unapproved new drugs. In response to this notification and subsequent discussions with the FDA, we stopped the sale and distribution of Nicomide® as a prescription product in June 2008.
On August 12, 2008, we entered into a worldwide non-exclusive patent License Agreement to our patent covering Nicomide®, or License Agreement, with River's Edge Pharmaceuticals, LLC, or River's Edge, and an amendment to our Settlement Agreement with River's Edge regarding earlier litigation. See Note 15 of the Notes to the Condensed Consolidated Financial Statements. The amendment to the Settlement Agreement allowed River's Edge to manufacture and market a prescription product that could be substitutable for Nicomide® pursuant to the terms of the License Agreement and changed certain payment obligations of River's Edge for sales of its substitutable product. In consideration for granting the license, we were paid a share of the net revenues, as defined in the License Agreement, of River's Edge's licensed product sales. In April 2009, we and River's Edge entered into an Amendment to the License Agreement, or License Amendment. The License Amendment grants River's Edge an exclusive license to U.S. Patent, No. 6,979,468, and a license to use all know-how and the trademark associated with the Licensed Products worldwide. Under the License Amendment, we are required to transfer all of our rights, title and interest in and to DUSA's patent, know-how and trademark relating to the Licensed Products (but not the copyright registration relating to product labeling) to River's Edge upon our receipt of $5,000,000. Of the $5,000,000, River's Edge is required to make a minimum guaranteed payment to us of $2,600,000, in thirteen monthly installments of $200,000, subject to reduction under certain conditions, and pay additional consideration of $2,400,000 payable over time based on a share of River's Edge's net revenues as defined in the License Amendment. The License Agreement, as amended, has a term of 30 months, subject to a further extension under certain circumstances to 48 months, and may be terminated early by River's Edge on 30 days' prior written notice. Under the License Agreement, River's Edge has assumed all regulatory responsibilities for the Licensed Products. If the License Agreement is terminated prior to the payment of the $5,000,000, all of the rights and licenses granted by us to River's Edge will revert to us. We are recording the revenue under the License Amendment on a cash basis. We received the first $200,000 installment payment under the License Amendment during the three-month period ended June 30, 2009, which is included in Product Revenues in the accompanying Consolidated Statements of Operations. The Company has not received the payments which were due on June 1, July 1 and August 1, 2009. We are evaluating our options to collect the outstanding amounts due from River's Edge under the License Agreement, as amended, and have not yet determined our course of action.
We are marketing Levulan® PDT under an exclusive worldwide license of patents and technology from PARTEQ Research and Development Innovations, the licensing arm of Queen's University, Kingston, Ontario, Canada. In January, 2009, we filed a request for reexamination with the USPTO of one of the Queen's patents that cover our approved indication for AK. We also own or license certain other patents relating to our BLU-U® device and methods for using pharmaceutical formulations which contain our drug and related processes and improvements. In the United States, DUSA®, DUSA Pharmaceuticals, Inc.®, Levulan®, Kerastick®, BLU-U®, Nicomide®, Nicomide-T®, ClindaReach®, Meted®, and Psoriacap® are registered trademarks. Several of these trademarks are also registered in Europe, Australia, Canada, and in other parts of the world. Numerous other trademark applications are pending.
As of June 30, 2009, we had an accumulated deficit of approximately $144,311,000. We cannot predict whether any of our products will achieve significant enough market acceptance or generate sufficient revenues to enable us to become profitable on a sustainable basis.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are disclosed in Note 2 to the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008. Since not all of these accounting policies require management to make difficult, subjective or complex judgments or estimates, they are not all considered critical accounting policies. We have discussed these policies and the underlying estimates used in applying these accounting policies with our Audit Committee. With the exception of the updated listed below, there have been no material changes to our critical accounting policies in the six months ended June 30, 2009.
Fair Value Measurements of Marketable Securities In determining the fair value of our marketable securities, we consider the level of market activity and the availability of prices for the specific securities that we hold. For our Level 2 financial instruments, comprising our corporate debt and United States government-backed securities, we use quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency in the determination of value. We also access publicly available market activity from third party databases and credit ratings of the issuers of the securities we hold to corroborate the data used in the fair value calculations obtained from our primary source. We also take into account credit rating changes, if any, of the securities or recent marketplace activity. We do not have any Level 1 or Level 3 marketable securities.

RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2009 VERSUS JUNE 30,
2008
REVENUES -Total revenues for the three and six-month periods ended June 30, 2009
were $6,966,000 and $14,104,000, respectively, as compared to $8,112,000 and
$16,042,000 in 2008, and were comprised of the following:

                                              Three months ended                                                         Six months ended
                                                   June 30,                                                                  June 30,
                                                                                       INCREASE/                                                                  INCREASE/
                                         2009                    2008                  (DECREASE)                  2009                     2008                  (DECREASE)

PDT PRODUCT REVENUES
LEVULAN®KERASTICK®PRODUCT
REVENUES
United States                        $ 5,621,000             $ 4,572,000               $1,049,000             $ 11,306,000               $9,346,000               $1,960,000
Canada                                   108,000                 218,000                 (110,000 )                243,000                  377,000                 (134,000 )
Korea                                    126,000                 159,000                  (33,000 )                296,000                  524,000                 (228,000 )
Other                                     84,000                 133,000                  (49,000 )                171,000                  190,000                  (19,000 )
Subtotal
Levulan®Kerastick®product
revenues                               5,939,000               5,082,000                  857,000               12,016,000               10,437,000                1,579,000
BLU-U® PRODUCT REVENUES
United States                            479,000                 347,000                  132,000                1,121,000                  822,000                  299,000

Subtotal BLU-U® product
revenues                                 479,000                 347,000                  132,000                1,121,000                  822,000                  299,000


TOTAL PDT PRODUCT REVENUES             6,418,000               5,429,000                  989,000               13,137,000               11,259,000                1,878,000

TOTAL NON-PDT PRODUCT
REVENUES                                 548,000               2,683,000               (2,135,000 )                967,000                4,783,000               (3,816,000 )


TOTAL PRODUCT REVENUES               $ 6,966,000             $ 8,112,000             $ (1,146,000 )           $ 14,104,000             $ 16,042,000             $ (1,938,000 )

For the three and six-month periods ended June 30, 2009, total PDT Drug and Device Products revenues, comprised of revenues from our Kerastick® and BLU-U® products, were $6,418,000 and $13,137,000, respectively. This represents an increase of $989,000, or 18%, and $1,878,000, or 17%, over the comparable 2008 totals of $5,429,000 and $11,259,000, respectively. The incremental revenue was driven primarily by increased Kerastick® revenues and BLU-U® revenues in the United States.
For the three and six-month periods ended June 30, 2009, Kerastick® revenues were $5,939,000, and $12,016,000, respectively, representing a $857,000, or 17%, and $1,579,000, or 15%, increase over the comparable 2008 totals of $5,082,000 and $10,437,000, respectively. Kerastick® unit sales to end-users were 49,815 and 101,762, for the three and six-month periods ended June 30, 2009, respectively, including on a year-to date basis 2,700 sold in Canada and 3,726 sold in Korea. This represents an increase from 48,478 and 100,588 Levulan®Kerastick® units sold in the three and six-month periods ended June 30, 2008, respectively, including on a year-to date basis 4,800 sold in Canada and 8,100 sold in Korea. Our overall average net selling price for the Kerastick® increased to $116.41 per unit for the first six months of 2009 from $102.21 per unit for the first six months of 2008. Our average net selling price for the Kerastick® in the United States increased to $121.75 per unit in 2009 from $110.16 per unit in 2008. The increase in 2009 Kerastick® revenue was driven by increased sales volumes in the United States along with the increase in our overall average unit selling price.
For the three and six-month periods ended June 30, 2009, BLU-U® revenues were $479,000 and $1,121,000, respectively, representing a $132,000, or 38%, and $299,000, or 36%, increase over the comparable 2008 totals of $347,000 and $822,000, respectively. The increase in year-to-date 2009 BLU-U® revenues was driven by increased overall sales volumes, partially offset by a decrease in our average selling price. In the three and six-month periods ended June 30, 2009, there were 58 and 139 units sold, respectively, versus 41 and 97 units sold, respectively, in the comparable 2008 periods. All of the units sold in

