Exhibit 10.1

   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

                          SERVICES AND SUPPLY AGREEMENT
                          -----------------------------

     This is a  Service  and  Supply  Agreement  ("Agreement")  effective  as of
     September  26,  2000,  and  amended as of  December  1, 2000 by and between
     CollaGenex Pharmaceuticals,  Inc. a corporation of Delaware, having a place
     of  business  at  41  University   Drive,   Newtown,   Pennsylvania   18940
     ("CollaGenex"), and Pharmaceutical Manufacturing Research Services, Inc., a
     corporation of Pennsylvania,  having a place of business at 423 Sargon Way,
     Horsham, PA 19044 ("PMRS"). This Agreement will be revised after review and
     negotiations with the United States Food and Drug Administration.

                                   BACKGROUND
                                   ----------

          A.   CollaGenex  desires to engage the facilities and services of PMRS
               for the  manufacture  Bulk  Product in  Exhibit  A, using  Active
               Ingredient provided by CollaGenex.

          B.   CollaGenex shall have the appropriate rights and registrations to
               manufacture or have  manufactured,  market or distribute the Bulk
               Product and Final Product.

          C.   PMRS has  appropriate  facilities  and the ability to manufacture
               the Bulk Product according to the Specifications in Exhibit A.

          D.   PMRS desires to manufacture  the Bulk Product and supply the Bulk
               Product and Testing of Final  Product to  CollaGenex,  subject to
               the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the foregoing premises and the promises
     herein, the parties, intending to be legally bound, agree as follows:

                             ARTICLE 1 - DEFINITIONS
                             -----------------------

     1.1  "Affiliate"  shall mean (i) any  corporation or business  entity where
          fifty  percent  (50%)  or more of the  voting  stock  of  which is and
          continues to be owned directly or indirectly by any party hereto; (ii)
          any  corporation or business  entity which directly or indirectly owns
          fifty percent (50%) or more of the voting stock of any party hereto.

     1.2  "Active  Ingredient"  shall mean the doxycycline  hyclate  supplied by
          CollaGenex to PMRS for the  manufacture of Product as provided in this
          Agreement.

                                       1

<PAGE>


     1.3  "CGMP"  shall  mean (i)  those  current  Good  Manufacturing  Practice
          regulations  required by the FDA in the  production of  pharmaceutical
          products as published in 21 Code of Federal Regulations ("CFR"), Parts
          210  and  211  and  all  applicable  rules,  regulations,  guides  and
          guidances,  as amended; and (ii) any other rules,  regulations or laws
          of a governmental  agency where  manufacturing  will take place or the
          Final Product will be made available.

     1.4  "Specifications"  shall mean the requirements and standards pertaining
          to Bulk and Final Product as set forth in EXHIBIT A.

     1.5  "Bulk Product" shall mean the unpackaged  finished tablets  containing
          the  active   ingredient   described   in  NDA  50-783,   Periostat(R)
          (doxycycline hyclate tablets) 20 mg, and as specified and described in
          EXHIBIT A.

     1.6  "Bulk Product COA" shall mean a Certificate  of Analysis,  in the same
          form attached as EXHIBIT B.

     1.7  "Final  Product"  shall mean the  packaged  Product  described  in NDA
          50-783,  Periostat(R)(doxycycline  hyclate  tablets)  20  mg,  and  as
          specified and described in EXHIBIT A.

     1.8  "Final Product COA" shall mean a Certificate of Analysis,  in the same
          form attached as EXHIBITS C.1, C.2 and C.3.

     1.9  "Batch Records" shall mean all records and documentation (i) necessary
          to comply with all applicable  laws,  rules and  regulations  (whether
          domestic or foreign)  that govern this  Agreement  and (ii)  verifying
          that PMRS has  completed  and adhered to both the  CollaGenex  Quality
          Assurance  Requirements and approved PMRS  manufacturing  instructions
          used to 1) prepare the blend and  compress  into  tablet  cores and 2)
          film coat the tablet  cores  attached  as  referenced  in NDA  50-783.
          During  the term of this  Agreement  and for the  period  of seven (7)
          years following the expiration of termination of this Agreement,  PMRS
          shall make  available to  CollaGenex  any copies of records,  reports,
          documents and Batch Records in connection with this Agreement.

     1.10 "FDA" shall mean the United  States Food and Drug  Administration,  or
          comparable governmental state or local authority.

     1.11 "NDA" shall mean New Drug Application.

     1.12 "SNDA" shall mean Supplemental New Drug Application.

     1.13 "SUPAC" shall mean Scale Up and Post Approval Changes.

     1.14 "Fee" shall mean the prices as set forth in EXHIBIT D.


                                       2
<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

           ARTICLE 2 - RIGHTS TO INFORMATION, ORDERS, PRICING, PAYMENT
           -----------------------------------------------------------
                                 AND CONFORMANCE
                                 ---------------

     2.1  Requirements
          ------------

          (a)  CollaGenex  shall provide PMRS with written orders for Product at
          least  [**]  days   prior  to  the   requested   manufacturing   date.
          CollaGenex's  purchase  orders shall (i.)  reference  this  Agreement;
          (ii.) be  submitted  in  writing;  (iii.)  state the  quantity of Bulk
          Product to be manufactured and delivered by PMRS to CollaGenex  and/or
          CollaGenex's  agents;  and (iv.) specify the delivery  location of the
          Bulk  Product.   Such  purchase  orders  shall  be  non-binding  until
          CollaGenex receives written confirmation from PMRS pursuant to Section
          2.1 (b).

          (b) Upon receipt of a CollaGenex purchase order, PMRS shall confirm in
          writing (the "PMRS  Confirmation")  within  fifteen (15) calendar days
          said purchase  order and fix the  manufacturing  and shipping dates by
          written confirmation to CollaGenex.

