure. The TRIAZ® products,
which the Company sells on a prescription basis, have the same
ingredients at the same dosage levels as the OTC products. When
the FDA issues the final monograph, the Company may be required
by the FDA to sell TRIAZ® as an OTC drug unless the Company
files an NDA covering such product. There can be no assurance as
to the results of these studies or any FDA action to reclassify
benzoyl peroxide. In addition, there can be no assurance that
adverse test results would not result in withdrawal of
TRIAZ® from marketing. An adverse decision by the FDA with
respect to the safety of benzoyl peroxide could result in the
assertion of product liability claims against the Company and
could have a material adverse effect on the Companys
business, financial condition and results of operations.

Certain ESOTERICA® and LUSTRA® products contain the
active ingredient hydroquinone at a 2% and 4% concentration,
respectively. Independent expert dermatologists have formally
expressed the view that hydroquinone is generally recognized as
safe and effective for its intended use. Hydroquinone at a 2%
concentration is currently a Category I ingredient under a
tentative final monograph. In 1992, with the concurrence of the
FDA, the industry initiated dermatological metabolism and
toxicity studies to fully support hydroquinones continued
Category I status. Notwithstanding the pendency or results
of these tests, the FDA may elect to classify hydroquinone as a
Category III ingredient. The Company, in conjunction with
the NDMA and other manufacturers, is responsible for 50% of the
costs associated with these studies. An adverse decision by the
FDA on the safety of hydroquinone could result in the assertion
of product liability claims against the Company. Moreover, if
hydroquinone is not maintained as a Category I or
Category III ingredient, the Company would be required to
cease marketing the ESOTERICA® and LUSTRA® products
containing hydroquinone. An adverse decision by the FDA on the
safety of hydroquinone could have a material adverse effect on
the Companys business, financial condition and results of
operations.

The ESOTERICA®, TRIAZ® and LUSTRA® products must
meet the composition and labeling requirements established by the
 FDA for products containing their respective basic ingredients.
The Company believes that compliance with those established
standards avoids the requirement for premarketing clearance of
these products. There can be no assurance that the FDA will not
take a contrary position. PLEXION®, which contains the
active ingredients sodium sulfacetamide and sulfur, is marketed
under the FDA compliance policy entitled Marketed New Drugs
 without Approved NDAs or ANDAs.

The Company believes that certain of its products, as they are
promoted and intended by the Company for use, are exempt from
being considered new drugs based upon the
introduction date of their active ingredients and therefore do
not require premarketing clearance. There can be no assurance
that the FDA will not take a contrary position. If the FDA were
to do so, the Company may be required to seek FDA approval for
such products, market such products as OTC products or withdraw
such products from the market. The Company believes that such
products are subject to regulations governing product safety, use
 of ingredients, labeling and promotion and manufacturing
methods.

The Company also will be subject to foreign regulatory
authorities governing clinical trials and pharmaceutical sales if
 it seeks to market its products outside the United States.
Whether or not FDA approval has been obtained, approval of a
product by the comparable regulatory authorities of foreign
countries must be obtained prior to the commencement of marketing
 the product in those countries. The approval process varies from
 country to country and the time required may be longer or
shorter than that required for FDA approval. There can be no
assurance that any foreign regulatory agency will approve any
product submitted for review by the Company.

EMPLOYEES

At June 30, 2000, the Company had 172 full-time employees.
The Company believes its relationship with its employees is good.
 The Company intends to hire additional personnel as needed
during the next 12 months.

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ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

Our discussion and analysis in this report, in other reports that
 we file with the Securities and Exchange Commission, in our
press releases and in public statements of our officers and
corporate spokespersons contain forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or
current events. They use words such as anticipate,
estimate, expect, intend,
plan, believe and other words of similar
meaning in connection with discussion of future operating or
financial performance. These include statements relating to
future actions, prospective products or product approvals, future
 performance or results of current and anticipated products,
sales efforts, expenses, the outcome of contingencies such as
legal proceedings and financial results.

Forward-looking statements may turn out to be wrong. They can be
affected by inaccurate assumptions or by known or unknown risks
and uncertainties. Many factors mentioned in this
report  for example, governmental regulation and
competition in our industry  will be important in
determining future results. No forward-looking statement can be
guaranteed, and actual results may vary materially from those
anticipated in any forward-looking statement.

Medicis undertakes no obligation to update any forward-looking
statement. We provide the following discussion of risks and
uncertainties relevant to our business. These are factors that we
 think could cause our actual results to differ materially from
expected and historical results. Medicis could also be adversely
affected by other factors besides those listed here. The
following discussion is provided pursuant to the Private
Securities Litigation Reform Act of 1995.

WE RELY ON OTHERS TO MANUFACTURE OUR PRODUCTS

Currently, we contract out for all of our product manufacturing
needs and do not manufacture any of our products. Typically,
these manufacturing contracts are short-term. We are dependent
upon renewing agreements with our existing manufacturers or
finding replacement manufacturers to satisfy our requirements. As
 a result, we cannot be certain that manufacturing sources will
continue to be available or that we can continue to out-source
the manufacturing of our products on reasonable or acceptable
terms.

The underlying cost to Medicis for manufacturing our products is
established in our agreements with these outside manufacturers.
Because of the short-term nature of these agreements, our
expenses for manufacturing are not fixed and could change from
contract to contract. If the cost of production increases, our
gross margins could be negatively impacted.

In addition, we rely on outside manufacturers to provide us an
adequate and reliable supply of our products on a timely basis.
Any loss of a manufacturer or any difficulties which could arise
in the manufacturing process could significantly affect our
inventories and supply of products available for sale. In some
cases, we do not have alternative sources of supply for our
products. In the event our primary suppliers are unable to
fulfill our requirements for any reason, it could have a negative
 effect on our sales margins and market share, as well as our
overall business and financial results. If we are unable to
supply sufficient amounts of our products on a timely basis, our
market share could decrease and, correspondingly, our
profitability could decrease.

We have entered into exclusive supply or manufacturing agreements
 for several of our largest-selling products, such as
DYNACIN® and LIDEX®. Under these agreements, with
certain exception, we must purchase most of our product supply
from specific manufacturers. If any of these exclusive
manufacturer or supplier relationships were terminated, we would
be forced to find a replacement manufacturer or supplier. The FDA
 requires that all manufacturers used by pharmaceutical companies
 such as Medicis comply with the FDAs regulations,
including those cGMP regulations applicable to manufacturing
processes. The cGMP validation of a new facility and the approval
 of that manufacturer for a new drug product may take a year or
more before manufacture can begin at the facility. Delays in
obtaining FDA validation of a replacement manufacturing facility
could cause an interruption in the supply of our products.
Although we have business interruption insurance covering the
loss of income for up to 12 months, which may mitigate the
harm to Medicis from the interruption of

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the manufacturing of our largest selling products caused by
certain events, the loss of a manufacturer could still have a
negative effect on our sales, margins and market share, as well
as our overall business and financial results.

OUR RELIANCE ON THIRD-PARTY MANUFACTURERS AND SUPPLIERS CAN BE
 DISRUPTIVE TO OUR INVENTORY PLANNING

We and the manufacturers of our products rely on suppliers of raw
 materials used in the production of our products. Some of these
materials are available from only one source and others may
become available from only one source. Any disruption in the
supply of raw materials or an increase in the cost of raw
materials to our manufacturers could have a significant effect on
 their ability to supply us with our products.

We try to maintain inventory levels that are no greater than
necessary to meet our current projections. Any interruption in
the supply of finished products could hinder our ability to
timely distribute finished products. If we are unable to obtain
adequate product supplies to satisfy our customers orders,
we may lose those orders and our customers may cancel other
orders and stock and sell competing products. This in turn could
cause a loss of our market share and negatively affect our
revenues.

We cannot be certain that supply interruptions will not occur or
that our inventory will always be adequate. Numerous factors
could cause interruptions in the supply of our finished products
including shortages in raw material required by our
manufacturers, changes in our sources for manufacturing, our
failure to timely locate and obtain replacement manufacturers as
needed and conditions effecting the cost and availability of raw
materials.

THE GROWTH OF MANAGED CARE ORGANIZATIONS AND OTHER THIRD-PARTY
 REIMBURSEMENT POLICIES MAY HAVE AN ADVERSE EFFECT ON OUR PRICING
 POLICIES AND OUR MARGINS

Our operating results and business success depends in large part
on the availability of adequate third-party payor reimbursement
to patients for our prescription-brand products. These
third-party payors include governmental entities (such as
Medicaid), private health insurers and managed care organizations
 (MCOs). Over 70% of the U.S. population now
participates in some version of managed care. Because of the size
 of the patient population covered by MCOs, marketing of
prescription drugs to them and the pharmacy benefit managers
(PBMs) that serve many of these organizations has
become important to our business. MCOs and other third-party
payors try to negotiate the pricing of medical services and
products to control their costs. MCOs and PBMs typically develop
formularies to reduce their cost for medications. Formularies can
 be based on the prices and therapeutic benefits of the available
 products. Due to their lower costs, generic products are often
favored. The breadth of the products covered by formularies
varies considerably from one MCO to another, and many formularies
 include alternative and competitive products for treatment of
particular medical conditions. Exclusion of a product from a
formulary can lead to its sharply reduced usage in the MCO
patient population. Payment or reimbursement of only a portion of
 the cost of our prescription products could make our products
less attractive, from a net-cost perspective, to patients,
suppliers and prescribing physicians. We cannot be certain that
the reimbursement policies of these entities will be adequate for
 our branded pharmaceutical products to compete on a price basis.
 If our products are not included within an adequate number of
formularies or adequate reimbursement levels are not provided, or
 if those policies increasingly favor generic products, our
market share and gross margins could be negatively affected, as
could our overall business and financial condition.

Some of our products are not of a type generally eligible for
reimbursement. It is possible that products manufactured by
others could address the same effects as our products and be
subject to reimbursement. If this were the case, some of our
products may be unable to compete on a price basis.

Managed care initiatives to control costs have influenced
primary-care physicians to refer fewer patients to dermatologists
 and other specialists. The result has been a declining market
for dermatological products. Further reductions in these
referrals could have a material adverse effect on the size of our
 potential market as well as our business, financial condition
and results of operation.

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OUR CONTINUED GROWTH DEPENDS ON ACQUISITIONS

The Companys strategy for continued growth to a material
extent involves the acquisition of new product lines or
businesses. These acquisitions could be by acquiring other
pharmaceutical companies, acquiring a portion of a companys
 assets or product lines, or obtaining licenses or other rights
to manufacture and distribute products. Currently, we intend to
focus our acquisition, licensing and development efforts on skin
care products, which has been our historical focus, and possibly
on other specialty pharmaceutical niches. We cannot be certain
that we will be able to identify suitable acquisition candidates
or products or if any will be available at all. In addition, even
 if suitable acquisitions are identified, we may not be able to
secure terms which are beneficial. Other pharmaceutical companies
 with greater financial, marketing and sales resources than we
have also try to grow through these same acquisition and
licensing strategies. Because of their greater resources, our
competitors may be able to offer better terms for an acquisition
than Medicis can offer, or they may be able to demonstrate a
greater ability than Medicis to market licensed products.

OUR CONTINUED GROWTH DEPENDS UPON OUR ABILITY TO DEVELOP NEW
PRODUCTS

Medicis has internally developed potential pharmaceutical
compounds and agents; we also have acquired the rights to certain
 potential compounds and agents in various stages of development.
 We currently have a variety of new products in various stages of
 research and development and are working on possible
improvements, extensions and reformulations of some existing
products. These research and development activities, as well as
the clinical testing and regulatory approval process, which must
be completed before commercial quantities of these developments
can be sold, will require significant commitments of personnel
and financial resources. Due to the limited financial resources
available for research and development, there can be no assurance
 that we will be able to develop a product or technology in a
timely matter, or at all. Delays in the research, development,
testing or approval processes will cause a corresponding delay in
 revenue generation from those products. Regardless of whether
they are ever released to the market, the expense of such
processes will have already been incurred.

We reevaluate our research and development efforts regularly to
assess whether our efforts to develop a particular product or
technology are progressing at a rate that justifies our continued
 expenditures. On the basis of these reevaluations, we have
abandoned in the past, and may abandon in the future, our efforts
 on a particular product or technology. There can be no certainty
 that any product we are researching or developing will ever be
successfully released to the market. If we fail to take a product
 or technology from the development stage to market on a timely
basis, we may incur significant expenses without a near-term
financial return.

We have in the past, and may in the future, supplement our
internal research and development by entering into research and
development agreements with other pharmaceutical companies. We
may, upon entering into such agreements, be required to make
significant upfront payments to fund the project. We cannot be
sure, however, that we will be able to locate adequate research
partners or that supplemental research will be available on terms
 acceptable to us in the future. If Medicis is unable to enter
into additional research partnership arrangements, we may incur
additional costs to continue research and development internally
or abandon certain projects.

OUR BUSINESS STRATEGY MAY CAUSE FLUCTUATING OPERATING RESULTS

Our operating results and financial condition may fluctuate from
quarter to quarter and year to year depending upon the relative
timing of events or uncertainties which may arise. For example,
the following events or occurrences could cause fluctuations in
our financial performance from period to period:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in the levels we spend to develop, acquire or license new
	 product lines;                                                                     
|
| |  | changes in the amount we spend to promote our products;                                                                                                
|
| |  | delays between our expenditures to acquire new product lines or
	businesses and the generation of revenues from those acquired
	products or businesses;
|
| |  | changes in treatment practices of physicians that currently
	prescribe our products;                                                                   

15



---





| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in reimbursement policies of health plans and other
	similar health insurers, including changes that affect newly
	developed or newly acquired products;
|
| |  | increases in the cost of raw materials used to manufacture our
	products;                                                                                       
|
| |  | the development of new competitive products by others;                                                                                                          
|
| |  | the mix of products that we sell during any time period; and                                                                                                    
|
| |  | our responses to price competition.                                                                                                                             

FLUCTUATIONS IN DEMAND FOR OUR PRODUCTS CREATE INVENTORY
MAINTENANCE UNCERTAINTIES

Medicis historically has experienced lower sales levels in the
first quarter of our fiscal year (July 1 
September 30). In addition, we typically experience greater
revenues and, correspondingly, greater income during the last
month of each fiscal quarter. We try to match our expenditures
for inventory with these historical fluctuations in demand.
However, if these demand patterns change or we experience even a
small delay in delivery of inventory, revenue could be deferred
or even lost if products are unavailable to meet peak demand. A
deferral of revenue to a later period, or the loss of revenue
completely, could cause significant period-to-period fluctuations
 in our operating results, as a significant portion of our
operating expenses are fixed in the short term. These
fluctuations could result in our not meeting earnings
expectations or result in operating losses for a particular
period.

MEDICIS IS SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATION

Pharmaceutical companies are subject to heavy regulation by a
number of national, state and local agencies. The FDA has
jurisdiction over all of our business and administers
requirements covering testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, approval,
advertising and promotion of our products. In addition, the FTC
and state and local authorities regulate the advertising of OTC
drugs and cosmetics. Failure to comply with applicable regulatory
 requirements could, among other things, result in fines; changes
 to advertising; suspensions of regulatory approvals of products;
 product recalls; delays in product distribution, marketing and
sale; and civil or criminal sanctions.

Our prescription and OTC products receive FDA review regarding
their safety and effectiveness. However, the FDA is permitted to
revisit and change its prior determinations. We cannot be sure
that the FDA will not change its position with regard to the
safety or effectiveness of our products. If the FDAs
position changes, we may be required to change our labeling or
formulations, or cease to manufacture and market the challenged
products. Even prior to any formal regulatory action, we could
voluntarily decide to cease distribution and sale or recall any
of our products if concerns about the safety or effectiveness
develop.

Before marketing any drug that is considered a new
drug by the FDA, the FDA must provide its premarketing
approval of the product. All products which are considered
cosmetics or drugs which are not new
drugs and that generally are recognized by the FDA as safe
and effective for use do not require the FDAs premarketing
approval. We believe that some of our products, as they are
promoted and intended for use, are exempt from treatment as
new drugs and are not subject to premarketing
approval by the FDA. The FDA, however, could take a contrary
position and we could be required to seek FDA approval of those
products and the marketing of those products. We could also be
required to withdraw those products from the market.

In recent years, various legislative proposals have been offered
in Congress and in some state legislatures that include major
changes in the health care system. These proposals have included
price or patient reimbursement constraints on medicines and
restrictions on access to certain products. We cannot predict the
 outcome of such initiatives, and it is difficult to predict the
future impact of the broad and expanding legislative and
regulatory requirements affecting us.

WE FACE SIGNIFICANT COMPETITION WITHIN OUR INDUSTRY

The pharmaceutical industry is highly competitive. Competition in
 our industry occurs on a variety of fronts, including developing
 and bringing new products to market before others, developing
new technologies to

16



---



improve existing products, developing new products to provide the
 same benefits as existing products at less cost and developing
new products to provide benefits superior to those of existing
products.

Most of our competitors are large, well-established companies in
the fields of pharmaceuticals, chemicals, cosmetics and health
care. Our competitors include AHP, Barr Labs, Schering-Plough,
Bristol-Myers, Glaxo Wellcome, Galderma, Dermik Labs,
Pharmacia & Upjohn, Pfizer and others. Many of these
companies have greater resources than we do to devote to
marketing, sales, research and development and acquisitions. As a
 result, they have a greater ability to undertake more extensive
research and development, marketing and pricing policy programs.
It is possible that our competitors may develop new or improved
products to treat the same conditions as our products treat or
make technological advances reducing their cost of production so
that they may engage in price competition through aggressive
pricing policies to secure a greater market share to our
detriment. These competitors also may develop products which make
 our current or future products obsolete. Any of these events
could have a significant negative impact on our business and
financial results, including reductions in our market share and
gross margins.

Medicis sells and distributes both prescription brands and an OTC
 product. Each of these products competes with products produced
by others to treat the same conditions. Several of our
prescription products, including DYNACIN®, LIDEX®,
SYNALAR® and TOPICORT®, compete with generic
pharmaceuticals, which claim to offer equivalent benefit at a
lower cost. In some cases, insurers and other health care payment
 organizations try to encourage the use of these less expensive
generic brands through their prescription benefits coverages and
reimbursement policies. These organizations may make the generic
alternative more attractive to the patient by providing different
 amounts of reimbursement so that the net cost of the generic
product to the patient is less than the net cost of our
prescription brand product. Aggressive pricing policies by our
generic product competitors and the prescription benefits
policies of insurers could cause us to lose market share or force
 us to reduce our gross margins in response.

OUR SUCCESS DEPENDS ON THE MANAGEMENT OF RECENT AND FUTURE
GROWTH

Medicis recently experienced a period of rapid growth from both
acquisitions and internal expansion of our operations. This
growth has placed significant demands on our human and financial
resources. We must continue to improve our operational, financial
 and management information controls and systems and effectively
motivate, train and manage our employees to properly manage this
growth. Even if these steps are taken, we cannot be sure that our
 recent acquisitions will be assimilated successfully into our
business operations. If we do not manage this growth effectively,
 maintain the quality of our products despite the demands on our
resources and retain key personnel, our business could be
negatively impacted.

THERE ARE HIGH COSTS OF OBTAINING FDA AND OTHER REGULATORY
APPROVALS

The process of obtaining FDA and other regulatory approvals is
lengthy and expensive. Clinical trials are required and the
marketing and manufacturing of pharmaceutical products are
subject to rigorous testing procedures. We may not be able to
obtain FDA approval to conduct clinical trials or to manufacture
and market any of the products we develop, acquire or license.
Moreover, the costs to obtain approvals could be considerable and
 the failure to obtain or delays in obtaining an approval could
have a significant negative effect on our business performance
and financial results. Even if premarketing approval from the FDA
 is received, the FDA is authorized to impose post-marketing
requirements such as:



| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | testing and surveillance to monitor the product and its continued
	 compliance with regulatory requirements;                                                              
|
| |  | submitting products for inspection and, if any inspection reveals
	 that the product is not in compliance, the prohibition of the
	sale of all products from the same lot;
|
| |  | suspending manufacturing;                                                                                                                                                 
|
| |  | recalling products; and                                                                                                                                                   
|
| |  | withdrawing marketing clearance.                                                                                                                                          

17



---



In its regulation of advertising, the FDA from time to time
issues correspondence to pharmaceutical companies alleging that
some advertising or promotional practices are false, misleading
or deceptive. The FDA has the power to impose a wide array of
sanctions on companies for such advertising practices, and the
receipt of correspondence from the FDA alleging these practices
could result in the following:



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incurring substantial expenses, including fines, penalties, legal
	 fees and costs to comply with the FDAs requirements;                                              
|
| |  | changes in the methods of marketing and selling products;                                                                                                              
|
| |  | taking FDA-mandated corrective action, which may include placing
	advertisements or sending letters to physicians rescinding
	previous advertisements or promotion; and
|
| |  | disruption in the distribution of products and loss of sales
	until compliance with the FDAs position is obtained.                                                    

DEPENDENCE OF LICENSES FROM OTHERS

We have acquired the right to manufacture, use or market certain
products, including certain of our Key Products. We also expect
to continue to obtain licenses for other products and
technologies in the future. Our license agreements generally
require us to develop a market for the licensed products. If we
do not exert enough efforts to develop these markets, the
licensors may be entitled to terminate these license agreements.

