C O L L A G E N E X
                          p h a r m a c e u t i c a l s



                                                                 August 14, 2001

Via EDGAR
---------

Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549

     Re:  CollaGenex  Pharmaceuticals,  Inc.  (Commission File No. 0-28308) Form
          10-Q for the Quarter Ended June 30, 2001

Dear Sirs:

     Pursuant to Rule 13a-13(a)  under the  Securities  Exchange Act of 1934, as
amended, on behalf of CollaGenex  Pharmaceuticals,  Inc., a Delaware corporation
(the  "Corporation"),   submitted  herewith  for  filing  is  the  Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

     If you have any  questions  or  comments  concerning  this  filing,  kindly
contact the undersigned at (215) 579-7388 ext. 3110.




                                                     /s/ Frank Ruffo
                                                     Frank Ruffo
                                                     Controller






  CollaGenex Pharmaceuticals, Inc., 41 University Drive, Newtown, PA 18940 USA
                       215-579-7388 voice 215-579-8577 fax



<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q
               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2001
                             Commission File Number
                                     0-28308


                        CollaGenex Pharmaceuticals, Inc.
         --------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)


        Delaware                                        52-1758016
-------------------------------            ------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)

41 University Drive, Newtown, PA                                         18940
------------------------------------------------------------------------------
(Address of Principal Executive Offices)                            (Zip Code)


                                 (215) 579-7388
                         -------------------------------
                         (Registrant's Telephone Number,
                              Including Area Code)

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

      Yes:   X                                         No:
          ------                                           ------

         Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of July 15, 2001:


         Class                                         Number of Shares
---------------------------                            ----------------
Common Stock $.01 par value                               10,550,638


<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.

                                TABLE OF CONTENTS
                                -----------------


                                                                           Page
                                                                           ----

PART I.  FINANCIAL INFORMATION..........................................      1

   Item 1. Financial Statements.........................................      1

           Condensed Consolidated Balance Sheets as of December 31,
              2000 and June 30, 2001 (unaudited)........................      2

           Condensed Consolidated Statements of Operations for the Three
              Months Ended June 30, 2000 and 2001 (unaudited)...........      3

           Condensed Consolidated Statements of Operations for the Six
              Months Ended June 30, 2000 and 2001 (unaudited)...........      4

           Condensed Consolidated Statements of Cash Flows for the Six
              Months Ended June 30, 2000 and 2001 (unaudited)...........      5

           Notes to Condensed Consolidated Financial Statements
              (unaudited)...............................................      6

  Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations....................................      9

           Results of Operations........................................     10

           Liquidity and Capital Resources..............................     13

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk...     16

PART II. OTHER INFORMATION..............................................     17

  Item 4.  Submission of Matters to a Vote of Security Holders .........     17

  Item 5.  Other Information............................................     18

  Item 6.  Exhibits and Reports on Form 8-K.............................     18

SIGNATURES..............................................................     20


                                      -i-

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.


                                      -1-


<PAGE>

<TABLE>
<CAPTION>

                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                      Condensed Consolidated Balance Sheets
                       December 31, 2000 and June 30, 2001
                  (dollars in thousands, except per share data)


                                                                             DECEMBER 31,              JUNE 30,
                                  ASSETS                                         2000                    2001
                                                                             ------------             ----------
                                                                                                      (unaudited)
Current assets:

<S>                                                                           <C>                   <C>
   Cash and cash equivalents...........................................       $     3,709           $     6,897
   Short term investments..............................................             1,739                   296
   Accounts receivable, net of allowance of $381 and $352 at December
     31, 2000 and June 30, 2001, respectively..........................             3,038                 3,863
   Inventories.........................................................               277                 1,216
   Prepaid expenses and other current assets...........................               989                 1,187
                                                                                ---------             ---------
         Total current assets..........................................             9,752                13,459
Equipment and leasehold improvements, net..............................               652                   574
Other assets...........................................................                27                    26
                                                                                ---------             ---------
         Total assets..................................................       $    10,431           $    14,059
                                                                                =========             =========

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Current portion of note payable.....................................       $        65           $        65
   Accounts payable....................................................             1,865                 3,878
   Accrued expenses....................................................             2,514                 2,578
                                                                                ---------              --------
         Total current liabilities.....................................             4,444                 6,521
                                                                                ---------              --------
Note payable, less current portion.....................................                47                    10
Deferred revenue.......................................................               676                   645

Commitments

Stockholders' equity:

   Preferred stock, $0.01 par value, 5,000,000 shares authorized;
     200,000 shares of Series D cumulative convertible preferred stock
     issued and outstanding at December 31, 2000 and June 30, 2001
     (liquidation value of $20,000 at June 30, 2001)...................                 2                     2

   Common stock, $0.01 par value; 25,000,000 shares authorized,
     8,775,176 and 10,550,638 shares issued and outstanding at
     December 31, 2000 and June 30, 2001, respectively.................                88                   106

   Common stock to be issued (275,462 shares at December 31, 2000 and
     118,379 at June 30, 2001) ........................................               872                   840
   Additional paid in capital..........................................            68,461                76,293
   Deferred compensation...............................................               (29)                  (15)
   Accumulated deficit.................................................           (64,130)              (70,343)
                                                                                ---------              --------
         Stockholders' equity..........................................             5,264                 6,883
                                                                                ---------              --------
         Total liabilities and stockholders' equity....................       $    10,431           $    14,059
                                                                                =========             =========
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.