          (c) PMRS shall  allocate  sufficient  production  resources  and adopt
          sufficient planning  procedures in order to meet CollaGenex's  ordered
          requirements  of the Product and shall provide  CollaGenex  with fixed
          manufacturing  and  shipping  dates,  which  shall be  binding  on the
          parties under the terms and conditions of the Agreement.

          (d) PMRS  shall  not  provide  toll  manufacturing  services  or other
          contract  manufacturing  services  for  any  finished   pharmaceutical
          product  containing  the Active  Ingredient  for any party  other than
          CollaGenex without prior written permission from CollaGenex during the
          term of this Agreement.

          2.2  Forecasts and Orders
               --------------------

          (a)  CollaGenex  shall place orders as specified in Section 2.1(a) and
          each order shall at minimum be for [**] kgs Bulk Product.

          (b) PMRS shall supply  CollaGenex with Bulk Product in accordance with
          EXHIBIT A.

          (c) PMRS agrees to deliver the Bulk Product in such  quantities on the
          basis and on such  delivery  dates as are  specified in  CollaGenex 's
          purchase order with not less than [**] days advance notice. CollaGenex
          agrees to provide PMRS with an initial non-binding annual forecast and
          rolling  quarterly updates to keep PMRS informed of changing needs and
          better plan for resource allocation.

                                       3

<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

          (d) BACK UP MANUFACTURING  CAPACITY:  In the event that PMRS is unable
          to provide Bulk Product in accordance with this Agreement,  PMRS shall
          locate,  identify and qualify  (including  assistance  with technology
          transfer) an alternate  manufacturing  site for the  production of the
          Bulk  Product at  CollaGenex's  sole  expense  and upon their  written
          authorization. PMRS' assistance will in no way limit any remedies that
          CollaGenex may have whether in law or equity.

          In any event, PMRS shall use its best efforts to adjust its production
          capacity to accommodate CollaGenex's forecast for the Product.


          2.3  Price: Payment, Shipment
               -------------------------

          (a) The Fee for the Bulk  Product  ordered  and  accepted  under  this
          Agreement is as set forth in EXHIBIT D.

          (b) CollaGenex  agrees to pay PMRS based on PMRS' invoice for the Bulk
          Product in accordance with Section 2.3(a) above net [**] days from the
          later of the receipt by  CollaGenex,  or its agent,  of released  Bulk
          Product or the receipt of the invoice. All payments hereunder shall be
          made in U.S.  Dollars.  CollaGenex  agrees  to pay  PMRS a [**]%  down
          payment at the placement of the order.

          (c) Bulk  Product  and/or Final  Product  shall be deemed to be at all
          times and at all stages of manufacture the property of CollaGenex.

          (d) Service  changes  requested by CollaGenex  must be consistent with
          SUPAC  requirements  of current NDA, or an approved SNDA, or marketing
          authorizations or analogous  approvals  granted by regulatory  bodies,
          whether  domestic or foreign.  Where disputed,  a mutually agreed upon
          third party or the FDA shall be consulted regarding  regulatory impact
          of  changes.   Where  changes  require   submission  of  a  SNDA,  the
          requirements  of  this  paragraph  do not  become  binding  until  the
          approval of the  submitted  SNDA.  Where  changes  require  additional
          expense, revalidation of any process or method validation,  CollaGenex
          will be responsible for these  additional  costs;  provided,  however,
          CollaGenex  in its  sole  determination  may,  without  incurring  any
          liability  to PMRS,  cancel  any  purchase  order that  requires  such
          additional changes.

          2.4    Testing: Certificate of Analysis and Conformance:
          --------------------------------------------------------

          (a) PMRS shall provide a Bulk Product COA and such other  documents as
          may be requested or required by regulatory bodies, whether domestic or
          foreign, to CollaGenex, prior to shipment as set forth in EXHIBIT B.

          (b) PMRS  shall  provide  the  results  of such  analysis  along  with
          supporting  data. PMRS shall provide  CollaGenex with a recommendation
          to release the batch and complete Batch Records.


                                       4
<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

          (c) CollaGenex  shall be under no obligation to accept any shipment of
          Bulk  Product  without  an  accompanying  Bulk  Product  COA and Batch
          Records.

          (d) BULK  PRODUCT  ACCEPTANCE:  Prior to the  shipment of any batch of
          Bulk  Product  by  PMRS  to  CollaGenex  or  CollaGenex's   designated
          packager,  CollaGenex shall have [**] calendar days to examine (i) the
          completed  Batch  Records and Bulk Product COA provided to  CollaGenex
          pursuant  to Section  2.4;  or (ii)  samples of the Bulk  Product,  to
          determine whether the Bulk Product conforms to Specifications.  In the
          event that  CollaGenex  accepts a batch or  batches  of Bulk  Product,
          CollaGenex  will  authorize  PMRS to ship the batch or batches of Bulk
          Product to its  designated  packager by providing  PMRS with a written
          release  authorization.   This  written  release  authorization  shall
          thereby enable PMRS to invoice  CollaGenex for the batch,  or batches,
          accepted.

          (e) NONCONFORMING BULK PRODUCT REJECTION:  In the event that any batch
          of the  Product  shall  fail  to so  conform  to  the  Specifications,
          CollaGenex  shall,  prior to any rejection of the batch,  consult with
          PMRS,  regarding the  nonconformity  with a view towards resolving the
          nonconformity. If CollaGenex and PMRS are not able to mutually resolve
          the nonconformity, CollaGenex may reject the batch within [**] days of
          notice to PMRS of the nonconformity,  by giving written notice thereof
          to PMRS, which notice shall specify the  nonconformity.  If CollaGenex
          rejects a batch of Bulk Product pursuant to Section 2.4(d), PMRS shall
          thereupon,  at  its  sole,  cost  and  CollaGenex's  option:  (1)  use
          reasonable  best effort to replace as quickly as  possible,  but in no
          event  longer  than  [**]  days  of   rejection   and  (2)  refund  to
          CollaGenex's  account for CollaGenex's  acquisition cost of the Active
          Ingredient and any other costs incurred by CollaGenex relating to such
          non-conforming batches.

