BioSpecifics Technologies Corp. is a pharmaceutical company with a major focus on wound healing, and tissue remodeling. In particular, BioSpecifics has pioneered production and use of the enzyme collagenase ABC, the essential ingredient in prescription drug formulations that are sold as Collagenase Santyl® in the United States and under other trademarks abroad. Collagenase is widely used as a topical treatment for dermal ulcers, pressure sores (bedsores), and second and third degree burns.

BioSpecifics is also developing injectable collagenase ABC for diseases where topical application is not suitable. Clinical trials are under way in the U.S. and other countries for treatment of three of these conditions: Dupuytren's Disease, Peyronie's Disease, keloids and hypertrophic scars. Another important area is in the healing of wounds of any origin, and BioSpecifics maintains an active role in laboratories and clinics to better understand and promote the important role of collagenase in wound healing.

TO OUR STOCKHOLDERS

Fiscal 1997 was a year to be proud of. We achieved important milestones toward our goal of helping to satisfy medical needs by providing healthcare professionals with a precise chemical "tool" that can deliver pinpoint therapy molecule by molecule.

First, on the financial front, in the fiscal year ended January 31, 1997 the Company earned $1,126,000 or $.23 per share on revenues of $5,875,000. This compares with a loss of ($336,000) or ($0.07) per share on revenues of $4,448,000 in fiscal 1996. Second, our U.S. distributor, Knoll Pharmaceutical Company, has expanded, both in number and in territories, the corps of clinical nurse consultants who act as expert sales representatives for our product, Collagenase Santyl® ointment. The new sales representatives are now in place in their territories, but are not expected to contribute to sales until the third quarter. Collagenase Santyl® is now the top selling pharmaceutical product for chronic wound management. Product Insert.

Abroad, we have licensed our ointment product to a German company which will market the product in that country as soon as approval is granted by its health authority, which is reviewing the application. In a continuing search for new markets, our licensing activity abroad, particularly for Europe, is going forward intensely. Active discussions are under way with other pharmaceutical companies for licenses for Europe and throughout the world.

The year has also been productive on the research and development front. You are probably aware, but it bears repetition, that we spent over 25% of our revenues on R&D, and we're taking this money ($.30 per share, pre tax) out of profits because we think that it's the most profitable long term investment we can make. We have ongoing clinical trials for three injectable products, for Peyronie's disease (Phase 2 multi-center), for Dupuytren's disease (Phase 1), and for keloids (Phase 1). Without diminishing the other two products, I can tell you we have reached a point with Dupuytren's Disease that is very exciting. Up until now, the only available treatment for this painful condition has been time consuming and expensive surgery. Several developments are noteworthy: first of all, the clinical results. Also, BioSpecifics has been granted a U.S. patent for the use of collagenase ABC in Dupuytren's Disease, FDA has given the approach Orphan Drug designation, and just this month, we were awarded a research grant for continued clinical investigations by the New York State Center for Advanced Technology in Medical Biotechnology.

An ongoing trial of collagenase in the treatment of keloids at University Hospital of the Albert Einstein School of Medicine yielded positive results that were reported at the annual International Burn Foundation conference covering wound healing. Ongoing work is very active.

An agreement has been reached with Bausch and Lomb for a collaborative clinical research investigation to confirm previous studies on the use of our collagenase for the treatment of glaucoma. An estimated three million Americans have glaucoma. Glaucoma accounts for about 14% of world blindness.

As of January 31, 1997, we had cash, cash equivalents, and marketable securities of over $5.6 million. As part of our business strategy, we are looking to add therapeutic products or acquire companies that will fit in with our technology, manufacturing and product licensing skills.

Our Board of Directors recently authorized a program for the repurchase of up to 100,000 shares of our common stock. We believe that the common stock is undervalued, and view the stock repurchase program as a sound investment. The buyback and R&D program are well supported by our strong balance sheet and profitable operations.

Much of our development and planning work is summarized in the essay entitled "Collagenase - Precision Therapy". We've also reprinted last year's essay "What's Collagen and Why Collagenase" which has proven useful to stockholders.

I'd like to take this opportunity to extend thanks to Mr. Harold Stern for the many years he has devoted his skills and 24 hour a day concerns to the interests of BioSpecifics. Hal will step down from his positions as Executive Vice President and member of the Board of Directors effective July 1, 1997. Fortunately, he will continue his long-term association with the Company but with lesser responsibilities. Thomas L. Wegman has been appointed Executive Vice President to replace Mr. Stern.

The dedication and enthusiasm of our entire staff grow with each milestone achieved.

Sincerely,

Edwin H. Wegman
President and Chairman
June 9, 1997