We cannot be certain that we will fulfill all of our obligations
under any particular license agreement for any variety of
reasons, including insufficient resources to adequately develop
and market a product, lack of market development despite our
diligence and lack of product acceptance. Our failure to fulfill
our obligations could result in the loss of our rights under a
license agreement.

Our inability to continue the distribution of any particular
licensed product could have a material negative effect on our
business, market share and profitability. Also, certain products
we license are used in connection with other products we own or
license. A loss of a license in such circumstances could
materially harm our ability to market and distribute these other
products.

Our growth and acquisition strategy depends upon the successful
integration of licensed products with our existing products.
Therefore, any loss, limitation or flaw in a licensed product
could impair our ability to market and sell our products, delay
new product development and introduction, and/ or adversely
affect our reputation. These problems, individually or together,
could have a material adverse effect on our business and results
of operation.

We have granted licenses to certain products. We cannot be
certain that a licensee will fulfill their obligations under such
 licenses. The non-performance of a licensee for our products
could have a material adverse effect on our business and results
of operations.

ADEQUACY OF TRADEMARKS, PATENTS AND PROPRIETARY RIGHTS

We believe that the protection of our trademarks and service
marks is an important factor in product recognition, maintaining
goodwill and in maintaining or increasing market share. If we do
not adequately protect our rights in our various trademarks and
service marks from infringement, any goodwill which has been
developed in those marks could be lost or impaired. If the marks
we use are found to infringe upon the trademark or service mark
of another company, we could be forced to stop using those marks
and, as a result, we could lose all the goodwill which has been
developed in those marks and could be liable for damages caused
by an infringement.

We are pursuing several U.S. patent applications, although we
cannot be sure that any of these patents will ever be issued. We
also have acquired rights under certain patents and patent
applications in connection with our licenses to distribute
products and by assignment of rights to patents and patent
applications from certain of our consultants and officers. These
patents and patent applications may be subject to claims of
rights by third parties. If there are conflicting claims to the
same patent or patent application, we may not prevail and, even
if we do have

18



---



some rights in a patent or application, those rights may not be
sufficient for the marketing and distribution of products covered
 by the patent or application.

The patents and applications in which we have an interest may be
challenged as to their validity or enforceability. Challenges may
 result in potentially significant harm to our business. The cost
 of responding to these challenges and the inherent costs to
defend the validity of our patents, including the prosecution of
infringements and the related litigation, could be substantial.
Such litigation also could require a substantial commitment of
managements time.

The ownership of a patent or an interest in a patent does not
always provide significant protection. Others may independently
develop similar technologies or design around the patented
aspects of our technology. We only conduct patent searches to
determine whether our products infringe upon any existing
patents, when we think such searches are appropriate. As a
result, the products and technologies we currently market, and
those we may market in the future, may infringe on patents and
other rights owned by others. If we are unsuccessful in any
challenge to the marketing and sale of our products or
technologies, we may be required to license the disputed rights,
if the holder of those rights is willing, or to cease marketing
the challenged products, or to modify our products to avoid
infringing upon those rights. A claim or finding of infringement
regarding one of our products could have a material adverse
effect on the Companys business, financial condition and
results of operations. The costs of responding to infringement
claims could be substantial and could require a substantial
commitment of managements time.

We also rely upon unpatented proprietary know-how and continuing
technological innovation in developing and manufacturing many of
our principal products. Medicis requires all of its employees,
consultants and advisors to enter into confidentiality agreements
 prohibiting them from taking our proprietary information and
technology. Nevertheless, these agreements may not provide
meaningful protection for our trade secrets and proprietary
know-how if they are used or disclosed. Despite all of the
precautions we may take, people who are not parties to
confidentiality agreements may obtain access to our trade secrets
 or know-how. In addition, others may independently develop
similar or equivalent trade secrets or know-how.

PRODUCT LIABILITY

Medicis is exposed to risks of product liability claims from
allegations that our products resulted in adverse effects to the
patient or others. These risks exist even with respect to those
products that are approved for commercial sale by the FDA and
manufactured in facilities licensed and regulated by the FDA.

In addition to our desire to reduce the scope of our potential
exposure to these types of claims, many of our customers require
us to maintain product liability insurance as a condition of
conducting business with us. We currently carry product liability
 insurance in the amount of $40.0 million per claim and $40.0
million in the aggregate on a claims-made basis. Nevertheless,
this insurance may not be sufficient to cover all claims made
against us. We also cannot be certain that our current coverage
will continue to be available in the future on reasonable terms,
if at all. If we are liable for any product liability claims in
excess of our coverage or outside of our coverage, the cost and
expense of such liability could severely damage our business,
financial condition and profitability.

SUCCESSFUL INTEGRATION OF NEW PRODUCTS IS NOT CERTAIN

When we acquire or develop new products and product lines, we
must be able to integrate those products and product lines into
our systems for marketing, sales and distribution. If these
products or product lines are not integrated successfully, the
potential for growth is limited. The new products we acquire or
develop could have channels of distribution, competition, price
limitations or marketing acceptance different from our current
products. As a result, we do not know whether we will be able to
compete effectively and obtain market acceptance in any new
product categories. After acquiring or developing a new product,
we may need to significantly increase our sales force and incur
additional marketing, distribution and other operational
expenses. These additional expenses could negatively affect our
gross margins and operating results. In addition, many of these
expenses could be incurred prior to the actual distribution of
new products. Because of this timing, if the new products are not
 accepted by the

19



---



market or if they are not competitive with similar products
distributed by others, the ultimate success of the acquisition or
 development could be substantially diminished.

Item 2:  Properties

The Company presently occupies approximately 49,000 square feet
of office space, at an average annual expense of $1,346,000,
under a lease agreement that expires in February 2010. The
lease contains certain rent escalation clauses and, upon
expiration, can be renewed for two additional periods of five
years each. Rent expense was approximately $1,024,500, $564,000,
and $350,000 for fiscal 2000, 1999 and 1998, respectively. The
Company relocated to its present office space in Scottsdale,
Arizona in February 2000.

Medicis Canada, Inc., a wholly owned subsidiary, presently leases
 approximately 7,500 square feet of office and warehouse space in
 St-Laurent, Quebec, Canada, under a lease agreement that expires
 in April 2001.

Item 3:  Legal Proceedings

The Company and certain of its subsidiaries are parties to
actions and proceedings incident to their businesses, including
certain litigation assumed in connection with the GenDerm
Corporation (Genderm) acquisition as well as
litigation regarding our intellectual property, including
challenges to the enforceability or validity of our intellectual
property and claims that our products infringe on the
intellectual property rights of others. The Company believes
liability in the event of final adverse determinations in any of
these matters is either covered by the indemnification provided
to the Company under the GenDerm acquisition agreement, insurance
 and/or established reserves, or, should not, in the aggregate,
have a material adverse effect on the business, financial
position or results of operations of the Company. There can be no
 assurance, however, that an adverse determination on any action
or proceeding will not have a material adverse effect on the
business, financial condition and results of operations of the
Company, or that the Company will be able to realize the full
amount of any indemnification obligation that any person may have
 to the Company under the GenDerm acquisition agreement or that
any such indemnification will adequately cover any liability.

Item 4:  Submission of Matters to a Vote of
Security Holders

No matters were submitted to a vote of the security holders of
the Company during the fourth quarter of fiscal 2000.

20



---



PART II

Item 5:  Market for Registrants Common
Equity and Related Shareholder Matters

Dividend Policy

The Company declared a 3-for-2 stock split in the form of a 50%
stock dividend paid on February 16, 1999, to holders of
record on January 29, 1999. The Company has never declared a
 cash dividend. The Company intends to retain any earnings to
fund future growth and the operation of its business and,
therefore, does not anticipate paying any cash dividends in the
foreseeable future.

Price Range of Common Stock

The Companys Class A Common Stock during fiscal 1999
was traded on the Nasdaq National Market under the symbol
MDRX through September 23, 1998. At market open
on September 24, 1998, the Companys Class A
Common Stock began trading on the New York Stock Exchange under
the symbol MRX. The following table sets forth for
the fiscal periods indicated, and the range of high and low sales
 prices for the Class A Common Stock of the Company on the
Nasdaq National Market and the New York Stock Exchange, as
adjusted to reflect the 3-for-2 stock split in the form of a 50%
stock dividend paid on February 16, 1999, to holders of
record as of January 29, 1999, as adjusted to the
nearest  1/16:

|                                |                |      |   |     |       |  |   |    |    
|------------------------------- | -------------- | ---- | - | --- | ----- |  | - | -- | ---
|                                |                | High |   | Low
|                                |                |      |   |    
|FISCAL YEAR ENDED JUNE 30, 2000 |                |      |   |     |       |  |   |   
|                               
|                               
|                               
|                               
|                                | First Quarter  |      | $ | 32  | 7/8   |  | $ | 20 | 1/4
|                               
|                               
|                               
|                               
|                                | Second Quarter |      |   | 43  | 3/4   |  |   | 22 | 3/4
|                               
|                               
|                               
|                               
|                                | Third Quarter  |      |   | 51  | 15/16 |  |   | 35 | 1/4
|                               
|                               
|                               
|                               
|                                | Fourth Quarter |      |   | 64  | 3/4   |  |   | 34 | 1/4
|                               
|FISCAL YEAR ENDED JUNE 30, 1999 |                |      |   |     |       |  |   |   
|                               
|                               
|                               
|                               
|                                | First Quarter  |      | $ | 29  | 15/16 |  | $ | 19 | 7/8
|                               
|                               
|                               
|                               
|                                | Second Quarter |      |   | 43  | 3/16  |  |   | 25 | 5/8
|                               
|                               
|                               
|                               
|                                | Third Quarter  |      |   | 47  | 3/4   |  |   | 25 | 7/8
|                               
|                               
|                               
|                               
|                                | Fourth Quarter |      |   | 31  |       |  |   | 23 | 1/4

On September 7, 2000, the last reported sale price on the
New York Stock Exchange for the Companys Class A
Common Stock was $63.38 per share. As of such date, there were
approximately 274 holders of record of Class A Common Stock.

21



---



Item 6:  Selected Financial Data

The following selected financial data has been derived from the
consolidated financial statements of Medicis Pharmaceutical
Corporation for the fiscal years 2000, 1999, 1998, 1997 and 1996.
 Gross profit does not include amortization of the related
intangibles.

|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |        | 
|------------------------------------------------------------------------------ | ----------------------------------- | ------------------------------------- | ------- | ------- | - | ---- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                               |                                     |                                      
|                                                                               |                                     | June 30,                             
|                                                                               |                                     |                                      
|                                                                               |                                     | 2000                                  |         | 1999    |   | 1998 |         | 1997    |   | 1996
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |     
|                                                                               |                                     |                                      
|                                                                               |                                     | (in thousands, except per share data)
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Statements of Operations Data:                                                 |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Net revenues                                                                   |                                     | $                                     | 139,099 |         |   | $    | 116,871 |         |   | $    | 7,571   |         |   | $ | 41,159 |        |  | $ | 25,310 |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Gross profit                                                                   |                                     |                                       | 113,188 |         |   |      | 95,236  |         |   |      | 63,592  |         |   |   | 31,797 |        |  |   | 18,354 |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Operating expenses:                                                            |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Selling, general and administrative |                                       |         | 45,404  |   |      |         | 38,219  |   |      |         | 27,424  |   |   |        | 16,484 |  |   |        | 10,868 | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Research and development expenses   |                                       |         | 4,903   |   |      |         | 3,396   |   |      |         | 2,885   |   |   |        | 1,450  |  |   |        | 952    | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | In-process research and development |                                       |         |        |   |      |         | 9,500   |   |      |         | 35,400  |   |   |        |       |  |   |        |       | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Depreciation and amortization       |                                       |         | 7,375   |   |      |         | 5,810   |   |      |         | 2,903   |   |   |        | 999    |  |   |        | 559    | 
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Total operating expenses                                                       |                                     |                                       | 57,682  |         |   |      | 56,925  |         |   |      | 68,612  |         |   |   | 18,933 |        |  |   | 12,379 |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Operating income (loss)                                                        |                                     |                                       | 55,506  |         |   |      | 38,311  |         |   |      | (5,020  | )       |   |   | 12,864 |        |  |   | 5,975  |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Other:                                                                         |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Gain on sale of assets              |                                       |         |        |   |      |         | 17,650  |   |      |         |        |   |   |        |       |  |   |        |       | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Net interest income                 |                                       |         | 11,875  |   |      |         | 9,678   |   |      |         | 7,037   |   |   |        | 3,787  |  |   |        | 79     | 
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Income tax (expense) benefit        |                                       |         | (24,387 | ) |      |         | (24,202 | ) |      |         | (14,424 | ) |   |        | 694    |  |   |        | 1,826  | 
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Net income (loss)                                                              |                                     | $                                     | 42,994  |         |   | $    | 41,437  |         |   | $    | (12,407 | )       |   | $ | 17,345 |        |  | $ | 7,880  |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Basic net income (loss) per common share                                       |                                     | $                                     | 1.48    |         |   | $    | 1.46    |         |   | $    | (0.51   | )       |   | $ | 0.88   |        |  | $ | 0.52   |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Diluted net income (loss) per common share                                     |                                     | $                                     | 1.41    |         |   | $    | 1.41    |         |   | $    | (0.51   | )       |   | $ | 0.83   |        |  | $ | 0.50   |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Number of shares used in computing basic net income
	(loss) per common share   |                                     |                                       | 29,029  |         |   |      | 28,414  |         |   |      | 24,102  |         |   |   | 19,788 |        |  |   | 15,195 |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|Number of shares used in computing diluted net income
	(loss) per common share |                                     |                                       | 30,499  |         |   |      | 29,462  |         |   |      | 24,102  |         |   |   | 20,891 |        |  |   | 15,882 |       
|                                                                               |                                     |                                       |         |         |   |      |         |         |   |      |         |         |   |   |        |        |  |   |        |       
|                                                                              

|                                                  |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |        | 
|------------------------------------------------- |  | -------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------ | 
|                                                  |  |               
|                                                  |  | June 30,      
|                                                  |  |               
|                                                  |  | 2000           |         | 1999 |  | 1998 |         | 1997 |  | 1996
|                                                  |  |                |         |      |  |      |         |      |  |     
|                                                  |  |               
|                                                  |  | (in thousands)
|                                                 
|                                                 
|                                                 
|                                                 
|Balance Sheet Data:                               |  |                |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |        | 
|                                                 
|                                                 
|                                                 
|                                                 
|Cash, cash equivalents and short-term investments |  | $              | 285,737 |      |  | $    | 237,304 |      |  | $    | 237,921 |  |  | $ | 85,132  |  |  | $ | 7,956  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Working capital                                   |  |                | 312,302 |      |  |      | 278,612 |      |  |      | 262,956 |  |  |   | 94,803  |  |  |   | 12,401 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Total assets                                      |  |                | 495,340 |      |  |      | 467,510 |      |  |      | 352,350 |  |  |   | 140,537 |  |  |   | 26,313 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Long-term obligations                             |  |                | 14,914  |      |  |      | 34,716  |      |  |      | 95      |  |  |   | 111     |  |  |   | 117    | 
|                                                 
|                                                 
|                                                 
|                                                 
|Stockholders equity                              |  |                | 437,439 |      |  |      | 373,748 |      |  |      | 324,495 |  |  |   | 131,565 |  |  |   | 19,460 | 

22



---



Item 7:  Managements Discussion and
Analysis of Financial Condition and Results of Operations

The following Managements Discussion and Analysis of
Financial Condition and Results of Operations contains
forward-looking statements, which involve risks and
uncertainties. The Companys actual results could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including those
discussed in Item 1, (see Additional Factors that May
Affect Future Results below).

OVERVIEW

Medicis is a specialty pharmaceutical company and the leading
independent pharmaceutical company in the United States focusing
primarily on the treatment of dermatological conditions. The
Company offers prescription products and an over-the-counter
(OTC) product, emphasizing the clinical
effectiveness, quality, affordability and cosmetic elegance of
its products. Medicis develops and markets leading products for
major segments within dermatology, including acne, rosacea,
antifungals, eczema, hyperpigmentation, pediculosis (head lice),
psoriasis, seborrheic dermatitis, and cosmesis (improvement in
the texture and appearance of skin). Medicis has built its
business by successfully executing a four-part growth strategy.
The Companys growth strategy includes: (1) expanding
sales of existing brands; (2) launching new products from
intensive research and development efforts; (3) acquiring
complementary strategic products, businesses and technologies;
and (4) collaborating with other companies.

The Companys primary products include the prescription
brands DYNACIN® (minocycline HCl), TRIAZ® (benzoyl
peroxide), LOPROX® (ciclopirox), LUSTRA® and
LUSTRA-AF (hydroquinone), OVIDE® (malathion),
PLEXION (sodium sulfacetamide/sulfur), LIDEX®
(fluocinonide), SYNALAR® (fluocinolone acetonide),
TOPICORT® (desoximetasone), BUPHENYL (sodium
phenylbutyrate), a prescription product indicated in the
treatment of Urea Cycle Disorder, and the over-the-counter brand
ESOTERICA®.

Medicis derives a majority of its revenue from sales of its
DYNACIN®, TRIAZ®, LIDEX®, LOPROX®,
LUSTRA®, LUSTRA-AF and TOPICORT® products (the
Key Products). The Company believes that sales of the Key
Products will constitute the majority of net revenues for the
foreseeable future. Accordingly, any factor adversely affecting
the sale of the Key Products, individually or collectively, could
 have a material adverse effect on the Companys business,
financial condition and results of operations. Each of the Key
Products could be rendered obsolete or uneconomical by regulatory
 or competitive changes. The sale of the Key Products could also
be adversely affected by other factors, including manufacturing
or supply interruptions; the development of new competitive
pharmaceuticals to treat the conditions addressed by the Key
Products; technological advances; factors affecting the cost of
production; marketing or pricing actions by one or more of the
Companys competitors; regulatory action by the FDA; changes
 in the prescribing practices of dermatologists; changes in the
reimbursement policies of third-party payors; product liability
claims; the outcome of disputes relating to trademarks, patents
and other rights; or other factors.

The Companys results of operations may vary from period to
period due to a variety of factors, including expenditures
incurred to acquire, license and promote pharmaceuticals;
expenditures and timing relating to the acquisition and
integration of businesses; the introduction of new products by
the Company or its competitors; cost increases from third-party
manufacturers; manufacturing and supply interruptions; the
availability and cost of raw materials; the mix of products sold
by the Company; changes in marketing and sales expenditures;
market acceptance of the Companys products; competitive
pricing pressures; the outcome of disputes relating to
trademarks, patents and other rights; general economic and
industry conditions that affect customer demand; and the
Companys level of research and development activities. In
addition, the Companys business has historically been
subject to seasonal fluctuations, with lower sales generally
being experienced in the first quarter of each fiscal year. As a
result of customer buying patterns, a substantial portion of the
Companys revenues has been in the last month of each
quarter. The Company schedules its inventory purchases to meet
anticipated customer demand. As a result, relatively small delays
 in the receipt of manufactured products by the Company could
result in revenues being deferred or lost. The Companys
operating expenses are based upon anticipated sales levels, and a
 high percentage of the Companys

23



---



operating expenses are relatively fixed in the short term.
Consequently, variations in the timing of revenue recognition
could cause significant fluctuations in operating results from
period to period and may result in unanticipated periodic
earnings shortfalls or losses. There can be no assurance that the
 Company will maintain or increase revenues or profitability or
avoid losses in any future period.

Medicis recognizes revenues from sales upon shipment to its
customers. At the time of sale, the Company records reserves for
returns based upon estimates using historical experience. Sales
are reported net of actual and estimated product returns and net
of pricing adjustments and/or discounts. The Company applies
royalty obligations to the cost of sales in the period the
corresponding sales are recognized.

The Companys customers include the nations leading
wholesale pharmaceutical distributors, such as McKesson HBOC,
Inc. (McKesson); Bergen Brunswig Corporation
(Bergen Brunswig); Cardinal Health, Inc.
(Cardinal); Bindley Western Industries, Inc.
(Bindley); Quality King (Quality King)
and other major drug chains. During fiscal 2000, Cardinal,
McKesson, Quality King and Bergen Brunswig accounted for 21.0%,
18.1%, 11.3% and 10.2%, respectively, of the Companys
sales. During fiscal 1999, McKesson and Cardinal accounted for
18.0% and 14.1%, respectively, of the Companys sales.
During fiscal 1998, McKesson, Bergen Brunswig and Cardinal,
accounted for 16.9%, 13.2% and 12.6%, respectively, of the
Companys sales. The loss of any of these customers accounts
 could have a material adverse effect upon the Companys
business, financial condition or results of operations.

The Company plans to spend substantial amounts of capital to
continue the acquisition of and the research and development of
pharmaceutical products. Actual expenditures will depend upon the
 Companys financial condition, as well as the results of
clinical testing, delays or changes in government-required
testing and approval procedures, technological and competitive
developments, and strategic marketing decisions. The Company may
increase total expenditures for research and development and
expects that research and development expenditures as a
percentage of net revenues will fluctuate from period to period.
The Company can give no assurance that the research and
development projects will provide technologies or products that
will be patentable, commercially feasible or acceptable to
government agencies whose approval may be necessary.