          (e) Final Product Testing:  PMRS shall provide CollaGenex with a Final
          Product COA and such other  documents  as may be requested or required
          by regulatory  bodies,  whether  domestic or foreign,  to  CollaGenex,
          prior to shipment as set forth in EXHIBIT C.1 (100 count bottles), C.2
          (blisters) or C.3 (1000 count bottles).  If the Final Product does not
          conform to the Specification,  PMRS will immediately notify CollaGenex
          and  the  parties  will  consult  with  each  other,   regarding   the
          nonconformity with a view towards resolving the nonconformity.

     2.5 GRANT OF LIMITED  RIGHTS:  CollaGenex  grants to PMRS,  for the term of
     this Agreement,  a non-exclusive,  non-transferable  limited license to use
     the information  provided by CollaGenex and the trademarks  associated with
     the Final  Product  solely for the purpose to  manufacture  and package the
     Products  for  CollaGenex   under  this   Agreement.   Such  license  shall
     immediately  terminate upon expiration or termination of this Agreement and
     PMRS  shall  immediately  stop  using  such  information  and  return  such
     information to CollaGenex.



                                       5
<PAGE>

             ARTICLE 3 - WARRANTIES, COVENANTS AND INDEMNIFICATION
             ------------------------------------------------------

          3.1  General Warranty and Indemnification.
               -------------------------------------

               (a) PMRS  warrants that (i) the Bulk Product is  manufactured  in
               accordance  with  CGMPs and any  other  applicable  law,  rule or
               regulation  (whether domestic or foreign);  and (ii), at the time
               of delivery of the Bulk Product, the Bulk Product will (A) comply
               with the  Specifications,  and (B) shall be free from  defects in
               materials and workmanship.

               (b) PMRS agrees to defend,  indemnify and hold CollaGenex and its
               Affiliates,  directors,  employees  and agents  harmless from and
               against  any  claims,  liabilities,  damages,  costs or  expenses
               (including  reasonable attorney's fees) resulting from any claims
               arising  solely from (i) the fault or negligence of PMRS; or (ii)
               from any misrepresentation or material breach of warranty of PMRS
               contained herein or in any EXHIBIT or schedule hereto,  or in any
               other  statement,  certificate  or  document  furnished  or to be
               furnished to CollaGenex pursuant hereto or in connection with the
               transactions  contemplated  hereby,  or (iii)  from any  material
               breach of any covenant or  obligation  of PMRS  contained in this
               Agreement.

               (c) CollaGenex agrees to defend,  indemnify and hold PMRS and its
               Affiliates,  directors,  employees  and agents  harmless from and
               against  any  claims,  liabilities,  damage,  costs  or  expenses
               (including  reasonable  attorney's fees) resulting from any claim
               by a third party  arising  solely from (i) issues  regarding  the
               safety  or  efficacy  of the  Bulk  and  Final  Product  with the
               exception of claims that arise from the negligence or wrong doing
               of PMRS or  claims  for  which  PMRS is  otherwise  obligated  to
               indemnify    CollaGenex   under   this   Agreement,    (ii)   any
               misrepresentation  of package materials,  illegal distribution of
               Bulk and  Final  Product,  or  material  breach  or  warranty  of
               CollaGenex  contained  herein,  or in  any  EXHIBIT  or  schedule
               hereto,  or in  any  other  statement,  certificate  or  document
               furnished  or to be  furnished  to  PMRS  pursuant  hereto  or in
               connection with the transactions  contemplated  hereby,  or (iii)
               any material  breach of any covenant or  obligation of CollaGenex
               contained herein.

               (d) The  obligations  to indemnify,  defend and hold harmless set
               forth  above in this  Section 3 will not apply to the  extent the
               indemnified  party was  responsible for giving rise to the matter
               upon  which the claim for  indemnification  is based and will not
               apply  unless the  indemnified  party (i)  promptly  notifies the
               indemnifying  party  of any  matters  in  respect  of  which  the
               indemnity  may  apply  and of which  the  indemnified  party  has
               knowledge;  (ii) gives the indemnifying party full opportunity to
               control the response thereto and the defense  thereof,  including
               any agreement relating to the settlement  thereof,  provided that
               the indemnifying  party shall not settle any such claim or action
               without the prior written consent of the indemnified party (which
               shall  not  be  unreasonably  withheld  or  delayed);  and  (iii)
               cooperates  with  the  indemnifying  party,  at the  indemnifying
               party's  cost and expense in the defense or  settlement  thereof.
               The indemnified  party may  participate,  at its own expense,  in
               such  defense  and  in any  settlement  discussions  directly  or
               through  counsel of its choice on a  monitoring,  non-controlling
               basis.

                                       6

<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

     3.2 Environmental Health and Safety Warranty
         ----------------------------------------

               (a) PMRS warrants that all Bulk Product sold and shipped pursuant
               to this agreement  shall be  manufactured  in accordance with all
               applicable  federal,  state and local  environmental,  health and
               safety  laws and  regulations  in effect at the time and place of
               manufacture of the Bulk Product.  Further, PMRS warrants that all
               waste,   including  but  not  limited  to  all  hazardous  waste,
               generated at the time of manufacture of the Bulk Product shall be
               disposed of in accordance with Section 3.7 (a) and all applicable
               federal, state and local laws and regulations.

