10KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                   FORM 10-KSB

      (Mark One)

[x]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended December 31, 2003
                                   ------------------

[ ]      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 0-19879


                         BIOSPECIFICS TECHNOLOGIES CORP.
                         -------------------------------
                 (Name of small business issuer in its charter)

            Delaware                                        11-3054851
            --------                                        ----------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

  35 Wilbur Street, Lynbrook, New York                                11563
- --------------------------------------                             ------------
(Address of principal executive offices)                            (Zip Code)

Issuer's telephone number, including area code:  (516) 593-7000
                                                 ----------------

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

                          Common Stock, par value $.001
                          -----------------------------

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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  [ ]    No  [X]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         Issuer's revenues for its most recent fiscal year were approximately
$3,240,000. The aggregate market value of common voting stock held by
non-affiliates of the Issuer was $5,264,510 computed by reference to the last
sale price at which the stock was sold on November 1, 2004 as reported by the
OTC Pink Sheets. As of November 1, 2004, 5,326,341 shares of common stock were
outstanding.



                                     PART I

ITEM 1. BUSINESS OF BIOSPECIFICS

The entire discussion in this report, as well as any other management discussion
of the Company's goals and expectations, contains Forward-Looking statements
that are subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. The words believe, expect,
intend, anticipate, variations of such words and similar expressions identify
Forward-Looking statements, but their absence does not mean that the statement
is not Forward-Looking. These statements are not guaranties of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this Item 1
Business of BioSpecifics, including without limitation, Risk Factors, and Item 6
Management's Discussion and Analysis, as well as those discussed in any
documents incorporated by reference herein. Readers are cautioned not to place
undue reliance on these Forward-Looking statements, which speak only as of the
date of this report. BioSpecifics undertakes no obligation to update any
Forward-Looking statement to reflect new information, events or circumstances
after the date of this report or to reflect the occurrence of unanticipated
events. When used in this annual report, the terms BioSpecifics, Company, we,
our, ours and us refer to BioSpecifics Technologies Corp. and its consolidated
subsidiaries.

OVERVIEW

Biospecifics Technologies Corp., was incorporated in Delaware in 1990 Since that
time the Company and its subsidiaries have not entered into bankruptcy,
receivership, or any similar proceedings, and have not had any material
reclassifications, merger, consolidation or purchase or sale of a significant
amount of assets not in the ordinary course of business. We have been engaged in
the business of manufacturing and licensing for sale a fermentation derived
enzyme named Collagenase ABC (the "enzyme" or the "product"), approved by the
U.S. Food and Drug Administration ("FDA") for debriding chronic dermal ulcers
and severely burned areas. This product is by prescription only in the United
States and is applied topically. We are also developing additional products
derived from this enzyme for potential use as pharmaceuticals. On June 3, 2004
we signed a development and licensing agreement with Auxilium Pharmaceuticals,
Inc ("the Auxilium Agreement") that covers all potential uses of the enzyme in
an injectable form other than for wound healing (see subsequent events for more
detail).

We derive most of our net sales of the product, (historically, approximately
90%) and all royalty revenues, from one customer in the United States, Abbott
Laboratories and its subsidiaries ("Abbott") who, pursuant to an exclusive
licensing agreement (the "Agreement"), compounds the product into Collagenase
Santyl(R) Ointment ("Santyl(R)" or "ointment"), a topical prescription drug used
to treat dermal ulcers and burns. The royalty revenues from Abbott were earned
on North American sales of Santyl(R) to distributors by Smith & Nephew, Inc.
("S&N") through December 31, 2003. On June 30, 2003 a sub-license agreement
under which S&N marketed Santyl(R) ointment terminated. Effective January 1,
2004, the Ross Products Division of Abbott Laboratories Inc. assumed United
States marketing responsibility for Collagenase Santyl(R) Ointment. During 2003,
the Abbott Agreement automatically renewed for an additional 10-year period, to
August 2013. Collagenase Santyl(R) Ointment is sold primarily to long-term care
centers.

                                       2


In June 2004, we entered into a development and license agreement with Auxilium
Pharmaceuticals, Inc. ("the Auxilium Agreement"). Under the agreement, we have
granted Auxilium the rights to develop products containing our enzyme ("AA4500")
for the treatment of Peyronie's and Dupuytren's disease. We have granted
Auxilium the exclusive world-wide license to any products developed under the
agreement other than dermal formulations labeled for topcial administration. We
also granted Auxilium the option to develop and license the technology for use
in other indications other than dermal formulations labeled for topical
administration. The agreement extends, on a country-by-country and
product-by-product basis, for the longer of the patent life, the expiration of
any regulatory exclsivity period or 12 years. Auxilium may terminate the
agreement with 90 days written notice. Auxilium is obligated to pay all clinical
and regulatory development costs on an on-going basis, to purchase commercial
inventory from us and to pay royalties based on product sales. In addition,
Auxilium is obligated to make milestone payments for contract initiation,
receipt of technical data, manufacturing process development, the one-year
anniversary date, filing of regulatory applications and receipt of regulatory
approval.

In June 2004, we received an up-front payment under the agreement totalling
$2,500,000. In August 2004, we received an additional $2,500,000 for delivery of
all in-process research and development material product data relating to
Dupuytren's and Peyronie's disease. We may also receive up to $10,500,000 of
contingent milestone payments under this agreement if all existing conditions
are met. Additional milestone obligations may be due if Auxilium exercises an
option to develop and license our enzyme for additional medical indications.

Prior to the signing of the Auxilium Agreement, we funded operations by (1)
modification of the terms of two loans, principally, by deferring a balloon
payment of $364,000 due in November 2003 to November 2004; and deferring the
payment of $100,000 principal due on a promissory note from March 2004 to March
2005; (2) receiving a $250,000 advance of royalties from Abbott Laboratories,
our major customer, in January 2004 and a $500,000 royalty advance at the end of
March 2004, both of which are to be repaid from royalties to be earned from
distribution of Santyl(R) Ointment during 2004 (of which $94,000 and $130,000
were repaid from royalties earned during the respective quarters ended March 31,
2004 and June 30, 2004); (3) our chairman's deferred salary of $100,000 during
the three months ended June 2003 has been applied against the chairman note
receivable in March 2004 and (4) deferring or making partial payments to
creditors. Due to manufacturing problems encountered in 2003, we will be able to
supply Abbott with only limited quantities of our enzyme throughout 2004 and
will continue to incur significant operating losses exclusive of the income
received from the Auxilium Agreement. As a result of payments received under the
Auxilium Agreement, we generated positive cash flow during both the second and
third quarters of 2004.

In March 2003 we changed our fiscal year end from January 31 to December 31. Our
first fiscal year using this new basis is the twelve months ending December 31,
2003 similarly in this report we compare the twelve months ended December 31,
2003 ("calendar year 2003") to the twelve months ended January 31, 2003 ("fiscal
year 2003").
 The year ended January 31, 2003 is not materially different to the eleven month
period, therefore the eleven months ended December 31, 2002 is not presented..
The eleven months period ended December 31, 2003 is also presented.

                                       3



THE COMPANY'S PRODUCT AND MARKETS

Collagenase ABC
- ---------------

Our principal drug product, Collagenase ABC, is an enzyme that digests collagen,
the body's principal connective tissue. The drug is approved by the FDA for
topical enzymatic debridement of dermal ulcers (wounds), such as pressure ulcers
(also known as "bed sores") and second and third degree burns.

In general, necrotic (i.e., dead or devitalized) tissue must be debrided
(removed) from a dermal ulcer either surgically, by enzyme, or by autolysis (the
much slower natural process) before proper healing can take place. Necrotic
tissue is largely collagen and is anchored to dermal ulcers by strands of
collagen. The unique ability of collagenase to digest collagen in necrotic
tissue and thereby effect the debridement of a wound is an important part of the
healing process associated with dermal ulcers and helps provide a healthy base
for the growth of new tissue. Collagenase ABC does not attack collagen in
healthy tissue or in newly formed granulation tissue.

Manufacture, Sale and Distribution of Collagenase ABC
- -----------------------------------------------------

Our collagenase ABC enzyme powder is the active pharmaceutical ingredient of a
topical ointment, known as Collagenase Santyl(R) Ointment (Santyl(R)) in the
United States. We do not directly market the product to end-users. We
manufacture and supply the product in powder form, primarily to Abbott, and to a
lesser extent, pharmaceutical companies in Brazil and India, which compound the
product into ointment that is then marketed to end-users.

In 1999, as a result of inspectional observations made by the FDA, on Form 483,
of deficiencies in our compliance with FDA good manufacturing practices and
policies ("GMP") regulations at our Lynbrook and Curacao facilities, and at
Abbott Laboratories, (hereinafter referred to as "our Subcontractor"), the FDA
advised us in a letter (the "FDA letter") that it would revoke our license to
manufacture the enzyme and ointment unless we could immediately provide
satisfactory assurance to the FDA (including submitting a comprehensive plan of
corrective action) addressing the FDA's observations and demonstrate compliance
with the applicable GMP regulations. We submitted such a plan in 1999.

Pursuant to this plan, we voluntarily suspended manufacture of the product in
March 2000 to allow for major renovations at our manufacturing facilities in
Curacao and Lynbrook. Beginning March 2000, we supplied Abbott with the product
from inventory built up in anticipation of the upgrade. This built up inventory
was depleted in July 2002.

The FDA notified us on July 28, 2003 that our request to supplement our
biologics license for collagenase ABC was approved ("FDA approval"). The
supplement included major renovations to the manufacturing facility, utility
systems, and process equipment at our Curacao facility. The FDA notification
acknowledged our written commitments to provide additional information regarding
ongoing studies and when to submit this information to our biologics license for
review. As a result of the FDA approval, enzyme product manufactured at the
Curacao facility is now being distributed to Abbott. Regardless of this FDA
approval, the FDA letter will remain in effect until we demonstrate compliance
with the applicable federal standards and regulations, which we understand to be
two "satisfactory annual GMP inspections" of our Lynbrook and Curacao
manufacturing facilities. We believe that we have made progress in complying


                                       4


with the applicable federal standards and regulations, although there can be no
assurances as to when the FDA letter will be rescinded, if at all. During the
quarter ended June 30, 2004, the FDA completed an inspection of our Lynbrook
facility. We are hopeful that after the next FDA inspection is completed at our
Lynbrook facility, we will be eligible to have the FDA letter rescinded. In May
2004, the FDA inspected the facility of our Subcontractor. To the best of our
knowledge, the FDA has not commented on the inspection, nor is the FDA obligated
to do so. The FDA has not conducted an inspection of our Curacao facility since
July 2002.

Prior to the FDA approval, the renovated Curacao facility went into limited
production of quarantine inventory during the fiscal year ended January 31,
2002. However, FDA approval was required before Santyl(R) could be made from
inventory manufactured at the renovated Curacao facility. With FDA approval,
deliveries of finished inventory of the product manufactured at the renovated
Curacao facility were subsequently resumed. There have been no studies made to
determine how substantial the impact of prior manufacturing delays have been on
the market for Santyl(R) Ointment.

Abbott Agreement and Sublicense
- -------------------------------

In March 2001, Abbott Laboratories acquired Knoll Pharmaceutical Company ("KPC",
collectively, "Abbott"), our original licensee for product applications relating
to the treatment of skin ulcers and burns. Since 1972, we have sold Collagenase
ABC, our only commercial product to date, principally in the United States
through exclusive license agreements with Abbott, under which we supply Abbott
with the product, monitor the production of Santyl(R) by Abbott, and collect a
royalty on the distribution of Santyl(R) (the "Abbott Agreement" or the
"Agreement"). KPC marketed the ointment under its registered trademark,
Collagenase Santyl(R), in the United States from 1972 to January 2000, and in
Canada from 1994 to January 2000. Commencing February 2000, S&N began marketing
Collagenase Santyl(R) under a sublicensing agreement made with KPC, which Abbott
assumed. The January 2000 sub-license agreement under which S&N marketed
Santyl(R) ointment terminated on June 30, 2003 but S&N agreed to continue to
market Collagenase Santyl(R) through the end of 2003. The Ross Products Division
of Abbott Laboratories Inc. assumed United States marketing responsibility for
Collagenase Santyl(R) Ointment effective January 1, 2004. During calendar 2003,
the Abbott Agreement automatically renewed for an additional 10-year period, to
August 2013.

It is our belief that we will be able continue providing Abbott with quantities
of the enzyme they require on a going forward basis. The Abbott Agreement
provides that Abbott is our exclusive licensee to market Collagenase Santyl(R)
("Santyl(R)") in the United States and Canada so long as Abbott uses its best
efforts to increase sales. Abbott pays us for the product, at a price that is
subject to annual adjustment based upon increases in our actual manufacturing
costs, not to exceed increases in the consumer price index for certain items.
Abbott also pays us a royalty based upon net Santyl(R) sales. Royalties for the
calendar year ended December 31, 2003 and the fiscal year ended January 31, 2003
were approximately $1,684,000 and $2,141,000, respectively. As part of the
Abbott Agreement, KPC and its U.S. affiliates, and its successor Abbott, (i)
agreed not to seek, or become a party to, any license or other agreement for the
production or purchase of collagenase powder or collagenase ointment from any
source other than us, (ii) will make no efforts to achieve registration with the
FDA for collagenase powder manufactured by parties other than us, and (iii) will
not collaborate with any third party attempting to achieve a registration.

                                       5


Abbott accounted for approximately $3,093,000 and $3,196,000 of our product
sales and royalties for the calendar year 2003 and fiscal year 2003,
respectively. These amounts were approximately 95% and 78% of our revenues
during the calendar year 2003 and fiscal year 2003, respectively. At December
31, 2003, we had approximately $1.6 million of firm booked orders with Abbott
for the product. We will not be able to fulfill all these orders in a timely
manner due to the time required to manufacture our product. Both parties have
agreed on a manufacturing and delivery timetable for future deliveries of
product and manufacture of Santyl(R).

Our product is approved in two other countries, Brazil and India, and sold to
commercial customers in those countries, who compound the product into ointment.
During the calendar year ended December 31, 2003 and the fiscal year ended
January 31, 2003, sales to the customer in Brazil represented approximately 0%
and 19% of total revenues, respectively, and sales to the customer in India
represented approximately 5% and 3% of total revenues, respectively. We have a
license agreement with the customer in India. There is no license and supply
agreement with the customer in Brazil, and we will only make limited deliveries
of the product to either our Brazilian or Indian customers at least through
2004, as we are currently devoting all of our manufacturing to Abbott's
requirements. The product and purified collagenase are also sold for
non-sponsored research purposes.

Other Agreements for the Distribution of Collagenase ABC
- --------------------------------------------------------

In 1994, we entered into a 10-year license and supply agreement with a Swiss
pharmaceutical company to market an ointment containing the product in two
European countries and several Middle Eastern countries. In June 1994, we
entered into a multi-year license with an Italian pharmaceutical company that
had agreed to market an ointment containing the product in Italy subject to the
receipt of requisite Italian governmental approval. The Company is no longer
pursuing these agreements as the enzyme has not received approval in any of
these countries.

In 1996, we entered into an agreement to license the product for sale as an
ointment in Germany to the German subsidiary of an international pharmaceutical
company. The agreement called for an initial payment on signing and further
payments if, and when, the German health authority grants marketing approval of
Collagenase ABC ointment. During fiscal 1997, we recognized $20,000 in license
fees and deferred revenue of $45,000 from this agreement. We submitted
collagenase ointment to the German health authority for marketing aproval in
1997, whose final decision remains pending.

Proposed Products and Uses
- --------------------------

We expect that a substantial portion of our business activities in the future
will be the research and development ("R&D"), followed by manufacturing and
licensing, of various proposed injectable Collagenase ABC products and their
uses. It is anticipated that the terms of the Auxilium Agreement will provide us
with sufficient funds to continue such research and development and provide us
with the necessary funding to set up a manufacturing facility for the
injectable.

Injectable Collagenase ABC
- --------------------------

We have developed a proprietary process to further purify Collagenase ABC. We
have investigated using this purified form of collagenase as an injectable to
remove collagen that interferes with normal bodily functioning or is unsightly.


                                       6


We, our affiliates, and individual investigators are clinically testing in the
United States injectable collagenase for treatment of Dupuytren's disease,
Peyronie's disease, frozen shoulder, and lipolysis. See "Investigational New
Drug Applications ("IND's") for Injectable Collagenase ABC". We produced
purified collagenase for injection at our facility in Lynbrook, N.Y. that has
been, and will be, used in U.S. clinical trials. Effective with the signing of
the agreement with Auxilium, Auxilium will be responsible for completion of any
Phase 2 and Phase 3 clinical studies for all potential uses they elect to
pursue. We will still be responsible for all Phase 1 clinical studies. We sell
small amounts of purified collagenase for non-human research in the United
States and other countries.

Investigational New Drug Applications ("INDs") for Injectable Collagenase ABC
- -----------------------------------------------------------------------------

We, our affiliates, or individual investigators have filed INDs with the FDA,
and are in the clinical testing process, for additional products using
injectable Collagenase ABC. The INDs permit testing our drug candidates on
humans. None of these products have completed testing.

Dupuytren's Disease
- -------------------

Dupuytren's disease is a deforming condition of the hand in which one or more
fingers, commonly the ring and little fingers, contract toward the palm, often
resulting in functional disability. We were granted a United States patent for
the use of our collagenase enzyme to treat this condition in July 2000. The use
of collagenase for the treatment of Dupuytren's disease has received "orphan
drug" designation from the FDA. Orphan drug designation is based on the
provisions of the Orphan Drug Act. The designation is given to products used to
treat a specified rare disease or condition defined as affecting fewer than
200,000 people in the United States. Orphan drug designation imparts certain
benefits including a seven year period of exclusivity after approval for
marketing, the ability to apply for clinical research grant funds, tax credits
for costs of clinical trials performed in the U.S., assistance from FDA in
protocol development, and possible waivers from "user fees" charged by the FDA
after drug approval. A dose response study was successfully completed at
Stanford University and at State University at Stony Brook Hospital and Medical
Center ("Stony Brook"). The results were submitted to the FDA in support of
concluding Phase 2. An end of Phase 2 meeting was held in August 2001 with the
FDA to discuss how to proceed with Phase 3 studies. The investigators at Stony
Brook received a grant from the FDA in September 2002 to conduct Phase 3
clinical trials to determine safety and efficacy of collagenase for this use.
The clinical trials on Dupuytren's disease are summarized in an article in the
September 2002 issue of the Journal of Hand Surgery. As part of the agreement
with Auxilium, Auxilium is responsible for all Phase 3 clinical trials, along
with the related expenses.

Peyronie's Disease
- ------------------

We are seeking to develop a product for the treatment of Peyronie's disease, a
condition in which collagen plaques form on the shaft of the penis and interfere
with erection and sexual intercourse. Initial tests on approximately 200 men
have shown favorable results in dissolving the plaques by injecting purified
collagenase directly into such plaques. We cannot assure you that this treatment
will be proven effective. We were awarded a patent for this use in March 2000
and received "orphan drug" designation from the FDA in March 1996. A study to
optimize this treatment was completed at Devine-Tidewater Urology, Norfolk,
Virginia, the largest United States center for the study and treatment of


                                       7


Peyronie's disease. In August 1999, the trial's investigator reported on 22
patients who were treated in an open label trial. The investigator reported
encouraging results. A new clinical trial was initiated in January 2004 and the
study is continuing. As part of the agreement with Auxilium, Auxilium is
responsible for all further clinical trials with the related expenses.

Frozen Shoulder
- ---------------

Frozen shoulder is a clinical syndrome of pain and severely decreased motion in
the shoulder joint. This syndrome afflicts up to 2 million patients annually. A
double blind randomized placebo controlled dose response study is being
conducted at Stony Brook using collagenase injection for treatment of adhesive
capsulitis, better known as "frozen shoulder. Positive clinical results were
presented at the March 2004 meeting of the Orthopaedic Research Society in San
Francisco.

Lipolysis
- ---------

Lipomas are benign fatty tumors that occur as bulges under the skin. A clinical
investigation is currently being performed with collagenase injection in the
treatment of skin lipomas. . The concept of using collagenase for removal of fat
is discussed in a European Patent Application issued June 2002.

OTHER PROPOSED PRODUCTS AND USES

Treatment of Burns
- ------------------

Collagenase Santyl(R) has received FDA approval for the treatment of burns. A
number of studies have been conducted, which compared the efficacy of
Collagenase Santyl(R) to standard treatment (silver sulfadiazine), for deep
second degree burns. The results of these studies have been favorable showing
faster cleaning and healing, as well as economic benefits. We are considering
the development of other dosage forms for the treatment of burns.

Collagenase for Wound Healing
- -----------------------------

In vitro studies conducted at Tufts University Medical School showed that
collagenase treatment of skin cells significantly enhances cell migration and
growth after injury. Clinical and laboratory investigations further profiling
the potential role of collagenase and its pharmacological activity in wound
healing are being pursued. We have been assigned two patents awarded to Tufts
University relating to this discovery. Pre-clinical experiments have been
conducted. Additionally, clinical experiments to confirm the observations made
at Tufts are being planned.

Glaucoma and Treatment of Other Eye Disorders
- ---------------------------------------------

We collaborated with Bausch & Lomb in a clinical investigation to confirm
previous studies on the use of our collagenase to treat glaucoma. The
collagenase treatment reduced IOP (intraocular pressure) in open angle glaucoma
patients for at least three months post treatment with no vision-threatening
complications. The results of the clinical investigation were published in May
2002 in the Archives of Ophthalmology.

                                       8


PRODUCT LIABILITY

The sale of the product, as well as the development of any additional products
of ours, exposes us to potential product liability claims, both directly from
patients using the product or potential products, as well as from our agreement
to indemnify certain distributors of the products for claims made against such
distributors. We have limited product liability insurance for the use of
Collagenase Santyl(R) and clinical experiments in the United States for its
additional product candidates. To date, no product liability claims have been
made against us.

COMPETITION

The pharmaceutical industry is characterized by rapidly evolving technology and
intense competition. Many companies of all sizes, including major pharmaceutical
companies and specialized biotechnology companies, are engaged in activities
similar to ours. Many of our competitors have substantially greater financial
and other resources, larger research and development staffs, and significantly
greater experience in regulatory approval procedures. We do not have comparable
resources, and do not intend to compete with, major pharmaceutical companies in
drug marketing, except in possible niche marketing, for one or more of the
products, if feasible.

Our debriding ointment product, Collagenase Santyl(R), competes primarily with
other available enzymatic debridement products in the United States. Those
currently available are manufactured or marketed by Healthpoint Ltd. and the Dow
B. Hickam division of Marion Labs. Since January 2004, S&N has been marketing a
non-collagenase enzymatic debriding ointment in the United States. A potential
debridement agent was known to be under development by Genzyme Tissue Repair
Division, and other large drug companies may also have debridement products
under development. Debriding products also compete with surgical debridement and
mechanical debridement using hydrotherapy. We believe enzymatic debridement is
superior to surgical and mechanical debridement, because those procedures are
painful, labor intensive, and remove viable tissue along with necrotic tissue.
In December 1994, the Federal Agency for Health Care Policy and Research
("AHCPR") issued Clinical Practice Guideline Number 15 entitled "Treatment of
Pressure Ulcers". Collagenase is the only product suggested for enzymatic
treatment of pressure ulcers by the guideline. Unlike the other available
enzymatic debriding products, ours is collagen specific. Approximately 75% of
skin is collagen, making this enzyme particularly appropriate for the
debridement of necrotic tissue.

In Europe, Knoll AG ("KAG") markets an ointment substantially similar to our
Collagenase Santyl(R) Ointment under the trade name "Iruxol(R)". In January
2000, Smith & Nephew plc acquired worldwide marketing rights to Iruxol(R)
excluding the United States and Canada, as that ointment is not FDA approved for
sale in the United States or Canada. KAG, which, as part of the global
pharmaceutical business of BASF, was acquired by Abbott in March 2001.

Colleges, universities, governmental agencies and other public and private
research organizations continue to conduct research, and are becoming more
active in, seeking patent protection and licensing arrangements to collect
royalties for use of technology that they have developed, some of which may be
directly competitive with our products. We expect competition to intensify as
technological advances occur in the development of pharmaceutical products of
biologic origin.

                                       9


MARKETING

We do not have our own sales staff and instead rely on licensees who have
recognition and acceptance in the marketplace. During the quarter ended December
31, 2003, we decided to liquidate our German subsidiary, Biospecifics Pharma
GmbH, which was established in November 1995. Its purpose was to identify
additional licensees, assist us in achieving the clinical and scientific data
necessary to obtain product approvals in the EU, and assist licensees in
registration of products, which objectives were not realized. See "Employees".

We may decide to directly market certain products under development,
particularly if the market is well defined, the number of specialists who
address the targeted indication is small, and we have the financial resources at
that time to engage in those activities.

RESEARCH AND DEVELOPMENT

Since inception (1957 and 1976 for the New York and Curacao subsidiaries,
respectively), we have expended over $27.2 million in research on collagenase
and other products. We incurred approximately $885,000 and $1,069,000 in
research and development activities during calendar year 2003 and fiscal year
2003, respectively.

GOVERNMENT REGULATION

Regulation in the United States
- -------------------------------

All pharmaceutical manufacturers in the U.S. are subject to extensive regulation
by the federal government, principally the FDA, and, to a lesser extent, by
state governments. The Federal Food, Drug, and Cosmetic Act, the Public Health
Service Act, and other federal statutes and regulations govern or influence the
testing, approval, manufacture, safety, labeling, storage, record keeping,
advertising, promotion, sale and distribution of products. Non-compliance with
applicable requirements can result in fines, recall or seizure of products,
total or partial suspension of production and/or distribution, refusal of the
government to enter into supply contracts or to approve new drug applications,
and criminal prosecution. The FDA also has the authority to revoke drug
approvals previously granted.

Our products in development will require regulatory clearance prior to
commercialization. The nature and extent of regulation may differ with respect
to different products. In order to test, produce, and market certain therapeutic
products in the United States, mandatory procedures and safety standards,
approval processes, and manufacturing and marketing practices, established by
the FDA, must be satisfied. Obtaining FDA approval has historically been a
costly and time-consuming process.

We are also licensed by, registered with, and subject to,4 2 regulation and
periodic inspection by the New York State Department of Health and the New York
State Board of Pharmacy, pursuant to federal and state legislation relating to
drugs and narcotics.

In 1999, as a result of inspectional observations made by the FDA, on Form 483,
of deficiencies in our compliance with FDA good manufacturing practices and
policies ("GMP") regulations at our Lynbrook and Curacao facilities, and at
Abbott Laboratories, (hereinafter referred to as "our Subcontractor"), the FDA
advised us in a letter (the "FDA letter") that it would revoke our license to
manufacture the enzyme and ointment unless we could immediately provide
satisfactory assurance to the FDA (including submitting a comprehensive plan of
corrective action) addressing the FDA's observations and demonstrate compliance
with the applicable GMP regulations. We submitted such a plan in 1999.

                                       10


Pursuant to this plan, we voluntarily suspended manufacture of the product in
March 2000 to allow for major renovations at our manufacturing facilities in
Curacao and Lynbrook. Beginning March 2000, we supplied Abbott with the product
from inventory built up in anticipation of the upgrade. This built up inventory
was depleted in July 2002

The FDA notified us on July 28, 2003 that our request to supplement our
biologics license for collagenase ABC was approved ("FDA approval"). The
supplement included major renovations to the manufacturing facility, utility
systems, and process equipment at our Curacao facility. The FDA notification
acknowledged our written commitments to provide additional information regarding
ongoing studies and when to submit this information to our biologics license for
review. As a result of the FDA approval, enzyme product manufactured at the
Curacao facility is now being distributed to Abbott. Regardless of this FDA
approval, the FDA letter will remain in effect until we demonstrate compliance
with the applicable federal standards and regulations, which we understand to be
two "satisfactory annual GMP inspections" of our Lynbrook and Curacao
manufacturing facilities. We believe that we have made progress in complying
with the applicable federal standards and regulations, although there can be no
assurances as to when the FDA letter will be rescinded, if at all. During the
quarter ended June 30, 2004, the FDA completed an inspection of our Lynbrook
facility. We are hopeful that after the next FDA inspection is completed at our
Lynbrook facility, we will be eligible to have the FDA letter rescinded. In May
2004, the FDA inspected the facility of our Subcontractor. To the best of our
knowledge, the FDA has not commented on the inspection, nor is the FDA obligated
to do so. The FDA has yet to conduct an inspection of our Curacao facility.

Foreign Regulation of Pharmaceutical Products
- ---------------------------------------------

The marketing of pharmaceutical products outside the United States is subject to
the regulatory requirements of the country in which the product is marketed.
These requirements may vary widely from country to country. Approval in foreign
countries is required regardless of whether FDA approval has been obtained in
the United States. Nevertheless, the time required to obtain such approval may
be longer or shorter than required to obtain FDA approval, and there can be no
guarantees that such approvals will be granted.

Our subsidiary in Curacao has produced the pharmaceutical substance "Collagenase
ABC (Sterile)" for incorporation into ointment. As this product is not a
pharmaceutical end product, it need not be officially registered with the Bureau
of Pharmaceutical Affairs of the Netherlands Antilles (the "Pharmaceutical
Bureau"). However, the plant in which the product has been produced and the
production process are subject to inspection by the Pharmaceutical Bureau under
the laws and regulations of the Netherlands Antilles. Production was suspended
during the upgrade, as discussed above in "Regulation in the United States".
Production restarted during the third quarter of 2003.

PATENT AND TRADEMARK PROTECTION

Patents
- -------

We are the assignee or licensee of nine U.S. and one European patent. We are not
able to ascertain whether these patents will provide any value. We are the
assignee of additional U.S. patent rights that have expired as well as certain


                                       11


foreign patent rights corresponding to certain of the foregoing patents. We have
other patents under application. There can be no assurances when, if ever, such
patents will be issued, or that such patents, if issued, will be of any value to
us.