The Company intends to seek additional acquisitions of products
or companies to leverage its existing distribution channels and
marketing infrastructure, to provide additional opportunities for
 growth, and to aggressively market formulations of existing
products. The Company is also seeking licensing opportunities.
The Company can give no assurance that opportunities will be
available on terms acceptable to the Company, if at all.

To enable Medicis to focus on its core marketing and sales
activities, the Company selectively out-sources certain non-sales
 and non-marketing functions, such as laboratory research,
manufacturing and warehousing. As the Company expands its
activities in these areas, additional financial resources are
expected to be utilized. The Company typically does not enter
into long-term manufacturing contracts with third-party
manufacturers. Whether or not such contracts exist, there can be
no assurance that the Company will be able to obtain adequate
supplies of such products in a timely fashion, on acceptable
terms, or at all.

The success of the Companys efforts is subject to a number
of risks and uncertainties, including: dependence on sales of the
 Key Products; integration of new product acquisitions; risks
associated with the GenDerm Corporation and subsidiaries
(GenDerm) acquisition; reliance upon third-party
manufacturers to produce certain Key Products; the ability to
effectively manage a changing business; uncertainties related to
pharmaceutical pricing and reimbursement; and the uncertainty of
competitive forces within the pharmaceutical industry that
affects both the market for its product, and the availability of
product lines for acquisitions that meet the Companys
acquisition or licensing criteria. The future results of
operations, both annually and from quarter to quarter, are
subject to a variety of factors applicable to the Company and to
the industries and markets in which it operates.

24



---



RESULTS OF OPERATIONS

The following discussion and analysis should be read in
conjunction with the Consolidated Financial Statements and Notes
to Consolidated Financial Statements contained elsewhere herein.
The following table sets forth certain data as a percentage of
net revenues for the periods indicated.

Percentage of Net Revenues

|                     |  |          |       |       |  |        |       |   |  |  |       |  
|-------------------- |  | -------- | ----- | ----- |  | ------ | ----- | - |  |  | ----- | -
|                     |  |         
|                     |  | June 30,
|                     |  |         
|                     |  | 2000     |       | 1999* |  | 1998**
|                     |  |          |       |       |  |       
|Net revenues         |  |          | 100.0 | %     |  |        | 100.0 | % |  |  | 100.0 | %
|                    
|                    
|                    
|                    
|Gross profit         |  |          | 81.4  |       |  |        | 81.5  |   |  |  | 82.0  |  
|                    
|                    
|                    
|                    
|Operating exp        |  |          | 41.5  |       |  |        | 40.6  |   |  |  | 42.8  |  
|                    
|                    
|                    
|                    
|Operating income     |  |          | 39.9  |       |  |        | 40.9  |   |  |  | 39.2  |  
|                    
|                    
|                    
|                    
|Interest income, net |  |          | 8.5   |       |  |        | 8.3   |   |  |  | 9.0   |  
|                    
|                    
|                    
|                    
|Income tax expense   |  |          | (17.5 | )     |  |        | (17.8 | ) |  |  | (18.6 | )
|                     |  |          |       |       |  |        |       |   |  |  |       |  
|Net income           |  |          | 30.9  | %     |  |        | 31.4  | % |  |  | 29.6  | %
|                     |  |          |       |       |  |        |       |   |  |  |       |  




|  |                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------
|* | Absent tax-effected special charge for in-process research and
	development and tax-effected gain on divested products



|   |                                                              
|-- | -------------------------------------------------------------
|** | Absent special charge for in-process research and development

The following table reflects certain selected unaudited quarterly
 operating results of the Company for each of the last eight
quarters through the quarter ended June 30, 2000. The
Company believes that all necessary adjustments have been
included to fairly present the quarterly information. The
operating results for any quarter are not necessarily indicative
of the results for any future period. Gross profit does not
include amortization of the related intangibles.

FISCAL 2000 AND FISCAL 1999* ANALYSIS



|                                                      |  |                                       |        |              |  |       |        |      |  |       |        |      |  |       |        |      |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|----------------------------------------------------- |  | ------------------------------------- | ------ | ------------ |  | ----- | ------ | ---- |  | ----- | ------ | ---- |  | ----- | ------ | ---- |  | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                      |  |                                       |        |             
|                                                      |  | Fiscal 2000                           |        | Fiscal 1999*
|                                                      |  |                                       |        |             
|                                                      |  | Sept.                                 |        | Dec.         |  | March |        | June |  | Sept. |        | Dec. |  | March |        | June
|                                                      |  |                                       |        |              |  |       |        |      |  |       |        |      |  |       |        |     
|                                                      |  |                                      
|                                                      |  | (in thousands, except per share data)
|                                                     
|                                                     
|                                                     
|                                                     
|Net revenues                                          |  | $                                     | 31,644 |              |  | $     | 33,379 |      |  | $     | 35,049 |      |  | $     | 39,027 |      |  | $ | 24,780 |  |  | $ | 28,016 |  |  | $ | 30,183 |  |  | $ | 33,892 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Gross profit                                          |  |                                       | 25,858 |              |  |       | 26,940 |      |  |       | 28,726 |      |  |       | 31,664 |      |  |   | 20,073 |  |  |   | 22,700 |  |  |   | 25,158 |  |  |   | 27,305 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Operating expenses                                    |  |                                       | 13,230 |              |  |       | 13,003 |      |  |       | 14,076 |      |  |       | 17,372 |      |  |   | 10,279 |  |  |   | 10,964 |  |  |   | 11,739 |  |  |   | 14,443 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Operating income                                      |  |                                       | 12,628 |              |  |       | 13,937 |      |  |       | 14,650 |      |  |       | 14,292 |      |  |   | 9,794  |  |  |   | 11,736 |  |  |   | 13,419 |  |  |   | 12,862 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Net income                                            |  |                                       | 9,640  |              |  |       | 10,481 |      |  |       | 11,063 |      |  |       | 11,810 |      |  |   | 8,089  |  |  |   | 8,976  |  |  |   | 9,708  |  |  |   | 9,883  | 
|                                                     
|                                                     
|                                                     
|                                                     
|Net income per common share:                          |  |                                       |        |              |  |       |        |      |  |       |        |      |  |       |        |      |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|                                                     
|                                                     
|                                                     
|                                                     
|Basic                                                 |  | $                                     | 0.34   |              |  | $     | 0.36   |      |  | $     | 0.38   |      |  | $     | 0.40   |      |  | $ | 0.29   |  |  | $ | 0.32   |  |  | $ | 0.34   |  |  | $ | 0.35   | 
|                                                     
|                                                     
|                                                     
|                                                     
|Diluted                                               |  | $                                     | 0.33   |              |  | $     | 0.35   |      |  | $     | 0.36   |      |  | $     | 0.38   |      |  | $ | 0.28   |  |  | $ | 0.30   |  |  | $ | 0.33   |  |  | $ | 0.34   | 
|                                                     
|                                                     
|                                                     
|                                                     
|Shares used in computing net income per common share: |  |                                       |        |              |  |       |        |      |  |       |        |      |  |       |        |      |  |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|                                                     
|                                                     
|                                                     
|                                                     
|Basic                                                 |  |                                       | 28,750 |              |  |       | 28,834 |      |  |       | 29,164 |      |  |       | 29,375 |      |  |   | 28,161 |  |  |   | 28,279 |  |  |   | 28,576 |  |  |   | 28,645 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Diluted                                               |  |                                       | 29,471 |              |  |       | 30,170 |      |  |       | 30,967 |      |  |       | 31,079 |      |  |   | 28,791 |  |  |   | 29,585 |  |  |   | 29,811 |  |  |   | 29,343 | 




|  |                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Absent tax-effected special charge for in-process research and
	development in December quarter; absent tax-effected gain on
	divested products in March and June quarters

Quarterly results may vary from period to period due to a variety
 of factors, including: expenditures incurred to acquire, license
 and promote pharmaceutical products; expenditures and timing
relating to the acquisition and integration of products or
businesses; changes in the prescribing practices of physicians;
the introduction of new products by the Company or its
competitors; cost increases from third-party manufacturers;
supply interruptions; the availability and cost of raw materials;
 the mix of products sold by the Company; changes in marketing
and sales expenditures; market acceptance of the Companys
products; competitive pricing pressures; the outcome of disputes

25



---



relating to trademarks, patents and other rights; general
economic and industry conditions that affect customer demand; and
 the Companys level of research and development activities.
 There can be no assurance that the Company will maintain or
increase revenues or profitability or avoid losses in any future
period.

Years ended June 30, 2000 and 1999

Net Revenues

Net revenues for fiscal 2000 increased 19.0%, or $22.2 million,
to $139.1 million from $116.9 million for fiscal 1999. The
Companys net revenues increased in fiscal 2000 primarily as
 a result of sales growth associated with the Companys
DYNACIN®, LOPROX®, BUPHENYL and TRIAZ®
products. In fiscal 1999, the Company divested or licensed 16
non-strategic products to Bioglan Pharma plc
(Bioglan). Net revenue associated with these products
 for fiscal 1999 was $19.3 million. Absent divested products, net
 revenues for fiscal 2000 increased 42.6%, or $41.6 million, to
$139.1 from $97.5 million in fiscal 1999.

Gross Profit

Gross profit during fiscal 2000 increased 18.8%, or $18.0
million, to $113.2 million from $95.2 million in fiscal 1999. As
a percentage of net revenues, gross profit was 81.4% and 81.5% in
 fiscal 2000 and fiscal 1999, respectively. Gross profit remained
 consistent primarily as a result of revenue associated with the
LOPROX®, LUSTRA® and BUPHENYL products, which
enjoy higher gross profit percentages than the Companys
other products, offset by an increase in revenues associated with
 the DYNACIN® products, which have lower gross profit
percentages than the Companys other products. Amortization
of related intangible assets is not included in gross profit.

Selling, General and Administrative Expenses

Selling, general and administrative expenses in fiscal 2000
increased 18.8%, or $7.2 million, to $45.4 million from $38.2
million in fiscal 1999. This increase was primarily attributable
to an increase in personnel costs. The increase in personnel
costs was primarily due to an increase in the number of
employees, to 172 in fiscal 2000 from 144 in fiscal 1999, and
yearly salary escalations for existing employees. The increase
was also due to variable costs commensurate with increased sales
volumes. Selling, general and administrative expenses as a
percentage of net revenues in fiscal 2000 remained consistent
from fiscal 1999.

Research and Development Expenses

Research and development expenses in fiscal 2000 increased 44.4%,
 or $1.5 million, to $4.9 million from $3.4 million in fiscal
1999. The increase was primarily due to the timing of various
research and development projects and expenses associated with
the clinical support of the Companys existing products.

Depreciation and Amortization Expenses

Depreciation and amortization expenses in fiscal 2000 increased
26.9%, or $1.6 million, to $7.4 million from $5.8 million in
fiscal 1999. This increase was primarily attributable to a full
year of amortization of the purchase price of the LOPROX®,
TOPICORT® and A/T/S® products purchased by the Company
in November 1998; the BUPHENYL products purchased in
April 1999; and the VECTRIN® products purchased in
September 1999. The Company is amortizing the various
purchase prices over a period of 15 to 25 years.

26



---



In-Process Research and Development

In fiscal 1999, the Company recorded a $9.5 million charge to
operations as in-process research and development related to new
indications and forms of certain products acquired, and had
incurred additional charges for in-process research and
development of $35.4 million in 1998. The acquired in-process
research and development projects are in various stages of
development, had not reached technological feasibility at the
time of acquisition and had no known alternative uses.

The efforts required to develop the acquired in-process research
and development into commercially viable products include
completion of the development stages of the commercially viable
products, clinical-trial testing, FDA approval and
commercialization. Due to the nature of the pharmaceutical
development process, the Company anticipates incurring additional
 costs to develop these products. However, there is no certainty
that any of these development efforts will result in commercially
 viable products.

A portion of the Companys in-process research and
development projects acquired in 1998 related to OTC products.
Such projects were discontinued during fiscal 1999 in conjunction
 with the Companys change in strategic focus to
prescription products. Of the remaining acquired in-process
research and development projects from 1998, the most significant
 project resulted in a new product introduction during late
fiscal 1999, as that product was completed and commenced
commercial sale. The Company continues its development efforts on
 the remaining projects that were acquired in both 1998 and 1999
in the in-process state. During fiscal 2000 the Company incurred
development costs of approximately $500,000, and should all of
the remaining projects continue to move toward commercialization,
 the Company estimates that future expenditures could approximate
 $4.0 million over the next few years.

Operating Income

Operating income for fiscal 2000 increased $17.2 million, to
$55.5 million from $38.3 million in fiscal 1999. Absent special
charges in fiscal 1999, operating income in fiscal 2000 increased
 16.1%, or $7.7 million, to $55.5 million from $47.8 million in
fiscal 1999. This increase was primarily a result of higher sales
 volume offset by an increase in cost of sales and operating
expenses.

Net Interest Income (Expense)

Interest income in fiscal 2000 increased $2.6 million, to $14.1
million from $11.5 million in fiscal 1999, primarily due to
higher average cash, cash equivalents and short-term investment
balances during fiscal 2000. The Companys higher average
cash, cash equivalents and short-term investment balances are due
 to cash generated from operations and proceeds from the
divestiture of non-strategic products in fiscal 1999, offset by a
 $22.0 million payment made in November 1999 to Aventis
Pharma (Aventis), successor in interest to Hoechst
Marion Roussell (HMR), relating to the license of the
 LOPROX®, TOPICORT® and A/T/S® products, as well
as payments made in association with the acquisitions of the
company, Ucyclyd Pharma, Inc. (Ucyclyd), and the
VECTRIN® products.

Interest expense in fiscal 2000 increased $0.4 million, to $2.2
million from $1.8 million in fiscal 1999. This increase was
primarily attributable to a full year of interest expense related
 to the contract obligation recorded in connection with the
acquisition of the LOPROX®, TOPICORT® and A/T/S®
products.

Income Tax Expense

Income tax expense during fiscal 2000 increased $0.2 million, to
$24.4 million from $24.2 million in fiscal 1999. The increase in
income tax expense in fiscal 2000, as compared to fiscal 1999,
was primarily due to an increase in pre-tax income in fiscal
2000. In fiscal 1999, pre-tax income included a gain of $17.7
million related to the sale of assets to Bioglan. Absent this
gain on the divesture of products, pre-tax income increased $19.4
 million, to $67.4 million from $48.0 million in fiscal 1999.
Income tax expense increased $7.2 million, to $24.4 million from
$17.1 million in fiscal 1999. The decrease in the effective tax
rate in fiscal 2000, as compared to fiscal 1999, was primarily
attributable to the implementation of tax-saving strategies and
an increase in tax-exempt interest income.

27



---



Net Income

Net income during fiscal 2000 increased approximately $1.6
million, to $43.0 million from $41.4 million in fiscal 1999.
Fiscal 1999 included special charges to operations for in-process
 research and development related to the LOPROX®,
TOPICORT® and A/T/S® acquisition. Net income in fiscal
1999 also included $17.7 million related to a gain on the sale of
 assets to Bioglan. Absent tax-effected special charges and a
tax-effected gain on divested products in fiscal 1999, net income
 increased approximately 17.3%, or $6.4 million, to $43.0 million
 from $36.6 million in fiscal 1999. This increase was due
primarily to an increase in sales volume and interest income
offset by an increase in depreciation and amortization and
research and development expenses.

Years Ended June 30, 1999 and 1998

Net Revenues

Net revenues for fiscal 1999 increased 50.7%, or $39.3 million,
to $116.9 million from $77.6 million for fiscal 1998. The
Companys net revenues increased in fiscal 1999 primarily as
 a result of both unit and dollar sales growth associated with
the Companys prescription products. The Companys
prescription products accounted for 77.0% of net revenues in
fiscal 1999 and in fiscal 1998. Net revenues of the
Companys prescription products grew 50.8%, or $30.3
million, to $90.0 million in 1999 from $59.7 million in fiscal
1998, primarily due to the continued growth of the DYNACIN®
and LUSTRA® products and the newly acquired LOPROX®
line. In fiscal 1999, the Companys OTC products, contract
revenue and the physician-dispensed division accounted for 23.0%
of net revenues. In fiscal 1998, the Companys OTC products
and physician-dispensed division accounted for 23.0% of net
revenues.

Gross Profit

Gross profit during fiscal 1999 increased 49.8%, or $31.6
million, to $95.2 million from $63.6 million in fiscal 1998. As a
 percentage of net revenues, gross profit was 81.5% and 82.0% in
fiscal 1999 and fiscal 1998, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses in fiscal 1999
increased 39.4%, or $10.8 million, to $38.2 million from $27.4
million in fiscal 1998. This increase was primarily attributable
to an increase in personnel costs. The increase in personnel
costs was primarily due to an increase in the number of employees
 to 144 in fiscal 1999 from 125 in fiscal 1998 and yearly salary
escalations for existing employees. The increase was also due to
promotional costs associated with the sampling and advertising of
 the Companys products, promotional and administrative
costs associated with the EXOREX joint venture with IMX
Pharmaceuticals, Inc., and variable costs commensurate with
increased sales volumes. Selling, general and administrative
expenses as a percentage of net revenues in fiscal 1999 decreased
 2.7 percentage points, to 32.7% from 35.4% in fiscal 1998,
primarily attributable to a decrease in promotional and personnel
 costs as a percentage of sales.

Research and Development Expenses

Research and development expenses in fiscal 1999 increased 17.7%,
 or $0.5 million, to $3.4 million from $2.9 million in fiscal
1998. The increase was primarily due to development efforts on
the LUSTRA-AF and DYNACIN® 75 mg. products in the
fourth quarter of fiscal 1999, development efforts related to new
 products, and expenses associated with the clinical support of
the Companys existing products.

28



---



Depreciation and Amortization Expenses

Depreciation and amortization expenses in fiscal 1999 increased
100.1%, or $2.9 million, to $5.8 million from $2.9 million in
fiscal 1998. This increase was primarily attributable to the
amortization of the purchase price of the LOPROX®,
TOPICORT® and A/T/S® products purchased by the Company
in November 1998. The Company is amortizing this purchase
price over a 25-year period. The Companys depreciation and
amortization also increased due to the full year of amortization
of the intangible assets acquired in connection with the
acquisition of GenDerm in December 1997.

In-Process Research and Development

In fiscal 1999, the Company recorded a $9.5 million charge to
operations as in-process research and development as part of the
allocated purchase price on the acquisition of the LOPROX®,
TOPICORT® and A/T/S® products. The acquired in-process
research and development consists of technologies related to new
indications and forms of certain products acquired. The acquired
in-process research and development projects are in various
stages of development, have not reached technological
feasibility, and have no known alternative uses.

The efforts required to develop the acquired in-process research
and development into commercially viable products include
completion of the development stages of the commercially viable
products, clinical-trial testing, FDA approval and
commercialization. Due to the nature of the pharmaceutical
development process, the Company anticipates incurring additional
 costs to develop these products. However, there is no certainty
that any of these development efforts will result in commercially
 viable products. During the upcoming fiscal year, the Company
anticipates research and development expenditures of
approximately $500,000 relating to the development of
commercially viable products. Such amounts may increase if the
FDA should require additional studies, testing or supplemental
information.

In fiscal 1998, the Company recorded a $35.4 million charge to
operations as in-process research and development as part of the
allocated purchase price of the GenDerm acquisition.

The value of the acquired in-process research and development was
 determined by estimating the projected net cash flows related to
 such products, including costs to complete the development, and
future revenues to be earned upon commercialization of the
products. These cash flows were discounted back to their net
present value. The resulting projected net cash flows from such
projects were based upon managements estimates of revenues
and operating profits at the time of the acquisition related to
such projects. Management also reviewed the probability of
product success, which was estimated using certain probability
factors for each stage of development.

Operating Income (Loss)

Operating income for fiscal 1999 increased $43.3 million, to
$38.3 million from a $5.0 million operating loss in fiscal 1998.
This increase was primarily a result of the $35.4 million
in-process research and development charge relating to the
Companys purchase of GenDerm in fiscal 1998 and a $9.5
million in-process research and development charge relating to
the LOPROX®, TOPICORT® and A/T/S® product
acquisition in fiscal 1999. Absent special charges in fiscal 1999
 and 1998, operating income in fiscal 1999 increased 57.4%, or
$17.4 million, to $47.8 million from $30.4 million in fiscal
1998. This increase was primarily a result of higher sales volume
 and a decrease of 2.7 percentage points in selling, general
 and administrative expenses as a percentage of sales offset by
an increase in research and development and depreciation and
amortization expenses.

Net Interest Income (Expense)

Interest income in fiscal 1999 increased $4.4 million, to $11.5
million from $7.1 million in fiscal 1998, primarily due to higher
 average cash, cash equivalents and short-term investment
balances during fiscal 1999. The Companys higher average
cash, cash equivalents and short-term investment balances were
due to a full year of proceeds from the Companys
February 1998 public offering. The Company raised offering
proceeds of $209.4 million before related expenses, or $197.9
million net of related expenses.

29



---



Interest expense in fiscal 1999 increased $1.8 million, to $1.8
million from $23,600 in fiscal 1998. This increase was primarily
related to interest expense of $1.8 million related to the
contract obligation recorded in connection with the acquisition
of the LOPROX®, TOPICORT® and A/T/S® products.