both years were sold in the United States. In 2009 on a year-to-date basis, our average net selling price for the BLU-U® decreased to $7,637 from $8,134 in 2008. Our BLU-U® evaluation program allows customers to take delivery for a limited number of BLU-U® units for a period of up to four months for private practitioners and up to one year for hospital clinics, before a purchase decision is required. At June 30, 2009, there were approximately 25 units in the field pursuant to this evaluation program, compared to 58 units in the field at December 31, 2008. The units are classified as inventory in the financial statements and are being amortized during the evaluation period to cost of goods sold using an estimated life for the equipment of three years.
Non-PDT Drug Product Revenues reflect the revenues generated by the products acquired as part of our acquisition of Sirius. Total Non-PDT Product revenues for the three and six-month periods ended June 30, 2009 were $548,000 and $967,000, respectively, compared to $2,683,000 and $4,783,000, respectively for the comparable 2008 periods. The substantial majority of the Non-PDT product revenues were from Nicomide® related royalties from River's Edge, as further described below, and sales of ClindaReach®. In April 2008, we were notified by Actavis Totowa, LLC, the manufacturer of Nicomide®, that Actavis would cease manufacturing several prescription vitamins, including Nicomide®, due to continuing discussions with the FDA. In response to this notification and subsequent discussions with the FDA, we stopped the sale and distribution of Nicomide® as a prescription product in June 2008.
On August 12, 2008, we entered into a worldwide non-exclusive patent License Agreement (the "License Agreement") to our patent covering Nicomide® with River's Edge Pharmaceuticals, LLC and an amendment to our Settlement Agreement with River's Edge. In April 2009, we and River's Edge entered into an Amendment to the License Agreement (the "License Amendment") which granted River's Edge an exclusive license to U.S. Patent, No. 6,979,468, and a license to use all know-how and the trademark associated with the Licensed Products worldwide. Under the License Amendment, DUSA is required to transfer all of its rights, title and interest in and to the DUSA's patent, know-how and trademark relating to the Licensed Products (but not the copyright registration relating to product labeling) to River's Edge upon our receipt of $5,000,000. Of the $5,000,000, River's Edge is required to make a minimum guaranteed payment to us of $2,600,000, in thirteen monthly installments of $200,000, subject to reduction under certain conditions, and pay additional consideration of $2,400,000 payable over time based on a share of River's Edge's net revenues as defined in the License Amendment. The License Agreement, as amended, has a term of 30 months, subject to a further extension under certain circumstances to 48 months, and may be terminated early by River's Edge on 30 days' prior written notice to us. Under the License Agreement, River's Edge has assumed all regulatory responsibilities for the Licensed Products. If River's Edge terminates the License Agreement prior to the payment of the $5,000,000, all of the rights and licenses granted by us to River's Edge will revert to us. We are recording the revenue under the License Amendment on a cash basis. We received the first $200,000 installment payment under the License Amendment during the three-month period ended June 30, 2009, which is included in Product Revenues in the accompanying Consolidated Statements of Operations. We have not received payments which were due on June 1, July 1 and August 1, 2009. We are evaluating our options to collect the outstanding amounts due from River's Edge under the License Agreement, as amended, and have not yet determined our course of action. The decrease in our total revenues for the three and six month periods ended June 30, 2009 compared with the comparable periods in 2008 results from decreases in Non-PDT revenues and international Kerastick® revenues, partially offset by increased PDT segment revenues in the United States. We must continue to increase sales from these levels in order for us to become profitable. We cannot provide any assurance that we will be able to increase sales sufficiently to become profitable, and we cannot provide assurance that a material increase in sales will necessarily cause us to be profitable. PhotoCure received FDA approval to market Metvixia® for treatment of AKs in July 2004, and this product, which is directly competitive with our Levulan® Kerastick® product, is now commercially available. While we are entitled to royalties from PhotoCure on its net sales of Metvixia®, a large dermatology company has the marketing rights in the U.S., which may adversely affect our ability to maintain or increase our Levulan® market. We expect to be able to grow our PDT segment revenues in the United States during 2009, due in part to the 6% increase in Medicare reimbursement of our PDT-related procedure fee, which became effective January 1, 2009, as well as our price increases, which were effective October 1, 2008 and January 1, 2009. We also believe that these two price increases may have caused some of our larger customers to accelerate their purchases in 2008, prior to the price increases becoming effective, thus affecting our first half of 2009 revenues. Although we expect growth in our PDT segment revenues, we are susceptible to the uncertain economic conditions, particularly with our customer base in the U.S. that focuses on the cosmetic market and with the international markets. Reduced sales to the cosmetic customer base and softness in the international markets could be expected until the economy recovers. We expect our Non-PDT revenues for the full year 2009 to be significantly reduced compared to 2008 since we are no longer manufacturing and marketing Nicomide® and are experiencing difficulty collecting payments due under the Nicomide® License Agreement.
COST OF PRODUCT REVENUES - Cost of product revenues for the three and six-month periods ended June 30, 2009 were $1,441,000 and $3,379,000 as compared to $1,787,000 and $3,488,000 in the comparable periods in 2008. A summary of the components of cost of product revenues and royalties is provided below:

                                                                       THREE MONTHS ENDED JUNE 30,
                                                                                                     INCREASE/
                                                              2009                 2008              (DECREASE)

Levulan® Kerastick® cost of product revenues and
royalties
Direct Levulan® Kerastick® product costs                  $   539,000          $   594,000          $  (55,000 )
Other Levulan® Kerastick® production costs
including internal costs assigned to support
products, net                                                  89,000               (8,000 )            97,000
Royalty and supply fees (1)                                   235,000              223,000              12,000

Subtotal Levulan® Kerastick® cost of product
revenues and royalties                                    $   863,000          $   809,000          $   54,000


BLU-U® cost of product revenues

Direct BLU-U® product costs                               $   209,000          $   147,000          $   62,000
Other BLU-U® product costs including internal costs
assigned to support products; as well as, costs
incurred to ship, install and service the BLU-U®in
physicians offices                                            214,000              213,000               1,000

Subtotal BLU-U® cost of product revenues                  $   423,000          $   360,000          $   63,000


TOTAL PDT DRUG AND DEVICE COST OF PRODUCT REVENUES
AND ROYALTIES                                             $ 1,286,000          $ 1,169,000          $  117,000

Non-PDT cost of product revenues and royalties            $   155,000          $   618,000          $ (463,000 )

TOTAL COST OF PRODUCT REVENUES AND ROYALTIES              $ 1,441,000          $ 1,787,000          $ (346,000 )

                                                                        SIX MONTHS ENDED JUNE 30,
                                                                                                     INCREASE/
                                                              2009                 2008              (DECREASE)

Levulan® Kerastick® cost of product revenues and
royalties
Direct Levulan® Kerastick® product costs                  $ 1,103,000          $ 1,232,000          $ (129,000 )
Other Levulan® Kerastick® production costs
including internal costs assigned to support
products, net                                                 448,000                2,000             446,000
Royalty and supply fees (1)                                   488,000              471,000              17,000


Subtotal Levulan® Kerastick® cost of product
revenues and royalties                                    $ 2,039,000          $ 1,705,000          $  334,000

BLU-U® cost of product revenues
Direct BLU-U® product costs                               $   500,000          $   348,000          $  152,000

Other BLU-U® product costs including internal costs
assigned to support products; as well as, costs
incurred to ship, install and service the BLU-U® in
physicians offices                                            462,000              390,000              72,000

Subtotal BLU-U® cost of product revenues                  $   962,000          $   738,000          $  224,000