Trademarks
- ----------

We have registered the name Salutyl(R) for our collagenase ointment in a number
of countries other than the United States. Trademarks for other countries are
protected for varying periods of time. We use the trademarked name "Cordase" for
the injectable collagenase being developed for the treatment of Dupuytren's
disease.

EMPLOYEES

We have 39 full-time employees, of which 23 are located at the Lynbrook facility
and 16 are at the Curacao facility. There are also 5 part-time employees in
Lynbrook and 1 in Curacao. None of these employees are represented by a union.
We consider our relationship with our employees to be good.

We have entered into confidentiality agreements with most of our employees.
Pursuant to such agreements, each employee in Lynbrook agrees to keep all of our
proprietary and other information secret and confidential and to return all
property to us upon termination. These employees further agree not to divulge
any trade secrets during their respective terms of employment and thereafter
without our prior written consent and further to assign to us all inventions,
discoveries, and improvements which they make during the term of employment,
within one year thereafter, or utilizing any of our trade secrets. The agreement
executed by Curacao employees provides that they will not divulge any data
connected with the production process in Curacao. There can be no assurance that
any particular court would enforce any, or all, of the terms of any such
agreements.

We have ceased operations in Germany and are in the process of liquidating our
subsidiary in Germany, Bio Pharma, which was managed by Rainer Friedel, MD., and
Ph.D. Dr. Friedel was a member of our board of directors until his resignation
on April 30, 2004.

RISK FACTORS RELATED TO OUR BUSINESS

Substantial debt levels
- -----------------------

In November 2001, ABC-Curacao borrowed a non-amortizing loan of $455,000 at 6.5%
interest due in November 2003 from Korpodeko, a Netherlands Antilles agency. In
connection with this loan, ABC-Curacao agreed to pledge as collateral
substantially all of the assets owned by ABC-Curacao, including the upgraded
facility's manufacturing assets with a book value of approximately $4.7 million
at December 31, 2003. BioSpecifics has also guaranteed the Korpodeko loan. In
September 2003, Korpodeko agreed to modify the terms of the loan. Korpodeko
permitted us to repay 20%, or $91,000 of the loan principal, which we did in
December 2003, and pay the remaining principal, or $364,000 in November 2004. In
return, we agreed to an interest rate increase from 6.5% to 7.5% from November
2003 to the new maturity in November 2004.

                                       12


On March 11, 2003, we borrowed $100,000 from an unaffiliated individual lender,
evidenced by a one-year promissory note, bearing interest of 8% per annum. We
also granted to the lender warrants to purchase up to 10,000 common shares of
BioSpecifics at $1.18, the closing price on that day, until March 11, 2008. The
cost associated with these warrants, based on Black-Scholes methodology, is
$5,000 and was recorded as interest expense during the calendar year ended
December 31, 2003. Our chairman has personally guaranteed this loan. On March 8,
2004, the lender agreed to extend the promissory note for one year, or until
March 11, 2005.

On June 19, 2003, the Company entered into a financing transaction with Bio
Partners LP, a private investor group, pursuant to which the Company sold to Bio
Partners in a private placement (i) a $1.575 million convertible note, (the
"Note") issued at face value, and (ii) 295,312 shares of Company common stock,
issued at par value, or $.001 per share. The net proceeds to the Company were
approximately $890,000, after the payment of expenses and repayment of $500,000
previously advanced to the Company by a principal of Bio Partners.

The Note matures on June 19, 2005 and bears interest at a rate of 12% per annum
with an effective interest rate of 36%. Interest-only payments under the Note
are payable monthly in arrears and the entire principal amount is payable at
maturity. At the time the agreement was made, up to $1,141,875 aggregate
principal amount of the Note is convertible into the Company's common stock at
any time, at a conversion price of $2.50 per share, subject to customary
adjustments. The Note also contains restrictions on the Company's ability to
incur debt as long as the Note is outstanding. The Note is secured by a pledge
of substantially all of the assets of the Company and the Company's New York
subsidiary, Advance Biofactures Corporation ("ABC"). In addition, ABC has
guaranteed the obligations of the Company under the Note and our chairman, Edwin
H. Wegman, has personally guaranteed 50% of the obligations of the Company under
the Note. The loan discount of $281,000 and loan costs of $258,000 on the Note
are being amortized over two years, the expected life of the Note.

Reliance on a Single Product for Revenues
- -----------------------------------------

Collagenase ABC enzyme is our sole source of revenues from the sale of product.
Commencing with the second quarter of 2004, we began receiving payments under
the terms of the Auxilium Agreement.

Uncertainty of Government Regulatory Requirements and Future Manufacture of the
- -------------------------------------------------------------------------------
Enzyme
- ------

The manufacture and marketing of Collagenase ABC enzyme is subject to regulation
in the United States by the federal government, principally the FDA. As
previously discussed, we stopped manufacturing the enzyme and began upgrading
the Curacao facility in March 2000. In May 2001 we completed the upgrade and
went back into limited manufacturing. In April 2002 we filed with the FDA a
"Prior Approval Supplement" ("PAS") for the Curacao facility upgrade. In July
2002, the FDA completed a Pre-Approval Inspection of this facility. At the
conclusion of the inspection, the FDA inspectors provided us with a list of
observations on FDA Form 483 and in August 2002, FDA issued a "Complete
Response" letter with respect to the Pre-Approval Inspection. We responded to
the FDA letter in November 2002 with a plan that is aimed at addressing issues
raised in the "Complete Response" letter.

The FDA notified us on July 28, 2003 that our request to supplement our
biologics license for collagenase ABC was approved ("FDA approval"). The
supplement included major renovations to the manufacturing facility, utility
systems, and process equipment at our Curacao facility. The FDA notification
acknowledged our written commitments to provide additional information regarding
ongoing studies and when to submit this information to our biologics license for


                                       13


review. As a result of the FDA approval, enzyme product manufactured at the
Curacao facility is now being distributed to Abbott. Regardless of this FDA
approval, the FDA letter will remain in effect until we demonstrate compliance
with the applicable federal standards and regulations, which we understand to be
two "satisfactory annual GMP inspections" of our Lynbrook and Curacao
manufacturing facilities. We believe that we have made progress in complying
with the applicable federal standards and regulations, although there can be no
assurances as to when the FDA letter will be rescinded, if at all. During the
quarter ended June 30, 2004, the FDA completed an inspection of our Lynbrook
facility. We are hopeful that after the next FDA inspection is completed at our
Lynbrook facility, we will be eligible to have the FDA letter rescinded. In May
2004, the FDA inspected the facility of our subcontractor. The FDA has not
conducted an inspection of our Curacao facility since July 2002.

Dependence on Abbott Laboratories
- ---------------------------------

We derive most of our net sales and all of our royalty revenue from the topical
ointment business, through an exclusive license agreement, which expires in
August 2013, with a pharmaceutical company in the United States, Abbott
Laboratories, which in March 2001 acquired Knoll Pharmaceutical Company ("KPC",
collectively, "Abbott"), the Company's original licensee. Revenues are derived
from two sources: i.) sales of Collagenase ABC enzyme in powder form (the
"product" or the "enzyme") to Abbott and to a lesser extent foreign
pharmaceutical companies, and ii.) royalties paid by Abbott on its U.S. sales of
Collagenase Santyl(R) Ointment, which contains the product, to distributors.

Delisting of Common Stock from The Nasdaq Stock Market
- ------------------------------------------------------

In December 2003, Nasdaq had informed us that we were not in compliance with the
independent directors and audit committee composition requirements. Nasdaq
changed our symbol from "BSTC" to BSTCC" because of this noncompliance but
allowed us 90 days to comply with this requirement. In late February 2004, we
added Michael Schamroth to our board of directors, on a temporary basis, subject
to vote at the next shareholders meeting, and informed Nasdaq of this
appointment. By doing so, we satisfied the minimum requirement of three
independent directors. However, when we informed Nasdaq of the director
appointment, we also informed it that at December 31, 2003 we were no longer in
compliance with the $2.5 million minimum stockholders' equity requirement. On
March 3, 2004 Nasdaq invited us to make a written submission with respect to the
minimum stockholders' equity deficiency, which we submitted on March 10, 2004.

On March 22, 2004 the Nasdaq Listings Qualifications Panel (the "Panel")
informed us in writing of its determination to delist our common stock from The
NASDAQ SmallCap Market effective with the open of business on March 24, 2004.
The Nasdaq notice stated that the Panel's determination was based on our failure
to satisfy the $2.5 million shareholders' equity requirement as of December 31,
2003. Our common stock was immediately eligible for quotation on the OTC
Bulletin Board effective with the open of business on March 24, 2004. The OTC
Bulletin Board symbol assigned to us is BSTC. No application was required to be
filed for inclusion on the OTC Bulletin Board.

Our Common Stock traded on The NASDAQ SmallCap Market tier of the Nasdaq Stock
Market ("Nasdaq") under the symbol "BSTCC" until March 23, 2004. On March 24,
2004, our common stock began trading on the OTC Bulletin Board under the symbol
BSTC. Effective May 2004, our stock was moved from the OTC Bulletin Board to the


                                       14


Pink Sheets due to our failure to file our financial reports on a timely basis
with the SEC.

SUBSEQUENT EVENTS

In June 2004, we entered into a development and license agreement with Auxilium
Pharmaceuticals, Inc. ("the Auxilium Agreement"). Under the agreement, we have
granted Auxilium the rights to develop products containing our enzyme ("AA4500")
for the treatment of Peyronie's and Dupuytren's disease. We have granted
Auxilium the exclusive world-wide license to any products developed under the
agreement other than dermal formulations labeled for topical administration. We
also granted Auxilium the option to develop and license the technology for use
in other indications other than dermal formulations labeled for topical
administration. The agreement extends, on a country-by-country and
product-by-product basis, for the longer of the patent life, the expiration of
any regulatory exclusivity period or 12 years. Auxilium may terminate the
agreement with 90 days written notice. Auxilium is obligated to pay all clinical
and regulatory development costs on an on-going basis, to purchase commercial
inventory from us and to pay royalties based on product sales. In addition,
Auxilium is obligated to make milestone payments for contract initiation,
receipt of technical data, manufacturing process development, the one-year
anniversary date, filing of regulatory applications and receipt of regulatory
approval.

In June 2004, we received an up-front payment under the agreement totalling
$2,500,000. In August 2004, we received an additional $2,500,000 for delivery of
all in-process research and development material product data relating to
Dupuytren's and Peyronie's disease. We may also receive up to $10,500,000 of
contingent milestone payments under this agreement if all existing conditions
are met. Additional milestone obligations may be due if Auxilium exercises an
option to develop and license our enzyme for additional medical indications.

On March 8, 2004, the holder of a one-year promissory note, bearing interest of
8% per annum which was due March 11, 2004 extended the note for one year.

In March 2004, our chairman's deferred salary of $100,000 has been applied
against the chairman note receivable.

On March 22, 2004 the Nasdaq Listings Qualifications Panel (the "Panel")
informed us in writing of its determination to delist our common stock from The
NASDAQ SmallCap Market effective with the open of business on March 24, 2004.
The Nasdaq notice stated that the Panel's determination was based on our failure
to satisfy the $2.5 million shareholders' equity requirement as of December 31,
2003. Our common stock was immediately eligible for quotation on the OTC
Bulletin Board effective with the open of business on March 24, 2004. The OTC
Bulletin Board symbol assigned to us is BSTC. No application was required to be
filed for inclusion on the OTC Bulletin Board.

Our Common Stock traded on The NASDAQ SmallCap Market tier of the Nasdaq Stock
Market ("Nasdaq") under the symbol "BSTCC" until March 23, 2004. On March 24,
2004, our common stock began trading on the OTC Bulletin Board under the symbol
BSTC. Effective May 2004, our stock was moved from the OTC Bulletin Board to the
Pink Sheets due to our failure to file our financial reports on a timely basis
with the SEC.

                                       15


We have ceased operations in Germany and are in the process of liquidating our
subsidiary in Germany, Bio Pharma, which was managed by Rainer Friedel, MD., and
Ph.D. Dr. Friedel was a member of our board of directors until his resignation
on April 30, 2004.

Michael Schamroth became an interim director as of February 24, 2004 and was
elected by the Board of Directors in a special meeting. His term will expire at
the next annual meeting where he can stand for re-election to the Board.

ITEM 2.  DESCRIPTION OF PROPERTY.

We lease two facilities, one in Lynbrook, New York and one in Curacao,
Netherlands Antilles. The New York facility, also our administrative
headquarters, contains 3,500 square feet of office space and 11,500 square feet
of laboratory, production, and storage facilities. We lease this facility from
the Wilbur Street Corporation ("WSC"), which is owned by The S.J. Wegman
Company, the principal stockholder of the Company and an affiliate of Edwin H.
Wegman, President of the Company. On January 30, 1998, WSC and the Company
entered into a triple net lease agreement, which provides for an annual rent
starting at $125,000, which can increase annually by the amount of annual
increase in the Consumer Price Index for the greater New York metropolitan
region. The lease term is 7 years, expiring January 31, 2005. During each of the
fiscal years ended December 31, 2003 and January 31, 2003, we paid rent and real
estate taxes of $125,000 (approximately $8.33 per square foot) relating to this
lease agreement. We believe that the terms of this lease are reasonable and the
rent charged is no greater than that which would be charged by an unaffiliated
landlord for comparable facilities, based on appraisals of the property.

We also lease a building in Brievengat, Curacao, Netherlands Antilles from an
unrelated company wholly owned by the Insular Territory of Curacao. This
building is our principal manufacturing facility, and is licensed by the FDA to
produce Collagenase ABC. The facility has approximately 15,750 square feet of
usable space. The lease, which was originally entered into with the Insular
Territory of Curacao on January 1, 1977, is automatically renewable upon the
same terms every five years, unless either party gives notice of termination
three months prior to the expiration of the five-year period. The lessor is
entitled to revalue the rent for each successive five-year period, and the lease
has been automatically renewed through March 1, 2006. The current rent is
approximately $37,000 per year.

ITEM 3.  LEGAL PROCEEDINGS.

None

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

None to date. The next annual meeting will include a vote to elect interim board
of director member Michael Schamroth as a full director of the Company

                                       16


                                     PART II

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

In December 2003, Nasdaq had informed us that we were not in compliance with the
independent directors and audit committee composition requirements. Nasdaq
changed our symbol from "BSTC" to BSTCC" because of this noncompliance but
allowed us 90 days to comply with this requirement. In late February 2004,
Michael Schamroth was added to our board of directors in a special meeting, on a
interim basis, subject to vote at the next shareholders meeting, and informed
Nasdaq of this appointment. By doing so, we satisfied the minimum requirement of
three independent directors. However, when we informed Nasdaq of the director
appointment, we also informed it that at December 31, 2003 we were no longer in
compliance with the $2.5 million minimum stockholders' equity requirement. On
March 3, 2004 Nasdaq invited us to make a written submission with respect to the
minimum stockholders' equity deficiency, which we submitted on March 10, 2004.

As described above, on March 24, 2004, our common stock began trading on the OTC
Bulletin Board under the symbol BSTC. Effective May 2004, our stock was moved
from the OTC Bulletin Board to the Pink Sheets due to our failure to file our
financial reports on a timely basis with the SEC.

As we currently meet the NASDAQ independent audit committee guidelines and
expect to meet the $2.5 million shareholders equity requirement, we anticipate
reapplying to the Nasdaq SmallCap Market upon filing all of our overdue
financial reports. However, there can be no assurance that we will be successful
in reapplying to the Nasdaq SmallCap Market.

On November 1, 2004, the closing price for our Common Stock was $2.00. The table
below sets forth the high and low sale prices for our Common Stock for the
period February 1, 2002 through December 31, 2003, as reported by Nasdaq.

QUARTER ENDED              HIGH              LOW
- -------------              ----              ---
December 31, 2003          $1.99            $1.05
September 30, 2003         $2.00            $0.79
June 30, 2003              $1.59            $0.60
March 31, 2003             $2.15            $1.06
January 31, 2003           $3.96            $0.66
October 31, 2002           $1.95            $0.60
July 31, 2002              $2.34            $1.13
April 30, 2002             $2.45            $1.56

On July 14, 2004, there were 113 stockholders of record of our Common Stock

It is our current policy to retain earnings to finance the growth and
development of our business and not pay dividends. Any payment of cash dividends
in the future will depend upon our financial condition, capital requirements and
earnings as well as such other factors as the Board of Directors may deem
relevant. Our Board of Directors authorized two buyback programs for the
repurchase of a total of 600,000 shares of common stock. Through July 1999, a
total of 361,380 shares were repurchased at an average price of $5.29 per share.
We have not repurchased shares since that time and have suspended the buyback
for the foreseeable future.

                                       17


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
         AND RESULTS OF OPERATIONS

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------

Information provided by us or statements contained in this report or made by our
employees, if not historical, are forward looking information, which involve
uncertainties and risks.

We caution readers that important factors may affect our actual results and
could cause such results to differ materially from forward-looking statements
made by us or on our behalf. Such factors include, but are not limited to,
changing market conditions, the impact of competitive products and pricing, the
timely development and approval by the Food and Drug Administration ("FDA") and
foreign health authorities of potential products, market acceptance of our
potential products, and other risks detailed herein and in other filings we make
with the Securities and Exchange Commission. Additionally there can be no
assurance that our agreement with Auxilium will provide us with new products in
the future. Further, any forward looking statement or statements speak only as
of the date on which such statements were made, and we undertake no obligation
to update any forward looking statement or statements to reflect events or
circumstances after the date on which such statement or statements were made.

Summary
- -------

We are a biopharmaceutical company focusing on wound healing and tissue
remodeling. We manufacture Collagenase ABC enzyme, (the "enzyme") which is the
active ingredient in the prescription drug Collagenase Santyl(R) Ointment sold
by Abbott Laboratories in the United States and indicated for debriding chronic
dermal ulcers and second and third degree burns. As previosuly mentioned, in
June 2004, we signed a development and license agreement with Auxilium
Pharmaceuticals to develop an injectable form of our enzyme (AA4500) for
treating Dupuytren's disease, Peyronie's disease, frozen shoulder, lipomas, and
other conditions, except for dermal formulations labeled for topical
administration. We have initiated Phase 3 clinical trials for Dupuytren's
disease. A clinical trial for Peyronie's disease began in January 2004. A Phase
2 trial for frozen shoulder is ongoing. Effective with the signing of the
Auxilium Agreement, they are now responsible for certain of these clinical
trials, including the trials already commenced for Dupuytren's and Peyronie's
disease.

We derive most of our sales revenues, (historically, approximately 90%) and all
of our royalty revenues, from one customer in the United States, Abbott
Laboratories ("Abbott") who, pursuant to an exclusive licensing agreement (the
"Agreement"), compounds the product into Collagenase Santyl(R) Ointment
("Santyl(R)" or "ointment"), a topical prescription drug used to treat dermal
ulcers and burns. The royalty revenues from Abbott were earned on North American
sales of Santyl(R) to distributors by Smith & Nephew, Inc. ("S&N") through
December 31, 2003. The January 2000 sub-license agreement under which S&N
marketed Santyl(R) ointment terminated on June 30, 2003 but it was agreed they
would continue to market through the end of 2003. The Ross Products Division of
Abbott Laboratories Inc. assumed United States marketing responsibility for
Collagenase Santyl(R) Ointment effective January 1, 2004. During 2003, the
Abbott Agreement automatically renewed for an additional 10-year period, to
August 2013. Collagenase Santyl(R) Ointment is sold primarily to long-term care
centers, where it is believed that Abbott's Ross Products Division has built a
strong market position and reputation.

                                       18


CRITICAL ACCOUNTING POLICIES

The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts in the financial statements
and the accompanying notes. Actual results could differ from those estimates. We
believe the following accounting policies are the most critical to us.

RESEARCH AND DEVELOPMENT

Research and development expenses ("R&D") include internal costs, such as
salaries and benefits, costs of materials, and facility costs. R&D also consists
of third party costs, such as medical professional fees, contract manufacturing
costs for material used in clinical trials, and costs associated with clinical
study R&D arrangements. We fund R&D at medical research institutions under
agreements that are generally cancelable. All of these costs are charged to R&D
as incurred, which may be measured by percentage of completion, contract
milestones, patient enrollment, or the passage of time.

At the initiation of clinical study R&D contracts, we make an estimate of the
duration and expected completion date of the contract, which may require a
change due to accelerations, delays or other adjustments to the contract period
or work performed. Changes in these estimates could have a significant effect on
the amount of R&D costs that we realize in a specific period.

Accounting for the Impairment or Disposal of Long-Lived Assets.
- ---------------------------------------------------------------

SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
requires judgments regarding future operating or disposition plans for
marginally performing assets. The application of both of these policies has
affected the amount and timing of charges to operating results that have been
significant in recent years. We evaluate our long-lived assets for impairment on
an annual basis, or whenever events and circumstances indicate that the carrying
amount may not be recoverable, including our business judgment of when to close
underperforming operations. These impairment evaluations require an estimation
of fair value based on recent negotiations to sell certain assets. Should the
carrying amount not be deemed to be recoverable, we write the assets down to
their fair value. For the year ended December 31,2003, we did not take any
impairment charges.

RESULTS OF OPERATIONS

In March 2003 we changed our fiscal year end from January 31 to December 31. Our
first fiscal year using this new basis is the twelve months ending December 31,
2003. In this report we compare the twelve months ended December 31, 2003
("calendar year 2003") to the twelve months ended January 31, 2003 ("fiscal year
2003") , because it is not practical to recast the prior comparative periods
ended December 31, 2002. The eleven months period ended December 31, 2003 is
also presented.

Net sales include the sales of Collagenase ABC enzyme recognized at the time it
is shipped to customers, primarily Abbott. Net sales also include fees we charge
Abbott for testing Collagenase Santyl(R) Ointment it contract manufactures with
the enzyme.

                                       19


As a result of the FDA approval, we may now distribute to Abbott enzyme
manufactured at our renovated Curacao facility. In September 2003, we delivered
the first available enzyme manufactured at the renovated Curacao facility to
Abbott.

Net sales recorded for fiscal 2003 were from delivery of stockpiled enzyme
inventory to Abbott. We depleted that stockpiled enzyme inventory during fiscal
2003. During calendar 2003, we sold limited amounts of enzyme produced at the
renovated facility in Curacao to an international customer. International sales
have historically represented approximately 10% of total revenues; however, we
expect minimal sales to international customers at least through 2004.

Net sales were $1,555,625 and $1,938,706 for the calendar year 2003 and fiscal
year 2003, respectively, a decrease in calendar 2003 of $383,081 or 20% from
fiscal 2003. Enzyme shipments to Abbott in calendar 2003 were from enzyme
manufactured at the renovated Curacao facility. Enzyme shipments to Abbott in
fiscal 2003 were from enzyme that had been stockpiled prior to the renovation,
which began in March 2000. We delivered less enzyme during calendar 2003 because
we did not achieve our 2002 and 2003 enzyme manufacturing and inventory level
goals due to delays caused by manufacturing and personnel issues associated with
the renovated plant. We believe we have solved most of the manufacturing and
personnel issues and have achieved increases in manufacturing in 2004. However,
due to thes problems encountered in calendar 2003, we will be able to supply
Abbott with only limited quantities of our enzyme throughout 2004 and will
continue to incur significant operating losses, exclusive of the revenue
received from the Auxilium Agreement.

Royalties earned on Collagenase Santyl(R) Ointment sales by S&N were $1,683,915
and $2,140,534 for the calendar year 2003 and fiscal year 2003, respectively,
representing a decrease in calendar 2003 of $456,619 or 21%. Santyl(R) sales
during calendar 2003 were significantly lower than fiscal 2003 levels because of
lack of sufficient enzyme available to manufacture Santyl(R). As previously
described, Abbott's inventory of Santyl(R) ointment, which it has supplied to
S&N for distribution and on which we earn royalties, was depleted by the end of
July 2003, and only replenished in November 2003, with the first delivery of
enzyme we made in September 2003. There was no distribution of Santyl during the
three months August through October 2003; therefore, no royalties were earned
during that period. We expect Santyl(R) sales to continue to be negatively
impacted in 2004, because we did not achieve our 2003 enzyme manufacturing and
inventory level goals. We are on target to meet our production objectives in
2004.

The sub-license agreement under which Smith & Nephew marketed Santyl(R) ointment
terminated on June 30, 2003 but they continued to market it through the end of
2003. The Ross Products Division of Abbott Laboratories Inc. assumed United
States marketing responsibility for Collagenase Santyl(R) Ointment effective
January 1, 2004.

Cost of sales was $2,843,921 and $3,205,235, respectively, during calendar year
2003 and fiscal year 2003, a decrease in calendar 2003 of $361,314 or 11%. We
had a negative gross profit margin in both calendar year 2003 and fiscal year
2003 due to delays and manufacturing and personnel issues associated with the
renovated plant.

General and administrative expenses ("G&A") were $2,615,007 and $3,045,319
respectively, during calendar year 2003 and fiscal year 2003, a decrease in
calendar 2003 of $430,312, or 14%. During fiscal 2003, our production and
regulatory personnel spent a significant portion of their time preparing for the
FDA inspection of the Curacao facility, which took place in July 2002, the cost
of which was allocated to G&A in fiscal 2003.

                                       20


Research and development expenses ("R&D") were $884,685 and $1,069,045
respectively, during calendar year 2003 and fiscal year 2003, a decrease in
calendar 2003 of $184,360 or 17%. Development efforts have been curtailed in our
attempt to conserve cash.

Other expense, net was $184,940 and $23,094 respectively, during calendar year
2003 and fiscal year 2003, an increase in other expense, net of $161,846. The
increase is due to interest expense on the 12% Senior Secured Convertible Note
borrowed in June 2003 and the March 2003 promissory note, and amortization of
the 12% Note's discount. The interest and discount amortization on these debt
instruments approximated $180,000 during calendar 2003. Interest expense in both
periods also includes interest on the two-year, 6.5% non-amortizing loan from
Korpodeko, a Curacao development corporation established to develop industry on
the island of Curacao. In September 2003, Korpodeko agreed to modify the terms
of the loan, by permitting us to repay 20%, or $91,000 of the loan principal in
November 2003, and pay the remaining principal, or $364,000 in November 2004. In
return, the Company agreed to an interest rate increase from 6.5% to 7.5% from
November 2003 to the new maturity in November 2004. In December 2003, we repaid
the $91,000 of loan principal.

The (expense) benefit for income taxes was ($13,000) and $260,464 respectively
during calendar year 2003 and fiscal year 2003. The net benefit in fiscal 2003
relates to US federal and state refunds of approximately $425,000 due by
carrying back most of the fiscal 2003 net operating loss to tax payments made in
prior taxable fiscal years, net of write-off of deferred tax assets. Due to a
change in the US tax law, we can only carryback net operating losses 2 years. We
recorded no income tax benefit for calendar 2003 because of uncertainties with
respect to the timing of future utilization of net operating loss benefit. Also,
the difference between the United States Federal statutory tax rate of 34% and
the effective tax rate in fiscal 2003 is due to the tax effect of foreign
sourced losses for which no benefit can be taken. Since 1976, our Curacao
subsidiary has had a 2% profit tax rate granted to it by the Curacao government
(the "2% tax holiday"). In November 2000, the Curacao government retroactively
extended the 2% tax holiday for another 15 years

We have ceased operations in Germany and are in the process of liquidating our
subsidiary in Germany, Bio Pharma, which was managed by Rainer Friedel, MD., and
Ph.D.

LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION

Our primary source of working capital is from operations, which includes sales
of product, testing fees, royalties, periodic license fees, and borrowings. At
December 31, 2003, we had a working capital deficit of approximately $824,000.
The principal use of cash during the year ended December 31, 2003 was
approximately $1.6 million for operating activities. Sources of cash included
approximately $481,000 of repayments by our chairman of his notes, an increase
of $100,000 in short term debt, and proceeds from a $1,575,000 two year senior
secured convertible note bearing 12% interest, described below.

As previously mentioned, under the terms of the Auxilium Agreement we received,
in June 2004 and August 2004, payments totalling $5,000,000. We may also receive
$10,500,000 of contingent milestone payments under this agreement if all
existing conditions are met. Additional milestone obligations may be due if
Auxilium exercises an option to develop and license our enzyme for additional
medical indications.

                                       21


Prior to the signing of the Auxilium Agreement, we funded operations by (1)
modification of the terms of two loans, principally, by deferring a balloon
payment of $364,000 due in November 2003 to November 2004; and deferring the
payment of $100,000 principal due on a promissory note from March 2004 to March
2005; (2) receiving a $250,000 advance of royalties from Abbott Laboratories,
our major customer, in January 2004 and a $500,000 royalty advance at the end of
March 2004, both of which are to be repaid from royalties to be earned from
distribution of Santyl(R) Ointment during 2004 (of which $94,000 and $130,000
were repaid from royalties earned during the respective quarters ended March 31,
2004 and June 30, 2004); (3) our chairman's deferred salary of $100,000 during
the three months ended June 2003 has been applied against the chairman note
receivable in March 2004, and (4) deferring or making partial payments to
creditors. Due to manufacturing problems encountered in 2003, we will be able to
supply Abbott with only limited quantities of our enzyme throughout 2004 and
will continue to incur significant operating losses exclusive of the income
received from the Auxilium agreement. As a result of payments due under the
Auxilium Agreement, we generated positive cash flow during the second quarter of
2004.

On June 19, 2003, the Company entered into a financing transaction with Bio
Partners LP, a private investor group, pursuant to which the Company sold to Bio
Partners in a private placement (i) a $1.575 million convertible note, (the
"Note") issued at face value, and (ii) 295,312 shares of Company common stock,
issued at par value, or $.001 per share. The net proceeds to the Company were
approximately $890,000, after the payment of expenses and repayment of $500,000
previously advanced to the Company by a principal of Bio Partners.