               (b) Not withstanding any other provision of this Agreement,  PMRS
               will defend,  indemnify and hold CollaGenex  harmless against any
               and all  liability,  damage,  loss,  cost or  expense  (including
               reasonable  attorney's fees) arising from or related to any third
               party claim, demand for reimbursement,  suit or action threatened
               or brought  CollaGenex  which arises from the alleged  release or
               threat  of  release  of a  hazardous  substance  at the  place of
               manufacture  of the Bulk Product.  PMRS'  obligations  under this
               Article  shall  include  any  liability,  damage,  loss,  cost or
               expense (including reasonable attorney's fees) arising from PMRS'
               breach of the  warranties  set forth herein.  Upon receipt of any
               such claim,  demand,  suit or action,  CollaGenex  shall promptly
               notify PMRS.

     3.3 Manufacturing of the Product.
         ----------------------------

               (a) PMRS  shall  manufacture  and  deliver  the Bulk  Product  to
               CollaGenex  at all times in full  compliance  with  CGMP's,  by a
               fully  validated  process,   with  the  Specifications,   and  in
               accordance with CollaGenex Quality Assurance  Requirements.  PMRS
               shall  maintain  and furnish to  CollaGenex  and at  CollaGenex's
               request,  any governmental  agency (whether domestic or foreign),
               all  records as are  necessary  and  appropriate  to  demonstrate
               compliance with CGMPs. PMRS shall manufacture the Bulk Product in
               a facility maintaining a current drug establishment  registration
               with FDA as set  forth in 21 CFR,  Part  207 and  which  has been
               inspected and approved by the United  Kingdom  Medicines  Control
               Agency or other  analogous  regulatory  body.  PMRS will  require
               reasonable   advance  notice  of  which  countries'   regulations
               CollaGenex  wishes PMRS to be in compliance with and that meeting
               compliance requirements will be at CollaGenex's expense.

               (b) CollaGenex shall have the right, on reasonable advance notice
               and during  normal  business  hours,  to inspect  and audit PMRS'
               facilities,   operations   and  books  and   records  to  confirm
               compliance with the covenants contained in this Agreement. Annual
               audits  will  be  allowed  by  PMRS  during  term  of  Agreement.
               Additional  audits will be  conducted  at a mutually  agreed upon
               times and CollaGenex's expense.  CollaGenex PMRS shall respond in
               writing to CollaGenex  regarding any items of noncompliance  with
               CGMP,  identified by CollaGenex  in written  reports  during such
               inspections  or  audits  within  [**] days of  CollaGenex  notice
               thereof.  PMRS shall use best efforts to remedy any such items of
               noncompliance with CGMP within [**] days of notice thereof.  PMRS
               shall provide  CollaGenex  with copies of PMRS' fire and property
               insurance company's inspection and loss reports for CollaGenex 's
               use solely for internal  control  practices.  CollaGenex  has the
               right  to have a  representative  at PMRS at  anytime  CollaGenex


                                       7
<PAGE>

               manufacturing  activities  are  undertaken  who can  observe  any
               manufacturing or testing operations of the CollaGenex Product.

               (c)  Except  as stated  otherwise  in this  Agreement,  PMRS will
               supply all of the components  and bulk  packaging  components for
               the  manufacture  of  Product,  including  but  not  limited  to:
               facilities,   tools,   equipment,   labor  and   supervision   to
               manufacture Product,  release testing,  stability testing, annual
               reporting  on stability  testing  (based upon the first three (3)
               commercial  batches and one batch  annually  thereafter),  and in
               accordance with CollaGenex Quality Assurance Requirements, all of
               which are included in the Fee as set forth in EXHIBIT D.

     3.4 Regulatory Matters.
         ------------------

               (a) PMRS shall maintain all regulatory and governmental  permits,
               licenses and approvals that may be necessary to  manufacture  and
               ship the Bulk Product to CollaGenex at CollaGenex's expense. PMRS
               shall  not  contact  the  regulatory  and  governmental  agencies
               regarding the  manufacture of Bulk Product  without prior oral or
               written notification of CollaGenex.

               (b) CollaGenex  will be responsible  for any reporting of matters
               regarding  the  manufacture  of Bulk Product and Final Product to
               the  FDA  or  other  appropriate   governmental   authorities  in
               accordance with pertinent laws and  regulations  except as stated
               elsewhere in this Agreement.  PMRS shall provide  CollaGenex with
               copies of any  documentation,  information  records,  log  and/or
               notebooks  relating to the  manufacturing and testing of the Bulk
               Products   and  testing  of  the  Final   Product   requested  by
               CollaGenex.  PMRS shall advise CollaGenex within twenty four (24)
               hours of any occurrences or information which arises out of PMRS'
               manufacturing  and testing  activities,  whether or not occurring
               with  Bulk  Products  and  Final  Product,  which  have or  could
               reasonably  be expected  to have  adverse  regulatory  compliance
               and/or reporting consequences concerning Bulk and Final Products.
               PMRS will  provide  information  required  for the annual  report
               submission and provide it in a timely manner to CollaGenex

               (c) PMRS shall be responsible  for handling and responding to any
               appropriate  governmental agency inspections of PMRS with respect
               to the manufacturing and testing of the Bulk Products and testing
               of the Final Product as required by governmental  authority or in
               recognition  of its role as the  manufacturer  and tester of Bulk
               Products  and tester of Final  Products.  PMRS  shall  provide to
               CollaGenex any information reasonably requested by CollaGenex and
               all  information   requested  by  any   governmental   agency  in
               connection  with  any  governmental  inspection  related  to  the
               manufacturing  and testing of Bulk  Products and testing of Final
               Product. PMRS shall immediately advise CollaGenex of any requests
               by any  governmental  agency for such inspections with respect to
               the Bulk and Final Product.