Income Tax (Expense) Benefit

Income tax expense during fiscal 1999 increased $9.8 million, to
$24.2 million from $14.4 million in fiscal 1998. The provision
for income taxes recorded for fiscal 1999 reflects
managements estimate of the effective tax rate. The
increase in income tax expense in fiscal 1999, as compared to
fiscal 1998, was primarily due to an increase in pre-tax income
offset by the special charge for in-process research and
development in fiscal 1998 for which no tax benefit was realized.
 The decrease in the effective tax rate in fiscal 1999, as
compared to fiscal 1998, was primarily attributable to the
implementation of tax-saving strategies, an increase in
tax-exempt interest income and the non-deductible in-process
research and development recorded in fiscal 1998.

Net Income (Loss)

Net income during fiscal 1999 increased approximately $53.8
million, to $41.4 million from a $12.4 million loss in fiscal
1998. Fiscal 1999 and 1998 included special charges to operations
 for in-process research and development related to the
LOPROX®, TOPICORT® and A/T/S® product acquisition
in fiscal 1999 and the purchase of GenDerm in fiscal 1998. Net
income in fiscal 1999 also included $17.7 million related to a
gain on the sale of assets to Bioglan. Absent tax-effected
special charges and a tax-effected gain on divested products in
fiscal 1999, net income increased approximately 59.4%, or $13.6
million, to $36.6 million from $23.0 million in fiscal 1998. This
 increase was due primarily to an increase in sales volume, a
decrease in selling, general and administrative costs as a
percentage of net revenues, and an increase in interest income
offset by an increase in depreciation and amortization and
research and development expenses.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities for fiscal 2000
increased $15.8 million, to $41.2 million from $25.4 million in
fiscal 1999. The change is primarily due to the increase in net
income, the absence of in-process research and development
charges in fiscal 2000 and changes in operating assets and
liabilities.

Net cash provided by investing activities for fiscal 2000
increased $102.2 million, to $13.4 million from a net cash used
in investing activities of $88.9 million in fiscal 1999. The
change is primarily due to proceeds received on the sale of
product rights to Bioglan and the fluctuation in
available-for-sale investments.

Net cash provided by financing activities increased $6.2 million,
 to $9.9 million from $3.7 million in fiscal 1999. The change is
primarily due to stock options proceeds.

The Company had cash, cash equivalents and short-term investments
 of $285.7 million and working capital of $312.3 million at
June 30, 2000, as compared to $237.3 million and $278.6
million, respectively, at June 30, 1999.

OTHER MATTERS

On September 21, 1999, the Company purchased VECTRIN®,
a branded minocycline HCl product line, and ownership of its
Abbreviated New Drug Application (ANDA) from Warner
Chilcott, plc (Warner Chilcott). Under terms of the
agreement, the Company paid Warner Chilcott $11.1 million cash at
 closing and paid an additional $2.0 million in contingent
payments in April 2000. Additionally, the Company is making
royalty payments and may be obligated to make additional
milestone payments conditioned upon the occurrence of certain
events.

On June 29, 1999, the Company sold the OTC products
ZOSTRIX®, EXOREX and THERAPLEX® and the
prescription product ZONALON® to Bioglan. Medicis received
cash of $900,000 and issued a note receivable for $39.1 million,
which was collected in July 1999. Under terms of the
agreement, the Company paid IMX $3.6 million subsequent to fiscal
 1999 for the sale of its interest in the EXOREX joint
venture.

30



---



On April 19, 1999, the Company acquired 100% of the common
stock of Ucyclyd for net cash of approximately $14.3 million.
Ucyclyds primary product, the orphan drug BUPHENYL,
is indicated in the treatment of Urea Cycle Disorder. Under terms
 of the agreement, the Company paid $15.1 million at the close of
 the transaction, paid an additional $5.7 million in contingent
payments in April 2000 and may be required to pay an
additional $2.7 million upon regulatory approval of a product
line extension.

On March 17, 1999, the Company sold nine non-strategic
dermatological products to Bioglan for a net cash payment of $9.8
 million. The products included in the sale were: A-FIL,
AFIRM®, BENZASHAVE®, BETA-LIFTx®, METED®,
PRAMEGEL®, PACKERS TAR SOAP®, THERAMYCIN Z®
and TEXACORT®. Under a separate agreement, the Company
licensed three additional products for a period of three years
with a buyout option of $15.5 million at the end of the term.
Under this agreement, Medicis receives quarterly license
revenues. The products included in this license agreement are:
OCCLUSAL-HP®, PENTRAX® and SALAC®.

In November 1998, the Company agreed to license, with an
option to purchase, the LOPROX®, TOPICORT® and
A/T/S® products from Aventis. The Company, using cash
reserves, paid $22.0 million on the close of the transaction,
made another payment of $22.0 million in November 1999 and
will make an additional payment of $22.0 million in
November 2000. The Company has the option to purchase the
products for $16.5 million after three years. The $22.0 million
due in November 2000 is recorded as a short-term obligation,
 and the remaining balance is recorded at its discounted value as
 a long-term obligation. The discount is being recorded as
interest expense over the related period. For accounting
purposes, the Company has recorded the transaction as an
acquisition. In conjunction with this acquisition, the Company
recorded a charge to operations of $9.5 million, based upon an
independent valuation, relating to acquired in-process research
and development for projects that are in various stages of
development, have not reached technological feasibility, and have
 no known alternative future uses.

Inflation did not have a significant impact upon the results of
the Company during fiscal 2000, 1999 or 1998.

MARKET RISK AND RISK MANAGEMENT POLICIES

Medicis has minimal operations outside of the United States and,
therefore, has no significant risk to changes in foreign
currencies. In addition, the Company has only one form of debt
that is in the form of a discounted contract obligation, which,
in effect, is a fixed-rate debt not subject to market rate
fluctuations.

The Company is exposed to interest rate fluctuations on its
short-term investments that are comprised of U.S. corporate
securities and other debt securities, which it holds on an
available-for-sale basis. A 100 basis-point change in the prime
rate or other indicative base rates would not materially change
the interest income the Company expects to receive.

31



---



Item 8:  Financial Statements and Supplementary
Data

The Companys financial statements and schedule at
June 30, 2000 and 1999 and for each of the three years in
the period ending June 30, 2000 and the Independent
Auditors Report thereon are contained on pages F-1
through F-20 and S-1 of this Form 10-K.

Item 9:  Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure

Not applicable.

PART III

Item 10:  Directors and Executive Officers of the
 Registrant

Item 11:  Executive Compensation

Item 12:  Security Ownership of Certain
Beneficial Owners and Management

Item 13:  Certain Relationships and Related
Transactions

The information called for by each of Items 10, 11, 12 and
13 is incorporated by reference to the Companys definitive
proxy statement for the 2000 Annual Meeting of Shareholders to be
 filed pursuant to Regulation 14A.

32



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PART IV

Item 14:  Exhibits, Financial Statement Schedules
 and Reports on Form 8-K

(a)  Documents filed as a part of this Report

|    |  |                                                                                                   |                                                                                                                                                                                                                                                                                                                                     |      |     |  | 
|--- |  | ------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | --- |  | 
|    |  |                                                                                                   |                                                                                                                                                                                                                                                                                                                                     | Page
|    |  |                                                                                                   |                                                                                                                                                                                                                                                                                                                                     |     
|(1) |  | Financial Statements:                                                                             |                                                                                                                                                                                                                                                                                                                                     |      |     | 
|   
|   
|   
|   
|    |  | Index to Consolidated Financial Statements                                                        |                                                                                                                                                                                                                                                                                                                                     |      | F-1 | 
|   
|   
|   
|   
|    |  | Report of Ernst & Young LLP, Independent Auditors                                                 |                                                                                                                                                                                                                                                                                                                                     |      | F-2 | 
|   
|   
|   
|   
|    |  | Consolidated balance sheets at June 30, 2000 and 1999                                             |                                                                                                                                                                                                                                                                                                                                     |      | F-3 | 
|   
|   
|   
|   
|    |  | Consolidated statements of income for the years ended June 
	30, 2000, 1999 and 1998              |                                                                                                                                                                                                                                                                                                                                     |      | F-5 | 
|   
|   
|   
|   
|    |  | Consolidated statements of stockholders equity for the
	years ended June 30, 2000, 1999 and 1998 |                                                                                                                                                                                                                                                                                                                                     |      | F-6 | 
|   
|   
|   
|   
|    |  | Consolidated statements of cash flows for the years ended
	June 30, 2000, 1999 and 1998           |                                                                                                                                                                                                                                                                                                                                     |      | F-7 | 
|   
|   
|   
|   
|    |  | Notes to consolidated financial statements                                                        |                                                                                                                                                                                                                                                                                                                                     |      | F-8 | 
|(2) |  | Financial Statement Schedules:                                                                    |                                                                                                                                                                                                                                                                                                                                     |      |     | 
|   
|   
|   
|   
|    |  | Schedule II  Valuation and Qualifying Accounts                                                   |                                                                                                                                                                                                                                                                                                                                     |      | S-1 | 
|    |  |                                                                                                   | The financial statement schedule should be read in conjunction
	with the consolidated financial statements. Financial statement
	schedules not included in this Annual Report on Form 10-K
	have been omitted because they are not applicable or the required
	 information is shown in the financial statements or notes
	thereto. |      |     |  | 
|(3) |  | Exhibits filed as part of this Report:                                                            |                                                                                                                                                                                                                                                                                                                                     |      |     | 

|            |          |  |  |             |   |  |  |                                                                                                                                                                                                                                        
|----------- | -------- |  |  | ----------- | - |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 2.1      |  |  |             |  |  |  | Agreement of Merger by and between Medicis Pharmaceutical
	Corporation, a Delaware corporation, Medicis Acquisition
	Corporation, a Delaware corporation, and GenDerm Corporation, a
	Delaware corporation, dated November 28, 1997(13)
|            | 3.1      |  |  |             |  |  |  | Certificate of Incorporation of the Company, as amended(6)                                                                                                                                                                             
|            | 3.3(a)   |  |  |             |  |  |  | Amended and Restated By-Laws of the Company(15)                                                                                                                                                                                        
|            | 4.1      |  |  |             |  |  |  | Rights Agreement, dated August 17, 1995, between the Company
	 and American Stock Transfer & Trust Company, as Rights
	Agent(6)                                                                                                        
|            | 4.1(b)   |  |  |             |  |  |  | Amendment No. 2 to Rights Agreement, dated March 17,
	1997, between the Company and Norwest Bank Minnesota, N.A.(11)                                                                                                                   
|            | 4.3      |  |  |             |  |  |  | Form of specimen certificate representing Class A Common
	Stock(1)                                                                                                                                                                     
|            | 10.8     |  |  |             |  |  |  | Medicis Pharmaceutical Corporation 1995 Stock Option Plan
	(incorporated by reference to Exhibit C to the definitive
	Proxy Statement for the 1995 Annual Meeting of Shareholders
	previously filed with the SEC, File No. 0-18443)    
|            | 10.9     |  |  |             |  |  |  | Employment Agreement between the Company and Jonah Shacknai,
	dated July 24, 1996(10)                                                                                                                                                  
|            | 10.10    |  |  |             |  |  |  | Medicis Pharmaceutical Corporation 1988 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.18    |  |  |             |  |  |  | Medicis Pharmaceutical Corporation 1990 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.58    |  |  |             |  |  |  | Medicis Pharmaceutical Corporation 1992 Stock Option Plan(4)                                                                                                                                                                           
|            | 10.59    |  |  |             |  |  |  | Supply Agreement, dated October 21, 1992, between Schein and
	 the Company(3)                                                                                                                                                          
|            | 10.70    |  |  |             |  |  |  | Amendment to Manufacturing and Supply Agreement, dated
	March 2, 1993, between Schein and the Company(5)                                                                                                                               
|            | 10.72(a) |  |  |             |  |  |  | Credit and Security Agreement, dated August 3, 1995, between
	 the Company and Norwest Business Credit, Inc.(7)                                                                                                                        
|            | 10.72(b) |  |  |             |  |  |  | First Amendment to Credit and Security Agreement, dated May 
	 29, 1996, between the Company and Norwest Bank Arizona, N.A.(10)                                                                                                        
|            | 10.72(c) |  |  |             |  |  |  | Second Amendment to Credit and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A. as successor-in-interest to Norwest Business
	Credit, Inc.(12)                                 

33



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|            |          |  |  |             |   |  |  |                                                                                                                                                                                                      
|----------- | -------- |  |  | ----------- | - |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 10.72(d) |  |  |             |  |  |  | Third Amendment to Credit and Security Agreement, dated
	November 22, 1998 by and between the Company and Norwest
	Bank Arizona, N.A., as successor-in-interest to Norwest Business
	Credit, Inc.(14)
|            | 10.73(a) |  |  |             |  |  |  | Patent Collateral Assignment and Security Agreement, dated
	August 3, 1995 by the Company to Norwest Business Credit,
	Inc.(8)                                                                       
|            | 10.73(b) |  |  |             |  |  |  | First Amendment to Patent Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(10)                                                       
|            | 10.73(c) |  |  |             |  |  |  | Amended and Restated Patent Collateral Assignment and Security
	Agreement, dated November 22, 1998, by the Company to
	Norwest Bank Arizona, N.A.(14)                                                
|            | 10.74(a) |  |  |             |  |  |  | Trademark Collateral Assignment and Security Agreement, dated
	August 3, 1995, by the Company to Norwest Business Credit,
	Inc.(9)                                                                   
|            | 10.74(b) |  |  |             |  |  |  | First Amendment to Trademark Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(10)                                                    
|            | 10.74(c) |  |  |             |  |  |  | Amended and Restated Trademark, Tradename, and Service Mark
	Collateral Assignment and Security Agreement, dated
	November 22, 1998, by the Company to Norwest Bank Arizona,
	N.A.(14)               
|            | 10.75    |  |  |             |  |  |  | Assignment and Assumption of Loan Documents, dated May 29,
	1996, from Norwest Business Credit, Inc., to and by Norwest Bank
	Arizona, N.A.(10)                                                      
|            | 10.76    |  |  |             |  |  |  | Multiple Advance Note, dated May 29, 1996, from the Company
	to Norwest Bank Arizona, N.A.(10)                                                                                                       
|            | 10.77    |  |  |             |  |  |  | Securities Account Pledge and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A.(12)                                                           
|            | 10.77(a) |  |  |             |  |  |  | First Amendment to Securities Account Pledge and Security
	Agreement dated November 22, 1998, by and between the
	Company and Norwest Bank Arizona, N.A.(14)                                         
|            | 10.78    |  |  |             |  |  |  | Acknowledgment of Control of Pledged Securities Account, dated
	November 22, 1996, by and among Norwest Bank Arizona, N.A.
	and the Company and Norwest Bank Minnesota, N.A.(12)                     
|            | 10.78(a) |  |  |             |  |  |  | First Amendment to Acknowledgement of Control of Pledged
	Securities Account dated November 22, 1998, by and between
	the Company and Norwest Bank Arizona, N.A.(14)                                 
|            | 10.89    |  |  |             |  |  |  | Asset Purchase Agreement dated November 15, 1998, by and
	among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMHB and Hoechst Marion Roussel,
	S.A.(14)         
|            | 10.90    |  |  |             |  |  |  | License and Option Agreement dated November 15, 1998, by and
	 among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMBH and Hoechst Marion Roussel,
	S.A.(14)    
|            | 10.91    |  |  |             |  |  |  | Loprox Lotion Supply Agreement dated November 15, 1998, by
	and between the Company and Hoechst Marion Roussel, Inc.(14)                                                                             
|            | 10.92    |  |  |             |  |  |  | Supply Agreement dated November 15, 1998, by and between the
	 Company and Hoechst Marion Roussel Deutschland GMBH(14)                                                                               
|            | 10.93    |  |  |             |  |  |  | Asset Purchase Agreement effective January 31, 1999, between
	 the Company and Bioglan Pharma Plc(16)                                                                                                
|            | 10.94    |  |  |             |  |  |  | Stock Purchase Agreement by and among the Company, Ucyclyd
	Pharma, Inc. and Syed E. Abidi, William Brusilow,
	Susan E. Brusilow and Norbert L. Wiech, dated
	April 19, 1999(16)                     
|            | 10.95    |  |  |             |  |  |  | Asset Purchase Agreement by and between the Company and Bioglan
	Pharma Plc dated June 29, 1999(16)                                                                                                  

34



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|            |       |  |  |             |   |  |  |                                                                                                                                                       
|----------- | ----- |  |  | ----------- | - |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |       |  |  | Description
|            |       |  |  |            
|            | 10.96 |  |  |             |  |  |  | Asset Purchase Agreement by and among The Exorex Company, LLC,
	Bioglan Pharma Plc, the Company and IMX Pharmaceuticals, Inc.
	dated June 29, 1999(16)
|            | 10.97 |  |  |             |  |  |  | Medicis Pharmaceutical Corporation Executive Retention Plan(16)                                                                                       
|            | 10.98 |  |  |             |  |  |  | Asset Purchase Agreement between Warner Chilcott, plc and the
	Company, dated September 14, 1999(16)                                                  
|            | 21.1  |  |  |             |  |  |  | Subsidiaries(16)                                                                                                                                      
|            | 23.1  |  |  |             |  |  |  | Consent of Ernst & Young LLP, Independent Auditors(17)                                                                                                
|            | 24.1  |  |  |             |  |  |  | Power of Attorney(17) See signature page(s)                                                                                                           
|            | 27.1  |  |  |             |  |  |  | Financial Data Schedule(17)                                                                                                                           




| |     |                                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the exhibit with the same number in
	the Registration Statement on Form S-1 of the Registrant,
	File No. 33-32918, filed with the SEC on January 16,
	1990                                       
|
| | (2) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1992, as amended, File
	No. 0-18443, previously filed with the SEC            
|
| | (3) | Incorporated by reference to the exhibit with the same number in
	Registration Statement on Form S-1 of the Company, File
	No.  33-54276, filed with the SEC on June 11, 1993                                                 
|
| | (4) | Incorporated by reference to Exhibit B to the Companys
	 definitive Proxy Statement for its 1992 Annual Meeting of
	Shareholders, File No. 0-18443, previously filed with the
	SEC                                           
|
| | (5) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1993, File No. 0-18443, filed with
	 the SEC on October 13, 1993              
|
| | (6) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1995, File No. 0-18443, previously
	 filed with the SEC (the 1994 Form 10-K)
|
| | (7) | Incorporated by reference to exhibit number 4.2 in the 1995
	Form 10-K                                                                                                                                                        
|
| | (8) | Incorporated by reference to exhibit number 4.4 in the 1995
	Form 10-K                                                                                                                                                        
|
| | (9) | Incorporated by reference to exhibit number 4.5 in the 1995
	Form 10-K                                                                                                                                                        



|     |                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1996, File No. 0-18443, previously
	 filed with the SEC 
|    
|(11) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1997, File No. 0-18443,
	previously filed with the SEC   
|    
|(12) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1996, File No. 0-18443,
	previously filed with the SEC
|    
|(13) | Incorporated by reference to the exhibit with the same number in
	the Companys Current Report on Form 8-K filed with the
	 SEC on December 15, 1997                                                    
|    
|(14) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1998, File No. 0-18443,
	previously filed with the SEC
|    
|(15) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1999, File No. 0-18443,
	previously filed with the SEC   

35



---





|     |                                                                                                                                                                                                        
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(16) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1999, File No. 0-18443, previously
	 filed with the SEC
|    
|(17) | Filed herewith                                                                                                                                                                                         

(b)  No reports on Form 8-K were filed with the SEC for
 the quarter ended June 30, 2000.



| |     |                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------
| | (c) | The exhibits to this Form 10-K follow the Companys
	Financial Statement Schedule included in this Form 
	 10-K.

(d)  The Financial Statement Schedule to this Form 10-K
 appears on page S-1 of this Form 10-K.