The Note matures on June 19, 2005 and bears interest at a rate of 12% per annum
with an effective interest rate of 36%. Interest-only payments under the Note
are payable monthly in arrears and the entire principal amount is payable at
maturity. At the time the agreement was made, up to $1,141,875 aggregate
principal amount of the Note is convertible into the Company's common stock, at
a conversion price of $2.50 per share, subject to customary adjustments. The
Note also contains restrictions on the Company's ability to incur debt as long
as the Note is outstanding. The Note is secured by a pledge of substantially all
of the assets of the Company and the Company's New York subsidiary, Advance
Biofactures Corporation ("ABC"). In addition, ABC has guaranteed the obligations
of the Company under the Note and our chairman, Edwin H. Wegman, has personally
guaranteed 50% of the obligations of the Company under the Note. The loan
discount of $281,000 and loan costs of $258,000 on the Note are being amortized
over two years, the expected life of the Note.

In November 2001, ABC-Curacao borrowed a non-amortizing loan of $455,000 at 6.5%
interest due in November 2003 from Korpodeko. In connection with this loan,
ABC-Curacao agreed to pledge as collateral substantially all of the assets owned
by ABC-Curacao, including the upgraded facility's manufacturing assets with a
book value of approximately $4.7 million at December 31, 2003. BioSpecifics has
also guaranteed the Korpodeko loan. In September 2003, Korpodeko agreed to
modify the terms of the loan. Korpodeko permitted us to repay 20%, or $91,000 of
the loan principal, which it did in December 2003, and pay the remaining
principal, or $364,000 in November 2004. In return, we agreed to an interest
rate increase from 6.5% to 7.5% from November 2003 to the new maturity in
November 2004. On the consolidated balance sheet as of December 31, 2003,
short-term liabilities include the remaining $364,000 due November 2004.
Long-term obligations at December 31, 2003 include operating leases of
approximately $159,000 annually through December 2004.

                                       22


On March 22, 2004 the Nasdaq Listings Qualifications Panel (the "Panel")
informed us in writing of its determination to delist our common stock from The
NASDAQ SmallCap Market effective with the open of business on March 24, 2004.
The Nasdaq notice stated that the Panel's determination was based on our failure
to satisfy the $2.5 million shareholders' equity requirement as of December 31,
2003. Our common stock was immediately eligible for quotation on the OTC
Bulletin Board effective with the open of business on March 24, 2004. The OTC
Bulletin Board symbol assigned to us is BSTC. No application was required to be
filed for inclusion on the OTC Bulletin Board. BioSpecifics had the right to
request that the Nasdaq Listing and Hearing Review Council (the "Listing
Council") review this decision. The request for review had to be made in writing
and received within 15 days from the date of the Nasdaq decision. We did not
request the Nasdaq Listing Council to review the delisting decision. The Listing
Council had the option, on its own motion, to determine to review any Panel
decision within 45 calendar days after issuance of the written decision, or
until May 6, 2004. If the Listing Council had determined to review this
decision, it could have affirmed, modified, reversed, dismissed or remanded the
decision of the Panel. We would have been notified in the event the Listing
Council determined that this matter would have been called for review. No such
review was requested by us nor did the Listing Council opt to review the Panel
decision.

Our Common Stock traded on The NASDAQ SmallCap Market tier of the Nasdaq Stock
Market ("Nasdaq") under the symbol "BSTCC" until March 23, 2004. On March 24,
2004, our common stock began trading on the OTC Bulletin Board under the symbol
BSTC. Effective May 2004, our stock was moved from the OTC Bulletin Board to the
Pink Sheets due to our failure to file our financial reports on a timely basis
with the SEC.

As we currently meet the NASDAQ independent audit committee guidelines and
expect to meet the $2.5 million shareholders equity requirement, we anticipate
reapplying to the Nasdaq SmallCap Market upon our filing of all overdue
financial reports. However, there can be no assurance that we will be successful
in reapplying to the Nasdaq SmallCap Market.

ITEM 7.  FINANCIAL STATEMENTS
                                                                           PAGE
                                                                           ----
Report of Independent  Registered  Public  Accounting Firm ..............   F-1

Consolidated  Balance Sheet as of December 31, 2003 .....................   F-2

Consolidated  Statements of Operations for Calendar Year ended
    December 31, 2003,  Fiscal Year ended January 31, 2003, and eleven
    months ended December 31, 2003 ......................................   F-3

Consolidated  Statements of  Stockholders'  Equity and  Comprehensive  Loss
    for Calendar Year ended December 31, 2003 and Fiscal Year ended
    January 31, 2003 ....................................................   F-4

Consolidated  Statements of Cash Flows for Calendar  Year ended
    December 31, 2003 and Fiscal Year ended January
    31, 2003, and eleven months ended December 31, 2003 .................   F-5

Notes to Consolidated  Financial Statements .............................   F-6

ITEM 8.  CHANGES IN, AND DISAGREEMENTS WITH ACCOUNTANTS, ON ACCOUNTING
         AND FINANCIAL DISCLOSURE.

None.

                                       23


ITEM 8A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls

Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to disclose in the reports we file
pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported. We have evaluated the effectiveness of such controls.

Limitation on the Effectiveness of Controls

Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated can provide only reasonable,
but not absolute assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management overrule of a control. A design
of a control system is also based upon certain assumptions about potential
future conditions over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.

Conclusions

There were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.

ITEM 8B. OTHER INFORMATION

                  NONE

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The Board of Directors is divided into three classes, each of which serves for a
term of three years, with only one class of directors being elected in each
year. The term of office of the first class of directors, presently consisting
of Thomas L. Wegman and Dr. Paul A. Gitman will expire at the Annual Meeting in
2006, the term of office of the second class of directors, presently consisting
of Henry Morgan and Michael Schamroth will expire on the date of the Annual
Meeting in 2004, and the third class of directors, consisting of Edwin H. Wegman
will expire on the date of the Annual Meeting in 2005. Dr Friedel resigned as a
Director and the Managing Director of Biospecifics Pharma GmbH on April 30,
2004. We do not anticipate replacing Dr. Friedel on the Board. In each case,
barring death, resignation or removal, each director serves from the date of his
election until the end of his term and until his successor is elected and
qualified.

                                       24


The directors have the positions with the Company and principal occupations set
forth in the table below.



                               AGE AT MAY    POSITION WITH THE COMPANY                                      TERM
NAME                           15, 2004      AND PRINCIPAL OCCUPATION                    DIRECTOR SINCE     EXPIRES
- ----                           --------      ------------------------                    --------------     -------
                                                                                                
Edwin H. Wegman                84            Chairman of the Board and President         1990               2005
Thomas L. Wegman               49            Director, Executive Vice President          1994               2006
Dr. Paul A. Gitman             63            Director; Director, Quality and Resource    1990               2006
                                             Management, Long Island Jewish Medical
                                             Center
Henry Morgan                   83            Director; Senior partner of the law firm    1990               2004
                                             Morgan, Melhuish, Monaghan, Arvidson,
                                             Abrutyn & Lisowski
Michael Schamroth              64            Director, owner of M. Schamroth & Sons      2004               2004


Edwin H. Wegman has had the principal occupation and positions with the Company
set forth in the table above for the past five years, and has held similar
positions with the Company's subsidiaries, Advance Biofactures Corporation
("ABC-New York") and Advance Biofactures of Curacao ("ABC-Curacao"), for the
past five years.

Thomas L. Wegman was Secretary and Treasurer of the Company from inception to
July 1997, at which time he assumed his current position. In addition, he has
held, for the past five years, similar positions with the Company's
subsidiaries, ABC-New York and ABC-Curacao.

Dr. Gitman is Medical Director at Long Island Jewish Medical Center since
January 1, 1995 and prior thereto was an independent physician engaged in the
practice of internal medicine with Spellman Mykoff & Gitman, MD, P.C.

Henry Morgan has had the principal occupation set forth in the table above for
the past five years. For personal reasons, Mr. Morgan resigned from the board on
May 16, 2003 and rejoined the board on July 10, 2003.

Michael Schamroth became an interim director as of February 24, 2004. Mr.
Schamroth's appointment to the Board will be ratified at the Company's next
stockholders' meeting, which should take place near the end of 2004. Mr.
Schamroth, who runs a fourth generation family owned business, has in excess of
twenty years of experience as a Board Member of a major Long Island based health
system. His many roles have included Chairman of the Board, Chairman of the
Compensation Board and Member of the Finance Committee.

                                       25


To the Company's knowledge, based solely on its review of the copies of Forms 4
and 5 furnished to it, the Company believes that all Section 16(a) reporting
requirements were complied with during the fiscal year ended December 31, 2003.

EXECUTIVE OFFICERS

In addition to the executive officers named above, the Company employed Albert
Horcher as its Secretary, Treasurer, and Principal Financial and Chief
Accounting Officer. Mr. Horcher, 44, is a certified public accountant and served
in these positions from July 1997 to April 2004, when he resigned from the
Company. From February 1991 to July 1997, he served as the Company's Controller
and Principal Financial and Chief Accounting Officer. In addition, he held for
the past five years similar positions with the Company's subsidiaries, ABC-New
York and ABC-Curacao. Executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board.

BOARD MEETINGS AND COMMITTEES

During the last fiscal year that ended December 31, 2003, the Board of Directors
met 5 times. All incumbent directors, with the exception of Mr. Schamroth who
joined the board in 2004, attended at least 80% of board meetings.

Audit Committee. The Board has an Audit Committee consisting of Dr. Paul A.
Gitman, and Henry Morgan. The function of the Audit Committee is to recommend
selection of the Company's independent accountants, review with the independent
accountants the results of their audits, review with the independent accountants
and management the Company's financial reporting and operating controls and the
scope of audits, review all budgets of the Company and its subsidiaries and make
recommendations concerning the Company's financial reporting, accounting
practices and policies and financial, accounting and operating controls and
safeguards and review matters relating to the relationship between the Company
and its auditors. The audit committee met 4 times during the fiscal year ended
December 31, 2003

Stock Option Committee. The stock option committee consists of Dr. Paul A Gitman
and Henry Morgan. The function of the Stock Option Committee is to administer
the Company's 1993 Stock Option Plan (the "1993 Plan") which expired July 2004,
the Company's 1997 Stock Option Plan (the "1997 Plan"), and the Company's 2001
Stock Option Plan (the "2001 Plan"). The stock option committee did not meet
during the last fiscal year.

Executive Committee. The executive committee consists of Edwin H. Wegman and
Thomas L. Wegman. The function of the Executive Committee is, except for certain
matters reserved to the full Board, to exercise all of the powers of the Board
in the management of the business of the Company during intervals between Board
meetings, if necessary. The executive committee held numerous meetings during
the last fiscal year.

The Board does not have nominating or compensation committees.

Family Relationships
- --------------------

Edwin Wegman, our Chief Executive Officer, is the father of Thomas Wegman, who
is our Executive Vice President.

                                       26


Involvement in Certain Legal Proceedings
- ----------------------------------------

None of our directors, executive officers, promoters or control persons has been
involved in any of the following events during the past five years:

1. any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time; 2. any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses); 3. being subject to any order, judgment,
or decree, not subsequently reversed, suspended or vacated, or any court of
competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or 4. being found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.

Audit Committee Financial Expert

Our Board of Directors has determined that it does not have a member of its
audit committee that qualifies as an "audit committee financial expert" as
defined in Item 401(e) of Regulation S-B, and is "independent" as the term is
used in Tem 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of
1934, as amended.

We believe that retaining an independent director who would qualify as an "audit
committee financial expert" would be overly costly and burdensome and is not
warranted in our current circumstances.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company's officers, directors and
persons who beneficially own more than ten percent of the Common Stock to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. These reporting persons also are required to furnish the Company
with copies of all Section 16(a) forms they file.

Code of Ethics

Our company's board of directors does not currently have a Code of Business
Conduct and Ethics but will be adopting one during the current calendar year
that will apply to, among other persons, members of our Board of Directors, our
company's officers including our president (being our principal officer) and our
company's chief financial officer (being our principal financial and accounting
officer), contractors, consultants and advisors. As adopted, our Code of
Business Conduct and Ethics will set forth written standards that are designed
to deter wrongdoing and to promote:

1. honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;

2. full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file with, or submit to, the Securities and Exchange
Commission and in other public communications made by us;

                                       27


3. compliance with applicable governmental laws, rules and regulations;

4. the prompt internal reporting of violations of the Code of Business Conduct
and Ethics to an appropriate person or persons identified in the Code of
Business Conduct and Ethics; and 5. accountability for adherence to the Code of
Business Conduct and Ethics.

ITEM 10. - EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation for services
rendered in all capacities awarded to, or earned by, certain of the Company's
executive officers for the fiscal years indicated. There are no other officers
who earned an aggregate salary and bonus in excess of $100,000 during the fiscal
year ended December 31, 2003. These executive officers also serve in the same
capacities in ABC-New York, and ABC-Curacao, except for Dr. Friedel.

- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
                                           Annual              Long-Term
                                           Compensation        Compensation
                                           (no other           (no restricted
                                           compensation        stock grants were
                                           applicable)         issued)
- --------------------------- -------------- ------------------- -----------------
Edwin H. Wegman             12/31/03       297,402(1)           -
  President                 1/31/03        405,169             39,000
                            1/31/02        405,169             100,000
- --------------------------- -------------- ------------------- -----------------
Thomas L. Wegman            12/31/03       193,147              -
  Executive                 1/31/03        205,895             45,000
  Vice President            1/31/02        205,895             50,000

- --------------------------- -------------- ------------------- -----------------
Rainer Friedel              12/31/03       192,500              -
  Managing Director         1/31/03        192,500             20,000
                            1/31/02        192,500             50,000

- --------------------------- -------------- ------------------- -----------------
Albert Horcher              12/31/03       118,469              -
  Secretary and             1/31/03        120,692             20,000
  Treasurer                 1/31/02        120,692             20,000

- --------------------------- -------------- ------------------- -----------------

(1) Mr. Edwin H. Wegman's salary for the three months ended June 30, 2003 for
approximately $100,000 was deferred and subsequently, in March 2004, applied to,
the chairman note receivable with the Company.

DIRECTOR COMPENSATION

The Company has no specific policy for compensating directors. In past fiscal
years, directors, who were not employees, were compensated for meetings attended
in person at the Company's headquarters, at a rate of $1,500 per meeting. They
were also granted stock options. However, during the year ended December 31,
2003, none of the incumbent directors, and none of the former directors, were
paid for any meetings attended in person, and no accruals were made.

                                       28



ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT.

To the Company's knowledge, the table that follows sets forth the beneficial
ownership of shares of Common Stock as of July 14, 2004 of (i) those persons or
groups known to the Company to beneficially own more than 5% of the Common
Stock, (ii) each director and nominee of the Company, (iii) each executive
officer whose compensation exceeded $100,000 (each, a "named executive officer")
in the calendar year ended December 31, 2003 (calendar 2003"), and (iv) all
directors and executive officers of the Company as a group. The information is
determined in accordance with Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), based on information
furnished by the persons listed or contained in filings made by them with the
Securities and Exchange Commission. Unless indicated below, the stockholders
listed possess sole voting and investment power with respect to their shares and
the business address of each stockholder is c/o BioSpecifics Technologies Corp.,
35 Wilbur St., Lynbrook, New York 11563.



                                                   NUMBER OF SHARES
NAME AND ADDRESS OF                                OF COMMON STOCK                 PERCENT OF
BENEFICIAL OWNER                                 BENEFICIALLY OWNED                  CLASS
- ----------------                                 ------------------                  -----
                                                                             
Edwin H. Wegman (1)(5)                                2,235,192                       39.4%
Thomas L. Wegman (2)(5)                                 240,544                       4.2
Paul A. Gitman, MD. (3)(5)                               72,925                       1.3
Henry Morgan (5)                                         35,425                         *
Michael Schamroth (4)(5)                                110,000                       1.9
Bio Partners LP (5)                                     295,312                       5.5

Directors and executive officers as a                 2,694,086                      46.8%
group (5 persons)

- ------------------------------------
(*)        Less than 1%.

(1)        Includes 1,843,327 shares of Common Stock owned by The S.J. Wegman
           Company, a partnership of which Edwin H. Wegman is the sole general
           partner. Includes 120,000 shares beneficially owned by The Isabel H.
           Wegman Rev. Trust. The sole trustee of this trust is the estate of
           Mr. Wegman's brother. Includes options to purchase 66,750 shares of
           Common Stock that are currently exercisable. Does not include options
           to purchase 79,250 shares of Common Stock that are not currently
           exercisable. Edwin H. Wegman is the father of Thomas L. Wegman.

(2)        Includes 7,300 shares of Common Stock held by Thomas L. Wegman's wife
           and child. Includes options to purchase 205,800 shares of Common
           Stock that are currently exercisable. Thomas L. Wegman is a son of
           Edwin H. Wegman.

(3)        Includes 16,500 shares of Common Stock held by Dr. Gitman's wife and
           children. Includes options to purchase 35,425 shares of Common Stock
           that are currently exercisable. Dr. Gitman's business address is c/o
           Long Island Jewish Medical Center, 270-05 76th Ave., New Hyde Park,
           New York 11040.

                                       29


(4)        Includes 100,000 shares owned by M. Schamroth & Sons and options to
           purchase 10,000 shares of Common Stock, which are currently
           exercisable.

(5)        Listed address is 35 Wilbur Street, Lynbrook, New York 11563

Equity Compensation Plan Information

We maintain three equity compensation plans, the 1993 stock option plan (which
expired July 2004), the 1997 stock option plan and the 2001 stock option plan.

In July 1994, the Company's stockholders approved a stock option plan (the "1993
plan") for eligible key employees, directors, independent agents, and
consultants who make a significant contribution toward the Company's success and
development and to attract and retain qualified employees. Under the 1993 plan,
qualified incentive stock options and non-qualified stock options may be granted
to purchase up to an aggregate of 200,000 shares of the Company's common stock,
subject to certain anti-dilution provisions. The exercise price per share of
common stock may not be less than 100% (110% for qualified incentive stock
options granted to stockholders owning at least 10% of common shares) of the
fair market value of the Company's common stock on the date of grant. In
general, the options vest and become exercisable in four equal annual
installments following the date of grant, although the Board of Directors, at
its discretion, may provide for different vesting schedules, and expire ten
years (five years for qualified incentive stock options granted to stockholders
owning at least 10% of common shares) after such date. In accordance with terms
of the 1993 plan, no option shall be granted under the plan subsequent to ten
years after its effective date, or July 2004.

In July 1997, the Company's stockholders approved a stock option plan (the "1997
plan") with terms identical to the 1993 plan. The 1997 plan authorizes the
granting of awards of up to an aggregate of 500,000 shares of the Company's
common stock, subject to certain anti-dilution provisions.

In August 2001, the Company's stockholders approved a stock option plan (the
"2001 plan"), with terms similar to the 1997 plan. The 2001 plan authorized the
granting of awards of up to an aggregate of 750,000 shares of the Company's
common stock, subject to certain anti-dilution provisions. On December 16, 2003,
stockholders approved an amendment to the 2001 stock option plan which increased
the number of shares authorized for grant from 750,000 shares to 1,750,000
shares, an increase of 1,000,000 shares. A total of 1,750,000 shares of common
stock are now authorized for issuance under the amended 2001 plan.

The following table sets forth information regarding securities authorized for
issuance under our equity compensation plans as of December 31, 2003.



- ------------------------------ --------------------------- --------------------- ----------------------------
                                                                                    Number of securities
                                Number of securities to      Weighted average      remaining available for
                                be issued upon exercise     exercise price of       future issuance under
                                 of outstanding options    outstanding options    equity compensation plans
- ------------------------------ --------------------------- --------------------- ----------------------------
                                                                                
Equity compensation plans
approved by security holders          1,350,625                  $1.77                   1,018,650
- ------------------------------ --------------------------- --------------------- ----------------------------


                                       30


                       EXECUTIVE STOCK OPTION GRANT TABLE


- -------------------------- ------------------------- ----------------------- --------------------------------
Executive                  Total Options Issued      Number Exercisable      Exercisable and under $1.47
- -------------------------- ------------------------- ----------------------- --------------------------------
                                                                      
Edwin Wegman               139,000                     66,750                  13,250
- -------------------------- ------------------------- ----------------------- --------------------------------
Thomas Wegman              205,800                    205,800                 115,000
- -------------------------- ------------------------- ----------------------- --------------------------------
Paul Gitman, M.D.           35,425                     35,425                  15,425
- -------------------------- ------------------------- ----------------------- --------------------------------
Henry Morgan                35,425                     30,000                  10,000
- -------------------------- ------------------------- ----------------------- --------------------------------


There were no grants of options to the executives of the Company during the
fiscal year ended December 31, 2003 and no officer or director exercised any
option during the year ended December 31, 2003.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The S.J. Wegman Company owns Wilbur Street Corporation ("WSC"), which has leased
to ABC-New York a building serving as a manufacturing facility and headquarters
in Lynbrook, New York for over 30 years. The building also serves as the
Company's administrative headquarters. Edwin H. Wegman, the Company's Chairman
of the Board and President, is the President of WSC and the sole general partner
of The S.J. Wegman Company, a limited partnership. In January 1998, WSC and the
Company entered into a triple net lease agreement that provides for an annual
rent starting at $125,000, which can increase annually by the amount of annual
increase in the Consumer Price Index for the greater New York metropolitan
region. The lease term is 7 years, expiring January 31, 2005. The Company
believes that the terms of this lease are reasonable and the rent charged is no
greater than that which would be charged by an unaffiliated landlord for
comparable facilities, based on appraisals of the property

The Company has two outstanding loans to the Company's chairman. One loan, whose
principal balance at December 31, 2003 is $494,302 is a demand promissory note,
bears interest at 9% per annum, and is collateralized by approximately 1,800,000
shares of the Company's stock. Another loan, whose principal balance at December
31, 2003 is $56,820 is a demand promissory note, bears interest at 9% per annum,
and is uncollateralized. The Company also has two loans with Wilbur St.
Corporation ("WSC"), an affiliate of the chairman. One loan is a non-amortizing
mortgage from WSC in the amount of $82,606 and bears interest at 9% per annum;
the other is for advances to WSC in the amount of $15,647. For financial
statement purposes, all these loans, which aggregate $649,375 of principal, are
classified as components of stockholders' equity in the balance sheet and appear
as "Notes due from chairman and other related party". During calendar 2003, the
Chairman repaid net principal of $375,935 on these loans. There is no assurance
that the Company will be able to collect on these notes. Interest income accrued
for these loans but not recognized for financial statement purposes aggregated
approximately $42,000 and $101,000 for the calendar year 2003 and fiscal 2003,
respectively.

ABC-New York has notes payable to a former director of the Company and to a
partner of the S.J. Wegman Company, an affiliate, amounting to $15,010 at
December 31, 2003. The notes, which bear interest at 9% per annum, are payable
on demand.

                                       31


ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

      (A) EXHIBITS FILED

      Exhibit 3.1      Certificate  of Amendment of  Certificate  of
                       Incorporation of Registrant, as amended. (Previously
                       filed with Registrant's Registration Statement on Form
                       S-18 "Registration Statement" and incorporated herein by
                       reference.)

      Exhibit 3.2      Registrant's by-laws as amended. (Previously filed as
                       Exhibit 3.2 and 3.2(a) to Registrant's Registration
                       Statement and incorporated herein by reference.)

      Exhibit 3.3      Registrant's by-laws as amended [Note: section 1.15
                       deleted in its entirety]*

      Exhibit 4.1      Copy of Promissory Note executed by Edwin H. Wegman in
                       favor of Advance Biofactures Corporation. (Previously
                       filed as Exhibit 28.1 to Registrant's Registration
                       Statement and incorporated herein by reference.)

      Exhibit 4.2      Copy of Promissory Note executed by Advance
                       Biofactures Corporation in favor of Sherman C. Vogel and
                       Clarification of Loan executed by Advance Biofactures
                       Corporation and Sherman C. Vogel, and. (Previously filed
                       as Exhibit 28.2 to Registrant's Registration Statement
                       and incorporated herein by reference.)

      Exhibit 4.3      Copy of Promissory Note executed by Advance
                       Biofactures Corporation in favor of Myron E. Wegman.
                       (Previously filed as Exhibit 28.3 to Registrant's
                       Registration Statement and incorporated herein by
                       reference.)

      Exhibit 10.1     Form of 1991 Stock Option Plan of the Registrant.
                       (Previously filed as Exhibit 10.1 to Registrant's
                       Registration Statement and incorporated herein by
                       reference.)

      Exhibit 10.2     Form of 1993 Stock Option Plan of Registrant.
                       (Previously filed on the Registrant's Form S-8
                       Registration No. 33-95116 dated July 28, 1995 and
                       incorporated herein by reference.)

      Exhibit 10.3 Copy of Agreement between Advance Biofactures
                       Corporation and Knoll Pharmaceutical Company, without
                       exhibits. (Previously filed as exhibit 10.3 to
                       Registrant's 10-KSB for the year ended January 31, 1995
                       and incorporated herein by reference.)

      Exhibit 10.4     Copy of Lease between Advance Biofactures Corporation
                       and the Wilbur Street Corporation. (Previously filed as
                       exhibit 10.4 to Registrant's 10-KSB for the year ended
                       January 31, 1998 and incorporated herein by reference.)

      Exhibit 10.5     Copy of Lease between the Curacao Industrial and
                       International Trade Development Company (Curinde) N.V.
                       and Advance Biofactures Corporation of Curacao, N.V.
                       (English translation). (Previously filed as Exhibit 10.5
                       to Registrant's Registration Statement and incorporated
                       herein by reference.)

                                       32


      Exhibit 10.6     Copy of Agreement between Bio-Specifics N.V. (a
                       wholly-owned subsidiary of Advance Biofactures of
                       Curacao, N.V.) and Sheldon R. Pinnell, MD. (Previously
                       filed as Exhibit 10.17 to Registrant's Registration
                       Statement and incorporated herein by reference.)

      Exhibit 10.7     Copy of Employment Agreement with Dr. Rainer Friedel
                       (English summary attached). (Previously filed as exhibit
                       10.18 to Registrant's 10-KSB for the year ended January
                       31, 1996 and incorporated herein by reference.)

      Exhibit 10.8     Copy of Collagenase ABC license agreement between
                       Advance Biofactures of Curacao, N.V. and a Swiss company,
                       without exhibits. (Previously filed as exhibit 29.2 to
                       Registrant's 10-KSB for the year ended January 31, 1995
                       and incorporated herein by reference.)

      Exhibit 10.9     Form of 1997 Stock Option Plan of Registrant.
                       (Previously filed on the Registrant's Form S-8
                       Registration No. 333-36485 dated September 26, 1997 and
                       incorporated herein by reference.)

      Exhibit 10.10    Regulatory Compliance Agreement between Advance
                       Biofactures Corp., Knoll Pharmaceutical Company, and
                       Smith and Nephew, Inc. (Previously filed on the
                       Registrant's Form 8-K dated March 3, 2000 and
                       incorporated herein by reference.)

      Exhibit 10.11    Allocation of Responsibilities Agreement between
                       Advance Biofactures Corp., Knoll Pharmaceutical Company,
                       and Smith and Nephew, Inc. (Previously filed on the
                       Registrant's Form 8-K dated March 3, 2000 and
                       incorporated herein by reference.)

      Exhibit 10.12    Adverse Event ("AE") Agreement between Advance
                       Biofactures Corp., Knoll Pharmaceutical Company, and
                       Smith and Nephew, Inc. (Previously filed on the
                       Registrant's Form 8-K dated March 3, 2000 and
                       incorporated herein by reference.)

      Exhibit 10.13    Recourse Secured Demand Note between BioSpecifics
                       Technologies Corp. and Edwin H. Wegman

      Exhibit 10.14    Stock Pledge Agreement between BioSpecifics Technologies
                       Corp. and Edwin H. Wegman

      Exhibit 10.15    Form of 2001 Stock Option Plan of Registrant

      Exhibit 10.16    Loan agreement between Advance Biofactures of
                       Curacao, NV and Korpodeko Curacao Development Corporation
                       dated August 6, 2001 and Letter of Intent dated May 15,
                       2001.

                                       33


      Exhibit 10.17    Promissory note loan and warrant agreement between
                       BioSpecifics Technologies Corp. and David Geller dated
                       March 11, 2003

      Exhibit 10.20    12% Senior Secured Convertible Note dated June 19,
                       2003 between BioSpecifics Technologies Corp. and Bio
                       Partners LP. (Previously filed on the Registrant's Form
                       8-K dated June 19, 2003 and incorporated herein by
                       reference.)

      Exhibit 10.21    Securities Purchase Agreement dated June 19, 2003
                       between BioSpecifics Technologies Corp., Advance
                       Biofactures Corporation, and Bio Partners LP. (Previously
                       filed on the Registrant's Form 8-K dated June 19, 2003
                       and incorporated herein by reference.)

      Exhibit 10.22    Investor Rights Agreement dated June 19, 2003
                       between BioSpecifics Technologies Corp. and Bio Partners
                       LP. (Previously filed on the Registrant's Form 8-K dated
                       June 19, 2003 and incorporated herein by reference.)

      Exhibit 22       Subsidiaries of the Registrant. (Previously filed as
                       exhibit 22 to Registrant's 10-KSB for the year ended
                       January 31, 1996 and incorporated herein by reference.)

      Exhibit 23.1     Consent of BDO Seidman LLP.*

      Exhibit 24       Development and Licensing Agreement dated June 3, 2004
                       between BioSpecifics Technologies Corp. and Auxilium
                       Pharmaceuticals, Inc.