               (d) PMRS  will not make  changes  relating  to the  manufacturing
               process and testing of the Bulk Products and testing of the Final
               Product  or  relating  to  any  of  the  materials,   components,
               functions,  or controls of the  manufacturing  and testing of the
               Bulk  Product  and  testing of the Final  Product  without  prior
               written  consent of  CollaGenex.  In the event that PMRS believes
               that such change is necessary,  PMRS will provide CollaGenex with
               written notice detailing such proposed change.  In no event shall
               any  change  be


                                       8

<PAGE>

               implemented   until  PMRS  has  received  written  approval  from
               CollaGenex unless stated otherwise in this Agreement.

               (e) In the event that PMRS is  inspected by the FDA, the Canadian
               and Mexican Drug Regulatory Authorities or any other governmental
               agency (whether domestic or foreign), PMRS shall promptly (within
               twenty four (24) hours) notify  CollaGenex  of any  violations or
               deficiencies relating to the manufacturing facility at which Bulk
               Product  was  manufactured,  packaged  or  stored,  or the  Final
               Product was tested,  and shall promptly  (within one (1) business
               day) disclose to CollaGenex  all relevant  portions of any notice
               of  observations  or  potential  violations  (e.g.  FDA form 483,
               etc.).  PMRS  will use its best  efforts  to  provide  CollaGenex
               within  five  (5)  business  days a copy of  PMRS'  response.  In
               addition,  PMRS will supply to CollaGenex written monthly reports
               of the  status  on any  commitments  made as a  result  of  these
               inspections.

               (f) PMRS  certifies  it did not and will not use 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 Food Drug and Cosmetic Act
               at 21 USC 335a. PMRS agrees to notify  CollaGenex  immediately in
               the event any person  providing  services to PMRS under the scope
               of this work of this Agreement is debarred or becomes  subject to
               debarment.

     3.5 Complaints and Recalls
         ----------------------

               (a) Final  Product  complaint  reports  received  by PMRS will be
               faxed within one (1) business day to:

               CollaGenex Pharmaceuticals, Inc.
               41 University Drive
               Newtown, PA 18940
               Attn: Christopher V. Powala
               Senior Director, Regulatory Affairs
               Phone: 215-579-7388
               Fax: 215-579-8577

               Final Product  complaint  reports  received by CollaGenex  either
               directly or from a commercial marketer concerning  manufacture of
               the Final Product will be faxed within one (1) business day to:

               PMRS
               423 Sargon Way
               Horsham, PA 19044
               Attn: Patrick McNally, Director, Quality Assurance
               Phone: 215-957-9400
               fax: 215-957-6161

               (b) PMRS will investigate,  within 5 working days, all complaints
               associated with the manufacture of the Bulk Product and provide a
               written  summary to  CollaGenex  within ten (10) business days on
               all  aspects of the product  testing  except  microbial  testing,
               where a written  summary  will be provided to  CollaGenex  within
               thirty (30) business

                                       9
<PAGE>

               days.  CollaGenex will  investigate all other product  complaints
               associated with the Final Product.

               (c) In the event PMRS believes a recall, field alert,  withdrawal
               or field  correction  may be necessary  for any Bulk Products and
               Final  Product   provided  under  this   Agreement,   PMRS  shall
               immediately  notify  CollaGenex.  In the  event  that  CollaGenex
               initiates a recall,  field alert,  withdrawal or field correction
               for Final  Product,  provided  under this  Agreement,  CollaGenex
               shall so notify  PMRS.  PMRS will not act to  initiate  a recall,
               field alert, product withdrawal or field correction without prior
               written consent from CollaGenex.

          3.6  Environmental
               -------------

               (a) PMRS shall  properly  dispose of any and all hazardous  waste
               materials  directly  involved with the manufacture and testing of
               Bulk Product and testing of the Final Product in full  compliance
               with all applicable federal and local regulations.  Any hazardous
               waste  generated  or  resulting  from  the  activities  performed
               hereunder,    if   any,    will   be    disposed   of   using   a
               CollaGenex-PMRS-approved  contractor at CollaGenex's expense. Any
               expense hereunder to CollaGenex will be pre-approved. However, it
               the creation of any  hazardous  waste is due to the error of PMRS
               personnel or failure of equipment,  any expenses incurred will be
               at the expense of PMRS.

               (b) PMRS  shall  promptly  notify  CollaGenex  in  writing of any
               unauthorized release, spill or emission of a reportable amount of
               hazardous  materials,  used  or  generated  from  the  activities
               performed hereunder;  and, of any alleged environmental violation
               or  litigation  relating  to  the  facility  for  the  activities
               performed hereunder.

               (c)  Notwithstanding  any  other  provision  of  this  Agreement,
               CollaGenex  personnel  may review and  request  copies  from PMRS
               records and procedures,  and may conduct environmental health and
               safety  audits  and  inspections  of those  portions  of the PMRS
               facility used for the (i) the storage,  manufacturing and testing
               of the Bulk Products and testing of the Final  Product;  (ii) any
               raw  materials  for the  manufacturing  and  testing  of the Bulk
               Products   and   testing   of  the  Final   Product;   (iii)  any
               intermediates;  and (iv) any waste,  including but not limited to
               all hazardous  waste,  generated from the manufacture and testing
               of the Bulk  Products  and  testing  of the  Final  Product.  The
               scheduling  of such visits will be at  reasonable  times and with
               prior  written  notice to PMRS.  Inspections  shall  scheduled to
               verify PMRS'  compliance with the Warranties set forth in Article
               3.  CollaGenex   conduct  of  any  document  review  or  facility
               inspection  pursuant to this  Agreement  shall in no way limit or
               reduce PMRS' obligations under Article 3 of this Agreement.