36



---



POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jonah Shacknai and
Mark A. Prygocki, Sr., or either of them, as his true
and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all
amendments to this Annual Report on Form 10-K and any
documents related to this report and filed pursuant to the
Securities and Exchange Act of 1934, and to file the same, with
all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority
to do and perform each and every act and thing requisite and
necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes may lawfully do or
cause to be done by virtue hereof.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: September 28, 2000



| |                                   
| | ----------------------------------
| | MEDICIS PHARMACEUTICAL CORPORATION



| |     |                  
| | --- | -----------------
| | By: | /s/JONAH SHACKNAI

| |                          
| | -------------------------
| |                          
| | Jonah Shacknai           
| | Chairman of the Board and
| | Chief Executive Officer  

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

|                                                   |  |                                                                                                          |  |                   
|-------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | ------------------
|Signature                                          |  | Title                                                                                                    |  | Date              
|                                                   |  |                                                                                                          |  |                   
|/s/ JONAH SHACKNAIJonah Shacknai                   |  | Chairman of the Board of Directors and Chief Executive Officer
	(Principal Executive Officer)            |  | September 28, 2000
|                                                  
|/s/ MARK A. PRYGOCKI, SR.Mark A. Prygocki, Sr.     |  | Chief Financial Officer, Corporate Secretary and Treasurer
	(Principal Financial and Accounting Officer) |  | September 28, 2000
|                                                  
|/s/ ARTHUR G. ALTSCHUL, JR.Arthur G. Altschul, Jr. |  | Director                                                                                                 |  | September 28, 2000
|                                                  
|/s/ SPENCER DAVIDSONSpencer Davidson               |  | Director                                                                                                 |  | September 28, 2000
|                                                  
|/s/ PETER S. KNIGHT, ESQ.Peter S. Knight, Esq.     |  | Director                                                                                                 |  | September 28, 2000
|                                                  
|/s/ MICHAEL A. PIETRANGELOMichael A. Pietrangelo   |  | Director                                                                                                 |  | September 28, 2000
|                                                  
|/s/ PHILIP S. SCHEIN, M.D.Philip S. Schein, M.D.   |  | Director                                                                                                 |  | September 28, 2000
|                                                  
|/s/ LOTTIE SHACKELFORDLottie Shackelford           |  | Director                                                                                                 |  | September 28, 2000

37



---



MEDICIS PHARMACEUTICAL CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                  |  |      |     | 
|------------------------------------------------- |  | ---- | --- | 
|                                                  |  | Page
|                                                  |  |     
|Report of Ernst & Young LLP, Independent Auditors |  |      | F-2 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Consolidated Balance Sheets                       |  |      | F-3 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Consolidated Statements of Income                 |  |      | F-5 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Consolidated Statements of Stockholders Equity   |  |      | F-6 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Consolidated Statements of Cash Flows             |  |      | F-7 | 
|                                                 
|                                                 
|                                                 
|                                                 
|Notes to Consolidated Financial Statements        |  |      | F-8 | 

F-1



---



REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders of Medicis
Pharmaceutical Corporation

We have audited the accompanying consolidated balance sheets of
Medicis Pharmaceutical Corporation and subsidiaries as of
June 30, 2000 and 1999, and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended June 30,
2000. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based upon our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial condition of Medicis Pharmaceutical Corporation and
subsidiaries at June 30, 2000 and 1999, and the consolidated
 results of their operations and their cash flows for each of the
 three years in the period ended June 30, 2000, in
conformity with accounting principles generally accepted in the
United States.



| |                      
| | ---------------------
| | /s/ Ernst & Young LLP

Phoenix, Arizona



F-2



---



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

|                            |                                                                            |                       |             |             |             |   |             |             |             | 
|--------------------------- | -------------------------------------------------------------------------- | --------------------- | ----------- | ----------- | ----------- | - | ----------- | ----------- | ----------- | 
|                            |                                                                            |                      
|                            |                                                                            | June 30,             
|                            |                                                                            |                      
|                            |                                                                            | 2000                  |             | 1999       
|                            |                                                                            |                       |             |            
|Assets                      |                                                                            |                       |             |             |             |   |             |            
|                           
|                           
|                           
|                           
|Current assets:             |                                                                            |                       |             |             |             |   |             |            
|                           
|                           
|                           
|                           
|                            | Cash and cash equivalents                                                  |                       | $           | 152,270,780 |             |   | $           | 87,718,718  |            
|                           
|                           
|                           
|                           
|                            | Short-term investments                                                     |                       |             | 133,466,609 |             |   |             | 149,585,195 |            
|                           
|                           
|                           
|                           
|                            | Accounts receivable, less allowances:
	2000: $4,190,000; 1999: $3,815,000. |                       |             | 33,164,092  |             |   |             | 31,582,935  |            
|                           
|                           
|                           
|                           
|                            | Inventories                                                                |                       |             | 10,001,731  |             |   |             | 7,273,142   |            
|                           
|                           
|                           
|                           
|                            | Deferred tax assets                                                        |                       |             | 3,366,268   |             |   |             | 4,697,085   |            
|                           
|                           
|                           
|                           
|                            | Note receivable                                                            |                       |             |            |             |   |             | 39,100,000  |            
|                           
|                           
|                           
|                           
|                            | Other current assets                                                       |                       |             | 19,018,672  |             |   |             | 15,635,164  |            
|                            |                                                                            |                       |             |             |             |   |             |            
|                            |                                                                            | Total current assets  |             |             | 351,288,152 |   |             |             | 335,592,239 | 
|                           
|                           
|                           
|                           
|Property and equipment, net |                                                                            |                       | 1,758,946   |             |             |   | 1,704,663   |            
|                           
|                           
|                           
|                           
|Intangible assets:          |                                                                            |                       |             |             |             |   |             |            
|                           
|                           
|                           
|                           
|                            | Intangible assets related to product line and business
	acquisitions       |                       |             | 156,569,425 |             |   |             | 137,508,154 |            
|                           
|                           
|                           
|                           
|                            | Other intangible assets                                                    |                       |             | 899,414     |             |   |             | 973,414     |            
|                            |                                                                            |                       |             |             |             |   |             |            
|                            |                                                                            |                       | 157,468,839 |             |             |   | 138,481,568 |            
|                           
|                           
|                           
|                           
|                            | Less: accumulated amortization                                             |                       |             | 16,286,738  |             |   |             | 9,505,319   |            
|                            |                                                                            |                       |             |             |             |   |             |            
|                            |                                                                            | Net intangible assets |             |             | 141,182,101 |   |             |             | 128,976,249 | 
|                           
|                           
|                           
|                           
|Other non-current assets    |                                                                            |                       | 1,110,356   |             |             |   | 1,237,195   |            
|                            |                                                                            |                       |             |             |             |   |             |            
|                            |                                                                            | $                     | 495,339,555 |             |             | $ | 467,510,346 |            
|                            |                                                                            |                       |             |             |             |   |             |            

See accompanying notes.

F-3



---



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                   |                        |                                |                            |      |            |             |             |   |            |             | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------- | ------------------------------ | -------------------------- | ---- | ---------- | ----------- | ----------- | - | ---------- | ----------- | 
|                                                                                                                                                                   |                        |                               
|                                                                                                                                                                   |                        | June 30,                      
|                                                                                                                                                                   |                        |                               
|                                                                                                                                                                   |                        | 2000                           |                            | 1999
|                                                                                                                                                                   |                        |                                |                            |     
|Liabilities                                                                                                                                                        |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   | Current liabilities:   |                                |                            |      |            |             |             |   |           
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Accounts payable               |                            | $    | 10,554,984 |             |             | $ | 9,346,244  |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Short-term contract obligation |                            |      | 22,000,000 |             |             |   | 22,000,000 |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Income taxes payable           |                            |      |           |             |             |   | 10,659,944 |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Other current liabilities      |                            |      | 6,431,617  |             |             |   | 14,973,736 |            
|                                                                                                                                                                   |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                   |                        |                                | Total current liabilities  |      |            | 38,986,601  |             |   |            | 56,979,924  | 
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   | Long-term liabilities: |                                |                            |      |            |             |             |   |           
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Other non-current liabilities  |                            |      |           |             |             |   | 130,278    |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Long-term contract obligation  |                            |      | 14,913,603 |             |             |   | 34,716,456 |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                   |                        | Deferred tax liability         |                            |      | 4,000,102  |             |             |   | 1,935,272  |            
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Commitments and Contingencies                                                                                                                                      |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Stockholders Equity                                                                                                                                               |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Preferred Stock, $0.01 par value; shares authorized: 5,000,000;
	no shares issued                                                                                  |                        |                                |                           |      |            |             |            |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Class A Common Stock, $0.014 par value; shares authorized:
	50,000,000; issued and outstanding: 29,069,085 and 28,239,269 at
	June 30, 2000 and 1999, respectively |                        |                                | 406,967                    |      |            |             | 395,350     |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Class B Common Stock, $0.014 par value; shares authorized:
	1,000,000; issued and outstanding: 422,962 at June 30, 2000
	and 1999.                                 |                        |                                | 5,921                      |      |            |             | 5,921       |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Additional paid-in capital                                                                                                                                         |                        |                                | 372,067,685                |      |            |             | 352,155,845 |  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Accumulated other comprehensive income (loss)                                                                                                                      |                        |                                | 479,410                    |      |            |             | (293,784    | )
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|                                                                                                                                                                  
|Accumulated earnings                                                                                                                                               |                        |                                | 64,479,266                 |      |            |             | 21,485,084  |  
|                                                                                                                                                                   |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                   |                        |                                | Total stockholders equity |      |            | 437,439,249 |             |   |            | 373,748,416 | 
|                                                                                                                                                                   |                        |                                |                            |      |            |             |             |  
|                                                                                                                                                                   |                        | $                              | 495,339,555                |      |            | $           | 467,510,346 |  
|                                                                                                                                                                   |                        |                                |                            |      |            |             |             |  

See accompanying notes.

F-4



---



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |            |            | 
|--------------------------------------------------------------------- | ----------------------------------- | ---------------------------- | ----------- | ---------- | ---------- | ---- | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | 
|                                                                      |                                     |                             
|                                                                      |                                     | Year Ended June 30,         
|                                                                      |                                     |                             
|                                                                      |                                     | 2000                         |             | 1999       |            | 1998
|                                                                      |                                     |                              |             |            |            |     
|Net revenues                                                          |                                     | $                            | 139,099,152 |            |            | $    | 116,870,540 |            |            | $ | 77,571,419  |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Operating costs and expenses:                                         |                                     |                              |             |            |            |      |             |            |            |   |             |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Cost of sales                       |                              |             | 25,911,579 |            |      |             | 21,633,902 |            |   |             | 13,979,793 |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Selling, general and administrative |                              |             | 45,403,841 |            |      |             | 38,219,119 |            |   |             | 27,423,574 |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Research and development            |                              |             | 4,902,715  |            |      |             | 3,396,393  |            |   |             | 2,884,479  |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | In-process research and development |                              |             |           |            |      |             | 9,500,000  |            |   |             | 35,400,000 |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|                                                                      | Depreciation and amortization       |                              |             | 7,374,534  |            |      |             | 5,810,288  |            |   |             | 2,903,423  |           
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|                                                                      |                                     | Operating costs and expenses |             |            | 83,592,669 |      |             |            | 78,559,702 |   |             |            | 82,591,269 | 
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Operating income (loss)                                               |                                     |                              | 55,506,483  |            |            |      | 38,310,838  |            |            |   | (5,019,850  | )         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest income                                                       |                                     |                              | 14,120,839  |            |            |      | 11,503,256  |            |            |   | 7,060,354   |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Interest expense                                                      |                                     |                              | (2,245,578  | )          |            |      | (1,825,200  | )          |            |   | (23,635     | )         
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Gain on sale of assets                                                |                                     |                              |            |            |            |      | 17,650,903  |            |            |   |            |           
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Income before taxes                                                   |                                     |                              | 67,381,744  |            |            |      | 65,639,797  |            |            |   | 2,016,869   |           
|                                                                     
|                                                                     
|                                                                     
|                                                                     
|Income tax expense                                                    |                                     |                              | (24,387,562 | )          |            |      | (24,202,571 | )          |            |   | (14,424,045 | )         
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Net income (loss)                                                     |                                     | $                            | 42,994,182  |            |            | $    | 41,437,226  |            |            | $ | (12,407,176 | )         
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Basic net income (loss) per common share                              |                                     | $                            | 1.48        |            |            | $    | 1.46        |            |            | $ | (0.51       | )         
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Diluted net income (loss) per common share                            |                                     | $                            | 1.41        |            |            | $    | 1.41        |            |            | $ | (0.51       | )         
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Shares used in computing basic net income (loss)  per common
	 share  |                                     |                              | 29,028,896  |            |            |      | 28,413,608  |            |            |   | 24,101,658  |           
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           
|Shares used in computing diluted net income (loss)  per
	common share |                                     |                              | 30,498,776  |            |            |      | 29,462,311  |            |            |   | 24,101,658  |           
|                                                                      |                                     |                              |             |            |            |      |             |            |            |   |             |           

See accompanying notes.

F-5



---



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |             |  
|---------------------------- | ------------------------------------------------------- | ------------ | ---------- | ------------ |  | ---------- | ------- | ----------- |  | ----------- | ------- | ------ |  | -------- | ----- | - |  | - | ----------- | ----------- |  | - | -------- | -------- | - | - | ----------- | ----------- | -
|                             |                                                         |              |            |              |  |            |         | Accumulated |  |            
|                             |                                                         | Class A      |            | Class B      |  |            |         | Other       |  |            
|                             |                                                         | Common Stock |            | Common Stock |  | Additional |         | Comp.       |  | Accumulated
|                             |                                                         |              |            |              |  | Paid-In    |         | (Loss)      |  | (Deficit)  
|                             |                                                         | Shares       |            | Amount       |  | Shares     |         | Amount      |  | Capital     |         | Income |  | Earnings
|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |         
|Balance at June 30, 1997     |                                                         |              | 20,969,523 |              |  | $          | 293,574 |             |  |             | 422,962 |        |  | $        | 5,921 |   |  | $ | 138,873,363 |             |  | $ | (63,075  | )        |   | $ | (7,544,966  | )          
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|                            
|                            
|                            
|                            
|                             | Net loss                                                |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          |         |   |   |             | (12,407,176 | )
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on available-for-sale securities   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          | 140,764  |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Comprehensive loss                                      |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |             |  
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |              |            | 233,314      |  |            |         | 3,266       |  |             |         |       |  |          |       |  |  |   |             | 954,296     |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 6,305,311   |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 57,500      |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Public offering                                         |              |            | 6,510,000    |  |            |         | 91,140      |  |             |         |       |  |          |       |  |  |   |             | 197,785,567 |  |   |          |         |   |   |             |            |  
|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|Balance at June 30, 1998     |                                                         |              | 27,712,837 |              |  |            | 387,980 |             |  |             | 422,962 |        |  |          | 5,921 |   |  |   | 343,976,037 |             |  |   | 77,689   |          |   |   | (19,952,142 | )          
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|                            
|                            
|                            
|                            
|                             | Net income                                              |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          |         |   |   |             | 41,437,226  |  
|                            
|                            
|                            
|                            
|                             | Net unrealized losses on available-for-sale securities  |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          | (371,619 | ) |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on foreign currency translation    |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          | 146      |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Comprehensive income                                    |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |             |  
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |              |            | 526,432      |  |            |         | 7,370       |  |             |         |       |  |          |       |  |  |   |             | 3,834,839   |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 4,329,969   |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 15,000      |  |   |          |         |   |   |             |            |  
|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|Balance at June 30, 1999     |                                                         |              | 28,239,269 |              |  |            | 395,350 |             |  |             | 422,962 |        |  |          | 5,921 |   |  |   | 352,155,845 |             |  |   | (293,784 | )        |   |   | 21,485,084  |            
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|                            
|                            
|                            
|                            
|                             | Net income                                              |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          |         |   |   |             | 42,994,182  |  
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on available-for-sale securities   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          | 790,228  |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Net unrealized losses on foreign currency translation   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             |            |  |   |          | (17,034  | ) |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Comprehensive income                                    |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |             |  
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |              |            | 829,816      |  |            |         | 11,617      |  |             |         |       |  |          |       |  |  |   |             | 10,162,400  |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 9,728,440   |  |   |          |         |   |   |             |            |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |              |            |             |  |            |         |            |  |             |         |       |  |          |       |  |  |   |             | 21,000      |  |   |          |         |   |   |             |            |  
|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            
|Balance at June 30, 2000     |                                                         |              | 29,069,085 |              |  | $          | 406,967 |             |  |             | 422,962 |        |  | $        | 5,921 |   |  | $ | 372,067,685 |             |  | $ | 479,410  |          |   | $ | 64,479,266  |            
|                             |                                                         |              |            |              |  |            |         |             |  |             |         |        |  |          |       |   |  |   |             |             |  |   |          |          |   |   |             |            

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |                                                         |       |             |             |  
|---------------------------- | ------------------------------------------------------- | ----- | ----------- | ----------- | -
|                             |                                                         | Total
|                             |                                                         |      
|Balance at June 30, 1997     |                                                         | $     | 131,564,817 |            
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |       |             |            
|                            
|                            
|                            
|                            
|                             | Net loss                                                |       |             | (12,407,176 | )
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on available-for-sale securities   |       |             | 140,764     |  
|                             |                                                         |       |             |            
|                             | Comprehensive loss                                      |       |             | (12,266,412 | )
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |       |             | 957,562     |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |       |             | 6,305,311   |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |       |             | 57,500      |  
|                            
|                            
|                            
|                            
|                             | Public offering                                         |       |             | 197,876,707 |  
|                             |                                                         |       |             |            
|Balance at June 30, 1998     |                                                         |       | 324,495,485 |            
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |       |             |            
|                            
|                            
|                            
|                            
|                             | Net income                                              |       |             | 41,437,226  |  
|                            
|                            
|                            
|                            
|                             | Net unrealized losses on available-for-sale securities  |       |             | (371,619    | )
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on foreign currency translation    |       |             | 146         |  
|                             |                                                         |       |             |            
|                             | Comprehensive income                                    |       |             | 41,065,753  |  
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |       |             | 3,842,209   |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |       |             | 4,329,969   |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |       |             | 15,000      |  
|                             |                                                         |       |             |            
|Balance at June 30, 1999     |                                                         |       | 373,748,416 |            
|                            
|                            
|                            
|                            
|Comprehensive income (loss): |                                                         |       |             |            
|                            
|                            
|                            
|                            
|                             | Net income                                              |       |             | 42,994,182  |  
|                            
|                            
|                            
|                            
|                             | Net unrealized gains on available-for-sale securities   |       |             | 790,228     |  
|                            
|                            
|                            
|                            
|                             | Net unrealized losses on foreign currency translation   |       |             | (17,034     | )
|                             |                                                         |       |             |            
|                             | Comprehensive income                                    |       |             | 43,767,376  |  
|                            
|                            
|                            
|                            
|                             | Exercise of stock options                               |       |             | 10,174,017  |  
|                            
|                            
|                            
|                            
|                             | Tax effect of stock options exercised                   |       |             | 9,728,440   |  
|                            
|                            
|                            
|                            
|                             | Options issued in lieu of payment for services rendered |       |             | 21,000      |  
|                             |                                                         |       |             |            
|Balance at June 30, 2000     |                                                         | $     | 437,439,249 |            
|                             |                                                         |       |             |            

See accompanying notes.

F-6



---



MEDICIS PHARMACEUTICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |             |             |  
|----------------------------------------------------------------------------------------- | ----------------------------------------------------- | --------------------------------------------------- | ------------ | ---------- | ---------- | ---- | ------------ | ----------- | ----------- | - | ------------ | ----------- | ----------- | -
|                                                                                          |                                                       |                                                    
|                                                                                          |                                                       | Year Ended June 30,                                
|                                                                                          |                                                       |                                                    
|                                                                                          |                                                       | 2000                                                |              | 1999       |            | 1998
|                                                                                          |                                                       |                                                     |              |            |            |     
|Operating Activities:                                                                     |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Net income (loss)                                                                         |                                                       | $                                                   | 42,994,182   |            |            | $    | 41,437,226   |             |             | $ | (12,407,176  | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Adjustments to reconcile net income (loss) to net cash
	provided by operating activities: |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | In-process research and development                   |                                                     |              |           |            |      |              | 9,500,000   |             |   |              | 35,400,000  |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Gain on sale of assets                                |                                                     |              |           |            |      |              | (17,650,903 | )           |   |              |            |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Depreciation and amortization                         |                                                     |              | 7,374,534  |            |      |              | 5,810,288   |             |   |              | 2,903,423   |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | (Gain) loss on sale of available-for-sale investments |                                                     |              | (483,038   | )          |      |              | 14,658      |             |   |              | (50,931     | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other non-cash expenses                               |                                                     |              | 21,000     |            |      |              | 15,000      |             |   |              | 57,500      |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Deferred income tax expense (benefit)                 |                                                     |              | 2,947,647  |            |      |              | (9,792,229  | )           |   |              | 13,787,173  |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Provision for doubtful accounts and returns           |                                                     |              | 375,000    |            |      |              | 989,000     |             |   |              | 460,000     |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accretion of premium (discount) on investments        |                                                     |              | 508,323    |            |      |              | 179,649     |             |   |              | (344,454    | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accretion of discount on contract obligation          |                                                     |              | 2,197,147  |            |      |              | 1,801,885   |             |   |              |            |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Changes in operating assets and liabilities (net of acquired
	amounts):                   |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accounts receivable                                   |                                                     |              | (1,956,157 | )          |      |              | (13,285,268 | )           |   |              | (10,944,095 | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Inventories                                           |                                                     |              | (1,338,576 | )          |      |              | 2,298,397   |             |   |              | (4,772,069  | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other current assets                                  |                                                     |              | (2,502,530 | )          |      |              | (4,134,323  | )           |   |              | (5,353,132  | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Accounts payable                                      |                                                     |              | 1,208,740  |            |      |              | 2,975,103   |             |   |              | 35,575      |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Income taxes payable                                  |                                                     |              | (931,504   | )          |      |              | 10,062,755  |             |   |              | 597,189     |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                          | Other current liabilities                             |                                                     |              | (9,176,278 | )          |      |              | (4,796,891  | )           |   |              | (4,623,987  | )          
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                          |                                                       | Net cash provided by operating activities           |              |            | 41,238,490 |      |              |             | 25,424,347  |   |              |             | 14,745,016  |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Investing Activities:                                                                     |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Purchase of property and equipment                                                        |                                                       |                                                     | (628,941     | )          |            |      | (725,165     | )           |             |   | (833,111     | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Proceeds from sale of product rights                                                      |                                                       |                                                     | 39,100,000   |            |            |      | 10,712,402   |             |             |   |             |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Acquisition of businesses, net of cash acquired                                           |                                                       |                                                     | (5,974,973   | )          |            |      | (14,278,840  | )           |             |   | (54,982,386  | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Payments for purchase of product rights                                                   |                                                       |                                                     | (36,723,130  | )          |            |      | (25,110,371  | )           |             |   | (5,012,483   | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Purchase of available-for-sale investments                                                |                                                       |                                                     | (159,776,955 | )          |            |      | (202,169,056 | )           |             |   | (147,656,185 | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Sale of available-for-sale investments                                                    |                                                       |                                                     | 29,937,533   |            |            |      | 52,644,964   |             |             |   | 74,690,916   |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Maturity of available-for-sale investments                                                |                                                       |                                                     | 147,170,951  |            |            |      | 89,711,000   |             |             |   | 34,500,000   |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Change in other assets                                                                    |                                                       |                                                     | 282,382      |            |            |      | 355,712      |             |             |   | (490,000     | )          
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                          |                                                       | Net cash provided by (used in) investing activities |              |            | 13,386,867 |      |              |             | (88,859,354 | ) |              |             | (99,783,249 | )
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Financing Activities:                                                                     |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Proceeds from the sale of common equity securities, net                                   |                                                       |                                                     |             |            |            |      |             |             |             |   | 197,876,707  |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Payment of notes payable                                                                  |                                                       |                                                     | (100,000     | )          |            |      | (105,920     | )           |             |   | (10,660      | )          
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Change in other non-current liabilities                                                   |                                                       |                                                     | (130,278     | )          |            |      | 6,163        |             |             |   | 2,354        |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Proceeds from the exercise of options                                                     |                                                       |                                                     | 10,174,017   |            |            |      | 3,842,209    |             |             |   | 957,562      |            
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|                                                                                          |                                                       | Net cash provided by financing activities           |              |            | 9,943,739  |      |              |             | 3,742,452   |   |              |             | 198,825,963 |  
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Effect of foreign currency exchange rate on cash and cash
	equivalents                    |                                                       |                                                     | (17,034      | )          |            |      | 146          |             |             |   |             |            
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|Net increase (decrease) in cash and cash
	equivalents                                     |                                                       |                                                     | 64,552,062   |            |            |      | (59,692,409  | )           |             |   | 113,787,730  |            
|                                                                                         
|                                                                                         
|                                                                                         
|                                                                                         
|Cash and cash equivalents at beginning of year                                            |                                                       |                                                     | 87,718,718   |            |            |      | 147,411,127  |             |             |   | 33,623,397   |            
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            
|Cash and cash equivalents at end of year                                                  |                                                       | $                                                   | 152,270,780  |            |            | $    | 87,718,718   |             |             | $ | 147,411,127  |            
|                                                                                          |                                                       |                                                     |              |            |            |      |              |             |             |   |              |            

See accompanying notes.