      Exhibit 31.1     Certification pursuant to Section 302 of the
                       Sarbanes-Oxley Act of 2002*

      Exhibit 32.1     Certification pursuant to Section 906 of the
                       Sarbanes-Oxley Act of 2002*

      -----------------------------
      *        Filed herewith

      (B) REPORTS ON FORM 8-K

          Form 8-K dated March 22, 2004
          Form 8-K dated June 10, 2004
          Form 8-K dated June 10, 2004


                                       34


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our principal accountants for each of the past two years has been BDO Seidman,
LLP.

Audit Fees

The aggregate audit fees billed for each of the last two fiscal years for
professional services rendered by our principal accountants for the audit of our
annual financial statements included in our report on form 10-KSB and review of
our quarterly financial statements included in our Reports on Form 10-QSB were
$80,000 and $86,000 in the year ended December 31, 2003 and January 31, 2003,
respectively.

Audit Related Fees

For the fiscal years ended December 31, 2003 and January 31, 2003, there were no
aggregate fees billed for assurance and related services by BDO Seidman, LLP
relating to the performance of the audit of our financial statements, which are
not reported under the caption "Audit Fees" above.

Tax Fees

The aggregate fees billed in each of the last two fiscal years for professional
services rendered by our principal accountants for tax compliance, tax advice
and tax planning were $26,000 and $38,500 in fiscal years ended December 31,
2003 and January 31, 2003, respectively. These services included, in each fiscal
year reported, preparation of our corporate income tax returns, tax planning
advice related to our tax returns and tax advice relating to contemplated
corporate transactions.

All Other Fees

Other than the fees described above, we have not incurred any fees for any
services rendered by our principal accounting firm.

Pre-approval Policies and Procedures

It is our policy that, before we engage our principal accountants for any audit
or non-audit services, the engagement is approved by our audit committee. Our
audit committee has delegated to Henry Morgan, its Audit Committee Chairman, and
an independent director, the authority to grant such pre-approval during periods
when the audit committee is not in session and a meeting cannot be readily
convened. A decision by Mr. Morgan to pre-approve an audit or non-audit service
must be presented to the full audit committee at it next scheduled meeting. All
fees paid to, and or billed by, our principal accountants were approved in
accordance with the policy described above beginning May 6, 2003.

                                       35


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                      BIOSPECIFICS TECHNOLOGIES CORP.
                                             (Registrant)


Date:    November 2, 2004             By: /s/ Edwin H. Wegman
                                      ----------------------------------------
                                      Edwin H. Wegman, Chairman and President



In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
                                                                                    
/s/ Edwin H. Wegman                  Chairman of the Board, President and                 November 2, 2004
- ---------------------                Director (Principal Executive Officer),
Edwin H. Wegman                      and Interim Principal Accounting Officer
                                                                                          November 2, 2004
/s/ Thomas L. Wegman                 Executive Vice President and Director
- ---------------------
Thomas L. Wegman
                                                                                          November 2, 2004
/s/ Paul A. Gitman,                  Director
- ---------------------
M.D. Paul A. Gitman, M.D.

/s/ Michael Schamroth                Director                                             November 2, 2004
- ---------------------
Michael Schamroth

/s/ Henry Morgan                     Director                                             November 2, 2004
- ---------------------
Henry Morgan




                                       36



                      BDO SEIDMAN, LLP INTERNAL PUBLICATION

             Report of Independent Registered Public Accounting Firm


Board of Directors and Stockholders of
BioSpecifics Technologies Corp.

We have audited the accompanying consolidated balance sheet of BioSpecifics
Technologies Corp. and subsidiaries as of December 31, 2003, and the related
consolidated statements of operations, stockholders' equity and comprehensive
loss and cash flows for the years ended December 31, 2003 and January 31, 2003,
and the eleven months ended December 31, 2003. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioSpecifics Technologies Corp.
and Subsidiaries as of December 31, 2003 and the results of its operations and
its cash flows for the years ended December 31, 2003 and January 31, 2003, and
the eleven months ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles.



/s/  BDO Seidman, LLP

Melville, New York
March 22, 2004, except for Note 15, as to
Which the date is June 3, 2004

                                      F-1


                         BIOSPECIFICS TECHNOLOGIES CORP.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheet

                                                               December 31, 2003
                                                               -----------------
                               Assets
Current assets:
Cash and cash equivalents                                      $   268,998
Marketable securities                                                3,026
Accounts receivable, net                                           306,786
Inventories, net                                                   880,452
Prepaid expenses and other current assets                           47,151
                                                               -----------
Total current assets                                             1,506,413
Other assets - loan costs                                          203,457
Property, plant and equipment, net                               3,845,102
                                                               -----------
                                                                 5,554,972
                                                               ===========

                Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable and accrued expenses                          $ 1,806,850
Notes payable to related parties                                    15,010
Deferred revenue                                                    45,000
Short-term debt - Korpodeko                                        364,000
Short-term debt - promissory note                                  100,000
                                                               -----------
Total current liabilities                                        2,330,860

Minority interest in subsidiaries                                   89,728

Senior secured convertible 12% note, net of discount .           1,364,591

Commitments and contingencies

Stockholders' equity:
Series A Preferred stock, $.50 par value, 700,000
shares authorized; none outstanding                                     --
Common stock, $.001 par value; 10,000,000 shares
authorized; 5,249,528 shares issued                                  5,249
Additional paid-in capital                                       4,144,207
Retained earnings                                                  180,949
Treasury stock, 361,380 shares at cost                          (1,911,237)
Notes receivable from chairman and other related party            (649,375)
                                                               -----------
Total stockholders' equity                                       1,769,793
                                                               -----------

                                                               $ 5,554,972
                                                               ===========

See accompanying notes to consolidated financial statements.


                                      F-2


                         BIOSPECIFICS TECHNOLOGIES CORP.
                                 AND SUBSIDIARIES

                      Consolidated Statements of Operations


                                                                        Year ended                   Eleven months
                                                                        December 31,   January 31,  ended December 31,
                                                                           2003           2003           2003
                                                                       -----------    -----------    -----------
                                                                                            
Revenues:
Net sales                                                              $ 1,555,625    $ 1,938,706    $ 1,332,762
Royalties                                                                1,683,915      2,140,534      1,515,931
                                                                       -----------    -----------    -----------
                                                                         3,239,540      4,079,240      2,848,693
Costs and expenses:
Cost of sales                                                            2,843,921      3,205,235      2,571,780
General and administrative                                               2,615,007      3,045,319      2,317,739
Research and development                                                   884,685      1,069,045        806,312
                                                                       -----------    -----------    -----------
                                                                         6,343,613      7,319,599      5,695,831
                                                                       -----------    -----------    -----------
Loss from operations                                                    (3,104,073)    (3,240,359)    (2,847,138)
                                                                       -----------    -----------    -----------
Other income (expense):
Investment income                                                           22,794         23,462         19,740
Interest expense                                                          (207,734)       (46,556)      (225,629)
                                                                       -----------    -----------    -----------
                                                                          (184,940)       (23,094)      (205,889)

Loss before benefit (expense) for income taxes and minority interest    (3,289,013)    (3,263,453)    (3,053,027)
Income tax benefit (expense)                                               (13,000)       260,464        (13,000)
                                                                       -----------    -----------    -----------
Loss before minority interest                                           (3,302,013)    (3,002,989)    (3,066,027)
Minority interest in loss of subsidiaries                                   77,413         78,220         70,730
                                                                       -----------    -----------    -----------
Net loss                                                               ($3,224,600)   ($2,924,769)   ($2,995,297)
                                                                       ===========    ===========    ===========

Basic and diluted net loss per share                                   ($     0.68)   ($     0.64)   ($     0.63)
                                                                       ===========    ===========    ===========
Weighted-average common shares outstanding                               4,734,867      4,564,336      4,734,867
                                                                       ===========    ===========    ===========


See accompanying notes to consolidated financial statements

                                      F-3


                         BioSpecifics Technologies Corp
                 Consolodated Statments of Stockholders' Equity



                                         Common Stock                           Preferred Stock          Retained
                                    Shares        Amount        APIC          Shares       Amount        Earnings
                                 -----------   -----------   -----------   -----------   -----------   -----------
                                                                                     
Balances - 31 Jan 2002             4,912,216   $     4,912   $ 3,800,104             0             0   $ 6,101,015
                                 ===========   ===========   ===========   ===========   ===========   ===========
Foreign currency translation              --            --            --            --            --            --
Consultant option grants                  --            --         7,600            --            --            --
Options exercised                     27,000            27        26,973            --            --            --
Proceeds from Chairman                    --            --            --            --            --            --
Net (loss)                                --            --            --            --            --    (2,924,769)
                                 -----------   -----------   -----------   -----------   -----------   -----------
Balances - 31 Jan 2003             4,939,216         4,939     3,834,677             0             0     3,176,246
                                 ===========   ===========   ===========   ===========   ===========   ===========
Less: Jan 2003 activity                   na            na            na            na            na       229,303
Balances - 31 Dec 2002             4,939,216         4,939     3,834,677             0             0     3,405,549
Foreign currency translation              --            --            --            --            --            --
Consultant option grants - IS         15,000            15        14,985            --            --            --
BioPartners loan/discount            295,312           295       280,546            --            --            --
Geller warrants, Garut options            --            --        14,000            --            --            --
Proceeds from Chairman                    --            --            --            --            --            --
Net (loss)                                --            --            --            --            --    (3,224,600)
                                 -----------   -----------   -----------   -----------   -----------   -----------
Balances - 31 Dec 2003             5,249,528   $     5,249   $ 4,144,208             0             0   $   180,949
                                 ===========   ===========   ===========   ===========   ===========   ===========
[RESTUBBED-


                                       Treas        Due from       Currency     Stkholder Eq     Comprehen
                                       stock        Chairman        Transl          Total        inc (loss)
                                    -----------    -----------    -----------    -----------    -----------
                                                                                 
Balances - 31 Jan 2002              ($1,911,237)   ($1,116,378)   $    15,811    $ 6,894,227    ($  259,656)
                                    ===========    ===========    ===========    ===========    ===========
Foreign currency translation                 --             --         (6,823)        (6,823)        (6,823)
Consultant option grants                     --             --             --          7,600
Options exercised                            --             --             --         27,000
Proceeds from Chairman                       --         91,069             --         91,069
Net (loss)                                   --             --             --     (2,924,769)    (2,924,769)
                                    -----------    -----------    -----------    -----------    -----------
Balances - 31 Jan 2003               (1,911,237)    (1,025,309)         8,988      4,088,304     (2,931,592)
                                    ===========    ===========    ===========    ===========    ===========
Less: Jan 2003 activity                      na       (105,000)            na        124,303             na
Balances - 31 Dec 2002               (1,911,237)    (1,130,309)         8,988      4,212,607             --
Foreign currency translation                 --             --         (8,988)        (8,988)        (8,988)
Consultant option grants - IS                --             --             --         15,000             --
BioPartners loan/discount                    --             --             --        280,841             --
Geller warrants, Garut options               --             --             --         14,000             --
Proceeds from Chairman                       --        480,934             --        480,934             --
Net (loss)                                   --             --             --     (3,224,600)    (3,224,600)
                                    -----------    -----------    -----------    -----------    -----------
Balances - 31 Dec 2003              ($1,911,237)   ($  649,375)   $         0    $ 1,769,794    ($3,233,588)
                                    ===========    ===========    ===========    ===========    ===========



                                      F-4


                BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows



                                                                    Twelve months ended         Eleven months
                                                                December 31,   January 31,   ended December 31,
                                                                   2003           2003             2003
                                                               -----------    -----------    --------------------
                                                                                    
Cash flows from operating activities:
Net loss                                                       ($3,224,600)   ($2,924,769)   ($2,995,297)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization                                      699,129        636,657        650,011
Options and warrants issued for services                            14,000          7,600         14,000
Issuance of stock for services                                      15,000             --         15,000
Amortization of loan discount                                       70,137             --         70,137
Minority interest in loss of subsidiaries                          (77,413)       (78,220)       (70,730)
Deferred taxes                                                          --        164,536
Changes in operating assets and liabilities:
Accounts receivable                                                562,024      1,616,574        683,056
Inventories                                                       (231,572)       105,258       (201,546)
Prepaid expenses and other current assets                          (13,003)       (21,270)       (13,003)
Accounts payable and accrued expenses                              150,302        192,110        (65,894)
Income taxes                                                       417,000       (425,000)       425,000
                                                               -----------    -----------    -----------
Net cash used in operating activities                           (1,618,996)      (726,524)    (1,489,266)

Cash flows from investing activities:
Net paydown of notes receivable from chairman                      480,934         91,069        375,934
Expenditures for property, plant and equipment                     (16,189)       (52,268)       (16,189)
                                                               -----------    -----------    -----------
Net cash provided by investing activities                          464,745         38,801        359,745
                                                               -----------    -----------    -----------
Cash flows from financing activities:
Interest accrued on notes payable to related parties                   500            500            500
Exercise of stock options                                               --         27,000             --
Increase in short-term debt                                        100,000             --        100,000
Decrease in short-term debt                                        (91,000)            --        (91,000)
Proceeds from senior secured convertible debt                    1,575,000             --      1,575,000
Proceeds from issuance of common stock                                 295             --            295
Deferred loan costs, net                                          (203,457)            --       (203,457)
                                                               -----------    -----------    -----------
Net cash provided by financing activities                        1,381,338         27,500      1,381,338
                                                               -----------    -----------    -----------
Effect of exchange rates on cash and equivalents                    (8,988)        (6,823)        (8,988)

Increase (decrease) in cash and cash equivalents                   218,099       (667,046)       242,829
Cash and cash equivalents at beginning of year                      50,899        693,215         26,169
                                                               -----------    -----------    -----------
Cash and cash equivalents at end of year                       $   268,998    $    26,169    $   268,998
                                                               ===========    ===========    ===========

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest                                                           157,599         46,555        157,599
                                                               ===========    ===========    ===========
Income taxes                                                             0         14,050              0
                                                               ===========    ===========    ===========


See accompanying notes to consolidated financial statements

                                      F-5


BIOSPECIFICS TECHNOLOGIES CORP.
AND SUBSIDIARIES

Notes to Consolidated Financial Statements
December 31, 2003 and January 31, 2003

Organization and Description of Business

BioSpecifics Technologies Corp. ("the Company") was incorporated under the laws
of the State of Delaware in 1990. The Company produces a fermentation-derived
enzyme named Collagenase ABC (the "product" or "enzyme") that is licensed by the
U.S. Food and Drug Administration (the "FDA"). The Company operates production
facilities in Lynbrook, New York (the "Lynbrook Plant or Facility") and in
Curacao, Netherlands Antilles (the "Curacao Plant or Facility"). The Company is
also researching and developing additional products derived from this enzyme for
potential use as pharmaceuticals.

Historically, the Company's revenues have been from one customer in the United
States, Abbott Laboratories ("Abbott") who, pursuant to an exclusive licensing
agreement (the "Abbott Agreement", or the "Agreement"), compounds the product
into Collagenase Santyl(R) Ointment ("Santyl(R)" or "Ointment"), a prescription
drug used to treat a variety of skin wounds (the "topical ointment business").
The Company also earns royalties on the sale of Santyl(R) to distributors by
Abbott.

2.       Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its majority-owned subsidiaries, Advance Biofactures Corp. ("ABC - New York")
and Advance Biofactures of Curacao N.V. ("ABC - Curacao") and its wholly owned
subsidiary, Biospecifics Pharma GmbH ("Bio Pharma") of Germany. All significant
intercompany transactions and balances have been eliminated in consolidation. We
have ceased operations in Germany and are in the process of liquidating Bio
Pharma of Germany.

Change in Fiscal Year

In March 2003 we changed our fiscal year end from January 31 to December 31. Our
first fiscal year using this new basis is the twelve months ending December 31,
2003 similarly in this report we compare the twelve months ended December 31,
2003 ("calendar year 2003") to the twelve months ended January 31, 2003 ("fiscal
year 2003"). The year ended January 31, 2003 is not materially different to the
eleven month period therefore the eleven months ended December 31, 2002 is not
presented.. The eleven months period ended December 31, 2003 is also presented.

As a result of the signing of the Auxilium Agreement in June 2004, the Company
now has sufficient liquidity to fund its operations (See Note 15).

                                      F-6


Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all temporary
investments and time deposits with original maturities of three months or less
to be cash equivalents.

Marketable Securities

Marketable securities principally consist of investments in common and preferred
stocks. These investments are classified as trading securities and are adjusted
to market value at the end of each accounting period. Unrealized holding gains
and losses on trading securities are included in investment and other income in
the accompanying consolidated statements of operations.

Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out
basis) or market.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation.
Machinery and equipment, furniture and fixtures, and autos are depreciated on
the straight-line basis over their estimated useful lives of 5 to 10 years.
Leasehold improvements are being amortized over the lesser of their estimated
useful lives or the life of the lease which is approximately 8 to 10 years.

Impairment of Long-Lived Assets

The Company evaluates the net realizable value of its property and equipment and
other assets in accordance with Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"), relying on a number of factors including operating results, business
plans, economic projections and anticipated future cash flows. SFAS 144 requires
recognition of impairment of long-lived assets in the event the net book value
of such assets exceeds the estimated future undiscounted cash flows attributable
to such assets or the business to which such intangible assets relate. The
Company recorded no impairment charges for the year ended December 31, 2003 and
January 31, 2003.

Income Taxes

The Company uses the liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards ("SFAS") No. 109
"Accounting for Income Taxes". Under this method, deferred income taxes, when
required, are provided on the basis of the difference between the financial
reporting and income tax bases of assets and liabilities at the statutory rates
enacted for future periods.

Cumulative Translation Adjustment

The assets and liabilities of ABC Curacao are denominated in U.S. dollars.
ABC-Curacao conducts local transactions in local currency, which is translated
using average exchange rates for the period. The local currency in Curacao is
pegged to the US dollar; therefore gains and losses resulting from translation
are minimal and not included in stockholders' equity as accumulated other
comprehensive income or loss.

                                      F-7


Gains and losses resulting from translation of the Euro, the functional currency
of Bio Pharma GmbH had been included in stockholders' equity as accumulated
other comprehensive income (loss).

Revenue Recognition

Net sales include the sales of Collagenase ABC enzyme that are recognized at the
time the product is shipped to customers. Net sales also include nominal fees
the Company charges Abbott for testing Santyl(R) Ointment products manufactured
by Abbott. Net sales from testing are recognized when Santyl(R) is released by
the FDA for distribution. The Company also earns royalties on Santyl(R) sales in
the United States pursuant to its licensing agreement with Abbott. Royalties are
recognized during the period in which the Ointment is delivered to distributors
in the United States, as reported to the Company by Abbott. The royalty revenues
from Abbott for both periods presented were earned on North American sales of
Santyl(R) to distributors by Smith & Nephew, Inc. ("S&N") through December 31,
2003.

From time to time, the Company enters into licensing agreements with
pharmaceutical companies regarding the sale of the Company's approved product
and potential products. License fees and milestone payments for potential
products are recognized when earned and the item is delivered under the guidance
of EITF No. 00-21 "Revenue Arrangements with Multiple Deliverables". The Company
did not recognize any license fee revenue during the periods ended December 31,
2003 and January 31, 2003.

Research and Development

The Company conducts various research and development activities for the
approved product and for potential products. Research and development costs are
charged to expense when incurred. These costs amounted to $ 884,685 and
$1,069,045 in the calendar 2003 and fiscal 2003, respectively.

Net Loss Per Share

Net loss per share is presented under SFAS No. 128 "Earnings per Share". In
accordance with SFAS No. 128, basic and diluted net loss per share has been
calculated by dividing net loss attributable to common stockholders by the
weighted-average number of common shares outstanding during the period.

Diluted net loss per share reflects the potential dilution that would occur if
common stock equivalents were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
Company. Potentially dilutive securities have been excluded from the computation
for the years ended December 31, 2003 and January 31, 2003, as their effect is
antidilutive For the years ended December 31, 2003 and January 31, 2003,
potential dilutive securities representing 1,350,625 and 1,358,325 options
outstanding are not included as their effect would be antidilutive. Furthermore,
for the year ended December 31, 2003 the Company also has 456,750 shares that
would be issued assuming $1,141,875 aggregate principal amount of the
convertible Note were converted into the Company's common stock at a conversion
price of $2.50 per share, subject to customary adjustments. These potentially
dilutive securities are not included since their effect would be anti-dilutive
because of the net loss incurred.

                                      F-8


Stock Based Compensation

The Company has three stock-based employee compensation plans in effect which
are described more fully in Note 10. The Company accounts for all transactions
under which employees receive shares of stock or other equity instruments in the
Company based on the price of its stock in accordance with the provisions of
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees." No stock-based employee compensation cost for stock options is
reflected in net loss, as all options granted under the plan had an exercise
price equal to the market value of the underlying common stock on the date of
grant. The Company recorded an expense of $14,000 and $7,600 during calendar
2003 and fiscal 2003, respectively, for options granted to consultants. The
following table illustrates the effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of SFAS No. 123
"Accounting for Stock-Based Compensation".



- ------------------------------------------------- ------------------- ------------------ --------------------
Year ended                                        December 31, 2003   January 31, 2003   Eleven Months
                                                                                         Ended December 31,
                                                                                              2003
- ------------------------------------------------- ------------------- ------------------ --------------------
                                                                                
Net loss as reported                              ($3,224,600)        ($2,924,769)       ($2,995,297)
- ------------------------------------------------- ------------------- ------------------ --------------------
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net effect of minority
interest                                             (221,361)           (280,297)          (196,800)
- ------------------------------------------------- ------------------- ------------------ --------------------
Proforma net loss                                  (3,445,961)         (3,205,066)        (3,192,097)
- ------------------------------------------------- ------------------- ------------------ --------------------

Basic and diluted net loss per share:
- ------------------------------------------------- ------------------- ------------------ --------------------
As reported                                            ($0.68)             ($0.64)            ($0.63)
- ------------------------------------------------- ------------------- ------------------ --------------------
Proforma SFAS 123                                      $(0.73)             $(0.70)            ($0.67)
- ------------------------------------------------- ------------------- ------------------ --------------------


The fair value for each option granted was estimated at the date of grant using
the Black-Scholes option-pricing model, one of the allowable valuation methods
under SFAS 123, with the following assumptions:



- ---------------------------------------- ----------------------- ----------------------- --------------------
Year Ended                               December 31, 2003       January 31, 2003        Eleven Months
                                                                                         Ended December 31,
                                                                                              2003
- ---------------------------------------- ----------------------- ----------------------- --------------------
                                                                                      
Average risk free interest rates                 4.75%                 4.50%                   4.75%
- ---------------------------------------- ----------------------- ----------------------- --------------------
Average expected life (in years)                 5.00                  5.00                    5.00
- ---------------------------------------- ----------------------- ----------------------- --------------------
Volatility                                         82%                   82%                     82%
- ---------------------------------------- ----------------------- ----------------------- --------------------


The weighted-average fair value of the options granted during the calendar year
2003 and fiscal year 2003 was estimated to be $0.95 and $0.69, respectively, for
options granted at market value.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions in determining the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
financial statements, and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

                                      F-9


Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash, accounts payable,
and accrued expenses approximate fair value based on the short-term maturity of
these instruments. It is impractical to determine the fair value of notes
receivable due from the chairman and other related party.

Concentration of Credit Risk

The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company places its cash and cash equivalents with high quality
credit institutions. At times, such investments may be in excess of the FDIC or
SIPC insurance limit. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risks.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade accounts receivable, as the Company
does not require collateral or other securities to support customer receivables.
(see Note 9.)

Recently Issued Accounting Pronouncements

FIN No. 46 "Consolidation of Variable Interest Entities" was effective
immediately upon its issuance during fiscal 2003 for all enterprises with
interests in variable interest entities created after January 31, 2003. In
December 2003, FASB issued FIN No. 46 (R) that changes the effective dates for
the recording of interests in variable interest entities created before February
1, 2003 beginning with the first interim reporting period ending after March 15,
2004. If an entity is determined to be a variable interest entity, it must be
consolidated by the enterprise that absorbs the majority of the entity's
expected losses if they occur, or receives a majority of the entity's expected
residual returns if they occur, or both. Where it is reasonably possible that
the enterprise will consolidate or disclose information about a variable
interest entity, the enterprise must disclose the nature, purpose, size and
activity of the variable interest entity and the enterprise's maximum exposure
to loss as a result of its involvement with the variable interest entity in all
financial statements issued after January 31, 2003.

A determination has been made that although the lessor of its operating facility
is a variable interest entity, the Company is not the primary beneficiary. Under
FIN 46 the lessor will not be consolidated in the Company's consolidated balance
sheet. The adoption of this interpretation in 2004 is not expected to have an
effect on the Company's financial statements.

3.       Marketable Securities

Marketable securities at December 31, 2003 consist of common and preferred
stock, with a cost basis of $245,713 unrealized holding losses of $242,687, and
fair market value of $3,026. Fair values are based upon quoted market prices.

                                      F-10


4.       Inventories, net

Inventories, net at December 31, 2003 consist of:


Raw materials              $ 65,166
Work-in-process             815,286
                           --------
                           $880,452
                           ========

5.       Property, Plant and Equipment, net

Property, plant and equipment at December 31, 2003 consist of:

Machinery and equipment                                          $2,379,795
Furniture and fixtures                                              371,917
Leasehold improvements                                            4,079,120
                                                                 ----------
                                                                  6,830,832
Less accumulated depreciation and amortization                   (2,985,730)
                                                                 ----------
                                                                 $3,845,102
                                                                 ==========

Depreciation and amortization expense amounted to $699,129 and $636,657 for
calendar 2003 and fiscal year 2003, respectively.

6.       Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31, 2003 consist of the
following:

Trade accounts payable and accrued expenses                          $   984,509
Accrued legal and other professional fees                               542,036
Accrued payroll and related costs                                       280,305
                                                                     ----------
                                                                     $1,806,850
                                                                     ==========
7.       Income Taxes

The (expense) benefit for income taxes consist of the following:

Year ended                                          December 31,    January 31,
                                                        2003           2003
                                                    ---------       ---------
Current:
Federal                                             $ (13,000)      $ 425,000
State                                                      --              --
                                                    $ (13,000)      $ 425,000
                                                    ---------       ---------
Deferred:
Federal                                                    --        (148,783)
State                                                      --         (15,753)
                                                    ---------       ---------
                                                           --        (164,536)
                                                    ---------       ---------
Total                                               $ (13,000)      $ 260,464
                                                    ---------       ---------

The effective income tax rate of the Company differs from the federal statutory
tax rate of 34% in calendar 2003 and fiscal 2003 as a result of the effect of
the following items:

                                      F-11


Year ended                                      December 31,      January 31,
                                                    2003             2003
                                                -----------       -----------
Computed tax benefit at statutory rate          $ 1,118,264       $ 1,109,574
Tax effect of foreign sourced loss                 (506,511)         (307,645)
State income taxes, net of federal tax benefit           --           (10,397)
Non-deductible expenses                              (4,116)           (4,143)
Orphan drug and other tax credits                        --            20,000
Increase in valuation allowance                    (620,637)         (546,925)
                                                -----------       -----------
                                                $   (13,000)      $   260,464
                                                ===========       ===========

The components of the Company's deferred tax assets, pursuant to SFAS No. 109,
are summarized as follows:

Year ended                                   December 31,     January 31,
                                                2003             2003
                                            -----------       -----------
Tax Credit Carryforwards                      1,033,693       $ 1,037,182
Inventory                                        34,226           172,776
Accrued expenses                                 61,918           144,638
Depreciation and amortization                    49,351            77,917
Capital loss carryforward                        66,412            66,412
Net operating loss carryforward                 873,962                --
                                            -----------       -----------
Net deferred tax assets before
  valuation allowance                         2,119,562         1,498,925
Valuation allowance                          (2,119,562)       (1,498,925)
                                            -----------       -----------
Net deferred tax asset                      $        --       $        --
                                            ===========       ===========

SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets may not be realized. The Company increased the
valuation allowance by $620,637 during the year ended December 31, 2003. The net
deferred tax asset has been fully reserved due to the uncertainty of the
Company's ability to generate taxable income under the more likely than not
criteria of FAS 109.

The Company had domestic losses before taxes of $1,784,230 and $2,234,994 for
the years ended December 31, 2003 and January 31, 2003, respectively. The
Company had foreign losses before taxes of $1,447,370 and $950,239 for the years
ended December 31, 2003 and January 31, 2003, respectively. The Company has
permanently reinvested the accumulated earnings of its foreign subsidiaries,
mostly in the form of plant, property and equipment, and therefore will not
repatriate the net balance of such earnings (approximately $.9 million as of
December 31, 2003) to the United States.

In November 2000, the Curacao government extended the 2% profit tax holiday
enjoyed by AB-Curacao for an additional 15 years. The statutory rate is 30%.

At December 31, 2003, the Company has net operating loss carryforwards of
approximately $2.1 million and $4.0 million for Federal and State income tax
purposes, respectively. These will expire at various dates from 2022 and 2023.
As December 31, 2003, the Company has approximately $1,000,000 in tax credits
which expire at various dates from 2018 through 2023.

                                      F-12


8.       Credit Facilities

The Company, through its subsidiary ABC-Curacao, has a two-year, non-amortizing
loan of $455,000 at 6.5% interest from Korpodeko, a Curacao development
corporation established to develop industry on the island of Curacao. The entire
principal was due November 2003. In September 2003, Korpodeko agreed to modify
the terms of the loan. Korpodeko permitted the Company to repay 20%, or $91,000
of the loan principal in December 2003, and pay the remaining principal, or
$364,000 in November 2004. In return, the Company agreed to an interest rate
increase from 6.5% to 7.5% from November 2003 to the new maturity in November
2004. On the consolidated balance sheet as of December 31, 2003, short-term
liabilities include the remaining $364,000 due November 2004. Substantially all
of the Company's fixed assets located in Curacao, with a book value of $3.2
million at December 31, 2003, are pledged as collateral for these obligations.
The Company has also guaranteed the Korpodeko loan.