          3.7  INTELLECTUAL   PROPERTY  -  PMRS   represents   and  warrants  to
               CollaGenex  that PMRS is entitled to manufacture  and deliver the
               Product to CollaGenex as provided in this  Agreement and does not
               infringe  any patent,  trademark  or other  proprietary  right of
               others.  PMRS shall indemnify and hold  CollaGenex  harmless from
               and against any claims,  liabilities or damages  associated  with
               any such claim of infringement.


                                       10
<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

          3.8  Developments-New     technologies,      inventions,     processes
               methodologies,    processes    and   know-how    (herein    after
               "Developments")  may be developed by PMRS during the  performance
               of this  agreement.  CollaGenex  shall have ownership of all such
               Developments,  including  any  patents,  know-how  and any  other
               intellectual  property,  directly  related to  CollaGenex's  Bulk
               Products  and  Final   Product.   PMRS  shall  take  any  actions
               reasonably  requested by CollaGenex to perfect CollaGenex's right
               and title in and to the  Developments,  including but not limited
               to signing any documents and providing testimony.

          3.9  OTHER THAN AS EXPRESSLY  PROVIDED FOR IN THIS AGREEMENT,  NEITHER
               PARTY  MAKES ANY OTHER  WARRANTIES,  EITHER  EXPRESS OR  IMPLIED,
               INCLUDING   BUT  NOT  LIMITED  TO  THE  IMPLIED   WARRANTIES   OF
               MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

                        ARTICLE 4 - TERM AND TERMINATION
                        --------------------------------

          4.1  This Agreement  shall have an initial term commencing on the date
               first set  forth  above,  and  ending on  September  15,  2003 (3
               years).  This  Agreement  shall  be  automatically  extended  for
               consecutive  one (1) year periods,  unless either party  notifies
               the other,  in writing,  of its  intention  not to renew at least
               twelve (12) months prior to the expiration of the initial term of
               this Agreement or any succeeding term, as the case may be.

          4.2  Either  party may  terminate  the  Agreement by giving sixty (60)
               days notice to the other party if the other party is in breach of
               any material term of this Agreement and fails to cure that breach
               within such sixty (60) day period.

          4.3  This  Agreement  may be  terminated  upon  thirty (30) days prior
               written  notice by one party at any time during this Agreement if
               the other party shall file in any court pursuant to any statue of
               any  government  in any  country  a  petition  in  bankruptcy  or
               insolvency or for  reorganization  or for an  arrangement  or the
               appointment  of a  receiver  of  trustee  of the  party or of its
               assets;  or if any other party  proposes a written  agreement  of
               composition  for  extension  of its debts;  or if the other party
               shall be served with an involuntary petition against it, filed in
               any  insolvency  proceeding,  and  such  petition  shall  not  be
               dismissed within sixty (60) days after filing thereof;  or if the
               other party shall be a party to any  dissolution or  liquidation,
               or if the other party shall make an assignment for the benefit of
               its  creditors;  or if the other  party is  subject  to any final
               order of  debarment  which  can be  expected  to have a  material
               adverse effect on the sales of the Product.

          4.4  CollaGenex  may terminate  this  Agreement,  in whole or in part,
               with (30) thirty days written  notice to PMRS.  All payments made
               to  PMRS  by   CollaGenex   towards   this   Agreement   will  be
               nonrefundable. There will be a cancellation fee of $[**] for each
               year of the contract.


                                       11

<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

          4.5  Other than for  termination  by  CollaGenex  pursuant to Sections
               4.2, 4.3 or 6.3, upon  termination of this Agreement,  CollaGenex
               shall  purchase  from  PMRS,  at  cost,  all  raw  materials  and
               packaging  materials with Specifications and purchased within the
               preceding  [**]months by PMRS for use in  manufacturing  the Bulk
               Product.  Finished  goods shall be purchased by  CollaGenex  from
               PMRS at the price  established  pursuant to Section  2.3(A).  Any
               Bulk  Product  in the  process  of  manufacture  by  PMRS  on the
               termination  date shall be completed  and delivered to CollaGenex
               in accordance with the terms of this Agreement.

                           ARTICLE 5 - CONFIDENTIALITY
                           ---------------------------

          5.1  All  information  provided by CollaGenex to PMRS (the  "receiving
               party") in connection  with this Agreement shall be maintained in
               strict  confidence  by PMRS.  This  information  shall remain the
               property of CollaGenex  and PMRS shall not use the same for or on
               behalf of any entity other than CollaGenex. At the termination of
               this Agreement,  PMRS shall promptly return without retaining any
               copies  of  extracts  thereof,  except  as  required  by law,  to
               CollaGenex  any physical  embodiments  (including  copies) of any
               such information.

          5.2  All  information  provided by PMRS to CollaGenex  (the "receiving
               party") in connection  with this Agreement shall be maintained in
               strict  confidence by CollaGenex.  Such information  shall remain
               the property of PMRS,  and  CollaGenex  shall not make use of any
               such  information  except  for  the  purposes  for  which  it was
               provided. At the termination of this Agreement,  CollaGenex shall
               promptly  return,   without  retaining  any  copies  of  extracts
               thereof,  except  as  required  by  law,  to  PMRS  any  physical
               embodiments (including copies) of any such information.