F-7



---



MEDICIS PHARMACEUTICAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2000


NOTE 1.  FORMATION AND DEVELOPMENT OF THE COMPANY

Medicis Pharmaceutical Corporation and its wholly owned
subsidiaries (Medicis or the Company) is
a specialty pharmaceutical company and the leading independent
pharmaceutical company in the United States focusing primarily on
 the treatment of dermatological conditions. The Company offers
prescription products and an over-the-counter (OTC)
product, emphasizing the clinical effectiveness, quality,
affordability and cosmetic elegance of its products. Medicis
develops and markets leading products for major segments within
dermatology, including acne, rosacea, antifungals, eczema,
hyperpigmentation, pediculosis (head lice), psoriasis, seborrheic
 dermatitis, and cosmesis (improvement in the texture and
appearance of skin). Medicis has built its business by
successfully executing a four-part growth strategy. The
Companys growth strategy includes: (1) expanding sales
 of existing brands; (2) launching new products from
intensive research and development efforts; (3) acquiring
complementary strategic products, technologies, and businesses;
and (4) collaborating with other companies.

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the
accounts of Medicis and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. Certain prior period amounts have been
reclassified to conform to the current period presentation.

Cash and Cash Equivalents

At June 30, 2000, cash and cash equivalents included highly
liquid investments invested in money market accounts consisting
of government securities and high-grade commercial paper. These
investments are stated at cost, which approximates fair value.
The Company considers all highly liquid investments purchased
with a remaining maturity of three months or less to be cash
equivalents.

Investments

The Company accounts for investments under Statement of Financial
 Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The
Companys debt securities are classified as
available-for-sale. Available-for-sale securities are carried at
fair value with the unrealized gains and losses reported in
stockholders equity. The amortized cost of debt securities
in this category is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization is included
 in interest income. Realized gains and losses and interest and
dividends on securities are included in interest income. The cost
 of securities sold is based upon the specific identification
method.

Inventories

The Company utilizes third parties to manufacture and package
inventories held for sale, takes title to certain inventories
once manufactured, and warehouses such goods until packaged for
final distribution and sale. Inventories consist of salable
products held at the Companys warehouses, as well as at the
 manufacturers facilities, and are valued at the lower of
cost or market using the first-in, first-out method.

F-8



---



Inventories are as follows:

|                  |  |          |            |      |  |   |           | 
|----------------- |  | -------- | ---------- | ---- |  | - | --------- | 
|                  |  |         
|                  |  | June 30,
|                  |  |         
|                  |  | 2000     |            | 1999
|                  |  |          |            |     
|Raw materials     |  | $        | 2,700,695  |      |  | $ | 1,799,082 | 
|                 
|                 
|                 
|                 
|Finished goods    |  |          | 7,301,036  |      |  |   | 5,474,060 | 
|                  |  |          |            |      |  |   |           | 
|Total inventories |  | $        | 10,001,731 |      |  | $ | 7,273,142 | 
|                  |  |          |            |      |  |   |           | 

Property and Equipment

Property and equipment are stated at cost. Depreciation is
calculated on a straight-line basis over the estimated useful
lives of property and equipment (three to five years). Leasehold
improvements are amortized over the shorter of their estimated
useful lives or the remaining lease term. Property and equipment
consist of the following:

|                                  |  |          |           |      |  |   |           |  
|--------------------------------- |  | -------- | --------- | ---- |  | - | --------- | -
|                                  |  |         
|                                  |  | June 30,
|                                  |  |         
|                                  |  | 2000     |           | 1999
|                                  |  |          |           |     
|Furniture, fixtures and equipment |  | $        | 2,225,969 |      |  | $ | 1,898,614 |  
|                                 
|                                 
|                                 
|                                 
|Leasehold improvements            |  |          | 480,970   |      |  |   | 652,070   |  
|                                  |  |          |           |      |  |   |           |  
|                                  |  |          | 2,706,939 |      |  |   | 2,550,684 |  
|                                 
|                                 
|                                 
|                                 
|Less: accumulated depreciation    |  |          | (947,993  | )    |  |   | (846,021  | )
|                                  |  |          |           |      |  |   |           |  
|                                  |  | $        | 1,758,946 |      |  | $ | 1,704,663 |  
|                                  |  |          |           |      |  |   |           |  

Intangible Assets

Intangible assets resulting from acquisitions of products and
businesses principally consist of the excess of the fair value
attributed to the related developed products and are being
amortized on a straight-line basis over a 10-to 25-year period.
The Company assesses the recoverability of intangible assets
resulting from these acquisitions based upon expected future
undiscounted cash flows on a product-line basis along with other
relevant information.

Other Current Liabilities

Other current liabilities are as follows:

|                       |  |          |           |      |  |   |            | 
|---------------------- |  | -------- | --------- | ---- |  | - | ---------- | 
|                       |  |         
|                       |  | June 30,
|                       |  |         
|                       |  | 2000     |           | 1999
|                       |  |          |           |     
|Accrued incentives     |  | $        | 3,066,000 |      |  | $ | 2,739,245  | 
|                      
|                      
|                      
|                      
|Payable to IMX         |  |          |          |      |  |   | 3,600,000  | 
|                      
|                      
|                      
|                      
|Other accrued expenses |  |          | 3,365,617 |      |  |   | 8,634,491  | 
|                       |  |          |           |      |  |   |            | 
|                       |  | $        | 6,431,617 |      |  | $ | 14,973,736 | 
|                       |  |          |           |      |  |   |            | 

Revenue Recognition

Revenue from product sales is recognized upon shipment, net of
discounts, rebates and estimated allowances for chargebacks and
returns. The Company principally authorizes returns for damaged
products and exchanges for expired products in accordance with
its Return Goods Policy and Procedures, and
establishes reserves for such amounts at the time of sale. The
Company has not experienced significant returns of damaged or
expired products.

F-9



---



Advertising

The Company expenses advertising as incurred. Advertising
expenses for the fiscal years ended June 30, 2000
(fiscal 2000), June 30, 1999 (fiscal
1999) and June 30, 1998 (fiscal 1998) were
 approximately $11,521,000, $11,922,000 and $8,347,000,
respectively.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock
option grants to employees in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB No. 25) and,
accordingly, recognizes no compensation expense for employee
stock option grants. All stock-based awards to non-employees are
accounted for at their fair value in accordance with Statement of
 Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (SFAS
No. 123) and Emerging Issues Task Force
(EITF) Issue No. 96-18, Accounting for
Equity Instruments that are Issued to Other than Employees.

Research and Development Costs

All research and development costs, including payments related to
 products under development and research consulting agreements,
are expensed as incurred.

Income Taxes

Income taxes have been provided using the liability method in
accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes.

Earnings (Loss) Per Share

Basic and diluted earnings (loss) per common share are calculated
 in accordance with the requirements of Statement of Financial
Accounting Standards No. 128, Earnings Per Share
 (SFAS No. 128). All earnings (loss) per common
share amounts for all periods have been presented and, where
appropriate, restated to conform to the requirements of SFAS
No. 128.

Statements of Cash Flows

Non-cash investing and financing activities were as follows:

|                                        |  |          |           |      |  |      |            |  |  |   |           | 
|--------------------------------------- |  | -------- | --------- | ---- |  | ---- | ---------- |  |  | - | --------- | 
|                                        |  |         
|                                        |  | June 30,
|                                        |  |         
|                                        |  | 2000     |           | 1999 |  | 1998
|                                        |  |          |           |      |  |     
|Tax effect of stock options exercised   |  | $        | 9,728,440 |      |  | $    | 4,329,969  |  |  | $ | 6,305,311 | 
|                                       
|                                       
|                                       
|                                       
|Note receivable from the sale of assets |  |          |          |      |  |      | 39,100,000 |  |  |   |          | 

Use of Estimates

The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
 management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates based upon future events, which could include, among
other risks, changes in the regulations governing the manner in
which the Company sells its products, changes in the health care
environment and the reliance on contract manufacturing services.

F-10



---



Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, short-term
investments, accounts receivable, accounts payable and accrued
liabilities reported in the consolidated balance sheets
approximates fair value because of the immediate or short-term
maturity of these financial instruments.

Segment Information

The Company adopted Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise
and Related Information (SFAS No. 131).
SFAS No. 131 established standards for reporting information
 regarding operating segments in annual financial statements and
requires selected information to be presented in interim
financial reports issued to shareholders. SFAS No. 131 also
established standards for related disclosures about products and
services, geographic areas and major customers (see Note 11). The
 adoption of SFAS No. 131 did not affect the Companys
consolidated financial position, results of operations or
financial statement disclosures, as the Company operates only one
 business segment.

Recently Issued Accounting Standards

In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin 101, Revenue
Recognition in Financial Statements
(SAB 101). SAB 101 provides guidance
related to revenue recognition based upon interpretations and
practices followed by the SEC. For the Company, SAB 101 will
 be effective the quarter ended December 31, 2000. The
Company is currently in the process of evaluating what impact, if
 any, SAB 101 will have on the financial position or results
 of operations of the Company.

NOTE 3.  PRODUCT LINE AND BUSINESS ACQUISITIONS AND
DIVESTITURES

On September 21, 1999, the Company purchased VECTRIN®,
a branded minocycline HCl product line, and ownership of its
Abbreviated New Drug Application (ANDA) from Warner
Chilcott, plc (Warner Chilcott). Under terms of the
agreement, the Company paid Warner Chilcott $11.1 million cash at
 closing and paid an additional $2.0 million in contingent
payments in April 2000. Additionally, the Company is making
royalty payments and may be obligated to make additional
milestone payments conditioned upon the occurrence of certain
events.

On June 29, 1999, the Company sold the OTC products
ZOSTRIX®, EXOREX and THERAPLEX® and the
prescription product ZONALON® to Bioglan Pharma, plc
(Bioglan). Bioglan paid cash of $900,000 and issued a
 note receivable for $39.1 million, which was collected in July
1999. Under terms of the agreement, the Company purchased IMX
Pharmaceutical, Inc.s (IMX) 49.0% interest in
the EXOREX joint venture for $3.6 million. On June 25,
 1998, the Company paid $4.0 million for its 51.0% interest in
the EXOREX joint venture.

On April 19, 1999, the Company acquired 100% of the common
stock of Ucyclyd Pharma, Inc. (Ucyclyd), a privately
held pharmaceutical company based in Baltimore, Maryland, for net
 cash of approximately $14.3 million. Ucyclyds primary
product, the orphan drug BUPHENYL, is indicated in the
treatment of Urea Cycle Disorder. Under terms of the agreement,
the Company paid $15.1 million at the close of the transaction,
paid an additional $5.7 million in contingent payments in
April 2000, and may be required to pay an additional $2.7
million upon regulatory approval of a product line extension. The
 business acquired was not significant under Securities and
Exchange Commission rules.

On March 17, 1999, the Company sold nine dermatological
products to Bioglan for a net cash payment of $9.8 million. The
products included in the transaction were: A-FIL,
AFIRM®, BENZASHAVE®, BETA-LIFTx®, METED®,
PRAMEGEL®, PACKERS TAR SOAP®, THERAMYCIN Z®
and TEXACORT®. Under a separate agreement, the Company
licensed three additional products to Bioglan for a period of
three years with a buyout option of $15.5 million at the end of
the term. Under this agreement, the Company receives quarterly
license revenues. The products included in this license agreement
 were: OCCLUSAL-HP®, PENTRAX® and SALAC®.

F-11



---



On November 29, 1998, the Company agreed to license, with an
 option to purchase, the LOPROX®, TOPICORT® and
A/T/S® products from Aventis Pharma (Aventis) as
 successor-in-interest to Hoechst Marion Roussel
(HMR). The Company, using cash reserves, paid $22.0
million at the close of the transaction, made another payment of
$22.0 million in November 1999 and will make an additional
payment of $22.0 million in November 2000. The Company has
the option to purchase the products for $16.5 million after three
 years. The $22.0 million due in November 2000 is recorded
as a short-term obligation, and the remaining balance is recorded
 at its discounted value as a long-term obligation. The discount
is being recorded as interest expense over the related period.
For accounting purposes, the Company recorded the transaction as
an acquisition. In conjunction with this acquisition, the Company
 recorded a charge to operations of $9.5 million, based upon an
independent valuation, relating to acquired in-process research
and development for projects that are in various stages of
development, have not reached technological feasibility, and have
 no known alternative future uses.

The efforts required to develop the acquired in-process research
and development into commercially viable products include
completion of the development stages of the commercially viable
products, clinical-trial testing, FDA approval and
commercialization. Due to the nature of the pharmaceutical
development process, the Company anticipates incurring additional
 costs to develop these products. However, there is no certainty
that any of these development efforts will result in commercially
 viable products. During fiscal 2000 the Company incurred
development costs of approximately $500,000, and should all of
the remaining projects continue to move toward commercialization,
 the Company estimates that future expenditures could approximate
 $4.0 million over the next few years.

On December 3, 1997, the Company acquired 100% of the common
 stock of GenDerm Corporation and its subsidiaries
(GenDerm) for net cash of approximately $55.0
million. GenDerm marketed the prescription brands NOVACET®
and ZONALON®, as well as the OTC brands ZOSTRIX®,
OCCLUSAL-HP®, PENTRAX® and SALAC®. In conjunction
with the acquisition of this business, the Company recorded a
charge to operations of $35.4 million, based upon an independent
valuation, relating to acquired in-process research and
development for projects that are in various stages of
development, have not reached technological feasibility, and have
 no known alternative future uses. The $35.4 million charge is
not deductible for tax purposes.

The Ucyclyd and GenDerm business acquisitions were accounted for
using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, Business
Combinations (APB No. 16). Under APB
No. 16, purchase price allocations were made to the assets
acquired and the liabilities assumed based upon their respective
fair values. The operations of Ucyclyd and GenDerm have been
included in the consolidated statements of income (loss) as
of the acquisition date.

Unaudited pro forma operating results for the Company, assuming
the business acquisitions occurred at the beginning of the year
in which they were acquired and the immediately preceding fiscal
year, are as follows:

|                                           |  |                     |             |      |  |   |             |  
|------------------------------------------ |  | ------------------- | ----------- | ---- |  | - | ----------- | -
|                                           |  |                    
|                                           |  | Year Ended June 30,
|                                           |  |                    
|                                           |  | 1999                |             | 1998
|                                           |  |                     |             |     
|Net revenues                               |  | $                   | 120,653,854 |      |  | $ | 95,263,143  |  
|                                          
|                                          
|                                          
|                                          
|Net income(loss)                           |  |                     | 42,529,400  |      |  |   | (11,293,208 | )
|                                          
|                                          
|                                          
|                                          
|Basic net income (loss) per common         |  | $                   | 1.50        |      |  | $ | (0.47       | )
|                                          
|                                          
|                                          
|                                          
|Diluted net income (loss) per common share |  | $                   | 1.44        |      |  | $ | (0.47       | )

For purposes of these pro forma operating results, the charges
for in-process research and development are presented in the year
 the charge was incurred. The pro forma information does not
necessarily represent the actual results that would have occurred
 had the acquisitions taken place at the beginning of each fiscal
 year, given the manner that the Company assimilated the
acquisitions into its business.

On February 25, 1997, the Company acquired the LIDEX®
and SYNALAR® products from a third party for $28.0 million,
with the option to pay an additional $3.0 million, in $1.0
million installments, on the anniversary of the purchase for each
 of the next three years if certain market conditions are met.
The Company paid the first

F-12



---



installment of $1.0 million in February 1998, the second
installment of $1.0 million in February 1999, and the third
installment in February 2000. The Company has fulfilled all
of its obligations under the LIDEX® and SYNALAR®
acquisition.

NOTE 4.  SHORT-TERM INVESTMENTS

The Companys short-term investments are intended to
establish a high-quality portfolio that preserves principal,
meets liquidity needs, avoids inappropriate concentrations and
delivers an appropriate yield in relationship to the
Companys investment guidelines and market conditions.

The following is a summary of available-for-sale securities:

|                          |                  |               |            |             |  |            |         |           |  |   |         |         |  |   |            |             | 
|------------------------- | ---------------- | ------------- | ---------- | ----------- |  | ---------- | ------- | --------- |  | - | ------- | ------- |  | - | ---------- | ----------- | 
|                          |                  |              
|                          |                  | June 30, 2000
|                          |                  |              
|                          |                  |               |            | Gross       |  | Gross      |         | Gross    
|                          |                  |               |            | Unrealized  |  | Unrealized |         | Fair     
|                          |                  | Cost          |            | Gains       |  | Losses     |         | Value    
|                          |                  |               |            |             |  |            |         |          
|U.S. corporate securities |                  | $             | 32,807,598 |             |  | $          | 962,892 |           |  | $ | 157,011 |         |  | $ | 33,613,479 |            
|                         
|                         
|                         
|                         
|Other debt securities     |                  |               | 99,886,342 |             |  |            | 45,621  |           |  |   | 78,833  |         |  |   | 99,853,130 |            
|                          |                  |               |            |             |  |            |         |           |  |   |         |         |  |   |            |            
|                          | Total securities |               | $          | 132,693,940 |  |            | $       | 1,008,513 |  |   | $       | 235,844 |  |   | $          | 133,466,609 | 
|                          |                  |               |            |             |  |            |         |           |  |   |         |         |  |   |            |            

|                          |                  |               |             |             |  |            |         |         |  |   |         |         |  |   |             |             | 
|------------------------- | ---------------- | ------------- | ----------- | ----------- |  | ---------- | ------- | ------- |  | - | ------- | ------- |  | - | ----------- | ----------- | 
|                          |                  |              
|                          |                  | June 30, 1999
|                          |                  |              
|                          |                  |               |             | Gross       |  | Gross      |         | Gross  
|                          |                  |               |             | Unrealized  |  | Unrealized |         | Fair   
|                          |                  | Cost          |             | Gains       |  | Losses     |         | Value  
|                          |                  |               |             |             |  |            |         |        
|U.S. corporate securities |                  | $             | 27,757,402  |             |  | $          | 10,003  |         |  | $ | 542,000 |         |  | $ | 27,225,405  |            
|                         
|                         
|                         
|                         
|Other debt securities     |                  |               | 122,293,723 |             |  |            | 155,512 |         |  |   | 89,445  |         |  |   | 122,359,790 |            
|                          |                  |               |             |             |  |            |         |         |  |   |         |         |  |   |             |            
|                          | Total securities |               | $           | 150,051,125 |  |            | $       | 165,515 |  |   | $       | 631,445 |  |   | $           | 149,585,195 | 
|                          |                  |               |             |             |  |            |         |         |  |   |         |         |  |   |             |            

During the years ended June 30, 2000 and 1999, the gross
realized gains on sales of available-for-sale securities totaled
$587,011 and $22,800, respectively, and the gross realized losses
 totaled $103,973 and $37,458, respectively. The net adjustment
to unrealized gains (losses) during fiscal 2000 and fiscal
1999 on available-for-sale securities included in
stockholders equity totaled $790,228 and $(371,619),
respectively. The amortized cost and estimated fair value of the
available-for-sale securities at June 30, 2000, by maturity,
 are shown below. Expected maturities will differ from
contractual maturities because the issuers of the securities may
have the right to prepay obligations without prepayment
penalties, and the Company views its available-for-sale
securities as available for current operations.

|                   |                                      |               |             |            |  |   |             |            | 
|------------------ | ------------------------------------ | ------------- | ----------- | ---------- |  | - | ----------- | ---------- | 
|                   |                                      |              
|                   |                                      | June 30, 2000
|                   |                                      |              
|                   |                                      |               |             | Estimated 
|                   |                                      | Cost          |             | Fair Value
|                   |                                      |               |             |           
|Available-for-sale |                                      |               |             |            |  |   |             |           
|                  
|                  
|                  
|                  
|                   | Due in one year or less              |               | $           | 85,949,440 |  |   | $           | 86,743,923 | 
|                  
|                  
|                  
|                  
|                   | Due after one year through two years |               |             | 46,744,500 |  |   |             | 46,722,686 | 
|                  
|                  
|                  
|                  
|                   | Due after two years                  |               |             |           |  |   |             |           | 
|                   |                                      |               |             |            |  |   |             |           
|                   |                                      | $             | 132,693,940 |            |  | $ | 133,466,609 |           
|                   |                                      |               |             |            |  |   |             |           

F-13



---



NOTE 5.  DEBT

The Company has a revolving line of credit facility of up to
$25.0 million from Norwest Bank Arizona, N.A. The facility may be
 drawn upon by the Company, at its discretion, and is
collateralized by principal assets of the Company. The
outstanding balance of the credit facility bears interest at a
floating rate of 150 basis points in excess of the 30-day London
Interbank Offered Rate and expires in November 2000. The
agreement requires the Company to comply with certain covenants,
including covenants relating to the Companys financial
condition and results of operation. The Company has not drawn on
this credit facility.