In March 2003, the Company borrowed $100,000 from an individual lender,
evidenced by a one-year promissory note, bearing interest of 8% per annum, which
was due March 11, 2004. In March 2004, the holder of the note extended the note
for one year. The Company granted to the lender warrants to purchase up to
10,000 common shares of the Company at $1.18, the closing price on that day,
until March 11, 2008. The fair value of these warrants, based on Black-Scholes
methodology, is $5,000 and was recorded as interest expense during the calendar
year 2003. The Company's chairman has personally guaranteed the promissory note.

On June 19, 2003, the Company entered into a financing transaction with Bio
Partners LP, a private investor group, pursuant to which the Company sold to Bio
Partners in a private placement (1) a $1.575 million convertible note (the
"Note"), issued at face value, and (2) 295,312 shares (the "Shares") of Company
common stock, issued at par value, or $.001 per share. The net proceeds to us
were approximately $890,000, after the payment of expenses and repayment of
$500,000 previously advanced to us by a principal of Bio Partners. The Note
matures on June 19, 2005 and bears interest at a rate of 12% per annum with an
effective interest rate of 36%. Interest-only payments under the Note are
payable monthly in arrears and the entire principal amount is payable at
maturity. Up to $1,141,875 aggregate principal amount of the Note is convertible
into the Company's common stock at any time, at a conversion price of $2.50 per
share, subject to customary adjustments. The Note also contains restrictions on
the Company's ability to incur debt as long as the Note is outstanding. The Note
is secured by a pledge of substantially all of the assets of BioSpecifics and
its New York subsidiary, Advance Biofactures Corporation ("ABC"). In addition,
ABC has guaranteed the obligations of the Company under the Note and the
chairman has personally guaranteed 50% of the obligations under the Note. The
loan discount of $281,000 (representing the fair value of the shares issued) and
loan costs of $258,000 on the Note are being be amortized over the expected life
of the Note.

9.       Major Customer and Royalty and License Agreements

The Company's primary royalty and license agreements are for its FDA approved
product, Collagenase ABC. The Company derives most of its net sales of the
product and all of its royalty revenues from one customer in the United States,
Abbott Laboratories ("Abbott") who, pursuant to an exclusive licensing agreement
(the "Agreement"), compounds the product into Collagenase Santyl(R) Ointment
("Santyl(R)" or "ointment"), a prescription drug used to treat dermal ulcers and
burns.

                                      F-13


Abbott accounted for approximately $2,906,000 and $3,196,000 of our product
sales and royalties for the calendar year 2003 and fiscal year 2003,
respectively. These amounts were approximately 90% and 78% of our revenues
during the calendar year 2003 and fiscal year 2003, respectively. At December
31, 2003, we had firm booked orders with Abbott for the product. We will not be
able to fulfill all these orders in a timely manner due to the time required to
manufacture our product. Abbott and the Company have agreed on a manufacturing
and delivery timetable for future deliveries of product and manufacture of
Santyl(R).

The royalty revenues from Abbott were earned on North American sales of
Santyl(R) to distributors by Smith & Nephew, Inc. ("S&N") through December 31,
2003. The January 2000 sub-license agreement under which S&N marketed Santyl(R)
ointment terminated on June 30, 2003 but it was agreed they would continue to
market through the end of 2003. The Ross Products Division of Abbott
Laboratories Inc. assumed United States marketing responsibility for Collagenase
Santyl(R) Ointment effective January 1, 2004. During 2003, the Abbott Agreement
automatically renewed for an additional 10-year period, to August 2013. The
minimum annual royalty is $60,000 per year. Royalties from Abbott were
$1,683,915 and $2,140,534 in calendar year 2003 and fiscal year 2003,
respectively.

In fiscal 1997, the Company entered into an agreement to license Collagenase ABC
for sale in Germany to the German subsidiary of an international pharmaceutical
company. The agreement calls for an initial payment on signing and further
payments if and when the German health authority grants marketing approval of
Collagenase ABC ointment. Accordingly, deferred revenue at December 31, 2003 is
$45,000 from this agreement. The deferred revenue is refundable if approval in
Germany is not obtained.

10.      Stockholders' Equity

Stock Option Plans

In July 1994, the Company's stockholders approved a stock option plan (the "1993
plan", which expired July 2004) for eligible key employees, directors,
independent agents, and consultants who make a significant contribution toward
the Company's success and development and to attract and retain qualified
employees. Under the 1993 plan, qualified incentive stock options and
non-qualified stock options may be granted to purchase up to an aggregate of
200,000 shares of the Company's common stock, subject to certain anti-dilution
provisions. The exercise price per share of common stock may not be less than
100% (110% for qualified incentive stock options granted to stockholders owning
at least 10% of common shares) of the fair market value of the Company's common
stock on the date of grant. In general, the options vest and become exercisable
in four equal annual installments following the date of grant, although the
Board of Directors, at its discretion, may provide for different vesting
schedules, and expire ten years (five years for qualified incentive stock
options granted to stockholders owning at least 10% of common shares) after such
date. In accordance with terms of the 1993 plan, no option shall be granted
under the plan subsequent to ten years after its effective date, or July 2004.

In July 1997, the Company's stockholders approved a stock option plan (the "1997
plan") with terms identical to the 1993 plan. The 1997 plan authorizes the
granting of awards of up to an aggregate of 500,000 shares of the Company's
common stock, subject to certain anti-dilution provisions.

                                      F-14


In August 2001, the Company's stockholders approved a stock option plan (the
"2001 plan"), with terms similar to the 1997 plan. The 2001 plan authorizes the
granting of awards of up to an aggregate of 750,000 shares of the Company's
common stock, subject to certain anti-dilution provisions. On December 16, 2003,
stockholders approved an amendment to the 2001 stock option plan which increased
the number of shares authorized for grant from 750,000 shares to 1,750,000
shares, an increase of 1,000,000 shares. A total of 1,750,000 shares of common
stock are now authorized for issuance under the amended 2001 plan, of which
775,000 were subject to outstanding options at December 31, 2003. There are a
total of 1,018,650 shares available for grant from the 1993, 1997, and 2001
plans.

The summary of the stock options activity is as follows:



Year ended                                December 31, 2003           January 31, 2003
                                      ------------------------     ------------------------
                                                      Weighted                    Weighted
                                                      Average                     Average
                                                      Exercise                    Exercise
                                        Shares         Price         Shares         Price
                                      ----------      --------     ----------      --------
                                                                       
Outstanding at beginning of year       1,358,325      $   1.98      1,100,500      $   2.00
Options granted                           50,000          1.28        427,750          1.00
Options exercised                             --         --           (27,000)         1.00
Options canceled or expired              (57,700)         2.77       (142,925)         4.20
                                      ----------      --------     ----------      --------
Outstanding at end of year             1,350,625      $   1.77      1,358,325          1.98
                                      ----------      -------      ----------      --------
Options exercisable at year end        1,250,625          1.86      1,269,325          1.98
Shares available for future grant      1,006,150            --         56,150            --


During calendar 2003 and fiscal 2003, the Company granted 15,000 and 11,000
options, respectively, to consultants at an exercise price of $1.23 and $1.00
per share, respectively. In connection with these options, the Company recorded
in calendar 2003 and fiscal 2003 an expense of $14,000 and $7,600, respectively,
representing the estimated fair value of the options. During calendar 2003 and
fiscal 2003, the Company granted 35,000 and 416,750 options, respectively, to
employees of the Company at prices ranging from $1.00 to $3.00. The calendar
2003 options vest over 4 years and the fiscal 2003 options immediately vest. The
following table summarizes information relating to stock options by exercise
price as at December 31, 2003:

                                Outstanding         Exercisable
                             Weighted Averag      Weighted Average
  Option                     Life     Exercise                Option
exercise price   Shares     (years)    price     Shares       price
- ----------     ---------     -----   --------  ---------     --------
$1.00-1.38       973,600       7.8   $   1.04    873,600     $   1.00
      1.88       108,250       6.0       1.88    108,250         1.88
 2.00-2.88        54,750       6.8       2.63     54,750         2.63
 3.00-3.88        48,300       4.5       3.04     48,300         3.04
 4.00-4.63        97,425       3.4       4.17     97,425         4.17
 5.81-7.25        23,000       1.0       6.32     23,000         6.32
      8.00         5,300       1.0       8.00      5,300         8.00
      9.13        40,000       0.5       9.13     40,000         9.13
               ---------     -----   --------  ---------     --------
               1,350,625       6.8   $   1.77  1,250,625     $   1.86
               ---------     -----   --------  ---------     --------

                                      F-15


11.      Commitments and Contingencies

(a)      Lease Agreements

The Company's operations are principally conducted in leased premises. Future
minimum annual rental payments required under noncancellable operating leases
are approximated as follows:

Year ending December 31,

2004     $159,000
2005       47,000
2006        6,000

Rent expense under all operating leases amounted to approximately $191,000 in
both calendar 2003 and fiscal 2003, respectively. The S.J. Wegman Company, which
is owned by the Company's President and certain of his relatives, is the 100%
shareholder of the Wilbur Street Corporation ("WSC"), which owns and leases a
facility to ABC-New York.

In January 1998, WSC and the Company entered into a triple net lease agreement
that provides for an annual rent starting at $125,000, which can increase
annually by the amount of the annual increase in the consumer price index for
the greater New York metropolitan region. The lease term is 7 years, expiring
January 31, 2005. The Company paid approximately $161,000 representing rent and
real estate taxes to WSC in each of calendar 2003 and fiscal 2003.

ABC-Curacao leases a building in Brievengat, Curacao, Netherlands Antilles from
an unrelated company wholly owned by the Insular Territory of Curacao. The lease
term, which originally commenced on January 1, 1977, is automatically renewed
upon the same terms every five years, unless either party gives three months
notice prior to the expiration of the five-year period. The lessor is entitled
to revalue the rent for each successive five-year period. The lease has been
renewed through March 1, 2006. Rent expense amounted to approximately $30,000 in
calendar 2003 and fiscal 2003.

(b)      Scientific Advisory Board

The Company has an eight member Scientific Advisory Board ("the Board") that
provides research and consultation services to the Company. In fiscal 2003, the
Company recorded approximately $24,000 for payments to Board members under these
agreements. In calendar 2003, the Company made no payments to the Board.

(c)      Potential Product Liability

The sale of Collagenase ABC, as well as the development and marketing of any
potential products of the Company, expose the Company to potential product
liability claims both directly from patients using the product or products in
development, as well as from the Company's agreement to indemnify certain
distributors of the product for claims made by others. The Company has product
liability insurance which covers the use of the licensed product, Collagenase
Santyl(R), and clinical experiments of potential products in the United States.
No known claims are pending against the Company at the current time.

                                      F-16


(d)      Employment Agreement

The Company has an employment agreement with the managing director of its German
subsidiary, Bio Pharma. The Company or the managing director upon one year's
written notice can terminate the contract. The agreement provides for an annual
salary, currently $195,000, and a like severance payment if the agreement is
terminated by the Company without cause. The managing director left the employ
of the Company in January 2004 and resigned as a Director effective April 30,
2004.

(e)      FDA Observation

In 1999, the FDA advised the Company, as a result of their inspectional
observations, that it would revoke its license to manufacture the enzyme and
ointment unless the Company could immediately provide satisfactory assurance of
its compliance with the applicable GMP regulations. The Company submitted such a
plan in 1999.

The FDA notified the Company on July 28, 2003 that its request to supplement its
biologics license for collagenase ABC was approved ("FDA approval"). The FDA
notification acknowledged the Company's written commitments to provide
additional information regarding ongoing studies and when to submit this
information to its biologics license for review. Regardless of this FDA
approval, the FDA letter will remain in effect until the Company demonstrates
compliance with the applicable federal standards and regulations, which the
Company understands to be two "satisfactory annual GMP inspections" of its
Lynbrook and Curacao manufacturing facilities. The Company believes that it has
made progress in complying with the applicable federal standards and
regulations, although there can be no assurances as to when the FDA letter will
be rescinded, if at all. During the quarter ended June 30, 2004, the FDA
completed an inspection of the Company's Lynbrook facility. The Company is
hopeful that after the next FDA inspection is completed at its Lynbrook
facility, the Company will be eligible to have the FDA letter rescinded. In May
2004, the FDA inspected the facility of the Company's Subcontractor. To the best
of the Company's knowledge, the FDA has not commented on the inspection, nor is
the FDA obligated to do so.The FDA has not conducted an inspection of the
Company's Curacao facility since July 2002.

12.      Segment Information

The Company is engaged in one segment, specifically research, development, and
production of pharmaceutical products. Operations in this business segment are
summarized below by geographic area. All unaffiliated revenues from South
America are generated by ABC-Curacao and primarily represent export sales made
to Brazil and India ("S.A.").



                                       North
Year ended December 31, 2003:          America              S.A. and Europe        Eliminations           Consolidated
- -----------------------------          -------              ---------------        ------------           ------------
                                                                                                
Revenues                               $2,905,765             $333,775                                      $3,239,540
Intercompany revenue between
geographic regions                                             764,471                (764,471)                      -

Loss from operations                   (1,652,836)          (1,451,237)                                     (3,104,073)

Loss before taxes                      (1,784,230)          (1,447,370)                                     (3,231,600)

Identifiable assets                     2,141,223            3,541,657                (127,909)              5,554,971
Capital expenditures                       (7,960)              24,149                                          16,189
Depreciation and amortization             117,670              581,459                                         699,129


                                      F-17





                                       North
Year ended January 31, 2003:           America              S.A. and Europe        Eliminations           Consolidated
- -----------------------------          -------              ---------------        ------------           ------------
                                                                                                   
Revenues                               $3,196,356           $882,884                                        $4,079,240

Intercompany revenue between
geographic regions                                             629,640                (629,640)                      -

Loss from operations                   (2,299,442)            (940,917)                                     (3,240,359)

Loss before taxes                      (2,234,994)            (950,239)                                     (3,185,233)

Identifiable assets                     2,614,313            4,284,218                (262,520)              6,636,011
Capital expenditures                        3,885               48,383                                          52,268
Depreciation and amortization             125,199              511,458                                         636,657


The information presented above may not be indicative of results if the
geographic areas were independent organizations. Intercompany transactions are
made at transfer prices which management believes to be equivalent to those made
at arms-length.

13.      Related Party Transactions

The Company has two loans to the Company's chairman. One loan, whose principal
balance at December 31, 2003 is $494,302 is a demand promissory note, bears
interest at 9% per annum, and is collateralized by approximately 1,800,000
shares of the Company's stock. Another loan, whose principal balance at December
31, 2003 is $56,820 is a demand promissory note, bears interest at 9% per annum,
and is uncollateralized. The Company also has two loans with Wilbur St.
Corporation ("WSC"), an affiliate of the chairman. One loan is a non-amortizing
loan from WSC in the amount of $82,606 and bears interest at 9% per annum; the
other is for advances to WSC in the amount of $15,647. For financial statement
purposes, all these loans, which aggregate $649,375 of principal, are classified
as components of stockholders' equity in the balance sheet and appear as "Notes
due from chairman and other related party". During calendar 2003, the Chairman
repaid net principal of $375,935 on these loans. There is no assurance that the
Company will be able to collect on these notes. Interest income accrued for
these loans but not recognized for financial statement purposes aggregated
approximately $42,000 and $101,000 for the calendar year 2003 and fiscal 2003,
respectively.

ABC-New York has notes payable to a former director of the Company and to a
partner of the S.J. Wegman Company, an affiliate, amounting to $15,010 at
December 31, 2003. The notes, which bear interest at 9% per annum, are payable
on demand.

14.      Employee Benefit Plan

ABC-New York has a 401(k) Profit Sharing Plan for employees who meet minimum age
and service requirements. Contributions to the plan by ABC - New York are
discretionary and subject to certain vesting provisions. The Company made no
contributions to this plan for calendar 2003 or fiscal 2003.

                                      F-18


15.      Subsequent Events

In June 2004, the Company entered into a development and license agreement
Auxilium Pharmaceuticals, Inc.("the Auxilium Agreement"). Under the agreement,
the Company has granted Auxilium the rights to develop products containing its
enzyme ("AA4500") for the treatment of Peyronie's and Dupuytren's disease. The
Company has granted Auxilium the exclusive world-wide license to any products
developed under the agreement other than dermal formulations labeled for topical
administration. The Company also granted Auxilium the option to develop and
license the technology for use in other indications other than dermal
formulations labeled for topical administration. The agreement extends, on a
country-by-country and product-by-product basis, for the longer of the patent
life, the expiration of any regulatory exclusivity period or 12 years. Auxilium
may terminate the agreement with 90 days written notice. Auxilium is obligated
to pay all clinical and regulatory development costs on an on-going basis, to
purchase commercial inventory from the Company and to pay royalties based on
product sales. In addition, Auxilium is obligated to make milestone payments for
contract initiation, receipt of technical data, manufacturing process
development, the one-year anniversary date, filing of regulatory applications
and receipt of regulatory approval.

In June 2004, we received an up-front payment under the agreement totalling
$2,500,000. In August 2004, we received an additional $2,500,000 for delivery of
all in-process research and development material product data relating to
Dupuytren's and Peyronie's disease. We may also receive up to $10,500,000 of
contingent milestone payments under this agreement if all existing conditions
are met. Additional milestone obligations may be due if Auxilium exercises an
option to develop and license our enzyme for additional medical indications.

In March 2004, the chairman's deferred salary of $100,000 during the three
months ended June 2003 has been applied against the chairman's note receivable.

On March 22, 2004 the Nasdaq Listings Qualifications Panel (the "Panel")
informed the Company in writing of its determination to delist the Company's
common stock from The NASDAQ SmallCap Market effective with the open of business
on March 24, 2004. The Nasdaq notice stated that the Panel's determination was
based on the Company's failure to satisfy the $2.5 million shareholders' equity
requirement as of December 31, 2003. The Company's common stock was immediately
eligible for quotation on the OTC Bulletin Board effective with the open of
business on March 24, 2004. The OTC Bulletin Board symbol assigned to the
Company is BSTC. No application was required to be filed for inclusion on the
OTC Bulletin Board.


                                      F-19

EX-24

                                                                      Exhibit 24


- --------------------------------------------------------------------------------


                        DEVELOPMENT AND LICENSE AGREEMENT
                            dated as of June 3, 2004
                                 BY AND BETWEEN
                         BIOSPECIFICS TECHNOLOGIES CORP.
                            (a Delaware corporation)
                                       AND
                         AUXILIUM PHARMACEUTICALS, INC.
                            (A DELAWARE CORPORATION)


- --------------------------------------------------------------------------------
PLEASE TAKE NOTICE, SOME OF THE INFORMATION CONTAINED IN THE AGREEMENT HAS BEEN
REDACTED TO PRESERVE TRADE SECRETS.


                                    SCHEDULES


SCHEDULE 1.7               BTC PATENTS
SCHEDULE 1.16              COST OF GOODS
SCHEDULE 1.21              ENZYME
SCHEDULE 3.2               CLINICAL TRIALS


                                       i


                        DEVELOPMENT AND LICENSE AGREEMENT


         This DEVELOPMENT AND LICENSE AGREEMENT (this "Agreement") dated the 3rd
day of June, 2004 (the "June 3, 2004") is by and between BioSpecifics
Technologies Corp., a corporation organized and existing under the laws of
Delaware and having its principal office at 35 Wilbur Street, Lynbrook, New York
11563, and its Affiliates ("BTC"), and Auxilium Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware and
having its principal office at 160 West Germantown Pike, Norristown, PA
19401("Auxilium"). BTC and Auxilium shall sometimes be referred to herein
individually as a "Party" and collectively as "Parties."

                                  INTRODUCTION

         WHEREAS, BTC controls certain BTC Patents and BTC Know-How (each as
defined below) related to the Enzyme and the Product (each as defined below),
and has the right to grant certain rights and licenses thereunder as set forth
herein, and

         WHEREAS, Auxilium has certain expertise in the development and
commercialization of pharmaceutical products, and Auxilium wishes to obtain
certain licenses and options to develop and commercialize the Product for
certain therapeutic uses in humans, and

         WHEREAS, BTC wishes to convey such licenses to Auxilium.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereinafter set forth, the sufficiency of which is hereby
acknowledged, the Parties to this Agreement mutually agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         For purposes of this Agreement, the following initially capitalized
terms in this Agreement, whether used in the singular or plural, shall have the
following meanings:

         1.1 "Additional Indication" shall mean any Indication for a Product
outside of the Field.

         1.2 "Additional Indication Option" has the meaning set forth in Section
2.2(b).

         1.3 "Adverse Drug Experience" shall mean any of the following as such
terms are defined at either 21 C.F.R. ss. 312.32 or 21 C.F.R. ss. 314.80: an
"adverse drug experience," a "life-threatening adverse drug experience," a
"serious adverse drug experience," or an "unexpected adverse drug experience"
and the foreign counterparts thereof.

         1.4 "Affiliate" shall mean any corporation, company, partnership, joint
venture or firm which controls, is controlled by, or is under common control
with a specified person or entity. For purposes of this Section 1.4, "control"
shall be presumed to exist if one of the following conditions is met: (a) in the



case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors, and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities. The
Parties acknowledge that in the case of certain entities organized under the
laws of certain countries outside of the United States, the maximum percentage
ownership permitted by law for a foreign investor may be less than fifty percent
(50%), and that in such cases such lower percentage shall be substituted in the
preceding sentence, provided that such foreign investor has the power to direct
the management and policies of such entity.

         1.5 "Auxilium Remaining Indication" shall mean an Additional Indication
for a Product that Auxilium believes has a reasonable probability of obtaining
Regulatory Approval and achieving commercial success, but for which BTC does not
wish to undertake Stage I Development.

         1.6 "BTC Know-How" shall mean any proprietary information or materials
related to the Manufacture, preparation, formulation, use or development of the
Enzyme or the Product Controlled by BTC during the Term and shall include
formulations, processes, techniques, formulas, biological, chemical, assay
control and manufacturing, technical, pre-clinical, clinical or other data,
methods, know-how, and trade secrets.

         1.7 "BTC Patents" shall mean those Patents Controlled by BTC with at
least one claim directed to the Enzyme or the Product (or processes,
improvements, uses and intermediates for the foregoing) including those listed
on Schedule 1.7 attached hereto as it may be amended from time to time.

         1.8 "BTC Product" shall mean any pharmaceutical product that includes
Enzyme as an active ingredient and is under development for an Indication (or is
indicated for use) outside the Field.

         1.9 "Business Day" shall mean any day on which banking institutions in
New York, New York are open for business.

         1.10 "Clinical Trials" shall mean tests and studies in human subjects
or patients that are required to obtain, maintain, or sustain Regulatory
Approval in a country in the Territory.

         1.11 "Commercialization" or "Commercialize" shall mean activities
directed to marketing, promoting, co-promoting, distributing, importing,
exporting, offering for sale and selling the Product. When used as a verb,
"Commercialize" means to engage in Commercialization.

         1.12 "Commercially Reasonable Efforts" means, with respect to a Party,
the efforts and resources which would be used by that Party relating to a
certain activity or activities, consistent with its normal business practices,
which are consistent with the general level of effort and resources in the
pharmaceutical industry for a company similar in size and scope.

                                       2


         1.13 "Competing Product" shall mean a product that contains Enzyme and
is sold in a country by a Person (other than Auxilium) in an Indication for
which Auxilium is marketing a Product in such country.

         1.14 "Confidential Information" has the meaning set forth in Section
10.1

         1.15 "Controlled" or "Controls", when used in reference to intellectual
property, shall mean the legal authority or right of a Party hereto (or any of
its Affiliates) to grant a license or sublicense of intellectual property rights
to another Party, or to otherwise disclose proprietary or trade secret
information to such other Party, without breaching the terms of any agreement
with a Third Party, infringing upon the intellectual property rights of a Third
Party, or misappropriating the proprietary or trade secret information of a
Third Party.

         1.16 "Cost of Goods" shall mean the total cost of Product in Final
Packaging, including, but not limited to, the sum of the following actual costs:
(i) manufacturing, shipping and storage of Enzyme; (ii) manufacturing, shipping
and storage of Product, prior to sale to a Third Party; (iii) commercial
packaging and labeling; (iv) routine quality compliance and quality assurance
programs; and (v) customs or excise taxes, import duties, sales taxes and other
taxes or duties (other than those taxes resulting from sales to a Third Party of
Product in finished packaged and labeled form). In the event that BTC
manufactures Enzyme or Products, Cost of Goods shall be calculated in accordance
with Schedule 1.16.

         1.17 "Develop" or "Development" shall mean Stage I Development and
Stage II Development. When used as a verb, "Developing" means to engage in
Development. For purposes of clarity, in no event shall Development include
Manufacture.

         1.18 "Development Costs" shall mean costs associated with Development
activities.

         1.19 "Effective Date" shall mean the date specified in the first
paragraph of this Agreement.

         1.20 "EMEA" shall mean the European Medicines Evaluation Agency or any
successor agency thereto.

         1.21 "Enzyme" shall mean the purified form of the enzyme currently
identified by BTC as Collagenase ABC, more particularly described on Schedule
1.21, and any variants or derivatives thereof.

         1.22 "European Union" shall mean the countries of the European Union,
as it is constituted as of the Effective Date and as it may be expanded from
time to time.

         1.23 "Exercised Indication" has the meaning set forth in Section
2.2(c).

         1.24 "Exercised Indication Date" has the meaning set forth in Section
2.2(c).

         1.25 "Exercise Period" has the meaning set forth in Section 2.2(c).

                                       3


         1.26 "FDA" shall mean the U.S. Food and Drug Administration or its
successor agency.

         1.27 "Field" shall mean, subject to expansion pursuant to Section 2.2,
the prevention or treatment of Dupuytren's Disease and Peyronie's Disease.

         1.28 "Final Packaging" means the labeling and packaging to be used in
connection with the Product labeled for use in the Field in the Territory,
including the packaging of package inserts and components reasonably necessary
for sale of the finished Product to the ultimate consumer.

         1.29 "Indemnified Party" has the meaning set forth in Section12.3.

         1.30 "Indemnifying Party" has the meaning set forth in Section 12.3.

         1.31 "Indication" shall mean a pharmaceutical application for the
Product.

         1.32 "Infringement Claim" has the meaning set forth in Section 8.2(a).

         1.33 "Law" shall mean any applicable statute, law, ordinance,
regulation, order, or rule of any federal, state, local, foreign, or other
governmental agency or body or of any other type of regulatory body (including
common law) or securities exchange, including those covering pharmaceutical
sales, environmental, pollution, energy, safety, health, transportation,
bribery, record-keeping, zoning, antidiscrimination, antitrust, wage and hour,
and price and wage control matters.

         1.34 "Licensed Technology" shall mean the BTC Patents and the BTC
Know-How.

         1.35 "Loss" has the meaning set forth in Section 12.1.

         1.36 "Major Market Country" shall mean the United States, each country
of the European Union.

         1.37 "MAA" shall mean an application seeking Regulatory Approval of the
Regulatory Authority in the European Union to market and sell a Product in the
Field in the European Union.

         1.38 "MAA Acceptance" shall mean the written notification by the
applicable Regulatory Authority that the MAA has met all the criteria for filing
acceptance.

         1.39 "Manufacture" or "Manufacturing" shall mean manufacturing,
filling, processing, testing, engineering, designing, redesigning, packaging,
storing, quality control, quality assurance, releasing, disposing, handling,
shipping, and all other activities undertaken or required to be undertaken in
order to manufacture and supply the Product in its Final Packaging and related
devices and apparatus for administration thereof, in the case of commercial
supplies, or packaged in accordance with Laws, in the case of clinical supplies.

                                       4


         1.40 "NDA" or "New Drug Application" shall mean a new drug application
filed with the FDA pursuant to 21 C.F.R. ss.314, seeking permission to market
the Product for a particular Indication in the Field in interstate commerce in
the United States.

         1.41 "NDA Filing Acceptance" shall mean the written notification by the
FDA that the NDA has met all the criteria for filing acceptance.

         1.42 "Net Sales" shall mean the gross amount invoiced by Auxilium and
its Affiliates or Sublicensees on account of sales of the Product in Final
Packaging to Third Parties in the Territory, less the total of: (a) trade, cash
or quantity discounts not already reflected in the amount invoiced; (b) excise,
sales and other consumption taxes and customs duties to the extent included in
the invoice price; (c) freight, insurance and other transportation charges to
the extent specifically included in the invoice price; (d) returns or
retroactive price reductions; and (e) compulsory payments and rebates directly
related to the sale of the Product accrued, paid or deducted pursuant to
governmental regulations.

         1.43 "Orphan Drug Designation" shall mean the special designation of
Product by FDA's Orphan Product Division which provides the Product with the
opportunity to obtain additional market exclusivity from the date the drug
receives FDA approval and also possible tax and regulatory approval benefits.
The term "Orphan Drug Designation" shall include any foreign counterparts of the
foregoing.

         1.44 "Patents" shall mean any patents or patent applications and any
continuations, continuations-in-part, divisions, provisionals, substitutions,
patents of addition, reissues, reexamination, renewals or extensions thereof
(including any supplemental patent certificates) and any confirmation patent or
registration patent and all foreign counterparts of any of the foregoing.

         1.45 "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization or
government or political subdivision thereof.

         1.46 "Phase II Clinical Trials" shall mean a Clinical Trial for the
Product on a number of patients, no fewer than the number required to allow for
the detection of statistical differences between the control and treated
patients, for the purposes of determining dose and evaluating safety and
efficacy in the proposed therapeutic indication, conducted in accordance with
current good clinical practices and in accordance with a protocol that has been
reviewed by the FDA and reflects any comments or concerns raised by the same.

         1.47 "Phase III Clinical Trials" shall mean a Clinical Trial for the
Product on sufficient numbers of patients to generate safety and efficacy data
to support Regulatory Approval in the proposed therapeutic indication, conducted
in accordance with current good clinical practices and in accordance with a
protocol that has been reviewed by the FDA and reflects any comments or concerns
raised by the same.