          5.3  The  covenants of the receiving  party  contained in Sections 5.1
               and 5.2 shall not apply to information  which:  (i) is already in
               the public domain at the time of disclosure; (ii) becomes part of
               the public domain  through no action or omission of the receiving
               party after disclosure to the receiving  party;  (iii) is already
               known  to the  receiving  party  at the  time of  disclosure,  as
               evidenced by the receiving party's written records; (iv) had been
               or is disclosed to the  receiving  party in good faith by a third
               party  who was or is not,  at the time of  disclosure,  under any
               obligation  of  confidence  to the other party hereto at the time
               the third party disclosed such information; or (v) is required to
               be disclosed by law,  provided that it gives the disclosing party
               reasonable   prior  written  notice   sufficient  to  permit  the
               disclosing party to contest such disclosure.

               5.4 This Article 5 shall survive  termination  of this  Agreement
               for a period of [**] years.



                                       12
<PAGE>

   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.


                            ARTICLE 6 - MISCELLANEOUS
                            -------------------------

          6.1  CORPORATE  ORGANIZATION AND AUTHORITY - Each party represents and
               warrants that it is a company duly organized,  validly  existing,
               and in good standing under the laws of the  jurisdiction  wherein
               it is  organized,  and  that  it  has  all  necessary  power  and
               authorization to assume the obligations under this Agreement, and
               to discharge them pursuant to the terms hereof.

          6.2  PUBLIC  ANNOUNCEMENTS  - Neither  party shall make any  publicity
               releases,  interviews,  or  other  dissemination  of  information
               concerning  this  Agreement  or  its  terms,  or  either  party's
               performance   hereunder,   to  communication   media,   financial
               analysts,  or others  without the  approval  of the other  party,
               which approval shall not  unreasonably be withheld.  Either party
               may upon notice to the other make any  disclosure in filings with
               regulatory agencies as required by law or applicable court order;
               provided  that the other  party  shall  have the  opportunity  to
               notify such disclosures and filings.

          6.3  FORCE  MAJEURE - Neither  party  shall be liable to the other if,
               and to the extent,  that the  performance or delay in performance
               of any of its  obligations  under this  Agreement  is  prevented,
               restricted,  delayed  or  interfered  with  due to  circumstances
               beyond the reasonable control of such party,  including,  but not
               limited to, government  legislation,  fires, floods,  explosions,
               epidemics,   accidents,   acts  of  God,  wars,  riots,  strikes,
               lockouts,  or other  concerted  acts of  workers  and/or  acts of
               government.  The party  claiming an event of force  majeure shall
               promptly  notify the other  party in writing,  and  provide  full
               particulars  of  the  cause  of  event  and  the  date  of  first
               occurrence  thereof, as soon as possible after the event and also
               keep the other party  informed of any further  developments.  The
               party so affected  shall use its best efforts to remove the cause
               of non-performance, and both the parties shall resume performance
               hereunder  with the  utmost  dispatch  when such cause is removed
               unless this  Agreement is previously  terminated  under Article 4
               hereof.   If  performance  is  suspended  as  a  result  of  such
               contingencies  or causes  for a period  of [**]  days or  longer,
               CollaGenex  shall  have the  right to  terminate  this  Agreement
               citing  Force  Majeure  upon  written  notice to PMRS at any time
               thereafter with no liability to PMRS.

          6.4  ENTIRE  AGREEMENT  This  Agreement and the documents  referred to
               herein  constitutes  the entire  agreement  between  the  parties
               pertaining to the subject matter hereof,  and supersedes,  on its
               effective  date,  all  prior  and   contemporaneous   agreements,
               representations  and  understandings of the parties in connection
               herewith.  No agent of  either  party is  authorized  to make any
               representation,  promise,  or  warranty  not  contained  in  this
               Agreement.

          6.5  AMENDMENT  AND WAIVER - This  Agreement  may be  amended  only in
               writing,  which specifically states that such an amendment is its
               purpose,  and  which is  signed  by both  parties.  No  course of
               dealing  between  the  parties  or  failure  by  either  party to
               exercise  any  right or  remedy  hereunder  shall  constitute  an
               amendment  to this  Agreement  or a waiver of any other  right or
               remedy or the later exercise of any right or remedy.


                                       13

<PAGE>

          6.6  GOVERNING LAW - This Agreement shall be governed by and construed
               in accordance  with the  substantive  law of the  Commonwealth of
               Pennsylvania without regard to its rules for conflicts of law.

          6.7  SUCCESSORS AND ASSIGNS - The  provisions of this Agreement  shall
               be binding  upon and inure to the benefit of the  parties  hereto
               and their respective successors and assigns;  provided,  however,
               that no party may assign,  delegate or otherwise  transfer any of
               its rights or  obligations  under this  Agreement  without  first
               receiving  the prior  written  consent of the other party hereto,
               except that either  party may assign and  delegate its rights and
               duties  hereunder  without  obtaining  such  consent  (i)  to any
               affiliate or  subsidiary  of such party,  or (ii) to any party or
               entity which acquires substantially all of the business or assets
               of such party if such party  guarantees  the  performance  of the
               acquiring  party and the acquiring  party  expressly  assumes the
               assigning party's obligations hereunder.

          6.8  NATURE OF  AGREEMENT - In  operating  under the  Agreement,  each
               party shall act  independently  and this  Agreement  shall not be
               construed  as  creating  any   partnership,   joint   venture  or
               incorporated  business  entity.  Neither  party  shall  have  any
               authority to incur any  liability  or  obligation  whatsoever  on
               behalf of the other.