NOTE 6.  COMMITMENTS AND CONTINGENCIES

Occupancy Arrangements

The Company presently occupies approximately 49,000 square feet
of office space, at an average annual expense of $1,346,000,
under a lease agreement that expires in February 2010. The
lease contains certain rent escalation clauses and, upon
expiration, can be renewed for two additional periods of five
years each. Rent expense was approximately $1,024,500, $564,000
and $350,000 in fiscal 2000, 1999 and 1998, respectively. The
Company relocated to its present office space in Scottsdale,
Arizona, in February 2000. At June 30, 2000,
approximate future lease payments under the operating lease are
as follows:

|                     |  |   |            | 
|-------------------- |  | - | ---------- | 
|Year Ending June 30, |  |  
|                     |  |  
|2001                 |  | $ | 1,253,700  | 
|                    
|                    
|                    
|                    
|2002                 |  |   | 1,253,700  | 
|                    
|                    
|                    
|                    
|2003                 |  |   | 1,285,100  | 
|                    
|                    
|                    
|                    
|2004                 |  |   | 1,328,900  | 
|                    
|                    
|                    
|                    
|2005                 |  |   | 1,362,400  | 
|                    
|                    
|                    
|                    
|Thereafter           |  |   | 6,458,800  | 
|                     |  |   |            | 
|                     |  | $ | 12,942,600 | 
|                     |  |   |            | 

Medicis Canada, Inc., a wholly owned subsidiary, presently leases
 approximately 7,500 square feet of office and warehouse space in
 St-Laurent, Quebec, Canada, under a lease agreement that expires
 in April 2001.

Research and Development and Consulting Contracts

The Company has, in the past, and may, in the future, enter into
agreements with various research organizations and individuals
under which the Company acquires certain patent and marketing
rights for therapeutics developed under such agreements in
exchange for providing funding for collaborative research. It is
also anticipated that, before any commercial marketing can be
commenced, the Company will be required to secure certain
regulatory approvals on the technological processes involved.

The Company has various consulting agreements with certain
scientists in exchange for the assignment of certain rights and
consulting services. In addition, the Company has granted options
 to purchase shares of Class A Common Stock that are
included in the stock option plan described in Note 9. These
 options vest annually over the commitment periods. At
June 30, 2000, the Company had approximately $867,300 of
commitments (solely attributable to the Chairman of the Central
Research Committee of the Company) payable over the remaining
five years under an agreement that is cancelable by either party
under certain conditions.

Licensing, Marketing and Manufacturing Agreements

The Company has entered into licensing and marketing agreements
under which it has obtained rights to market certain existing and
 future pharmaceutical products. Generally, the terms of such
agreements vary, but range from 10 to 20 years from the date
 of the first sale of the related product or until the expiration
 of the patent applicable to the product. The agreements provide
for varying royalties with certain stated minimum annual amounts,
 which vary by

F-14



---



agreement from $35,000 to $50,000. Total minimum royalties
required to be paid on products currently being sold are
approximately $85,000 per year.

In July 1997, the Company entered into a joint product
development and distribution agreement with an unrelated third
party whereby the Company will pay certain costs with respect to
certain product approvals estimated to be approximately $1.0
million.

The Company purchases its inventory from third party
manufacturers, many of whom are the sole source of products for
the Company. The failure of such manufacturers to provide an
uninterrupted supply of products could adversely impact the
Companys ability to sell such products.

Other

The Company and certain of its subsidiaries are parties to other
actions and proceedings incident to their business. Liability in
the event of final adverse determinations in any of these matters
 is either covered by insurance and/or established reserves, or,
in the current opinion of management, after consultation with
counsel, should not, in the aggregate, have a material adverse
effect on the consolidated financial condition or results of
operations of the Company.

NOTE 7.  INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
 for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities are as
follows:

|                                  |                                                              |          |           |           |   |         |            |            |   |   |           |           |  |   |            |            |  
|--------------------------------- | ------------------------------------------------------------ | -------- | --------- | --------- | - | ------- | ---------- | ---------- | - | - | --------- | --------- |  | - | ---------- | ---------- | -
|                                  |                                                              |         
|                                  |                                                              | June 30,
|                                  |                                                              |         
|                                  |                                                              |          |           |          
|                                  |                                                              | 2000     |           | 1999     
|                                  |                                                              |          |           |          
|                                  |                                                              | Current  |           | Long-term |   | Current |            | Long-term 
|                                  |                                                              |          |           |           |   |         |            |           
|Deferred tax assets:              |                                                              |          |           |           |   |         |            |            |   |   |           |           |  |   |            |           
|                                 
|                                 
|                                 
|                                 
|                                  | Net operating loss carry forwards                            |          | $         |          |   |         | $          | 256,000    |   |   | $         |          |  |   | $          | 416,000    |  
|                                 
|                                 
|                                 
|                                 
|                                  | Reserves and liabilities                                     |          |           | 3,642,000 |   |         |            |           |   |   |           | 4,525,000 |  |   |            |           |  
|                                 
|                                 
|                                 
|                                 
|                                  | Unrealized gains (losses) on securities                      |          |           | (276,000  | ) |         |            |           |   |   |           | 172,000   |  |   |            |           |  
|                                 
|                                 
|                                 
|                                 
|                                  | Research and development credits                             |          |           |          |   |         |            |           |   |   |           |          |  |   |            | 94,000     |  
|                                  |                                                              |          |           |           |   |         |            |            |   |   |           |           |  |   |            |           
|                                  |                                                              |          | 3,366,000 |           |   |         | 256,000    |            |   |   | 4,697,000 |           |  |   | 510,000    |           
|                                 
|                                 
|                                 
|                                 
|                                  | Excess of net book value over tax basis of intangible assets |          |           |          |   |         |            | (4,256,000 | ) |   |           |          |  |   |            | (2,445,000 | )
|                                  |                                                              |          |           |           |   |         |            |            |   |   |           |           |  |   |            |           
|Deferred tax assets (liabilities) |                                                              | $        | 3,366,000 |           |   | $       | (4,000,000 | )          |   | $ | 4,697,000 |           |  | $ | (1,935,000 | )         
|                                  |                                                              |          |           |           |   |         |            |            |   |   |           |           |  |   |            |           

During fiscal 2000, the Company recorded $448,000 of deferred
taxes relating to unrealized gains on available-for-sale
securities presented in other comprehensive income in
stockholders equity. During fiscal 1999, the Company
recorded $172,000 of deferred taxes relating to unrealized losses
 on available-for-sale securities.

During fiscal 1998, the Company acquired all of the outstanding
stock of GenDerm in a taxable stock acquisition. As a result of
the GenDerm acquisition, net deferred tax liabilities and current
 taxes payable were recorded. The deferred tax liability related
to acquired intangible assets that have no tax basis. The
deferred tax assets acquired related to reserves, acquired net
operating loss carry forwards, research and development credits,
and other tax credits. All of the net operating losses and tax
credits acquired in the GenDerm acquisition are limited for tax
purposes under both the separate return limitation year rules and
 Internal Revenue Code sections 382 and 383, which limit the
 annual utilization of net operating losses and tax credits.

At June 30, 2000, the Company had net operating loss carry
forwards for federal income tax purposes of approximately
$680,000. All of the net operating loss carry forwards are
attributable to the Companys acquisition of GenDerm. As
such, they are limited for tax purposes under both the separate
return limitation year rules and Internal Revenue Code
sections 382 and 383, which limit the annual utilization of
net operating losses.

F-15



---



During fiscal 2000, 1999 and 1998, the Company made tax payments
of $14,180,000, $19,837,000 and $1,874,000, respectively.

Components of the provision for income taxes are as follows:

|         |         |          |            |            |            |      |            |            |            |  |           |           |            | 
|-------- | ------- | -------- | ---------- | ---------- | ---------- | ---- | ---------- | ---------- | ---------- |  | --------- | --------- | ---------- | 
|         |         |         
|         |         | June 30,
|         |         |         
|         |         | 2000     |            | 1999       |            | 1998
|         |         |          |            |            |            |     
|Current  |         |          |            |            |            |      |            |            |            |  |           |          
|        
|        
|        
|        
|         | Federal |          | $          | 19,849,000 |            |      | $          | 30,561,000 |            |  | $         | 3,222,000 |           
|        
|        
|        
|        
|         | State   |          |            | 1,564,000  |            |      |            | 3,415,000  |            |  |           | 1,570,000 |           
|        
|        
|        
|        
|         | Foreign |          |            | 27,000     |            |      |            | 19,000     |            |  |           |          |           
|         |         |          |            |            |            |      |            |            |            |  |           |          
|         |         |          | 21,440,000 |            |            |      | 33,995,000 |            |            |  | 4,792,000 |          
|         |         |          |            |            |            |      |            |            |            |  |           |          
|Deferred |         |          |            |            |            |      |            |            |            |  |           |          
|        
|        
|        
|        
|         | Federal |          |            | 2,768,000  |            |      |            | (9,048,000 | )          |  |           | 8,644,000 |           
|        
|        
|        
|        
|         | State   |          |            | 180,000    |            |      |            | (744,000   | )          |  |           | 988,000   |           
|         |         |          |            |            |            |      |            |            |            |  |           |          
|         |         |          | 2,948,000  |            |            |      | (9,792,000 | )          |            |  | 9,632,000 |          
|         |         |          |            |            |            |      |            |            |            |  |           |          
|         |         | Total    |            | $          | 24,388,000 |      |            | $          | 24,203,000 |  |           | $         | 14,424,000 | 
|         |         |          |            |            |            |      |            |            |            |  |           |          

Income tax expense for the three years ended June 30, 2000,
1999 and 1998 differs from the amount computed, applying the
federal statutory rates as follows:

|                                       |  |          |      |      |  |      |      |   |  |  |       |  
|-------------------------------------- |  | -------- | ---- | ---- |  | ---- | ---- | - |  |  | ----- | -
|                                       |  |         
|                                       |  | June 30,
|                                       |  |         
|                                       |  | 2000     |      | 1999 |  | 1998
|                                       |  |          |      |      |  |     
|Statutory federal income tax rate      |  |          | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0  | %
|                                      
|                                      
|                                      
|                                      
|State tax rate, net of federal benefit |  |          | 1.7  |      |  |      | 2.5  |   |  |  | 4.0   |  
|                                      
|                                      
|                                      
|                                      
|Change in valuation allowance          |  |          |     |      |  |      |     |   |  |  |      |  
|                                      
|                                      
|                                      
|                                      
|Tax-exempt interest                    |  |          | (2.3 | )    |  |      | (2.0 | ) |  |  | (14.4 | )
|                                      
|                                      
|                                      
|                                      
|In-process research and development    |  |          |     |      |  |      |     |   |  |  | 684.5 |  
|                                      
|                                      
|                                      
|                                      
|Other                                  |  |          | 1.8  |      |  |      | 1.4  |   |  |  | 6.0   |  
|                                       |  |          |      |      |  |      |      |   |  |  |       |  
|                                       |  |          | 36.2 | %    |  |      | 36.9 | % |  |  | 715.1 | %
|                                       |  |          |      |      |  |      |      |   |  |  |       |  

NOTE 8.  STOCK TRANSACTIONS

Class A Common Stock has one vote per share, and
Class B Common Stock has 10 votes per share. Each share of
Class B Common Stock may be converted into one share of
Class A Common Stock at the option of the holder or, in some
 circumstances, may automatically be converted upon a vote of the
 Board of Directors and the majority of the Class B Common
Stock shareholders.

On January 12, 1999, the Board of Directors declared a
3-for-2 stock split effected in the form of a 50% stock dividend
payable February 16, 1999, to common shareholders of record
at the close of business on January 29, 1999. Per share
amounts and the weighted average number of shares outstanding
have been retroactively revised for all periods presented.

In February 1998, the Company completed a public offering
for 6,000,000 primary shares of the Companys Class A
Common Stock at a price of $32.17 per share. The underwriters
also exercised the over-allotment option of 510,000 primary
shares at a price of $32.17 per share. Gross proceeds from the
offering before related expenses totaled $209,405,000.

F-16



---



NOTE 9.  STOCK OPTION PLANS

The Company has six Stock Option Plans (the 1998, 1996, 1995,
1992, 1990 and 1988 Plans or, collectively, the
Plans). As of June 30, 2000, the 1998, 1996,
1995, 1992, 1990 and 1988 Plans had the following options
outstanding: 1,345,700; 2,422,517; 351,858; 4,580; 43,800; and
36,270, respectively. The Plans allow the Company to designate
options as qualified incentive or non-qualified on an as-needed
basis. Qualified and non-qualified stock options vest over a
period determined at the time the options are granted, ranging
from one to five years. Options are granted at the fair market
value on the grant date. Options outstanding at June 30,
2000, vary in price from $1.57 to $57.19, with a weighted average
 of $23.45 outlined in the following chart:

|                |  |             |           |             |  |          |      |             |  |          |       |  |  |  |         |  |  |   |       | 
|--------------- |  | ----------- | --------- | ----------- |  | -------- | ---- | ----------- |  | -------- | ----- |  |  |  | ------- |  |  | - | ----- | 
|                |  |             |           | Weighted    |  | Weighted |      |             |  | Weighted
|                |  |             |           | Average     |  | Average  |      |             |  | Average 
|Range of        |  | Number      |           | Contractual |  | Exercise |      | Number      |  | Exercise
|Exercise Prices |  | Outstanding |           | Life        |  | Price    |      | Exercisable |  | Price   
|                |  |             |           |             |  |          |      |             |  |         
|$ 1.57-$12.11   |  |             | 400,987   |             |  |          | 4.77 |             |  | $        | 9.56  |  |  |  | 214,094 |  |  | $ | 8.05  | 
|$15.39-$26.42   |  |             | 2,778,655 |             |  |          | 8.64 |             |  | $        | 22.63 |  |  |  | 237,505 |  |  | $ | 22.82 | 
|$26.44-$37.94   |  |             | 896,835   |             |  |          | 7.63 |             |  | $        | 29.37 |  |  |  | 271,807 |  |  | $ | 29.44 | 
|$38.13-$57.19   |  |             | 128,248   |             |  |          | 9.02 |             |  | $        | 43.05 |  |  |  | 10,928  |  |  | $ | 40.40 | 

A summary of stock options granted within the Plans and related
information for the years ended June 30, 2000, 1999 and 1998
 is as follows:

|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 
|------------------------ |  | --------- | --------- | ------------- |  | ----- | --------- | -------- |  |  | --------- | - |  | - | ----- | 
|                         |  |           |           |               |  |       |           | Weighted
|                         |  |           |           |               |  |       |           | Average 
|                         |  | Qualified |           | Non-Qualified |  | Total |           | Price   
|                         |  |           |           |               |  |       |           |         
|Balance at June 30, 1997 |  |           | 868,948   |               |  |       | 942,640   |          |  |  | 1,811,588 |   |  | $ | 6.79  | 
|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 
|Granted                  |  |           | 566,630   |               |  |       | 495,554   |          |  |  | 1,062,184 |   |  | $ | 29.18 | 
|                        
|                        
|                        
|                        
|Exercised                |  |           | (87,434   | )             |  |       | (145,880  | )        |  |  | (233,314  | ) |  | $ | 4.11  | 
|                        
|                        
|                        
|                        
|Terminated/expired       |  |           | (83,645   | )             |  |       | (2,781    | )        |  |  | (86,426   | ) |  | $ | 18.26 | 
|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 
|Balance at June 30, 1998 |  |           | 1,264,499 |               |  |       | 1,289,533 |          |  |  | 2,554,032 |   |  | $ | 15.70 | 
|                        
|                        
|                        
|                        
|Granted                  |  |           | 718,023   |               |  |       | 703,103   |          |  |  | 1,421,126 |   |  | $ | 25.47 | 
|                        
|                        
|                        
|                        
|Exercised                |  |           | (296,708  | )             |  |       | (222,224  | )        |  |  | (518,932  | ) |  | $ | 7.36  | 
|                        
|                        
|                        
|                        
|Terminated/expired       |  |           | (191,854  | )             |  |       | (15,525   | )        |  |  | (207,379  | ) |  | $ | 25.63 | 
|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 
|Balance at June 30, 1999 |  |           | 1,493,960 |               |  |       | 1,754,887 |          |  |  | 3,248,847 |   |  | $ | 20.76 | 
|                        
|                        
|                        
|                        
|Granted                  |  |           | 906,337   |               |  |       | 1,084,163 |          |  |  | 1,990,500 |   |  | $ | 23.31 | 
|                        
|                        
|                        
|                        
|Exercised                |  |           | (366,789  | )             |  |       | (461,152  | )        |  |  | (827,941  | ) |  | $ | 12.27 | 
|                        
|                        
|                        
|                        
|Terminated/expired       |  |           | (157,839  | )             |  |       | (48,842   | )        |  |  | (206,681  | ) |  | $ | 24.75 | 
|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 
|Balance at June 30, 2000 |  |           | 1,875,669 |               |  |       | 2,329,056 |          |  |  | 4,204,725 |   |  | $ | 23.45 | 
|                         |  |           |           |               |  |       |           |          |  |  |           |   |  |   |       | 

Options exercisable under the Plans at June 30, 2000 were
734,334 with an average exercisable price of $21.23. During
fiscal 2000 and 1999, 1,875 and 7,500 non-qualified stock options
 not subject to the Plans were exercised at a price of $6.47.

The Company elected the adoption of the disclosure-only
provisions of SFAS No. 123 in fiscal 1998. In accordance
with the provisions of SFAS No. 123, the Company applies APB
 No. 25 and related interpretations in accounting for option
 grants to employees under its stock option plans. If the Company
 had elected to recognize

F-17



---



compensation costs based upon the fair value of the options
granted at grant date as prescribed by SFAS No. 123,
operating results would have changed to the pro forma amounts
indicated in the table below:

|                                |                              |      |            |      |  |      |            |      |  |   |             |       |  
|------------------------------- | ---------------------------- | ---- | ---------- | ---- |  | ---- | ---------- | ---- |  | - | ----------- | ----- | -
|                                |                              | 2000 |            | 1999 |  | 1998
|                                |                              |      |            |      |  |     
|Net income (loss)  as reported |                              | $    | 42,994,182 |      |  | $    | 41,437,226 |      |  | $ | (12,407,176 | )    
|                               
|                               
|                               
|                               
|Net income (loss)  pro forma   |                              | $    | 35,641,156 |      |  | $    | 36,930,216 |      |  | $ | (15,346,543 | )    
|Diluted earnings (loss)         |                              |      |            |      |  |      |            |      |  |   |             |      
|                               
|                               
|                               
|                               
|                                | Per common share as reported |      | $          | 1.41 |  |      | $          | 1.41 |  |   | $           | (0.51 | )
|                               
|                               
|                               
|                               
|                                | Per common share pro forma   |      | $          | 1.17 |  |      | $          | 1.25 |  |   | $           | (0.64 | )

The weighted average fair value of options granted during fiscal
2000, 1999 and 1998 was $11.95, $12.03 and $16.27, respectively.

Pro forma results disclosed are based upon the provisions of SFAS
 No. 123 using the Black-Scholes option pricing model and
are not likely to be representative of the effect on pro forma
net income for future years. The Black-Scholes option pricing
model was developed for use in estimating the fair value of
traded options, which, unlike options granted by the Company,
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price
volatility. Because the Companys stock options have
characteristics significantly different from options traded on an
 exchange, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
managements opinion, the existing models do not necessarily
 provide a reliable single measure of the fair value of its stock
 options.