         1.48 "Product" shall mean pharmaceutical product containing Enzyme as
an active ingredient and any reformulation, improvement, enhancement,


                                       5


combination, refinement, or modification thereof; provided however, Product
shall specifically exclude dermal formulations labeled for topical
administration.

         1.49 "Product Data" shall mean the physical embodiment, to the extent
available of: (a) the know-how, including relevant laboratory notebook
information, screening data and synthesis schemes, including descriptions in any
form, data and other information, and (b) all other data including Regulatory
Data and any other pre-clinical and clinical data and information, technical,
chemical, safety and scientific data, information and know-how, obtained or
generated in connection with Development of the Product in the Field.

1.50 "Product Details" shall mean a face-to-face meeting, in an individual or
group practice setting, between a healthcare professional with prescribing
authority who is a target prescriber of a Product in the Field and a
         professional representative of the applicable Party during which the
key
attributes of a Product are verbally presented to such healthcare professional.
When used as a verb, "detail" or "detailing" shall mean to engage in a Detail.

         1.51 "Regulatory Approval" shall mean, with respect to a country or
group of countries in the Territory, all authorizations by the appropriate
governmental entity or entities necessary for commercial sale of the Product in
the Field for a particular Indication in that country or group of countries
including, where applicable, approval of labeling, price, reimbursement and
manufacturing.

         1.52 "Regulatory Authority" shall mean the FDA or any foreign
counterpart or additional governmental or regulatory agencies in the Territory
responsible for applicable Regulatory Approvals.

         1.53 "Regulatory Data" shall mean any and all research data,
pharmacology data, chemistry, manufacturing, and control data, preclinical data,
clinical data or all other documentation submitted, or required to be submitted,
to Regulatory Authorities in association with regulatory filings for the Product
in the Field (including any Drug Master Files (DMFs), Chemistry, Manufacturing
and Control ("CMC") data, or similar documentation).

         1.54 "Remaining Indication" shall mean an Additional Indication for
which Auxilium has not exercised an Additional Indication Option within the
Exercise Period.

         1.55 "Stage I Development" shall mean pre-clinical and clinical drug
development activities reasonably necessary to completing all development
activities up to and including the completion of Phase II Clinical Trials for
the Product in the Field, including pre-clinical studies, test method
development, statistical analysis, Clinical Trials, regulatory affairs, and
activities directed to seeking Regulatory Approvals.

         1.56 "Stage I Development Costs" shall mean costs associated with Stage
I Development activities.

         1.57 "Stage II Development" shall mean non-clinical and clinical drug
development activities reasonably necessary to the development and submission of
Regulatory Data to a Regulatory Authority for the purpose of achieving


                                       6


Regulatory Approval, including non-clinical studies, test method development,
statistical analysis, Clinical Trials, regulatory affairs, and activities
directed to seeking Regulatory Approvals.

         1.58 "Stage II Development Costs" shall mean costs associated with
Stage II Development activities.

         1.59 "Standard Terms" has the meaning set forth in Section 6.4(d).

         1.60 "Sublicense Income" shall mean (a) the upfront payment, if any,
actually received from a Sublicensee by Auxilium upon execution of an agreement
with such Sublicensee, and (b) any milestone payments actually received from a
Sublicensee by Auxilium in consideration for the grant of a sublicense to such
Sublicensee under the Licensed Technology in the Field; provided, however, that
Sublicense Income shall not include any such consideration received by Auxilium
from any such Sublicensee in return for, as payment for or otherwise in respect
of: (i) equity or debt of Auxilium (provided, however, that the exclusion
contained in this sub-clause (i) shall not apply to transactions between
Auxilium and its Affiliates), (ii) the manufacture or supply of ingredients or
products, (iii) the performance of services (including research and development
services other than screening services performed on behalf of a Sublicensee) or
other similar payments, (iv) reimbursement of Auxilium's out of pocket costs and
expenses, including patent expenses, or (v) the sale of Auxilium in whole or in
part.

         1.61 "Sublicensee" shall mean a Person to whom Auxilium grants any
right or license to use the Licensed Technology to make, use or sell the Product
in the Field in the Territory.

         1.62 "Supply Agreement" has the meaning set forth in Section 6.4.

         1.63 "Term" has the meaning set forth in Section11.1(a).

         1.64 "Territory" shall mean all the countries and territories of the
world.

         1.65 "Third Party" shall mean any Person or other entity other than
Auxilium, BTC or their respective Affiliates.

         1.66 "Vial" shall means a single dose unit of Product.

                                   ARTICLE 2
                               LICENSE AND OPTION

         2.1 License Grant to Auxilium

             (a) Subject to the terms and conditions of this Agreement, on the
Effective Date, BTC hereby grants to Auxilium an exclusive license under the
Licensed Technology to research, Develop, use, Commercialize, market, sell and
distribute the Product for the Field in the Territory.

             (b) Subject to the terms and condition of this Agreement, BTC
hereby grants to Auxilium a non-exclusive right and license under the Licensed
Technology to Manufacture or have Manufactured the Product for the Field in the


                                       7


Territory. Notwithstanding the foregoing provisions of this Section 2.1(b),
Auxilium shall not exercise its license pursuant to this Section 2.1(b) to
Manufacture the Product except as permitted by, and solely for the purposes set
forth in, Article 6.

             (c) The licenses granted under Sections 2.1(a) and 2.2(b) shall
include the right to grant sublicenses (and in the case of Section 2.1(a),
distribution rights); provided, however, that all such sublicenses shall contain
terms and conditions which are consistent with the terms and conditions
contained in this Agreement.

         2.2 Option to License Additional Indications

             (a) Development of Additional Indications for Products. The Parties
shall cooperate in good faith in generating ideas and concepts for Additional
Indications for Products. BTC shall use Commercially Reasonable Efforts to
conduct Stage I Development for the use of the Product for the treatment of
Frozen Shoulder. BTC shall summarize such efforts in reports to be submitted to
the Joint Development Committee on a quarterly basis.

             (b) Option Grant. Subject to the terms and conditions of this
Agreement, BTC hereby grants to Auxilium an exclusive option to an exclusive
license to Products in the Territory for each Additional Indication on the same
terms and conditions as provided for Indications in the Field (each, an
"Additional Indication Option").

             (c) Exercise Period; Exercise of Option. The period during which
Auxilium may exercise an Additional Indication Option (the "Exercise Period")
shall commence on the date on which BTC submits a Phase II Clinical Trial report
to Auxilium for the Product for such Additional Indication and ends one hundred
and twenty (120) days thereafter. BTC shall provide Auxilium with a copy of a
Phase II Clinical Trial report and, any additional data or results in its
control. Auxilium may exercise the Additional Indication Option at any time
during the Exercise Period by delivering to BTC a written notice of exercise
with regard to such Additional Indication (each, an "Exercised Indication") that
sets forth the effective date of the exercise (the "Exercised Indication Date").
Upon receipt, BTC shall counter-sign the exercise notice which shall then be
appended to and incorporated by reference into this Agreement effective the
Exercised Indication Date.

             (d) License Grant Upon Exercise of Option. Effective on the
Exercised Indication Date, the Field definition shall be amended and expanded to
include the relevant Exercised Indication.

             (e) Auxilium Remaining Indications. Auxilium shall have the right
to Develop and Commercialize Auxilium Remaining Indications at its sole cost and
expense. Upon notification to BTC of Auxilium's intent to Develop and
Commercialize an Auxilium Remaining Indication, the Field definition shall be
amended and expanded to include such Auxilium Remaining Indication.

         2.3 Remaining Indications BTC may offer Third Parties the right under
the Licensed Technology to research, Develop, use Commercialize, market, sell
and distribute the Product for any Remaining Indication (the "Remaining
Indication Rights"), provided that, prior to executing a definitive agreement


                                       8


with a Third Party for one or more Remaining Indications, BTC must (a) provide
Auxilium with a written summary of the material terms of the proposed agreement
(the "Offer Terms"), and (b) grant Auxilium an option, exercisable for
seventy-five (75) days after Auxilium's receipt of the written summary, to agree
to equivalent terms, in which case the Parties shall negotiate in good faith an
exclusive license agreement on such terms as promptly as possible thereafter. In
the event that Auxilium does not exercise an option to license a Remaining
Indication within such seventy-five (75) day period, the Remaining Indication
Rights may be licensed to such Third Party on terms and conditions no less
favorable to BTC than the Offer Terms.

         2.4 Transfer of BTC Know-How Within forty-five (45) days of the
Effective Date, BTC shall, or shall cause its Affiliates to, transfer to
Auxilium all material Product Data relating to Dupuytren's Disease and
Peyronie's Diseases, including but not limited to preclinical, clinical data,
clinical trial protocols, study data tabulations, reports, the right of
cross-reference and permission to use in Auxilium Regulatory Data and regulatory
filings, investigator-generated data granted by the owners of such data, etc.,
in reasonably satisfactory form. Promptly, but in no event more than thirty (30)
days, after the Exercised Indications Date, BTC shall, or shall cause its
Affiliates to, transfer to Auxilium all Product Data relating to such Exercised
Indication, in reasonably satisfactory form.

         2.5 Exclusivity During the Term and any extension thereof, and for two
years thereafter, neither BTC nor any of its Affiliates shall, except as
otherwise set forth and provided in this Agreement, (a) directly or indirectly
develop, manufacture, market, sell, detail or promote any Competing Product or
(b) encourage off-label use of a Competing Product that could affect labeled
usage of the Product in the Field. In addition, in the event that BTC markets a
BTC Product outside the Field within a country in the Territory where Auxilium
is promoting the Product within the Field, BTC shall promote the BTC Product
under a trademark different from the Auxilium Trademark, and will not knowingly
market, ship, distribute, promote, sell or otherwise put into circulation the
BTC Products within the Field in such country or in any other country within the
Territory. In the event that BTC enters into any agreements with its
distributors or wholesalers for the BTC Products in a country in the Territory,
it shall include in any and all said agreements appropriate provisions
providing, to the extent not prohibited by Law, that the BTC Products must be
distributed and sold solely outside the Field within such country in the
Territory. In the event that Auxilium enters into any agreements with its
distributors or wholesalers for the Product in the Field, it shall include in
any and all said agreements appropriate provisions providing, to the extent not
prohibited by Law, that the Product must be distributed and sold solely within
the Field within such country in the Territory.

                                   ARTICLE 3
                               PRODUCT DEVELOPMENT

         3.1 Joint Development Committee

             (a) Formation. As soon as practicable after the execution of this
Agreement, BTC and Auxilium will establish a Joint Development Committee (the
"JDC") made up of two (2) representatives designated by each Party hereto to
assist in coordinating scientific interactions and resolving potential
disagreements between BTC and Auxilium during the course of the Development of


                                       9


Product. The JDC Chair will be appointed by Auxilium from among the members of
the committee designated by Auxilium. Each of BTC and Auxilium shall have one
vote on the JDC and, in the event of a deadlock with respect to any action, the
vote of Auxilium , rendered after reasonable and open discussion among the
members of the JDC, shall be final and controlling. BTC shall not take any
action with respect to Remaining Indications that would be detrimental to the
Product or damaging to Auxilium. Notwithstanding the foregoing, BTC will advise
the JDC of all Development and Commercialization of Remaining Indications. The
JDC shall have the right to discuss and comment on such activities but shall not
have the final vote with respect to such activities as they relate to Remaining
Indications.

             (b) Quarterly Meetings. While a Product is under Development, the
JDC shall meet formally at least quarterly, or with such other frequency, and at
such time and location, as may be established by the JDC, for the following
purposes, among others: (i) to oversee and coordinate Development activities of
the Parties for Products; (ii) to receive and review reports by the Parties as
may be submitted to the JDC on a quarterly basis; and (iii) to discuss matters
relating to Patents related to the Product, including but not limited to issues
of inventorship and decisions relating to the filing, prosecution and
maintenance of such Patents, provided however, when the JCC is established, the
JCC and the JDC will coordinate responsibility on such matters. Meetings of the
JDC may be held in person or by teleconference, as may be determined by the JDC.

         3.2 Auxilium's Stage II Development Activities.

             (a) Dupuytren's Disease and Peyronie's Disease. As soon as it has
received the relevant Product Data pursuant to Section 2.4, Auxilium shall
assume all responsibility for (including financial responsibility), and have
sole discretion over, all continuing Development of the Product for Dupuytren's
Disease and Peyronie's Disease including all Clinical Trials underway as of the
Effective Date and listed on Schedule 3.2. Auxilium shall not have financial
responsibility for Development Costs or any other costs incurred in connection
with Development related to Dupuytren's Disease and Peyronie's Disease prior to
the Effective Date.

             (b) Exercised Indications On each Exercised Indication Date,
Auxilium shall be entitled to assume responsibility for, and have sole
discretion over, all continuing Development activities for the Product for each
such Exercised Indication. Auxilium shall have one (1) year after the relevant
Exercised Indication Date to initiate Stage II Development for such Exercised
Indication, provided, however, that such obligations shall not be binding upon
Auxilium to the extent that BTC fails to (i) deliver material Product Data to
Auxilium in accordance with Section 2.4, or (ii) supply Auxilium with material
amounts of clinical supplies of the Product for use in the Field in accordance
with the delivery scheduled specified by Auxilium under the terms of Section
6.3.

             (c) Cooperation The Parties agree to cooperate with respect to the
transfer of Development activities from BTC to Auxilium including transferring
Clinical Trials and making introductions of Auxilium to clinical investigators
and opinion leaders.

             (d) Stage II Development Costs.

                                       10


                 (i) Dupuytren's Disease and Peyronie's Disease. Auxilium shall
         be responsible for all the Development Costs related to the Product for
         Dupuytren's Disease and Peyronie's Disease and incurred by Auxilium
         after the Effective Date; provided, however, that BTC shall continue to
         be responsible for all Development Costs which are which are incurred
         prior to the Effective Date.

                 (ii) Exercised Indications. In the event Auxilium assumes
         responsibility for Stage II Development of the Product for an Exercised
         Indication, Auxilium shall be responsible for all Development Costs
         related to the Product for such Exercised Indication and incurred by
         Auxilium after the Exercised Indication Date; provided, however, that
         BTC shall continue to be responsible for all Development Costs which
         are incurred prior to the Exercised Indication Date.

                 (iii) Right of Set-Off. To the extent that Auxilium pays any
         Stage I Development Costs resulting from additional Stage I Development
         that is requested or required by a Regulatory Authority after assuming
         responsibility for Development of the Product for any Indication,
         Auxilium shall be entitled to set-off the amount of such Stage I
         Development Costs against any amounts due to BTC pursuant to Section
         7.1.

         3.3 Data and Records

             (a) Ownership of Data. Auxilium shall retain ownership of all
Product Data, information and results related to Development activities for the
Product, provided, however, that Auxilium hereby grants to BTC a right of
reference with respect to Remaining Indications to the Regulatory Data contained
in Regulatory Approvals Controlled by Auxilium for the Product in the Field.
Notwithstanding the foregoing, (a) if Auxilium's license rights to the Product
terminate with respect to an Indication within the Field, Auxilium shall assign
BTC its right, title and interest in and to the Product and Regulatory Data for
that Indication, and (b) if Auxilium's license rights to a Product hereunder
terminate entirely, Auxilium shall assign BTC its right, title and interest in
and to all such Product and Regulatory Data; provided, however, that Auxilium
may maintain a copy of such Regulatory Data for legal and archival purposes.

             (b) Development Records. Each Party shall each maintain records in
sufficient detail and in good scientific manner appropriate for patent purposes
and as will properly reflect all work done and results achieved in the
performance of Development activities hereunder (including all Regulatory Data
in the form required to be maintained under any applicable governmental
regulations). Such records shall include books, records, reports, research
notes, charts, graphs, comments, computations, analyses, recordings,
photographs, computer programs and documentation thereof, computer information
storage means, samples of materials and other graphic or written data generated
in connection with the Development activities. Subject to the terms and
conditions of Article 10 below, each Party shall provide the other the right to
inspect (no more than once a year) such records upon reasonable request and
during normal business hours, and shall provide copies of all requested records,
to the extent reasonably required for the performance of the requesting Party's
obligations under this Agreement.

                                       11


                                   ARTICLE 4
                               REGULATORY MATTERS

         4.1 Efforts Within twelve (12) months of filing for Regulatory Approval
in any Major Market Country, Auxilium will file for Regulatory Approval in all
the Major Market Countries. Notwithstanding the foregoing, if a different
dossier is required for any such other Major Market Country(ies), Auxilium will
exercise Commercially Reasonable Efforts to seek Regulatory Approval with
respect to such country(ies). Auxilium may develop additional formulations,
dosage forms or delivery systems for the Product in the Field as may be
commercially practicable at its own expense. For purposes of clarity, Remaining
Indications shall not be subject to this Article 4; provided, however, that BTC
shall not conduct Development or Commercialization of Product in such Remaining
Indication in a manner that jeopardizes Auxilium's Development or
Commercialization of Product in the Field.

         4.2 Regulatory Matters in the Territory. As between the Parties,
Auxilium shall be responsible in the Territory for ensuring compliance with all
regulatory requirements relating to the Product labeled for use in the Field
(i.e., obtaining, maintaining, and updating all required any Regulatory
Approvals). Without limiting the foregoing, Auxilium shall (i) file all
regulatory filings and supporting documentation; (ii) serve as the designated
regulatory official for purposes of receiving communications from the Regulatory
Authority; and (iii) report any Adverse Drug Experience to Regulatory
Authorities.

         4.3 Ownership. All Regulatory Approvals relating to the Products
labeled for use in the Field shall be the property of Auxilium and held in the
name of Auxilium or its designee. BTC shall promptly take whatever steps
necessary to transition any existing regulatory filings to Auxilium. As promptly
as possible after the Effective Date, BTC shall cause the Investigational New
Drug ("IND") # 5780 and IND # 5588, and all foreign counterparts thereof, to be
assigned to Auxilium.

         4.4 Regulatory Interactions for Product.

             (a) Communications with Regulatory Authority; Advice of Counsel.
BTC shall not communicate with Regulatory Authorities, or take any action
regarding an investigation or a request by a Regulatory Authority with respect
to a Product in the Field, except (i) with the prior written consent of
Auxilium, or (ii) upon the advice of legal counsel that such communication is
required by Law. BTC shall cooperate with Auxilium and provide all reasonable
assistance and take all actions reasonably requested by Auxilium that are
necessary to comply with any Law applicable to a Product in the Field. If BTC is
advised by its legal counsel that it must communicate with any Regulatory
Authority, then BTC shall promptly, but in no event more than two (2) Business
Days, advise Auxilium of the same and provide Auxilium in advance with a copy of
any proposed written communication with such Regulatory Authority and comply
with any and all reasonable requests of Auxilium concerning any such
communication with such Regulatory Authority.

             (b) Receipt of Correspondence; Inspections. Each Party shall
promptly, but in any event within three (3) Business Days, (i) provide to the
other copies of any material documents or correspondence received from any


                                       12


Regulatory Authority related to Development activities for a Product and (ii)
inform the other Party of any inspections, proposed regulatory actions,
investigations or requests for information or a meeting by any Regulatory
Authority with respect to a Product. In the event BTC does not have advance
notice of an inspection by a Regulatory Authority, it shall immediately notify
Auxilium of such inspection and it shall cooperate with such Regulatory
Authority.

             (c) Recalls and Withdrawals. Subject to the terms and conditions of
the Supply Agreement, Auxilium shall have sole responsibility for and shall make
all decisions with respect to any recall, market withdrawals or any other
corrective action related to the Products labeled for use in the Field in the
Territory; provided however, (i) Auxilium shall immediately notify BTC of any
decision to initiate a recall or withdrawal of such Product; (ii) all costs and
expenses with respect to a recall, market withdrawal or other corrective action
for such Product shall be borne by Auxilium unless such recall, market
withdrawal or other corrective action was due to the negligence, willful
misconduct or material breach of this Agreement or the Supply Agreement by BTC;
and (iii) BTC shall immediately notify Auxilium of any decision to initiate a
recall or withdrawal of a Product outside of the Field. Each Party shall provide
the other Party with recall information received by it in sufficient detail to
allow the Parties to comply with Law.

             (d) Notice. Each Party shall provide the other Party with notice,
in a sufficiently timely basis to enable the other Party to comply in all
material respects with Laws, of notification or other information which it
receives (directly or indirectly) from, any Regulatory Authority (and providing,
as soon as reasonably possible, copies of any associated written requests) that
(i) raises any material concerns regarding the safety or efficacy of a Product;
(ii) indicates or suggests a claim of a Third Party arising in connection with a
Product, or (iii) is reasonably likely to lead to a recall or market withdrawal
of a Product, provided that neither Party shall be obliged to disclose
information in breach of any contractual restriction which it could not
reasonably have avoided or which disclosure would waive any legal privilege.

         4.5 Inquiries, Adverse Events, etc. As between the Parties, Auxilium
shall be responsible for the surveillance, receipt and evaluation of product
complaints for Product labeled for use in the Field in the Territory and
reporting to Regulatory Authorities Adverse Drug Experiences for the Products in
the Field. As between the Parties, BTC shall be responsible for the
surveillance, receipt and evaluation of product complaints for Product labeled
for use outside the Field and reporting to Regulatory Authorities Adverse Drug
Experiences for the Products outside the Field. Each Party shall ensure that, in
the Development or Commercialization of the Product, it will record,
investigate, summarize, notify, report and review all Adverse Drug Experiences
in accordance with Law. Each Party shall (i) adhere to all requirements of Laws
which relate to the reporting and investigation of Adverse Drug Experiences, and
(ii) keep the Parties informed of such events.

             (a) Each Party shall submit reports of all Adverse Drug Experiences
associated with the use of the Product and other required safety information
(e.g., PSUR's or annual safety reports) to the Regulatory Authorities in
accordance with Law. Each Party shall submit a copy of each such report to the
other Party in advance of such submission to permit the other Party to comply
with legal requirements applicable to it and comment on such reports.

                                       13


             (b) Each Party shall submit reports of all Adverse Drug Experiences
associated with the use of Product for which Regulatory Approval has not been
achieved and other required safety information to the Regulatory Authorities in
accordance with Law. Each Party shall submit a copy of each such report to the
other Party in advance of such submission to permit the other Party to comply
with legal requirements applicable to it and comment on such reports.

             (c) In order to accomplish the objectives of this Section and to
the extent required by Law, within one hundred and eighty (180) days of the
Effective Date, the Parties shall discuss and develop an agreement containing
mutually acceptable guidelines and procedures for the receipt, recordation,
communication, exchange and reporting of Adverse Drug Experiences for the
Product.

         4.6 Approval of Labeling and Promotional Materials. Auxilium shall be
responsible to seek or obtain any necessary Regulatory Authority approvals of
any label, labeling, package inserts or outserts, monographs and packaging, and
promotional materials for use in connection with the Products labeled for use in
the Field and for determining whether the same requires approval from Regulatory
Authority. The Parties shall cooperate in such efforts to seek and obtain such
approvals.

         4.7 Cooperation. The Parties shall cooperate to provide each other all
reasonable assistance and take all actions reasonably requested that are
necessary to comply with Laws, including safety updates, amendments, annual
reports, pharmacovigilance filings, investigator notifications, facility
inspections, and certifications and maintenance and updates for regulatory
filings and Regulatory Approvals. Unless otherwise provided under the terms of
this Agreement, the Parties will cooperate, communicate and provide reasonable
assistance to each other with regard to all CMC matters related to the Product.

                                   ARTICLE 5
                                COMMERCIALIZATION

         5.1 Joint Commercialization Committee.

             (a) Formation. Not later than the commencement of Phase III
Clinical Trials for any Product, BTC and Auxilium will establish a Joint
Commercialization Committee (the "JCC") made up of two (2) representatives
designated by each Party hereto to assist in coordinating interactions and
resolving potential disagreements between BTC and Auxilium during the course of
the Commercialization of Product. The JCC shall meet each and every calendar
quarter. The JCC Chair will be appointed by Auxilium from among the members of
the committee designated by Auxilium. Auxilium and BTC shall each have one vote
on the JCC. The objective of the JCC shall be to reach agreement by consensus on
all matters falling within its authority hereunder. In the event of a deadlock
with respect to any action, the vote of Auxilium, after reasonable opportunity
for open discussion among the members of the JCC, shall control. Notwithstanding
the foregoing, the JCC shall not have authority to commit the financial
resources of either party.

                                       14


             (b) Patent Position. The JCC will coordinate with the JDC in
discuss matters relating to Patents related to the Product, including but not
limited to issues of inventorship and decisions relating to the filing,
prosecution and maintenance of such Patents.

             (c) Coordinated Strategy. The JCC shall meet at least quarterly or
with such frequency and at such time and location as may be establishd by the
JCC and will monitor the overall strategy and oversee the global marketing of
all Products. The JCC will have the opportunity to review market research plans
and research results, clinical development results and similar items for each
Product, including Products Developed for Remaining Indications, for the purpose
of advising and assisting in communicating a unified global marketing strategy;
provided, however, that with respect to Remaining Indications, the JCC shall not
have the final vote.

         5.2 Commercialization. Auxilium shall use Commercially Reasonable
Efforts to Commercialize the Product in the Field in each country in the
Territory. Subject to Section 5.4 below, Auxilium shall be responsible for and
have sole discretion over all aspects of Commercialization of the Product for
use in the Field in the Territory.

         5.3 Orders, Booking Sales. Auxilium shall have the sole right and
responsibility for Product in the Field in each country in the Territory to (a)
receive, accept, and fill orders for such Product, (b) control invoicing, order
processing, and collection of accounts receivable for such Product sales, and
(c) record such Product sales in its books of account. If, for any reason, BTC
receives orders for such Product, BTC shall forward such orders to Auxilium (or,
if directed by Auxilium, to Auxilium' wholesalers) as soon as practicable. If
any quantities of such Product are returned to BTC, BTC shall immediately notify
Auxilium and ship them to the facility designated by Auxilium.

         5.4 BTC Co-Promotion Rights. In the event that BTC provides written
notice of its intent within ninety (90) days after an NDA Acceptance for a
Product in the Field in the Territory indicated for use for any Exercised
Indication, BTC will be allowed to provide up to ten percent (10%) of the
Product Details for such Indication. In addition, in the event that BTC provides
written notice of its intent within ninety (90) days after an NDA Acceptance for
Frozen Shoulder, BTC will be allowed to provide up to ten percent (10%) of the
Product Details for Dupuytren's Disease. Notwithstanding Section 13.10, BTC's
co-promotion rights granted pursuant to this Section shall not be assignable or
transferable to any other Person.

                                   ARTICLE 6
                             MANUFACTURE AND SUPPLY

         6.1 Joint Manufacturing Committee.

             (a) Within forty-five (45) days after the Effective Date, BTC and
Auxilium will establish a Joint Manufacturing Committee (the "JMC") made up of
two (2) representatives designated by each Party hereto to which shall oversee
the manufacturing of Product on a worldwide basis, including the planning,
manufacturing and supply (including supply chain management). The JMC Chair will
be appointed by BTC from among the members of the committee designated by BTC.
Each of BTC and Auxilium shall have one vote on the JMC. The objective of the
JMC shall be to reach agreement by consensus on all matters falling within its


                                       15


authority hereunder. In the event of a deadlock with respect to any action, the
vote of BTC, after reasonable opportunity for open discussion among the members
of the JMC, shall control.

             (b) Specific Responsibilities of the JMC. In support of its
responsibility for overseeing the Manufacturing of Product on a worldwide

basis the JMC shall meet at least quarterly or with such higher frequency, and
at such time and location as may be established by the JMC, and the JMC shall
perform the following activities:

                 (i) delineate requirements and responsibilities for development
         and licensure of manufacturing processes and facilities for Product and
         for supply of Product in the Territory;

                 (ii) together with the Joint Development Committee, develop a
         manufacturing strategy to enable development and licensure of
         manufacturing processes and facilities for Product in the Territory
         that includes all aspects of manufacture and release, including but not
         limited to formulations, intermediate, dosage form, devices, product
         characterization studies, stability studies and manufacturing plans and
         forecasts;

                 (iii) review quality assurance efforts, including but not
         limited to those efforts with respect to the establishment of
         specifications and quality standards for Product;

                 (iv) together with the Joint Development Committee review and
         comment on the process for Product Development and the drafting and
         contents of the CMC section of a Drug Approval Application for Product;

                 (v) review technology transfer plans for any changes in
         manufacturing sites, testing sites, and responsibilities in the supply
         chain for Product, it being understood that decisions regarding the
         selection of which of a Party's own manufacturing and testing sites
         shall be used to manufacture any component of a Product, if a Party
         manufactures any component of a Product pursuant to this Agreement or
         any related supply agreement, shall remain in the sole control of such
         Party;

                 (vi) prepare for regulatory inspections and ensure adherence to
         compliance standards with respect to Product; and

                 (vii) review quality compliance and manufacturing related
         regulatory issues concerning the Product or any component thereof as
         important issues arise through meetings and review of relevant written
         material produced by Auxilium, BTC or any Regulatory Authority.

         6.2 Development and Scale-Up. BTC shall, at its own cost and expense,
develop the formulation and the finished dosage form and scale-up the
Manufacture for commercial supply of the Enzyme and the Product for each
Indication for use in the Field, including the lyophilized injection
formulation, to be registered with Regulatory Authorities in accordance with Law
and in sufficient time prior to anticipated commercial launch of a Product to
provide for sufficient supply of Product for use in the Field. Notwithstanding


                                       16


the foregoing, Auxilium will have the sole right and responsibility for
selecting the finished dosage form and presentation for the Product in the
Field.