TOTAL PDT DRUG AND DEVICE COST OF PRODUCT REVENUES
AND ROYALTIES                                             $ 3,001,000          $ 2,443,000          $  558,000

Non-PDT cost of product revenues and royalties            $   378,000          $ 1,045,000          $ (667,000 )

TOTAL COST OF PRODUCT REVENUES AND ROYALTIES              $ 3,379,000          $ 3,488,000          $ (109,000 )

1) Royalty and supply fees reflect amounts paid to our licensor, PARTEQ
Research and Development Innovations, the licensing arm of Queen's University, Kingston, Ontario, and ongoing royalties paid to Draxis Health, Inc., on sales of the Levulan® Kerastick® in Canada.

MARGINS - Total product margins for the three and six-month periods ended June 30, 2009 were $5,525,000 and $10,725,000, respectively, as compared to $6,325,000 and $12,554,000 for the comparable 2008 periods, as shown below:

                                                                    THREE MONTHS ENDED JUNE 30,
                                                                                                              INCREASE/
                                             2009                             2008                            (DECREASE)
Levulan® Kerastick® gross margin          $ 5,076,000            85 %      $ 4,273,000            84 %       $    803,000
BLU-U® gross margin                            56,000            12 %          (13,000 )          (4 )%            69,000


Total PDT drug & device gross margin      $ 5,132,000            80 %      $ 4,260,000            78 %       $    872,000


Total Non-PDT gross margin                    393,000            72 %        2,065,000            77 %       $ (1,672,000 )


TOTAL GROSS MARGIN                        $ 5,525,000            79 %      $ 6,325,000            78 %       $   (800,000 )

                                                                     SIX MONTHS ENDED JUNE 30,
                                                                                                               INCREASE/
                                              2009                              2008                           (DECREASE)
Levulan® Kerastick® gross margin          $  9,977,000            83 %      $  8,731,000            84 %      $  1,246,000
BLU-U® gross margin                            159,000            14 %            85,000            10 %            74,000


Total PDT drug & device gross margin      $ 10,136,000            77 %      $  8,816,000            78 %      $  1,320,000


Total Non-PDT gross margin                     589,000            61 %         3,738,000            78 %      $ (3,149,000 )


TOTAL GROSS MARGIN                        $ 10,725,000            76 %      $ 12,554,000            78 %      $ (1,829,000 )

Kerastick® gross margins for the three and six-month periods ended June 30, 2009 were 85% and 83% versus 84% for both periods in 2008. The margin improvement for the second quarter is attributable to increased U.S. sales volumes and an increased overall average selling price. Our long-term goal is to achieve higher gross margins on Kerastick® sales which will be significantly dependent on increased volume. We believe that we could achieve improved gross margins on our Kerastick® during 2009 from further growth in the U.S.
BLU-U® margins for the three and six-month periods ended June 30, 2009 were 12% and 14%, respectively, versus (4%) and 10% for the comparable 2008 periods. The increase in gross margin is a result of increased sales volumes, partially offset by a decrease in our average selling price. It is important for us to sell BLU-U® units in an effort to drive Kerastick®sales volumes and accordingly, we may sell BLU-U's at low profit margins. Non-PDT Product gross margins reflect the gross margin generated by the products acquired as part of our merger with Sirius. Total gross margins for the three and six-month periods ended June 30, 2009 were 72% and 61%, respectively, compared to 77% and 78%, respectively, in the comparable prior year periods. During the three and six-month periods ended June 30, 2009, Non-PDT Product margins were negatively impacted by our discontinuance of sales of Nicomide® as a prescription product.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs for the three and six-month periods ended June 30, 2009 were $1,077,000 and $2,262,000 as compared to $1,375,000 and $3,562,000 in the comparable 2008 periods. The decrease in 2009 compared to 2008 was due primarily to the absence of spending related to our Phase IIb clinical trial on acne, which concluded in October 2008, and a one-time $600,000 Prescription Drug User Fee Act (PDUFA) charge, which occurred in the first quarter of 2008, related to our approved AK indication.
Based on the results of the Phase IIb clinical trial, which were previously . . .