                                      -2-
<PAGE>

<TABLE>
<CAPTION>

                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations
                For the Three Months Ended June 30, 2000 and 2001
                  (dollars in thousands, except per share data)
                                   (unaudited)

                                                                                   THREE MONTHS ENDED JUNE 30,
                                                                                -------------------------------
                                                                                    2000                 2001
                                                                                 ----------            ---------
                                                                                  RESTATED
                                                                                (SEE NOTE 3)

Revenues:
<S>                                                                            <C>                   <C>
   Product sales.......................................................        $       5,723         $      7,267
   Contract revenues...................................................                  878                1,024
   License revenues....................................................                   11                  420
                                                                                ------------         ------------
        Total revenues.................................................                6,612                8,711
                                                                                ------------         ------------
Operating expenses:
   Cost of product sales...............................................                1,127                1,516
   Research and development............................................                  965                  874
   Selling, general and administrative.................................                6,669                9,070
                                                                                ------------         ------------
         Total operating expenses......................................                8,761               11,460
                                                                                ------------         ------------
         Operating loss................................................               (2,149)              (2,749)

Other income (expense):
   Interest income.....................................................                  165                   74
   Interest expense....................................................                   (4)                  (2)
   Other expense.......................................................                   (2)                  (4)
                                                                                ------------         ------------
         Loss before cumulative effect of change in accounting
         principle....................................................                (1,990)              (2,681)
Cumulative effect of change in accounting principle....................                   --                   --
                                                                                ------------         ------------
         Net loss......................................................               (1,990)              (2,681)
   Preferred stock dividend............................................                  426                  420
                                                                                ------------         ------------
Net loss allocable to common stockholders..............................        $      (2,416)        $     (3,101)
Basic and diluted net loss per share allocable to common stockholders..         ============          ============
                                                                               $       (0.28)        $      (0.29)
Shares used in computing basic and diluted net loss per share allocable         ============          ============
   to common stockholders..............................................            8,678,073           10,550,638
                                                                                ============          ============
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.

                                      -3-
<PAGE>

<TABLE>
<CAPTION>




                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations
                 For the Six Months Ended June 30, 2000 and 2001
                  (dollars in thousands, except per share data)
                                   (unaudited)
                                                                                     SIX MONTHS ENDED JUNE 30,
                                                                                     -------------------------
                                                                                      2000                 2001
                                                                                     -------             --------
                                                                                    RESTATED
                                                                                  (SEE NOTE 3)

Revenues:
<S>                                                                            <C>                   <C>
   Product sales.......................................................        $      11,233         $     13,381
   Contract revenues...................................................                1,528                1,899
   License revenues....................................................                  381                  456
                                                                                ------------          -----------
        Total revenues.................................................               13,142               15,736
                                                                                ------------          -----------
Operating expenses:
   Cost of product sales...............................................                2,297                2,882
   Research and development............................................                1,812                1,818
   Selling, general and administrative.................................               13,436               16,547
                                                                                ------------          -----------
         Total operating expenses......................................               17,545               21,247
                                                                                ------------          -----------
         Operating loss................................................               (4,403)              (5,511)

Other income (expense):
   Interest income.....................................................                  351                  136
   Interest expense....................................................                   (8)                  (5)
   Other Income (expense)..............................................                   (3)                   8
                                                                                ------------          -----------
         Loss before cumulative effect of change in accounting principle              (4,063)              (5,372)

Cumulative effect of change in accounting principle....................                  764                   --
                                                                                ------------          -----------
         Net loss......................................................               (4,827)              (5,372)
   Preferred stock dividend............................................                  849                  840
                                                                                ------------          -----------
Net loss allocable to common stockholders..............................        $      (5,676)        $    (6,212)
Basic and diluted net loss per share allocable to common stockholders           ============          ===========
   before cumulative effect of change in accounting principle..........
                                                                               $       (0.57)        $      (0.62)
Cumulative effect of change in accounting principle....................                (0.09)                  --
                                                                                ------------          -----------
Basic and diluted net loss per share allocable to common stockholders..
                                                                               $       (0.66)        $      (0.62)
Shares used in computing basic and diluted net loss per share allocable         ============          ===========
   to common stockholders...............................................           8,664,835           9,946,992
                                                                                ============          ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                      -4-