         6.3 Clinical Supply.

             (a) Supply by BTC. BTC shall be responsible for supplying or
arranging for the supply of the Product suitable for use by Auxilium in Clinical
Trials. All the Product shall be Manufactured in accordance with applicable
specifications, all Laws, and shall be subject to the Standard Terms set forth
in below. BTC will supply Auxilium, free of charge, with bulk vials containing
sufficient quantities of the Product to treat up to five hundred (500) patients
per year in Clinical Trials. If Auxilium requires additional clinical supplies,
BTC will supply Auxilium with such clinical supplies at its Cost of Goods.
Auxilium will be entitled to qualify a back up supplier for the Manufacture of
clinical and commercial supplies of Product in the Field (the "Back-Up Supplier
") at any time after the Effective Date. BTC will use Commercially Reasonable
Efforts to ensure that such Back-Up Supplier has sufficient know-how to
Manufacture Product, including (i) providing all protocols, registration
applications and other substantive regulatory documents, including, but not
limited to, all data, scientific dossiers and governmental authorizations; (ii)
providing access and reference to all regulatory dossiers and filings produced
by BTC, its Affiliates and sublicensees relating to the Product; (iii) providing
access to BTC Know-How in reasonably satisfactory form, and (iv) providing all
technical assistance reasonably requested by the Back-Up Supplier related to the
Manufacture of the Product. Auxilium will require that the Back-up Supplier
execute a written confidentiality agreement with both Auxilium and BTC, in a
form consistent with industry standards, which includes, among other things, an
undertaking by the Back-up Supplier to keep confidential the manufacturing
information and know-how disclosed to the Back-up Supplier by BTC. In the
manufacturing information and know-how disclosed to the Back-up Supplier by BTC.
In addition, Auxilium will use reasonable commercial efforts to seek the
cooperation of the Back-up Supplier in sharing with BTC and Auxilium information
concerning the Manufacture of the Product that Back-up Supplier may acquire in
connection with such Manufacture.

            (b) Notification of Requirements. Auxilium will provide BTC with
XXXX days notice of its requirements for clinical supplies of Product including
a delivery schedule and address. BTC will provide notice within three (3)
Business Days of receipt of such notice if BTC is unable to supply Auxilium with
the quantities of clinical supplies of Product in accordance with the delivery
schedule. In such event, the Parties shall cooperate but BTC shall be primarily
responsible, at its sole cost and expense, for procuring such quantities of
Product from the Back-Up Supplier as are necessary to compensate for any such
deficiency.

            (c) Late Delivery of Clinical Supply. In the event that BTC is more
than thirty (30) days late in delivering such material amount of clinical
supplies, in addition to any other remedies Auxilium may have in Law or equity,
BTC will forgive Auxilium XXXX per day for each additional day, such amounts to
be creditable against any milestone payments due to BTC under Article 7.

         6.4 Commercial Supply; Supply Agreement. BTC will supply or arrange for
the supply of all necessary commercial quantities of the Product in the


                                       17


Territory. No later than three (3) months after the Effective Date, the Parties
shall enter into a commercial supply agreement on customary and reasonable terms
and conditions (the "Supply Agreement"), such Supply Agreement shall include the
following:

             (a) Royalty. Auxilium will pay BTC on a country-by-country and
Product by Product basis a royalty payment of X percent (X%) of Net Sales of
Products in the Field for the Term. Such royalty may be reduced as follows:

                 (i) Competing Product Sales. If a Competing Product is sold in
         a country in the Territory with a unit based market share of X% or
         greater, then there shall be no royalty due for sales in that country
         in the Territory.

                 (ii) Third Party Royalties. If the Manufacturing, Development
         or Commercialization of the Product by the Parties in accordance with
         this Agreement would, but for a license from such Third Party, infringe
         on such Third Party Patents, any royalties or other payments due to
         Third Parties pursuant to a license acquired by Auxilium then the
         royalty may be reduced by up to X% by such the royalty amounts to a
         floor of not less than X percent (X%) in any case.

             (b) Supply Price.

                 (i) Basic Supply Price. Subject to the adjustments set forth
         below, the "Supply Price" for the Product shall be calculated as a
         percentage of Net Sales as follows:

         XXXX

         Provided, however, the Supply Price shall not equal less than X percent
         (X%) of BTC's Cost of Goods for the Product as provided in Schedule
         1.16 (the "Minimum Supply Price").

                 (ii) Adjustments to Supply Price.

                      (A) Most Favored Customer. Notwithstanding anything in
             this Agreement to the contrary, if at any time during the Term BTC
             sells or provides products including Enzyme as an active ingredient
             to any customer for commercial use at rates more favorable than
             those accorded to Auxilium, BTC shall promptly offer Auxilium the
             benefit of such more favorable terms and conditions or rates,
             which, upon acceptance, shall be retroactive to the date that such
             more favorable terms and conditions were first effective for such
             other customer. In order for Auxilium to receive more favorable
             cost rates, Auxilum must accept the same basic business deal
             conditions as those provided to a party receiving the more
             favorable rates. Upon Auxilium's reasonable request, BTC shall


                                       18


             provide written confirmation that it is in compliance with the
             requirements of this Section.

                      (B) Reduction In Cost of Goods. If BTC is successful in
             reducing the Cost of Goods, the Supply Price to Auxilium will be
             reduced by fifty percent (50%) of such dollar reduction.

                      (C) Supply of Samples. Product samples shall be provided
             at no charge to Auxilium for use in post-market clinical trials and
             for selected use as commercial samples for dispensing to patients
             by an appropriate health care provider, but in no event for direct
             distribution to patients. The number of Product samples to be
             provided to Auxilium shall be set forth in the Supply Agreement.

                      (D) Delay in Delivery. If, for any reason other than a
             force majeure, the BTC delivers any shipment of Product in
             accordance with this Article later than the date of delivery set
             out in the purchase order as agreed by the Parties pursuant to the
             Supply Agreement then:

                          (1) a X% reduction in the Supply Price of Product if
the shipment is delivered more than thirty (30) days but less than sixty (60)
days late;

                          (2) a X% reduction in the Supply Price of Product if
the shipment is delivered more than sixty (60) days but less than ninety (90)
days late; and

                          (3) a X% reduction in the Supply Price of Product if
the shipment is delivered more than ninety (90) days late.

                          (4) Once the price has been reduced in accordance with
this Section, it will not revert to the original price unless and until the
deliveries are no longer delayed.

             (c) Stand-By Rights; Back Up Supplier.

                 (i) Standby Rights. Auxilium will be entitled to seek from the
         Back-Up Supplier the greater of (a) X% its requirements and (b) that
         quantity of Product that BTC is unable to provide, for a period of XX
          following the occurrence of any of the events set forth in
         (A), (B) or (C) below (the "Standby Rights"). In the event that
         Auxilium exercises its Standby Rights, the amount of Product that
         Auxilium is obligated to source from BTC pursuant to the Supply
         Agreement shall be reduced by such quantity for such one (1) year
         period.

                      (A) Failure to Meet Firm Order. If, for any reason,
             including, without limitation, as a result of a force majeure, BTC
             is unable to supply at least 75% of the amount of Product specified
             under a Firm Order, then Auxilium may exercise its Standby Rights
             by providing written notice; provided, however, that in the event
             that BTC is unable to supply the full amount specified in
             Auxilium's Firm Order for two consecutive quarters (regardless of
             the amount of such material shortfall), Auxilium may exercise its
             Standby Rights by providing written notice to BTC. In addition,


                                       19


             Auxilium shall be permitted to seek supply of any shortfall
             (regardless of amount of such shortfall or the number of times BTC
             has fulfill some or all of an Auxilium Firm Order) from the Back-Up
             Supplier on a per event basis without specifically invoking its
             Stand-By Rights.

                      (B) Egregious Delivery Delay. If, for any reason, other
             than a force majeure, BTC delivers any quantity of any Product more
             than X days after the date such delivery was due, then
             Auxilium may exercise its Standby Rights by providing written
             notice.

                      (C) Nonconforming Product. If any X consecutive
             shipments contain nonconforming Product and BTC (1) fails to
             replace any nonconforming Product with conforming Product in a
             timely manner or (2) fails to replace nonconforming Product within
             fifteen (15) Business Days after a dispute regarding whether any
             rejected quantity of any Product constitutes nonconforming Product
             is decided in Auxilium's favor, then Auxilium may exercise its
             Standby Rights by providing written notice.

                 (ii) Offset. Auxilium will be entitled to offset any royalties
         owed to BTC by the amount represented by the difference between the
         Back Up Supplier's supply price and BTC's supply price.

                 (iii) BTC's Use of the Back Up Supplier. If BTC opts to use the
         Back Up Supplier to provide Product to Auxilium, then BTC will either
         reimburse Auxilium for half of the documented costs and expenses
         Auxilium incurred in qualifying, sourcing and maintaining such Back Up
         Supplier or BTC will not be entitled to receive a royalty from Auxilium
         for the Product sourced from such Back Up Supplier.

             (d) Maintenance of Inventory. The Supply Agreement will require
that by the time of Commercialization of the Product, BTC will maintain at least
a six (6) month supply of API Enzyme and such reserve supply of Product as may
be set forth in the Supply Agreement.

             (e) Allocation of Supply. In the event of a shortage of raw
materials necessary to Manufacture the Product, BTC shall allocate X
percent (X%) of the total available supply of raw materials and Product to
Auxilium.

             (f) Continuous Improvement and Reduction of Cost of Goods. BTC
shall use reasonable efforts to continuously improve its performance, and any
Product suppliers' performance in the supply of the Product, including but not
limited to, reducing Cost of Goods, increasing yield, and optimizing delivery
timing.

             (g) Standard Terms of Supply. With respect to the supply of the
Product, BTC shall make the following representations, warranties, and covenants
(the "Standard Terms"):

                 (i) The Product shall be Manufactured in accordance with all
         Laws and, at the time of delivery of the Product, such the Product will


                                       20


         comply with the specifications, shall be free from defects in materials
         and workmanship, shall be fit for the purpose for which it is intended,
         and shall not be adulterated or misbranded within the meaning of the
         Act, and shall not constitute an article which may not, under the Act,
         be introduced into interstate commerce. BTC provides no other
         warranties, express or implied, regarding the Product and disclaims all
         other express or implied warranties, including the implied warranties
         of merchantability and fitness for a particular purpose.

                 (ii) The Product sold and shipped shall be Manufactured in
         accordance with all Laws in effect at the time and place of Manufacture
         of the Product, and all waste, including all hazardous waste, generated
         at the time of Manufacture of the Product shall be disposed of in
         accordance with all Laws;

                 (iii) All records as are necessary and appropriate to
         demonstrate compliance with Laws shall be maintained by BTC and such
         Manufacture of the Product shall be performed in a facility maintaining
         a current drug establishment registration with the FDA as set forth in
         21 C.F.R. ss. 207;

                 (iv) BTC shall ensure that it, its Affiliates, and its
         subcontractors maintain all Governmental Permits that may be necessary
         to Manufacture and ship the Product;

                 (v) BTC shall advise Auxilium of any information which arises
         out of BTC's, its Affiliates, and its subcontractors, as applicable,
         Manufacturing, relating to the Product, which have adverse regulatory
         compliance or reporting consequences concerning such the Product;

                 (vi) BTC shall provide to Auxilium any information reasonably
         requested by Auxilium and shall consult Auxilium before providing any
         information to any Regulatory Authority in connection with Manufacture
         of the Product. BTC shall as promptly as possible, but in no event
         later than within ten (10) days, advise Auxilium of any requests by any
         Regulatory Authority for inspections at the premises of BTC or any of
         its Affiliates or subcontractors with respect to the Product;

                 (vii) In the event BTC, its Affiliates, or its subcontractors
         are inspected by the FDA or any similar or related Regulatory Authority
         relating to the Product, BTC agrees to notify Auxilium of any such
         inspection and will use Commercially Reasonable Efforts to ensure that
         Auxilium shall have the right to be present during such inspection. BTC
         shall promptly notify Auxilium of any alleged violations or
         deficiencies relating to a Manufacturing facility at which the Product
         are Manufactured, packaged, or stored, and shall promptly disclose to
         Auxilium all relevant portions of any notice of observations or
         potential violations as well as a copy of its response thereto;

                 (viii) Neither BTC, its Affiliates nor subcontractors shall
         use, in the Manufacture of any the Product, in any capacity the
         services of any person, including any firm or individual, debarred or
         subject to debarment under the Generic Drug Enforcement Act of 1992,
         amending the Act at 21 U.S.C. ss. 335a. BTC agrees to notify Auxilium
         immediately in the event any person providing services to BTC, its


                                       21


         Affiliates, or subcontractors relating to this Agreement is debarred or
         becomes subject to debarment; and

                 (ix) For the purpose of permitting a quality and compliance
         audit, BTC, its Affiliates, and subcontractors shall grant to
         authorized representatives of (or a Third Party hired on behalf of
         Auxilium who is reasonably acceptable to BTC), in general not more than
         once per month, upon reasonable notice, access to areas of each of its
         plants to the extent permitted by Law. Auxilium shall have the right,
         subject to any Third Party confidentiality obligations and at its sole
         expense, to examine those technical records made by BTC, its Affiliates
         or subcontractors that relate to the Manufacture of the Product.

             (h) Customary Terms. The Supply Agreement shall also include
provisions for: forecasting and ordering, inventory maintenance requirements;
packaging obligations; back-up suppliers, compliance with applicable regulatory
requirements, Auxilium guidelines, and specifications, and all Laws.

                                   ARTICLE 7
                                    PAYMENTS

         7.1 Milestone Payments by Auxilium.

             (a) Amount of Milestone Payments.


         ----------------------------------------------------------------------------------------------------------------
         #         MILESTONE                                                      UNITED STATES DOLLARS
         ----------------------------------------------------------------------------------------------------------------
                                                                                             
         1         The Effective Date                                             $2.5 million
         ----------------------------------------------------------------------------------------------------------------
         2         The delivery to Auxilium of the Product Data relating to       $2.5 million
                   Dupuytren's Disease and Peyronie's Disease in accordance
                   with Section 2.4 of this Agreement.
         ----------------------------------------------------------------------------------------------------------------
         3         The one (1) year anniversary of the Effective Date             $X
         ----------------------------------------------------------------------------------------------------------------
         4         Upon first of either NDA Acceptance or MAA Acceptance for      Dupuytren's         $X
                   the following Indications on an Indication by Indication       Disease
                   basis:                                                       -----------------------------------------
                                                                                  Peyronie's Disease  $X
         ----------------------------------------------------------------------------------------------------------------
         5         Receipt by Auxilium or its Affiliate of first Regulatory       Dupuytren's         $X
                   Approval in the United States or three or more of the United   Disease
                   Kingdom, Spain, Germany, France or Italy with labeling       -----------------------------------------
                   approved for the following Indications on an Indication by     Peyronie's Disease  $X
                   Indication basis:
         ----------------------------------------------------------------------------------------------------------------


             (b) Timing of Milestone Payments. For milestones 1, 2 and 3,
payment shall be made within ten (10) Business Days after the occurrence of the
event giving rise to a payment obligation hereunder. For milestones 4 and 5,
payment shall be made within thirty (30) days after the occurrence of the event
giving rise to a payment obligation hereunder. All payments shall be made by


                                       22


wire transfer in United States Dollars to the credit of such bank account as may
be designated, from time to time, by BTC in writing.

         7.2 Process Development Milestones Within thirty (30) days following
the Effective Date, BTC will provide Auxilium with a plan for the scale-up of
Manufacturing for clinical and commercial supplies of Product (the
"Manufacturing Plan") which is acceptable to Auxilium. The Manufacturing Plan
shall contain, among other things, a schedule setting forth a timeline for the
achievement of certain manufacturing process development milestones (the
"Process Development Milestones"). Auxilium shall pay to BTC the amount of
$X monthly upon achieving the Process Development Milestones (the "Process
Development Payments"); provided, however, that Auxilium may suspend the Process
Development Payments at anytime if it determines, in its reasonable judgement
that BTC has not consistently met the Process Development Milestones. For
purposes of clarification, in no event will the Process Development Payments
exceed $X in the aggregate.

         7.3 Payments for Exercised Indications.

             (a) Upon Exercise of Option. Within ten (10) Business Days of the
inclusion on Exercised Indications in the Field, Auxilium shall make the
following one-time license fee payments to BTC on a per Indication basis:

             Amount                 Indication
             ------                    ----------
             $X                        Cellulite reduction
             $X                        Frozen Shoulder
             $X                        Each Additional Indication

             (b) Upon Approval. Within ten (10) Business days of receipt by
Auxilium of the first Regulatory Approval from the FDA for an Exercised
Indication, Auxilium shall make the following milestone payments to BTC on a per
Indication basis:

             Amount             Labeling Approved for the following Indication
             ------             ----------------------------------------------
             $X                 Cellulite reduction
             $X                 Treatment of keloids
             $X                 Treatment of lipomas
             $X                 Frozen Shoulder
             $X                 Each Additional Indication

         7.4 Payments Related to Sublicense Income. Within thirty (30) Business
Days of receiving Sublicense Income, Auxilium shall make a payment to BTC in the
following amount:

             7.3.1 If Auxilium has not conducted a Clinical Trial for Product in
the relevant Indication prior to the effective date of the relevant sublicense,
then Auxilium will remit X percent (X%) of the Sublicense Income actually
received.

                                       23


             7.3.2 If Auxilium has conducted Clinical Trials for a Product in
the relevant Indication prior to the date of the relevant sublicense, then
Auxilium will remit X percent (X%) of Sublicense Income actually received.

             7.3.3 Auxilium has obtained Regulatory Approval for a Product in
the relevant Indication prior to the date of the relevant sublicense, then
Auxilium will remit X percent (X%) of Sublicense Income actually received.

             7.3.4 If the field of use of the sublicense to the Product is
non-human use, then Auxilium will remit X percent (X%) of the Sublicense
Income actually received for that field of use.

         7.5 Currency. All payments shall be payable in United States Dollars.

         7.6 Books and Records. Auxilium agrees to maintain and retain, in
accordance with generally accepted accounting practices, complete and accurate
records showing all transactions and information relating to this Agreement for
a period of three (3) years from the date of entry to which they pertain.

         7.7 Audit Rights. Upon the written request of BTC and not more than
once in each calendar year, Auxilium shall permit an independent certified
public accounting firm (other than on a contingency fee basis) selected by BTC
and acceptable to Auxilium (which acceptance by Auxilium shall not be
unreasonably withheld) to have access during normal business hours to such
records of Auxilium as may be reasonably necessary to verify Auxilium's
compliance with the payment terms of this Article 7. The accounting firm shall
enter into an acceptable and customary confidentiality agreement with Auxilium
obligating the accounting firm to retain in confidence all information of
Auxilium which it obtains in performing such audits hereunder, and such audit
shall be subject to Auxilium's third Party confidentiality obligations. Any
audit under this Section 7.7 shall be at the expense of BTC, unless a particular
audit reveals an underpayment of five percent (5%) or more of the amount that
should have been paid to BTC for the period audited, in which case, Auxilium
shall bear the expense of such audit.

         7.8 Taxes. Auxilium shall be entitled to deduct from its payments to
BTC the amount of any withholding taxes required to be withheld by Auxilium or
its Affiliates or sublicensees to the extent BTC or sublicensees pay to the
appropriate governmental authority on behalf of BTC such taxes. Auxilium shall
deliver to BTC, upon BTC's request, proof of payment of all such taxes. Each
Party shall provide assistance to the other Party in seeking any benefits
available to such Party with respect to government tax withholdings by any
relevant law or double tax treaty.

         7.9 Interest. Any payments payable by either party which are not paid
on or before the date such payments are due under this Agreement (other than
such payments which are the subject of a good faith dispute between the Parties)
shall bear interest at the prime rate of interest plus 1%, calculated on the
number of days that payment is delinquent.

         7.10 Blocked Payments. In the event that, by reason of Laws or
regulations in any country, it becomes impossible or illegal for Auxilium or an
Affiliate or sublicensee of Auxilium, to transfer, or have transferred on its


                                       24


behalf, distribution fees or other payments to BTC, Auxilium shall promptly
notify BTC of the conditions preventing such transfer and such distribution fees
or other payments shall be deposited in local currency in the relevant country
to the credit of BTC in a recognized banking institution designated by BTC or,
if none is designated by BTC within a period of thirty (30) days, in a
recognized banking institution selected by Auxilium or its Affiliate or
sublicensee, as the case may be, and identified in a notice given to BTC.

                                   ARTICLE 8
                              INTELLECTUAL PROPERTY

         8.1 BTC Patentable Inventions and Know-How.

             (a) BTC Patent Prosecution.

                 (i) During the term of the Agreement, BTC shall, diligently and
         in the reasonable exercise of its commercial discretion, prepare, file,
         prosecute, maintain, renew and defend BTC Patents in the countries
         where such BTC Patents are filed as of the Effective Date; provided,
         however, that BTC shall select patent counsel with Auxilium's consent,
         such consent not to be unreasonably withheld.

                 (ii) If BTC does not intend to file for patent protection or
         does not wish to continue preparation, prosecution, or maintenance of a
         BTC Patent, then it shall give at least thirty (30) days advance
         notice, and in no event less than a reasonable period of time for
         Auxilium to act in its stead.

                      (A) In such case, Auxilium may elect at its sole
             discretion to continue preparation, filing and prosecution or
             maintenance of the discontinued BTC Patent at its sole expense.

                      (B) Ownership of any such discontinued BTC Patent shall at
             the request of Auxilium be assigned to Auxilium and BTC shall
             execute such documents and perform such acts as may be reasonably
             necessary for assigning such ownership to Auxilium.

                      (C) Discontinuance may be elected on a country-by-country
             basis or for a patent application or patent series in total.

             (b) Cooperation. BTC will consult Auxilium and will keep Auxilium
continuously informed of all matters relating to the filing, prosecution and
maintenance of BTC Patents including, but not limited to, disclosing to Auxilium
the complete text of all such BTC Patents.

                 (i) BTC shall provide Auxilium with a copy of any BTC Patents
         relating to Enzyme or Product withing thirty (30) days of the Effective
         Date. Prior to filing the first of any new Patents in any jurisdiction,
         BTC shall provide Auxilium with a copy of any such Patent applications
         and copies of all material correspondence with the relevant patent
         office pertaining to the BTC Patents and directly relating to Enzyme or
         Product.

                                       25


                 (ii) BTC shall consider all of Auxilium's comments in good
         faith and take all steps reasonably necessary to optimize the patent
         position for the Product.

                 (iii) In no event shall BTC relinquish control of the
         prosecution of BTC Patents to a Third Party.

         8.2 Infringement Claims by Third Parties.

             (a) Notice. If the manufacture, use or sale of the Product under
the BTC Patents results in a claim or a threatened claim by a Third Party
against a Party hereto for patent infringement or for inducing or contributing
to patent infringement ("Infringement Claim"), the Party first having notice of
an Infringement Claim shall promptly notify the other in writing. The notice
shall set forth the facts of the Infringement Claim in reasonable detail.

             (b) Third Party Licenses. In the event that practicing under the
BTC Patents in connection with manufacture, use or sale of the Product in a
country would infringe a Third Party Patent and a license to such Third Party
Patent is available and Auxilium in its sole discretion seeks such a license,
the Parties agree:

                 (i) Auxilium will be responsible for all costs associated with
         acquiring any Third Party license to the extent required for Auxilium
         to continue to make, use and sell the Product and the Enzyme, provided
         however, Auxilium may offset such costs against the Royalty, with a
         minimum floor of three percent (3%) in accordance with Section 6.4 or,
         prior to commercial launch, offset such costs against any milestones
         due to BTC pursuant to Article 7; and

                 (ii) Auxilium will use Commercially Reasonable Efforts to
         obtain any such required licenses under the Third Party's Patents with
         a right to sublicense to BTC and if requested by BTC will grant such
         sublicense, under reasonable sublicense terms mutually acceptable to
         both BTC and Auxilium.

             (c) Litigation. In the event of the institution of any suit by a
Third Party against Auxilium as a result of Auxilium's Development or
Commercialization of the Product or the Enzyme, Auxilium shall have the right
but, not the obligation, to defend such suit at its expense; BTC shall cooperate
and assist Auxilium in any such litigation at Auxilium' expense. In the event of
the institution of any suit by a Third Party against BTC as a result of BTC's
Manufacture of the Product or the Enzyme, BTC shall have the right but, not the
obligation, to defend such suit at its expense. Auxilium shall cooperate and
assist BTC in any such litigation at BTC's expense. For purposes of clarity,
notwithstanding anything to the contrary in Article 12, to the extent
applicable, Auxilium will be entitled to seek indemnification from BTC for
Losses arising in connection with such suit.

         8.3 Infringement Claims Against Third Parties.

             (a) Cooperation. BTC and Auxilium each agree to take reasonable
actions to protect BTC Patents from infringement. If one Party brings any such
action or proceeding, the second Party may be joined as a Party plaintiff if


                                       26


necessary for the action or proceeding to proceed and, in case of joining, the
second Party agrees to give the first Party reasonable assistance and authority
to file and to prosecute such suit.

             (b) Notice. If any BTC Patents are infringed by a Third Party, the
Party to this Agreement first having knowledge of such infringement, or
knowledge of a reasonable probability of such infringement, shall promptly
notify the other in writing. The notice shall set forth the facts of such
infringement in reasonable detail.

             (c) Institution of Proceedings. BTC, shall have the primary right,
but not the obligation, to institute, prosecute, and control with its own
counsel at its own expense any action or proceeding with respect to infringement
of the claims of such BTC Patents and Auxilium shall have the right, but not the
obligation at its own expense, to be represented in such action by its own
counsel.

             (d) Failure to Institute Proceedings. If BTC fails to institute,
prosecute, and control such action or prosecution and fails to do so within a
period of one hundred twenty (120) days after receiving notice of the
infringement, Auxilium shall have the right to bring and control any such action
by counsel of its own choice, and BTC shall have the right, at its own expense,
to be represented in any such action by counsel of its own choice.

             (e) Division of Damages Award. Any recovery made in connection with
such infringement claim shall be divided as follows:

                 (i) the Party that initiated and prosecuted such action shall
         recoup all of its costs and expenses (including reasonable attorney's
         fees) incurred in connection with such action, whether the recovery is
         by settlement or otherwise;

                 (ii) the other Party then shall, to the extent possible,
         recover its costs and expenses (including reasonable attorney's fees)
         incurred in connection with such action;

                 (iii) if BTC initiated and prosecuted the action, the amount of
         any recovery remaining shall be retained by BTC; and

                 (iv) if Auxilium initiated and prosecuted the action, the
         amount of any recovery remaining shall be retained by Auxilium, except
         that BTC shall receive a portion equivalent to the amount it would have
         received in accordance with the terms of Section 6.4 as if such amount
         were Net Sales of Auxilium.

             (f) Settlement. The Parties shall keep each other informed of the
status of and of their respective activities regarding any litigation or
settlement thereof concerning Product; provided, however, that no settlement or
consent judgment or other voluntary final disposition of a suit under this
Section may be undertaken without the consent of the other Party if such
settlement would require the other Party to be subject to an injunction or to
make a monetary payment or would otherwise adversely affect the other Party's
rights under this Agreement or the validity of BTC Patents.

                                       27


         8.4 Notice of Certification. BTC and Auxilium each shall immediately
give notice to the other of any certification filed under the "U.S. Drug Price
Competition and Patent Term Restoration Act of 1984" (or its foreign equivalent)
claiming that a BTC Patent is invalid or that infringement will not arise from
the manufacture, use or sale of any Product by a Third Party.

             (a) If BTC decides not to bring infringement proceedings against
the entity making such a certification, BTC shall give notice to Auxilium of its
decision not to bring suit within twenty one (21) days after receipt of notice
of such certification.

             (b) Auxilium may then, but is not required to, bring suit against
the Party that filed the certification; provided, however, that the costs
incurred by Auxilium in connection with such suit shall be creditable against
milestone payments payable by Auxilium in accordance with Article 7.

             (c) Any suit by Auxilium or BTC shall either be in the name of
Auxilium or in the name of BTC, or jointly in the name of Auxilium and BTC, as
may be required by law.

             (d) For this purpose, the Party not bringing suit shall execute
such legal papers necessary for the prosecution of such suit as may be
reasonably requested by the Party bringing suit.

         8.5 Patent Term Extensions. The Parties shall cooperate in good faith
with each other in gaining patent term extension wherever applicable to BTC
Patents covering Enzyme or Product.

             (a) Auxilium and BTC shall jointly determine which BTC Patents
shall be extended.

             (b) All filings for such extension shall be made by the Party
responsible for prosecution and maintenance of the BTC Patent, provided,
however, that in the event that the Party who is responsible for prosecution and
maintenance of the BTC Patent elects not to file for an extension, such Party
shall (i) inform the other Party of its intention not to file and (ii) grant the
other Party the right to file for such extension.

         8.6 Trademarks.

             (a) Each Party and its Affiliates shall retain all right, title and
interest in and to its and their respective corporate names and logos.

             (b) Auxilium shall be solely responsible for selecting a trademark
(the "Auxilium Trademark") to use for each country in the Territory. The Product
shall be promoted and sold, in accordance with the provisions of this Agreement,
in the Territory under the Auxilium Trademark. Auxilium (or its local
Affiliates, as appropriate) shall own and retain all rights to Auxilium
Trademark, and all goodwill associated therewith throughout the Territory.
Auxilium shall also own rights to any internet domain names incorporating the
Auxilium Trademark or any variation or part of Auxilium Trademark as its URL
address or any part of such address.