The fair value of these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following assumptions:

|                                |  |      |         |      |  |      |         |   |  |  |         |  
|------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                |  | 2000 |         | 1999 |  | 1998
|                                |  |      |         |      |  |     
|Expected dividend yield         |  |      | 0.0     | %    |  |      | 0.0     | % |  |  | 0.0     | %
|                               
|                               
|                               
|                               
|Expected stock price volatility |  |      | 0.5     |      |  |      | 0.5     |   |  |  | 0.5     |  
|                               
|                               
|                               
|                               
|Risk-free interest rate         |  |      | 5.5     | %    |  |      | 5.5     | % |  |  | 5.5     | %
|                               
|                               
|                               
|                               
|Expected life options           |  |      | 5 Years |      |  |      | 5 Years |   |  |  | 5 Years |  

NOTE 10.  EARNINGS PER SHARE

The following table sets forth the computation of basic and
diluted earnings per share:

|                                                           |                                |          |            |            |  |      |            |            |  |   |            |             |  
|---------------------------------------------------------- | ------------------------------ | -------- | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | ---------- | ----------- | -
|                                                           |                                |         
|                                                           |                                | June 30,
|                                                           |                                |         
|                                                           |                                | 2000     |            | 1999       |  | 1998
|                                                           |                                |          |            |            |  |     
|Numerator                                                  |                                |          |            |            |  |      |            |            |  |   |            |            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Net income (loss)              |          | $          | 42,994,182 |  |      | $          | 41,437,226 |  |   | $          | (12,407,176 | )
|                                                           |                                |          |            |            |  |      |            |            |  |   |            |            
|Denominator for basic net income (loss) per common share   |                                |          | 29,028,896 |            |  |      | 28,413,608 |            |  |   | 24,101,658 |            
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Effect of dilutive securities: |          |            |            |  |      |            |            |  |   |            |             |  
|                                                          
|                                                          
|                                                          
|                                                          
|                                                           | Stock options                  |          |            | 1,469,880  |  |      |            | 1,048,703  |  |   |            |            |  
|                                                           |                                |          |            |            |  |      |            |            |  |   |            |            
|Denominator for diluted net income (loss) per common share |                                |          | 30,498,776 |            |  |      | 29,462,311 |            |  |   | 24,101,658 |            
|                                                           |                                |          |            |            |  |      |            |            |  |   |            |            
|Basic net income (loss) per common share                   |                                | $        | 1.48       |            |  | $    | 1.46       |            |  | $ | (0.51      | )          
|                                                           |                                |          |            |            |  |      |            |            |  |   |            |            
|Diluted net income (loss) per common share                 |                                | $        | 1.41       |            |  | $    | 1.41       |            |  | $ | (0.51      | )          
|                                                           |                                |          |            |            |  |      |            |            |  |   |            |            

F-18



---



Options that are anti-dilutive because the exercise price was
greater than the average market price of the common shares are
not included in the computation of diluted earnings per share.
There were no dilutive securities in 1998 given that the Company
had a net loss.

NOTE 11.  SIGNIFICANT CUSTOMERS

For fiscal 2000, four customers accounted for approximately
21.0%, 18.1%, 11.3% and 10.2% of sales. For fiscal 1999, two
customers accounted for approximately 18.0% and 14.1% of sales.
For fiscal 1998, three customers accounted for approximately
16.9%, 13.2% and 12.6% of sales.

NOTE 12.  FINANCIAL INSTRUMENTS 
CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of
cash, cash equivalents, short-term investments and accounts
receivable.

The Company maintains cash, cash equivalents and short-term
investments primarily with two financial institutions that invest
 funds in short-term, interest-bearing, investment-grade,
marketable securities. The Company performs periodic evaluations
of the relative credit standing of these financial institutions.

At June 30, 2000 and 1999, three customers comprised
approximately 57.8% and 58.1%, respectively, of accounts
receivable. The Company does not require collateral from its
customers, but performs periodic credit evaluations of its
customers financial condition. Management does not believe
a significant credit risk existed at June 30, 2000.

NOTE 13.  DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan (the
Contribution Plan) that is intended to qualify under
Section 401(k) of the Internal Revenue Code. All employees,
except those who have not attained the age of 21, are eligible to
 participate in the Contribution Plan. Participants may
contribute, through payroll deductions, up to 20.0% of their
basic compensation, not to exceed Internal Revenue Code
limitations. Although the Contribution Plan provides for profit
sharing contributions by the Company, the Company has not made
any such contributions since its inception.

F-19



---



NOTE 14.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The table below lists the quarterly financial information for
fiscal 2000 and 1999. All figures are in thousands, except
per share data, and certain amounts do not total the annual
amounts due to rounding.

|                                    |  |                          |        |                   |  |                |        |               |  |   |        |  |  |   |        | 
|----------------------------------- |  | ------------------------ | ------ | ----------------- |  | -------------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | 
|                                    |  |                         
|                                    |  | Year Ended June 30, 2000
|                                    |  | (For the Quarters Ended)
|                                    |  |                         
|                                    |  | September 30, 1999       |        | December 31, 1999 |  | March 31, 2000 |        | June 30, 2000
|                                    |  |                          |        |                   |  |                |        |              
|Net revenues                        |  | $                        | 31,644 |                   |  | $              | 33,379 |               |  | $ | 35,049 |  |  | $ | 39,027 | 
|                                   
|                                   
|                                   
|                                   
|Gross profit                        |  |                          | 25,858 |                   |  |                | 26,940 |               |  |   | 28,726 |  |  |   | 31,664 | 
|                                   
|                                   
|                                   
|                                   
|Net income                          |  |                          | 9,640  |                   |  |                | 10,481 |               |  |   | 11,063 |  |  |   | 11,810 | 
|                                   
|                                   
|                                   
|                                   
|Basic net income per common share   |  | $                        | 0.34   |                   |  | $              | 0.36   |               |  | $ | 0.38   |  |  | $ | 0.40   | 
|                                   
|                                   
|                                   
|                                   
|Diluted net income per common share |  | $                        | 0.33   |                   |  | $              | 0.35   |               |  | $ | 0.36   |  |  | $ | 0.38   | 

|                                    |  |                          |        |                   |  |                |        |               |  |   |        |  |  |   |        | 
|----------------------------------- |  | ------------------------ | ------ | ----------------- |  | -------------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | 
|                                    |  |                         
|                                    |  | Year Ended June 30, 1999
|                                    |  | (For the Quarters Ended)
|                                    |  |                         
|                                    |  | September 30, 1999       |        | December 31, 1999 |  | March 31, 2000 |        | June 30, 2000
|                                    |  |                          |        |                   |  |                |        |              
|Net revenues                        |  | $                        | 24,780 |                   |  | $              | 28,016 |               |  | $ | 30,183 |  |  | $ | 33,892 | 
|                                   
|                                   
|                                   
|                                   
|Gross profit                        |  |                          | 20,073 |                   |  |                | 22,700 |               |  |   | 25,158 |  |  |   | 27,305 | 
|                                   
|                                   
|                                   
|                                   
|Net income                          |  |                          | 8,089  |                   |  |                | 3,181  |               |  |   | 13,975 |  |  |   | 16,192 | 
|                                   
|                                   
|                                   
|                                   
|Basic net income per common share   |  | $                        | 0.29   |                   |  | $              | 0.11   |               |  | $ | 0.49   |  |  | $ | 0.57   | 
|                                   
|                                   
|                                   
|                                   
|Diluted net income per common share |  | $                        | 0.28   |                   |  | $              | 0.11   |               |  | $ | 0.47   |  |  | $ | 0.55   | 

The quarterly net income per share data disclosed above does not
agree with the amounts reported in the Companys Quarterly
Reports on Form 10-Q filed with the Securities and Exchange
Commission, as the amounts have been revised to reflect the stock
 splits discussed in Note 8 and the effect of SFAS
No. 128 related to basic and diluted earnings per share.
Gross profit does not include amortization of the related
intangibles.

NOTE 15.  SUBSEQUENT EVENT

On August 15, 2000, the Company entered into a multi-year
development, commercialization and license agreement with Corixa
Corporation (Corixa), covering Corixas novel
psoriasis immunotherapeutic product, PVAC treatment. The
agreement provides Medicis with exclusive rights to PVAC
treatment in the United States and Canada. Corixa will be
responsible for development and manufacturing, and Medicis will
be responsible for commercialization and distribution.

Under the terms of the agreement, Medicis will pay Corixa license
 fees, research funding and milestone payments of up to $107
million. Upon effectiveness, Corixa will receive a non-refundable
 payment of $17 million with additional potential development
milestone payments of $35 million, and commercialization and
cumulative net sales threshold milestone payments of $55 million.
 Additionally, upon commercial sale of the product, Medicis will
purchase inventory from Corixa and pay a royalty on net sales of
the product. The effectiveness of the collaboration agreement
between Corixa and Medicis is subject to certain customary
conditions, including any required approval of the transaction by
 applicable government agencies.

F-20



---



SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

|                         |                               |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |           | 
|------------------------ | ----------------------------- | ---------- |  | ---------- | --------- | ---------- |  | ---------- | ------- | ----------- |  | - | --------- | --- |  | - | - |  |  | - | --------- | 
|                         |                               | Balance at |  | Charged to |           | Charged to |  |            |         |            
|                         |                               | beginning  |  | costs and  |           | other      |  |            |         | Balance at 
|Description              |                               | of year    |  | expenses   |           | accounts   |  | Deductions |         | end of year
|                         |                               |            |  |            |           |            |  |            |         |            
|Year Ended June 30, 2000 |                               |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         |                               | Allowances |  | $          | 3,815,000 |            |  | $          | 375,000 |             |  | $ |          |     |  | $ |  |  |  | $ | 4,190,000 | 
|Year Ended June 30, 1999 |                               |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         |                               | Allowances |  |            | 2,826,000 |            |  |            | 989,000 |             |  |   |          |     |  |   |  |  |  |   | 3,815,000 | 
|Year Ended June 30, 1998 |                               |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |  
|                        
|                        
|                        
|                        
|                         | Deducted from Asset Accounts: |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         | Accounts Receivable:          |            |  |            |           |            |  |            |         |             |  |   |           |     |  |   |   |  |  |   |          
|                        
|                        
|                        
|                        
|                         |                               | Allowances |  |            | 1,150,000 |            |  |            | 460,000 |             |  |   | 1,216,000 | (1) |  |   |  |  |  |   | 2,826,000 | 




|    |                                             
|--- | --------------------------------------------
|(1) | Allowance related to acquisition of GenDerm.

S-1



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EXHIBIT INDEX

|            |          |  |  |             |  |                                                                                                                                                                                                                                        
|----------- | -------- |  |  | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 2.1      |  |  |            |  | Agreement of Merger by and between Medicis Pharmaceutical
	Corporation, a Delaware corporation, Medicis Acquisition
	Corporation, a Delaware corporation, and GenDerm Corporation, a
	Delaware corporation, dated November 28, 1997(13)
|            | 3.1      |  |  |            |  | Certificate of Incorporation of the Company, as amended(6)                                                                                                                                                                             
|            | 3.3(a)   |  |  |            |  | Amended and Restated By-Laws of the Company(15)                                                                                                                                                                                        
|            | 4.1      |  |  |            |  | Rights Agreement, dated August 17, 1995, between the Company
	 and American Stock Transfer & Trust Company, as Rights
	Agent(6)                                                                                                        
|            | 4.1(b)   |  |  |            |  | Amendment No. 2 to Rights Agreement, dated March 17,
	1997, between the Company and Norwest Bank Minnesota, N.A.(11)                                                                                                                   
|            | 4.3      |  |  |            |  | Form of specimen certificate representing Class A Common
	Stock(1)                                                                                                                                                                     
|            | 10.8     |  |  |            |  | Medicis Pharmaceutical Corporation 1995 Stock Option Plan
	(incorporated by reference to Exhibit C to the definitive
	Proxy Statement for the 1995 Annual Meeting of Shareholders
	previously filed with the SEC, File No. 0-18443)    
|            | 10.9     |  |  |            |  | Employment Agreement between the Company and Jonah Shacknai,
	dated July 24, 1996(10)                                                                                                                                                  
|            | 10.10    |  |  |            |  | Medicis Pharmaceutical Corporation 1988 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.18    |  |  |            |  | Medicis Pharmaceutical Corporation 1990 Stock Option Plan, as
	amended(2)                                                                                                                                                              
|            | 10.58    |  |  |            |  | Medicis Pharmaceutical Corporation 1992 Stock Option Plan(4)                                                                                                                                                                           
|            | 10.59    |  |  |            |  | Supply Agreement, dated October 21, 1992, between Schein and
	 the Company(3)                                                                                                                                                          
|            | 10.70    |  |  |            |  | Amendment to Manufacturing and Supply Agreement, dated
	March 2, 1993, between Schein and the Company(5)                                                                                                                               
|            | 10.72(a) |  |  |            |  | Credit and Security Agreement, dated August 3, 1995, between
	 the Company and Norwest Business Credit, Inc.(7)                                                                                                                        
|            | 10.72(b) |  |  |            |  | First Amendment to Credit and Security Agreement, dated May 
	 29, 1996, between the Company and Norwest Bank Arizona, N.A.(10)                                                                                                        
|            | 10.72(c) |  |  |            |  | Second Amendment to Credit and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A. as successor-in-interest to Norwest Business
	Credit, Inc.(12)                                 
|            | 10.72(d) |  |  |            |  | Third Amendment to Credit and Security Agreement, dated
	November 22, 1998 by and between the Company and Norwest
	Bank Arizona, N.A., as successor-in-interest to Norwest Business
	Credit, Inc.(14)                                  
|            | 10.73(a) |  |  |            |  | Patent Collateral Assignment and Security Agreement, dated
	August 3, 1995 by the Company to Norwest Business Credit,
	Inc.(8)                                                                                                         
|            | 10.73(b) |  |  |            |  | First Amendment to Patent Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(10)                                                                                         
|            | 10.73(c) |  |  |            |  | Amended and Restated Patent Collateral Assignment and Security
	Agreement, dated November 22, 1998, by the Company to
	Norwest Bank Arizona, N.A.(14)                                                                                  
|            | 10.74(a) |  |  |            |  | Trademark Collateral Assignment and Security Agreement, dated
	August 3, 1995, by the Company to Norwest Business Credit,
	Inc.(9)                                                                                                     
|            | 10.74(b) |  |  |            |  | First Amendment to Trademark Collateral Assignment and Security
	Agreement, dated May 29, 1996, by the Company to Norwest
	Bank Arizona, N.A.(10)                                                                                      
|            | 10.74(c) |  |  |            |  | Amended and Restated Trademark, Tradename, and Service Mark
	Collateral Assignment and Security Agreement, dated
	November 22, 1998, by the Company to Norwest Bank Arizona,
	N.A.(14)                                                 



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|            |          |  |  |             |  |                                                                                                                                                                                                  
|----------- | -------- |  |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |          |  |  | Description
|            |          |  |  |            
|            | 10.75    |  |  |            |  | Assignment and Assumption of Loan Documents, dated May 29,
	1996, from Norwest Business Credit, Inc., to and by Norwest Bank
	Arizona, N.A.(10)                                                  
|            | 10.76    |  |  |            |  | Multiple Advance Note, dated May 29, 1996, from the Company
	to Norwest Bank Arizona, N.A.(10)                                                                                                   
|            | 10.77    |  |  |            |  | Securities Account Pledge and Security Agreement, dated
	November 22, 1996, by and between the Company and Norwest
	Bank Arizona, N.A.(12)                                                       
|            | 10.77(a) |  |  |            |  | First Amendment to Securities Account Pledge and Security
	Agreement dated November 22, 1998, by and between the
	Company and Norwest Bank Arizona, N.A.(14)                                     
|            | 10.78    |  |  |            |  | Acknowledgment of Control of Pledged Securities Account, dated
	November 22, 1996, by and among Norwest Bank Arizona, N.A.
	and the Company and Norwest Bank Minnesota, N.A.(12)                 
|            | 10.78(a) |  |  |            |  | First Amendment to Acknowledgement of Control of Pledged
	Securities Account dated November 22, 1998, by and between
	the Company and Norwest Bank Arizona, N.A.(14)                             
|            | 10.89    |  |  |            |  | Asset Purchase Agreement dated November 15, 1998, by and
	among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMHB and Hoechst Marion Roussel,
	S.A.(14)     
|            | 10.90    |  |  |            |  | License and Option Agreement dated November 15, 1998, by and
	 among the Company and Hoechst Marion Roussel, Inc., Hoechst
	Marion Roussel Deutschland GMBH and Hoechst Marion Roussel,
	S.A.(14)
|            | 10.91    |  |  |            |  | Loprox Lotion Supply Agreement dated November 15, 1998, by
	and between the Company and Hoechst Marion Roussel, Inc.(14)                                                                         
|            | 10.92    |  |  |            |  | Supply Agreement dated November 15, 1998, by and between the
	 Company and Hoechst Marion Roussel Deutschland GMBH(14)                                                                           
|            | 10.93    |  |  |            |  | Asset Purchase Agreement effective January 31, 1999, between
	 the Company and Bioglan Pharma Plc(16)                                                                                            
|            | 10.94    |  |  |            |  | Stock Purchase Agreement by and among the Company, Ucyclyd
	Pharma, Inc. and Syed E. Abidi, William Brusilow, Susan E.
	Brusilow and Norbert L. Wiech, dated April 19, 1999(16)                  
|            | 10.95    |  |  |            |  | Asset Purchase Agreement by and between the Company and Bioglan
	Pharma Plc dated June 29, 1999(16)                                                                                              
|            | 10.96    |  |  |            |  | Asset Purchase Agreement by and among The Exorex Company, LLC,
	Bioglan Pharma Plc, the Company and IMX Pharmaceuticals, Inc.
	dated June 29, 1999(16)                                           
|            | 10.97    |  |  |            |  | Medicis Pharmaceutical Corporation Executive Retention Plan(16)                                                                                                                                  
|            | 10.98    |  |  |            |  | Asset Purchase Agreement between Warner Chilcott, plc and the
	Company, dated September 14, 1999(16)                                                                                             
|            | 21.1     |  |  |            |  | Subsidiaries(16)                                                                                                                                                                                 
|            | 23.1     |  |  |            |  | Consent of Ernst & Young LLP, Independent Auditors(17)                                                                                                                                           
|            | 24.1     |  |  |            |  | Power of Attorney(17) See signature page(s)                                                                                                                                                      
|            | 27.1     |  |  |            |  | Financial Data Schedule(17)                                                                                                                                                                      




|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the exhibit with the same number in
	the Registration Statement on Form S-1 of the Registrant,
	File No. 33-32918, filed with the SEC on January 16,
	1990                           
|   
|(2) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1992, as amended, File
	No. 0-18443, previously filed with the SEC



---





|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Incorporated by reference to the exhibit with the same number in
	Registration Statement on Form S-1 of the Company, File
	No.  33-54276, filed with the SEC on June 11, 1993                                                 
|   
|(4) | Incorporated by reference to Exhibit B to the Companys
	 definitive Proxy Statement for its 1992 Annual Meeting of
	Shareholders, File No. 0-18443, previously filed with the SEC                                            
|   
|(5) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1993, File No. 0-18443, filed with
	 the SEC on October 13, 1993              
|   
|(6) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1995, File No. 0-18443, previously
	 filed with the SEC (the 1994 Form 10-K)
|   
|(7) | Incorporated by reference to exhibit number 4.2 in the 1995
	Form 10-K                                                                                                                                                        
|   
|(8) | Incorporated by reference to exhibit number 4.4 in the 1995
	Form 10-K                                                                                                                                                        
|   
|(9) | Incorporated by reference to exhibit number 4.5 in the 1995
	Form 10-K                                                                                                                                                        



|     |                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1996, File No. 0-18443, previously
	 filed with the SEC 
|    
|(11) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended March 31, 1997, File No. 0-18443,
	previously filed with the SEC   
|    
|(12) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1996, File No. 0-18443,
	previously filed with the SEC
|    
|(13) | Incorporated by reference to the exhibit with the same number in
	the Companys Current Report on Form 8-K filed with the
	 SEC on December 15, 1997                                                    
|    
|(14) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the
	quarter ended December 31, 1998, File No. 0-18443,
	previously filed with the SEC
|    
|(15) | Incorporated by reference to the exhibit with the same number in
	the Companys Quarterly Report on Form 10-Q for the quarter
	ended March  31, 1999, File No. 0-18443, previously
	filed with the SEC  
|    
|(16) | Incorporated by reference to the exhibit with the same number in
	the Companys Annual Report on Form 10-K for the fiscal
	 year ended June 30, 1999, File No. 0-18443, previously
	 filed with the SEC 
|    
|(17) | Filed herewith                                                                                                                                                                                          



| |     |                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------
| | (b) | No reports on Form 8-K were filed with the SEC for the
	quarter ended June 30, 2000.                         
|
| | (c) | The exhibits to this Form 10-K follow the Companys
	Financial Statement Schedule included in this Form 10-K.
|
| | (d) | The Financial Statement Schedule to this Form 10-K appears
	on page S-1 of this Form 10-K.