          6.9  NOTICE - Any notice, demand, waiver,  consent,  approval or other
               communication  which is required or  permitted to be given to any
               party hereunder shall be in writing and shall be deemed delivered
               if  sent  to the  party  personally,  if  sent  to the  party  by
               Facsimile  (i.e. by Fax),  upon receipt of confirmation of "good"
               transmission;  or if sent by  registered  or  certified  air mail
               (return receipt requested) (or its equivalent),  with postage and
               registration  or  certification  fees thereon  prepaid,  or by an
               internationally  recognized  courier  company,  addressed  to the
               party at its address set forth below or to such other  address as
               the  receiving  party may notify the sending  party in writing on
               the third day after dispatch:

               If to CollaGenex:
               Mr. Robert Ashley
               Senior Vice President, Commercial Development
               41 University Drive
               Newtown, PA 18940
               Telephone: 215-579-7388
               Fax: 215-579-8577

               If to PMRS:
               Mr. Edwin Thompson
               President
               423 Sargon Way
               Horsham, PA  19044
               Telephone: 215-957-9400
               Fax: 215-957-6161


                                       14

<PAGE>

          IN WITNESS  WHEREOF,  the parties  hereto have affixed  hereunto their
          authorized signature as follows:

                  COLLAGENEX PHARMACEUTICALS, INC. (COLLAGENEX):

                  By:   /s/ Robert A. Ashley
                        --------------------

                  Name: Robert A. Ashley

                  Title: Senior Vice President, Commercial Development

                  Date: September 26, 2000

                  PHARMACEUTICAL MANUFACTURING RESEARCH SERVICES INC. (PMRS):

                  By:    /s/Edwin R. Thompson
                        ---------------------

                  Name: Edwin R. Thompson

                  Title: President

                  Date: September 26, 2000



                                       15
<PAGE>


     EXHIBIT A: BULK PRODUCT  DESCRIPTION:(FINAL VERSION BASED UPON NEGOTIATIONS
     WITH FDA)

     White to off-white,  film coated tablets, engraved on one side with `PS 20'
     monogram that contain  doxycycline  hyclate equivalent to 20 mg doxycycline
     delivered in 300 kg lot sizes (~1.5 million  tablets/lot)  in  polyethylene
     lined fiber drums with desiccant pouches)

     Final Product Description:

     White to off-white,  film coated tablets, engraved on one side with 'PS 20'
     monogram that contain  doxycycline  hyclate equivalent to 20 mg doxycycline
     delivered in HDPE bottles with desiccant pouches, induction seal liners and
     CRC caps as 60 and 100 count  packages;  or in HDPE bottles with  desiccant
     pouches, induction seal liners and screw caps as 1000 count packages; or in
     blisterpacks composed of aluminum foil and PVC/ACLAR.


     TABLET RELEASE AND STABILITY SPECIFICATIONS:
     Test                                    Specification
     ----                                    -------------
     Description                             White to off White, round, film
                                             coated tablet with "PS 20" monogram
     Identication                            Conforms to standard
     Odor                                    Practically odorless
     Hardness                                Report
     Friability                              NMT 1%, USP <1218>
     Assay                                   90-120% Label Claim
     Uniformity of Dosage Units              Conforms, USP <905>
     Total Impurities/Degradants (% Area)    NMT 5%
     Water                                   NMT 8.5%
     Dissolution                             Q: 85% in 90 Minutes
                                                  USP <711>



                                       16

<PAGE>



                  EXHIBIT B: BULK PRODUCT COA
                  (final version based upon negotiations with FDA)



                                       17

<PAGE>


                  EXHIBIT C.1: FINAL PRODUCT COA-100 COUNT HDPE BOTTLE
                  (final version based upon negotiations with FDA)




                                       18

<PAGE>


                  EXHIBIT C.2: FINAL PRODUCT COA-BLISTERPACK
                  (final version based upon negotiations with FDA)




                                       19

<PAGE>


                  EXHIBIT C.3:  FINAL PRODUCT COA-1000 COUNT HDPE BOTTLE
                  (final version based upon negotiations with FDA)




                                       20

<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.


                  EXHIBIT D-(final version based upon negotiations with FDA to
                  set expiration dating)

                  FEE SCHEDULE (Interim)

                  Order Volume:     [**] tablets               $[**]/tablet
                                    [**] tablets               $[**]/tablet
                                    [**] tablets               $[**]/tablet


                                       21
<PAGE>


   Confidential Materials omitted and filed separately with the Securities and
                Exchange Commission. Asterisks denote omissions.

December 1, 2000

Ed Thompson
President, PMRS Inc.
423 Sargon Way
Horsham, PA 19044

Dear Ed,

Accompanying  this  letter  is a check for  $[**].  This  check is a deposit  by
CollaGenex of the funds required by PMRS to acquire the equipment  (e.g. a metal
detector and exterior vent system) to meet the  requirements  of the UK Medicine
Control Agency to manufacture Periostat for sale in the United Kingdom.

The following terms are associated with this deposit:

1. It is agreed that this  investment  by  CollaGenex  is the total  amount that
CollaGenex  will be required to deposit to accommodate  the  requirements of the
MCA.

2. It is agreed  that the sum of $[**] will be  deducted  by PMRS from the final
invoice  from PMRS to  CollaGenex  under  the  current  manufacturing  agreement
between PMRS and CollaGenex for the  manufacturing of Periostat.  This Agreement
(signed  September 26, 2000 and amended and corrected  December 1, 2000) is also
appended for reference.  This Agreement presently expires on September 15, 2003,
so the  deduction  of $[**]  will  take  place  from  the  invoice  for  product
manufactured immediately prior to September 2003.

3.  Immediately on receipt and signature of this letter PMRS will respond to the
MCA confirming its intent to comply with the requirements highlighted during the
MCA Inspection by Ms Liz Wall which took place in November 2000.

All other terms and  conditions  remain as per the attached  Services and Supply
Agreement.


For PMRS:

/s/Edwin Thompson
------------------------------------
Mr. Edwin Thompson, President


For CollaGenex Pharmaceuticals Inc.

/s/Robert A. Ashley
------------------------------------
Robert A. Ashley
Senior Vice President



                                       22