                                       28


                                   ARTICLE 9
                         REPRESENTATIONS AND WARRANTIES

         9.1 BTC Represents and Warrants. BTC hereby represents and warrants to
Auxilium that:

             (a) This Agreement has been duly executed and delivered by BTC and
constitutes the valid and binding obligation of BTC, enforceable against BTC in
accordance with its terms except as enforceability may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights generally and by general equitable
principles. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of BTC, its officers and
directors;

             (b) As of the Effective Date BTC owns or possesses adequate
licenses or other rights necessary to make, use and sell all technology covered
by the BTC Patents, and to grant the licenses herein and the granting of the
licenses to Auxilium hereunder does not violate any right known to BTC of any
Third Party;

             (c) BTC represents that to the best of its knowledge, as of the
Effective Date it is not aware that the development, manufacture, use or sale of
the Enzyme or the Product pursuant to this Agreement may infringe or conflict
with any Third Party right or Patent, and BTC is not aware of any pending patent
application that, if issued, would be infringed by the development, manufacture,
use or sale of the Enzyme or the Product pursuant to this Agreement;

             (d) The execution, delivery and performance of this Agreement by
BTC does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which it may be bound, and, to the best of
its knowledge, does not violate any material law or regulation of any court,
governmental body or administrative or other agency having authority over it;

             (e) BTC has disclosed to Auxilium all material information in its
control pertaining to the suitability of Enzyme as a pharmaceutical candidate;

             (f) The Product has valid and effective Orphan Drug Designation
under the applicable FDA statutes, rules or regulations, effective, May 23,
1996, and March 12, 1996 BTC has no reason to believe such Orphan Drug
Designation shall be terminated prior to the Effective Date.

             (g) BTC is not currently a Party to, and during the Term will not
enter into, any agreements, oral or written, that are inconsistent with its
obligations under this Agreement;

             (h) BTC is duly organized and validly existing under the laws of
the state of Delaware and has full legal power and authority to enter into this
Agreement; and

             (i) BTC is not subject to any order, decree or injunction by a
court of competent jurisdiction which prevents or materially delays the
consummation of the transactions contemplated by this Agreement.

                                       29


         9.2 Auxilium Represents and Warrants. Auxilium hereby represents and
warrants to BTC that:

             (a) The execution, delivery and performance of this Agreement by
Auxilium does not conflict with any agreement, instrument or understanding, oral
or written, to which it is a Party or by which it may be bound, and, to the best
of its knowledge, does not violate any material law or regulation of any court,
governmental body or administrative or other agency having authority over it;

             (b) Auxilium is not currently a Party to, and during the Term will
not enter into, any agreements, oral or written, that are inconsistent with its
obligations under this Agreement;

             (c) Auxilium is duly organized and validly existing under the laws
of the state of Delaware and has full legal power and authority to enter into
this Agreement; and

             (d) Auxilium is not subject to any order, decree or injunction by a
court of competent jurisdiction which prevents or materially delays the
consummation of the transactions contemplated by this Agreement.

         9.3 Disclaimer of Warranties. THE LIMITED WARRANTIES CONTAINED IN THIS
ARTICLE ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES AND ARE MADE EXPRESSLY IN
LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, TITLE, INFRINGEMENT OR OTHERWISE, AND ALL OTHER EXPRESS OR
IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW, STATUTE OR
OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES.

                                   ARTICLE 10
                                 CONFIDENTIALITY

         10.1 Confidentiality. During the Term, and for a period of five (5)
years thereafter, each Party hereto will maintain in confidence all information
disclosed, and reasonably believed by the other party to be confidential whether
orally or in writing, by the other Party hereto ("Confidential Information").
Neither Party shall use, disclose or grant use of such Confidential Information
except as required under this Agreement. Each Party shall use at least the same
standard of care as it uses to protect its own Confidential Information to
ensure that its and its Affiliates' employees, agents, consultants, and clinical
investigators only make use of Confidential Information for the purpose of this
Agreement and do not disclose or make any unauthorized use of such Confidential
Information. Each Party shall promptly notify the other upon discovery of any
unauthorized use or disclosure of Confidential Information. Confidential
Information shall not include any information which and to the extent:

              (a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;

              (b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the other Party;

                                       30


              (c) becomes generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement;

              (d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
other Party not to disclose such information; or

              (e) was independently developed by the receiving Party without
reference to the disclosure by the other Party, as documented by written
records.

         10.2 Terms of Agreement. The Parties agree that the material financial
terms of the Agreement shall be considered the Confidential Information of both
Parties.

         10.3 Permitted Disclosure. Each Party may disclose the Confidential
Information to the extent such disclosure is reasonably necessary in filing or
prosecuting patent applications, prosecuting or defending litigation, or
complying with any applicable statute or governmental regulation provided such
Party has given the disclosing Party prompt written notice allowing it to limit
such disclosure. In addition, either Party may disclose Confidential Information
to its Affiliates and to its Sublicensees; provided, however, in connection with
any such disclosure the disclosing Party shall secure confidential treatment of
such Confidential Information.

         10.4 Employee Obligations . The Parties shall undertake to ensure that
all their employees who have access to Confidential Information of the other
Party are under obligations of confidentiality fully consistent with those
provided in this Article.

         10.5 Publication. No Party may publish confidential or proprietary
information of the other Party, without the consent of the other Party. The
reviewing Party shall have thirty (30) days from receipt of the proposed oral
disclosure or written publication to provide comments or proposed changes to the
disclosing Party. The review period may be extended for an additional two (2)
months to permit the reviewing Party to file one or more patent applications as
it deems appropriate. This Section 10.5 shall be inapplicable to the publication
of information presented in substantially the same form in which was previously
published or disclosed to the public, and to any other disclosures which, on the
advice of counsel, are required by law to be disclosed.

         10.6 Prior Agreements. The obligations of Confidentiality and
Nondisclosure set forth in this Section 10 supersede any and all prior and
contemporaneous communications, representations, agreements or understandings,
whether oral or written concerning the subject matter of this Section 10.

                                   ARTICLE 11
                              TERM AND TERMINATION

         11.1 Term.

              (a) Term.Unless earlier terminated as provided herein, the Term
shall commence as of the Effective Date and shall remain in full force and
effect on a Product by Product and country by country basis until the later of


                                       31


(i) the last to expire valid claim of a patent covering such Product, (ii) the
expiration of the regulatory exclusivity period conveyed by Orphan Drug
Designation with respect to such Product, and (iii) twelve (12) years (the
"Term").

              (b) Accrued Obligations. Except where explicitly provided
elsewhere herein, termination of this Agreement for any reason, or expiration of
this Agreement, will not affect: (i) obligations, including the payment of any
royalties or other sums which have accrued as of the date of termination or
expiration, and (ii) rights and obligations which, from the context thereof, are
intended to survive termination or expiration of this Agreement.

         11.2 Termination for Insolvency. Either Party may terminate this
Agreement immediately upon delivery of written notice to the other Party (a)
upon the institution by or against the other Party of insolvency, receivership
or bankruptcy proceedings or any other proceedings for the settlement of the
other Party's debts; provided, however with respect to involuntary proceedings,
that such proceedings are not dismissed within one hundred and twenty (120)
days; (b) upon the other Party's making an assignment for the benefit of
creditors; or (c) upon the other Party's dissolution or ceasing to do business.

         11.3 Material Breach. Either Party may terminate this Agreement upon
ninety (90) days prior written notice to the other Party upon the material
breach by the other Party of any of its obligations under this Agreement;
provided, however, that such termination shall become effective only if the
other Party shall fail to remedy or cure the breach within such ninety (90) day
period.

         11.4 Termination by Auxilium. Auxilium may terminate this Agreement in
its entirety or on a country-by-country basis or on an Indication by Indication
basis or on a Product by Product basis at any time upon ninety (90) days prior
written notice to BTC.

         11.5 Effect Of Termination.

              (a) Effect On License. Upon the expiration or earlier termination
of this Agreement, the rights licensed under this Agreement shall be treated as
follows:

                  (i) Upon the expiration of the Term or the termination of this
         Agreement by Auxilium pursuant to Section 11.2 or Section 11.3,
         Auxilium shall have a fully paid-up, perpetual, irrevocable,
         royalty-free, transferable, worldwide, non-exclusive right and license
         under the Licensed Technology existing as of the date of such
         expiration to make, have made, use, offer to sell, and sell the Product
         in the Territory.

                  (ii) Upon termination of this Agreement by BTC pursuant to
         Section 11.2 or 11.3, or by Auxilium pursuant to Section 11.4 all
         rights to Product shall revert to BTC.

              (b) Ongoing Obligations.

                  (i) Upon expiration or termination of this Agreement for any
         reason, each Party shall no later than thirty (30) days after such
         termination return to the other Party or destroy any Confidential
         Information disclosed by the other Party, except for one copy which may
         be retained in its confidential files.

                                       32


                  (ii) Upon termination of this Agreement by BTC pursuant to
         Sections 11.2 or 11.3 or by Auxilium pursuant to Section 11.4, Auxilium
         shall assign and deliver to BTC all Regulatory Data and information
         (including registration dossiers) obtained for or in pursuing
         Regulatory Approvals, and all Regulatory Approvals (e.g., to BTC;
         designee in the Territory as permitted under the Law) for Product in
         the Territory received as of such termination date.

         11.6 Inventory. Notwithstanding the foregoing, upon early termination
of this Agreement pursuant to Section 11.2, 11.3 or 11.4, Auxilium shall have
the right to sell all remaining Product in its inventory within six (6) months
after the date of termination, but shall be bound to the royalty payments
provided by Article 7.4 herein.. Thereafter, Auxilium agrees to destroy any
remaining supply of Product or return it to BTC at BTC's request and direction.

                                   ARTICLE 12
                                 INDEMNIFICATION

         12.1 Auxilium. Auxilium shall defend BTC at Auxilium' cost and expense,
and will indemnify and hold BTC and their respective directors, officers,
employees, consultants, contractors, representatives, and agents harmless from
and against any and all losses, costs, damages, fees, or expenses (including
reasonable attorney's fees and expenses) ("Losses") incurred in connection with
or arising out of any Third Party claim (a "Third Party Claim") directly
relating to (i) any material breach by Auxilium of its representations or
warranties or obligations pursuant to this Agreement, (ii) any gross negligence
or willful misconduct of Auxilium, its Affiliates, or their respective
directors, officers, employees, contractors, consultants, agents,
representatives, or sublicensees in the exercise of any of Auxilium' rights or
the performance of any of Auxilium' obligations under this Agreement, and (iii)
the handling, packaging, storage, or Commercialization by Auxilium or any of its
Affiliates or sublicensees of any Product in the Territory (excluding all
intellectual property infringement or related claims, which are covered in
Section 12.2); provided that notwithstanding the foregoing, in all cases
referred to in this Section 12.1, Auxilium shall have no liability to BTC for
any Losses to the extent that such Losses were caused by any item for which BTC
is required to indemnify Auxilium pursuant to Section 12.2.

         12.2 BTC. BTC shall defend Auxilium and its Affiliates at BTC's cost
and expense, and will indemnify and hold Auxilium and its Affiliates and their
respective directors, officers, employees, consultants, contractors,
representatives, and agents harmless from and against any and all Losses
incurred in connection with or arising out of any Third Party Claim directly
relating to (i) material breach by BTC of any of its representations, warranties
or obligations pursuant to this Agreement, (ii) gross negligence or willful
misconduct of BTC in the exercise of any of its rights or the performance of any
of its obligations under this Agreement, (iii) personal injury and other product
liability resulting from BTC's Development, Manufacture, or Commercialization of
any Product, (iv) intellectual property infringement or related claims,
including any Third Party Claim and trade secret misappropriation liability
relating to the Development, Manufacture, or Commercialization of any Product,
(v) any liability or other claims from the Manufacture, handling, packaging,
storage, sale, or other disposition of any Product by BTC or any of its
Affiliates or sublicensees, and (vi) any liability or claims arising from
Product supplied by or on behalf of BTC to Auxilium that was not Manufactured in
accordance with current Good Manufacturing Practices, Good Clinical Practice and


                                       33


Good Laboratory Practices, the specifications or all Laws and regulations except
for such Losses that are indemnified pursuant to the Supply Agreement; provided
that notwithstanding the foregoing, in all cases referred to in this Section
12.2, BTC shall have no liability to Auxilium for any Losses to the extent (and
only to the extent) that such Losses were caused by any item for which Auxilium
is required to indemnify BTC pursuant to Section 12.1.

         12.3 Claims Procedures. Each Party entitled to be indemnified by the
other Party (an "Indemnified Party") pursuant to Section 12.1 or 12.2 hereof
shall give notice to the other Party (an "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any threatened or asserted claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom;
provided:

              (a) That counsel for the Indemnifying Party, who shall conduct the
defense of such claim or any litigation resulting therefrom, shall be approved
by the Indemnified Party (whose approval shall not unreasonably be withheld) and
the Indemnified Party may participate in such defense at such Party's expense
(unless (i) the employment of counsel by such Indemnified Party has been
authorized by the Indemnifying Party; or (ii) the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in the defense of such action, in
each of which cases the Indemnifying Party shall pay the reasonable fees and
expenses of one law firm serving as counsel for the Indemnified Party, which law
firm shall be subject to approval, not to be unreasonably withheld, by the
Indemnifying Party).

              (b) The failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement to the extent that the failure to give notice did not
result in harm to the Indemnifying Party.

              (c) No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the approval of each Indemnified Party which
approval shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which (i) would result in injunctive or other relief
being imposed against the Indemnified Party; or (ii) does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

              (d) Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.

         12.4 Escrow. In the event of any Third Party Claim against Auxilium for
which BTC is obligated to indemnify Auxilium in accordance with Section 12.2,
Auxilium shall be entitled, until a final un-appealable decision has been
rendered or a settlement has been reached (a "Final Decision"), to pay an amount
equal to fifty percent (50%) of all amounts due to BTC on Net Sales of Products
(such aggregate amount, the "Escrowed Amount") into an escrow account maintained
by a Third Party reasonably acceptable to BTC. To the extent that Auxilium
incurs any Losses in connection with such Third Party Claim, an amount equal to


                                       34


the amount of any such Losses shall be distributed to Auxilium out of such
escrow account, with the remainder (if any) to be paid to BTC. In the event that
the Escrow Amount is less than the amount of such Losses, BTC shall pay the
difference to Auxilium within thirty (30) days of such Final Decision.

         12.5 Insurance. During the Term, each of Auxilium and BTC shall
maintain general liability and product liability insurance in the following
amounts: (i) at all times prior to approval of a NDA for a Product, $3,000,000
per occurrence, and (ii) at all times after approval of a NDA for a Product,
$5,000,000.

         12.6 Compliance. The Parties shall comply fully with all Laws and
regulations in connection with their respective activities under this Agreement.

                                   ARTICLE 13
                            MISCELLANEOUS PROVISIONS

         13.1 Dispute Resolution. In the event of any controversy or claim
arising out of relating to or in connection with any provision of this
Agreement, or the rights or obligations hereunder, the Parties shall try to
settle their differences amicably between themselves. Either Party may initiate
such informal dispute resolution by sending written notice of the dispute to the
other Party, and within ten (10) business days after such notice appropriate
representatives of the Parties shall meet for attempted resolutions by good
faith negotiations. If such representatives are unable to resolve such disputed
matters, it shall be referred to the Chief Executive Officers of BTC and
Auxilium, for discussion and resolution. If they are unable to resolve the
dispute within thirty (30) days of initiating such negotiations, the Parties
agree first to submit the dispute to non-binding mediation before resorting to
litigation or other mutually agreed dispute resolution mechanism. The dispute
resolution procedures set forth herein shall not limit a court from granting a
temporary restraining order or a preliminary injunction in order to preserve the
status quo of the Parties pending arbitration or to protect a Party's trademark
or confidential or proprietary information.

         13.2 Construction. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "or" has the inclusive meaning frequently identified with the
phrase "and/or," (d) "including" has the inclusive meaning frequently identified
with the phrase "including but not limited to" or "including", and (e)
references to "hereunder" or "herein" relate to this Agreement. The section and
other headings contained in this Agreement are for reference purposes only and
shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, and Schedule
references are to this Agreement unless otherwise specified. Each accounting
term used herein that is not specifically defined herein shall have the meaning
given to it under GAAP.

         13.3 Governing Law; Jurisdiction. This Agreement shall be construed and
the respective rights of the Parties determined according to the substantive
laws of the State of New York notwithstanding the provisions governing conflict
of laws under such New York law to the contrary, except matters of intellectual
property law which shall be determined in accordance with the intellectual
property laws relevant to the intellectual property in question.

                                       35


         13.4 Post-Closing Access to Information. BTC shall afford to
representatives of Auxilium reasonable access to offices, plants, properties,
books and records of BTC relating to the Product, during normal business hours,
in order that Auxilium may have an opportunity to make such reasonable
investigations as it desires with respect to Product. At all times after the
Effective Date, each Party will permit the other Party and its representatives
(including its counsel and auditors) during normal business hours, for a proper
purpose to have reasonable access to and examine and make copies of, at the
expense of the copying Party, all books, records, files and documents in its
possession which relate to the Product.

         13.5 Section 365(n) of the Bankruptcy Code. All rights and licenses
granted under or pursuant to any section of this Agreement are, and shall
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy
Code, licenses of rights to "intellectual property" as defined under Section
101(35A) of the Bankruptcy Code. The Parties shall retain and may fully exercise
all of their respective rights and elections under section 365(n) of the
Bankruptcy Code.

         13.6 Waiver. The failure on the part of Auxilium or BTC to exercise or
enforce any rights conferred upon it hereunder shall not be deemed to be a
waiver of any such rights nor operate to bar the exercise or enforcement thereof
at any time or times thereafter. The observance of any Term may be waived
(either generally or in a particular instance and either retroactively or
prospectively) by the Party entitled to enforce such term, but any such waiver
shall be effective only if in writing signed by the Party against whom such
waiver is to be asserted.

         13.7 Force Majeure. Neither Party shall be held liable or responsible
to the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any Term, other than
an obligation to make a payment, when such failure or delay is caused by or
results from fire, floods, embargoes, government regulations, prohibitions or
interventions, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotions, strikes, lockouts, acts of God, or any other cause
beyond the reasonable control of the affected Party.

         13.8 Severability. It is the intention of the Parties to comply with
all Laws domestic or foreign in connection with the performance of its
obligations hereunder. In the event that any provision of this Agreement, or any
part hereof, is found invalid or unenforceable, the remainder of this Agreement
will be binding on the Parties hereto, and will be construed as if the invalid
or unenforceable provision or part thereof had been deleted, and the Agreement
shall be deemed modified to the extent necessary to render the surviving
provisions enforceable to the fullest extent permitted by law.

         13.9 Government Acts. In the event that any act, regulation, directive,
or law of a government, including its departments, agencies or courts, should
make impossible or prohibit, restrain, modify or limit any material act or
obligation of Auxilium or BTC under this Agreement, the Party, if any, not so
affected shall have the right, at its option, to suspend or terminate this
Agreement as to such country, if good faith negotiations between the Parties to
make such modifications to this Agreement as may be necessary to fairly address
the impact thereof, after a reasonable period of time are not successful in
producing mutually acceptable modifications to this Agreement.

                                       36


         13.10 Assignment. This Agreement may not be assigned or otherwise
transferred by either Party without the prior written consent of the other
Party; provided, however, that either Party may assign this Agreement, without
the consent of the other Party, in connection with the transfer or sale of all
or substantially all of its assets or business or in the event of its merger or
consolidation with another company. In all cases the assigning Party shall
provide the other Party with prompt notice of any such assignment. Any purported
assignment in contravention of this Section shall, at the option of the
nonassigning Party, be null and void and of no effect. No assignment shall
release either Party from responsibility for the performance of any accrued
obligation of such Party hereunder.

         13.11 Counterparts. This Agreement may be executed in duplicate, both
of which shall be deemed to be originals, and both of which shall constitute one
and the same Agreement.

         13.12 No Agency. Nothing herein contained shall be deemed to create an
agency, joint venture, amalgamation, partnership or similar relationship between
BTC and Auxilium. Notwithstanding any of the provisions of this Agreement,
neither Party shall at any time enter into, incur, or hold itself out to third
Parties as having authority to enter into or incur, on behalf of the other
Party, any commitment, expense, or liability whatsoever, and all contracts,
expenses and liabilities undertaken or incurred by one Party in connection with
or relating to the development, manufacture or sale of Enzymes or Product shall
be undertaken, incurred or paid exclusively by that Party, and not as an agent
or representative of the other Party.

         13.13 Notice. All communications between the Parties with respect to
any of the provisions of this Agreement will be sent to the addresses set out
below, or to other addresses as designated by one Party to the other by notice
pursuant hereto, by internationally recognized courier or by prepaid certified,
air mail (which shall be deemed received by the other Party on the seventh
business day following deposit in the mails), or by facsimile transmission or
other electronic means of communication (which shall be deemed received when
transmitted), with confirmation by letter given by the close of business on or
before the next following business day:

                  If to BTC, at:
                  -------------
                  Biospecifics Technologies Corp.
                  35 Wilbur Street
                  Lynbrook, New York 11563
                  Attn: ____________________

                  with a copy to:
                  --------------

                  Brown Raysman Millstein Felder & Steiner LLP
                  163 Madison Avenue
                  P.O. Box 1989 Morristown, New Jersey 07962-1989
                  Attn.: Leslie Gladstone Restaino, Esq.

                  If to Auxilium at:
                  -----------------
                  Auxilium Pharmaceuticals Inc.
                  160 West Germantown Pike
                  Norristown, PA 19401
                  Attn:  __________________

                                       37


                  with a copy to:
                  --------------
                  Morgan, Lewis & Bockius LLP
                  1701 Market Street
                  Philadelphia, PA 19103
                  Attn:  Manya S. Deehr, Esq.

         13.14 Headings. The paragraph headings are for convenience only and
will not be deemed to affect in any way the language of the provisions to which
they refer.

         13.15 Assurances. Neither Party will take any action, or fail to act in
a manner, which would prejudice the rights intended to be granted to the other
Party pursuant to this Agreement.

         13.16 Entire Agreement. This Agreement contains the entire
understanding of the Parties relating to the matters referred to herein, and may
only be amended by a written document, duly executed on behalf of the respective
Parties.



                            [SIGNATURE PAGE FOLLOWS]

                                       38


         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.



                                         AUXILIUM PHARMACEUTICALS, INC.


                                         By:
                                             -----------------------------------
                                                  Name:
                                                  Title:


                                         BIOSPECIFICS TECHNOLOGIES CORP.


                                         By:
                                             -----------------------------------
                                                  Name:
                                                  Title:



SCHEDULE 1.7 BTC PATENTS

                BIOSPECIFICS TECHNOLOGIES CORP. AND SUBSIDIARIES
                    PATENT APPLICATIONS AND EXISTING PATENTS

1. U.S. Patent 5,393,792, patented February 28, 1995, inventors Dr. Harold Stern
and Dr. David Yee, title: High Dosage Topical Forms of Collagenase

2. U.S. Patent 5,422,103, patented June 6, 1995, inventors Dr. Harold Stern and
Dr. David Yee, title: High Dosage Topical Forms of Collagenase

3. U.S. Patent 5,514,370, patented May 7, 1995, inventors Dr. Harold Stern and
Dr. David Yee, title: High Dosage Forms of Collagenase (Method of Treatment
with...). Note: Foreign patent applications corresponding to the above U.S.
applications have been filed in 14 foreign countries (Australia, Canada, 9
countries of the European patent convention, (Austria, France, Germany, Ireland,
Italy, Netherlands, Spain, Switzerland, United Kingdom, Hungary, Japan, Russia).
Patents have issued in all countries except Japan, where the application is
pending.

4. U.S. application inventors Edwin H. Wegman, Burton Bronsther, and Erwin T.
Jacob, title: Reduction of Adipose Tissue. US Patent Application # 10/172601
pending.

5. U.S. Patent 6.086.872, patented July 11, 2000, inventor Thomas L. Wegman,
Amelioration of Dupuytren's Disease.

Note: Foreign patents corresponding to the above patent have been granted in 4
countries. France (2,772,273 granted 4/25/03), Australia (733,208 granted
8/23/01), UK (98050503 granted 10/10/01) and Sweden (9800806-3 granted 3/2/04).
Patents have been filed in Denmark, and , Norway.

6. U.S. Patent 6.022,539, patented February 8, 2000, inventor Thomas L. Wegman,
Amelioration of Peyronie's Disease. Note: Foreign patent application
corresponding to the above application have been filed in 9 countries.
Australia, Canada, Denmark, France, Germany, Iceland, Norway, Sweden, United
Kingdom. Corresponding patent French Patent 0006863 has issued.

7.U.S. Patent 5,173,295, patented December 22, 1992, inventor Peter Wehling,
title: Method of Enhancing the Regeneration of Injured Nerves and Adhesive
Pharmaceutical Formulation Therefor.

8. U.S. Patent 5,279,825, patented January 18, 1994, inventor Peter Wehling,
title: Method of Enhancing the Regeneration of Injured Nerves and Adhesive
Pharmaceutical Formulation Therefor.

Note: Foreign patent application corresponding to the above two cases filed in
the European Patent Office (5 countries) For France, Germany, Italy, Spain, UK
foreign application in European Patent Office.



9. European Patent Office Patent EPO721781B1 June 2002 - inventors Edwin H.
Wegman, Burton Bronsther, and Erwin T. Jacob, title: Reduction of Adipose Tissue
Using Collagenase. This patent is being extended into 12 additional countries.

                  PATENTS LICENSED TO ADVANCE BIOFACTURES CORP.

10. US Patent 5,851,522, patented December 22, 1998 inventor Dr. I. M Herman
titled "Enhancing Keratinocyte Migration. EPO, (9 countries), Canada

11. US Patent 5,718,897, patented on February 17, 1998. Inventor Dr. Ira Herman,
Title: Enhancing Keratinocyte Migration and Proliferation.

Note: Foreign patent application corresponding to the above case has been filed
in Australia, Canada, EPO (12 countries).


Updated:  May 24, 2004




                                  SCHEDULE 1.16
                                  COST OF GOODS

The cost of Enzyme or a Product manufactured by BTC shall mean the fully
allocated cost of manufacturing, which shall include:

1. Materials cost, which means the price paid for raw material components and
finished goods which are purchased from outside vendors as well as any freight
and duty where applicable.

2. Direct labor costs, which means the employment costs including, salary and
employee benefits within the relevant manufacturing operating unit.

3. Direct and factory overheads, which means the cost of specific activities
that are provided by support functions. Overhead costs includes expenses
associated with quality assurance testing, batch review, equipment maintenance
costs, manufacturing energy and utilities, waste removal, storage,
transportation, insurance, management and administrative expenses, general
facilities costs, environmental engineering, interest expense and property
taxes.

Cost of Goods shall be calculated in accordance with U.S. Generally Accepted
Accounting Principles. BTC's Cost of Goods for Enzyme or Product shall in no
event exceed 110% of the cost of Enzyme or Product as supplied, or as could be
supplied, by a Third Party, as measured at the request of Auxilium and no more
frequently than once per calendar year.




                                  SCHEDULE 1.21
                                     ENZYME

Schedule 1.2.1 Enzyme

The enzyme is collagenase obtained by fermentation of Clostridium histolyticum,
purified by chromatography, lyophilized and substantially free from other
proteinases.


                                  SCHEDULE 3.2
                                 CLINICAL TRIALS

SCHEDULE 3.2 CLINICAL TRIALS


DUPUYTREN'S DISEASE


Dupy 303a and Dupy 303b Double Blind, Randomized, Placebo Controlled Study of
the Relative Safety and Efficacy of Collagenase Therapy in the Treatment of
Residual Type Dupuytren's Disease 11/21/03

Dupy 299 An Open Label Training Study for the Use of Collagenase Therapy for the
Use of Collagenase Therapy in the Treatment of Residual Type Dupuytren's Disease
4/4/03

Dupy 404 An Open Label Study of the Relative Safety and Efficacy of Collagenase
Therapy in the Treatment of Residual Type Dupuytren's Disease 4/4/03


PEYRONIE'S DISEASE


1035-PEY An Open Label Study To Evaluate the Efficacy and Safety of Collagenase
Therapy in the Treatment of Peyronie's Disease 1/2/03

EX-31.1

                                                                    Exhibit 31.1
                            Certification Pursuant to
                             18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002

I, Edwin H. Wegman, Chairman of the Board, Chief Executive Officer, President,
Interim Principal Financial Officer and Director, certify that:

1.       I have reviewed this annual report on Form 10-KSB of BioSpecifics
Technologies, Inc.;

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

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

4.       In my capacity as CEO and the registrant's interim principal accounting
offier, I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for
the registrant and I have:

designed such disclosure controls and procedures, or will cause such disclosure
controls and procedures to be designed under my supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to me by others within those entities, particularly
during the period in which this report is being prepared; I will evaluate the
effectiveness of the registrant's disclosure controls and procedures and will
present in future reports our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and I have disclosed in this report any change
in the registrant's internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the
registrant's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting

5.       In my capacity as CEO and the registrant's interim principal accounting
offier I have disclosed, based on our most recent evaluation of the preperation
for design of the internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent function):

         a. all foreseen significant deficiencies and material weaknesses in the
            design or operation of internal control over financial reporting
            which are reasonably likely to adversely affect the registrant's
            ability to record, process, summarize and report financial
            information; and within those entities, particularly during the
            period in which this report is being prepared;
         b. any foreseen fraud, whether or not material, that involves
            management or other individuals who have a significant role in the
            registrant's internal control over financial reporting




Date:  November 2, 2004    /s/        Edwin H. Wegman
                           --------------------------
                                      Edwin H Wegman
                           Chairman, Chief Executive Officer,
                           President and Interim Principal Accounting Officer

EX-32.1

                                                                    Exhibit 32.1

                            Certification Pursuant to
                             18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002


In connection with the annual report of BioSpecifics Technologies Corp. (the
"Company") on Form 10-KSB for the year period ended December 31, 2003, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Edwin H. Wegman, President, Chief Executive Officer and Interim Principal
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

      1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, subject to form TH and
12b(5); and

      2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

                                      /s/ Edwin H. Wegman
                                      -----------------------------------------
                                      Edwin H. Wegman
                                      President and Chief Executive Officer and
                                      Interim Principal Accounting Officer
November 2, 2004