<PAGE>

<TABLE>
<CAPTION>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Cash Flows
                 For the Six Months Ended June 30, 2000 and 2001
                             (dollars in thousands)
                                   (unaudited)
                                                                                       SIX MONTHS ENDED JUNE 30,
                                                                                       -------------------------
                                                                                       2000                  2001
                                                                                     --------              --------
                                                                                     RESTATED
                                                                                   (See Note 3)

Cash flows from operating activities:
<S>                                                                            <C>                   <C>
   Net loss..............................................................      $       (4,827)       $      (5,372)
   Adjustments to reconcile net loss to net cash used in operating
     activities:
       Noncash compensation expense......................................                 358                  178
       Depreciation and amortization expense.............................                 113                  127
       Cumulative effect of change in accounting principle...............                 764                   --
       Change in assets and liabilities:
         Accounts receivable.............................................                (549)                (825)
         Inventories.....................................................                 310                 (939)
         Prepaid expenses and other assets...............................                (166)                (198)
         Accounts payable................................................                 991                2,013
         Accrued expenses................................................                (148)                  64
         Deferred revenue................................................                (280)                 (31)
                                                                                  -----------            ----------
                  Net cash used in operating activities..................              (3,434)              (4,983)
                                                                                  -----------            ----------
Cash flows from investing activities:
   Capital expenditures..................................................                (144)                 (49)
   Proceeds from the sale of short term investments......................               5,638                1,739
   Purchase of short term investments....................................              (1,333)                (296)
                                                                                  -----------            ----------
                  Net cash provided by investing  activities.............               4,161                1,394
                                                                                  -----------            ----------
Cash flows from financing activities:
   Net proceeds from issuance of common stock............................                  71                6,814
   Repayment of long-term debt...........................................                 (34)                 (37)
                                                                                  -----------            ----------
                  Net cash provided by financing activities..............                  37                6,777
Net increase in cash and cash equivalents................................                 764                3,188
Cash and cash equivalents at beginning of period.........................               7,981                3,709
                                                                                  -----------            ----------
Cash and cash equivalents at end of period...............................      $        8,745     $          6,897
                                                                                  ===========            ==========
Supplemental schedule of noncash financing activities:
     Common stock dividends issued or issuable
     on preferred stock..................................................      $          849     $            840
                                                                                  ===========            ==========
     Issuance of common stock to be issued...............................                 858                  872
                                                                                  ===========            ==========
Supplemental disclosure of cash flow information:
     Cash paid during the period for interest............................      $            8     $              8
                                                                                  ===========            ==========
</TABLE>

See accompanying noted to unaudited condensed consolidated financial statements.

                                      -5-

<PAGE>



                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 2000 and 2001
                             (dollars in thousands)
                                   (Unaudited)

NOTE 1 -- BASIS OF PRESENTATION:

     The unaudited condensed  consolidated  financial statements included herein
have been prepared by the Company,  pursuant to the rules and regulations of the
Securities  and Exchange  Commission and in accordance  with generally  accepted
accounting  principles.  Certain information and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  These unaudited condensed consolidated financial statements should
be read in conjunction  with the Company's 2000 audited  consolidated  financial
statements and footnotes.

     The accompanying  unaudited  condensed  consolidated  financial  statements
include  the  results of the  Company  and its  wholly-owned  subsidiaries.  All
intercompany accounts and transactions have been eliminated in consolidation.

     In the opinion of the  Company's  management,  the  accompanying  unaudited
condensed  consolidated  financial  statements  have  been  prepared  on a basis
substantially  consistent with the audited consolidated financial statements and
contain adjustments, all of which are of a normal recurring nature, necessary to
present  fairly the  Company's  consolidated  financial  position as of June 30,
2001,  their results of  operations  for the three and six months ended June 30,
2000 and 2001,  and their cash flows for the six months  ended June 30, 2000 and
2001. Interim results are not necessarily  indicative of results anticipated for
the full fiscal year.

NOTE 2 -- INVENTORIES:

     Inventories  at  December  31,  2000  and  June  30,  2001  consist  of the
following:

                                           2000            2001
                                          ------          ------

       Raw materials                    $      60       $     219
       Work-in-process                         --             295
       Finished goods                         217             702
                                        ---------       ---------
                                        $     277       $   1,216
                                        =========       =========

NOTE 3 -- CHANGE IN ACCOUNTING PRINCIPLE:

     In the fourth  quarter  of 2000,  the  Company  adopted  SAB 101,  "Revenue
Recognition  in  Financial   Statements",   implementing  a  change  in  revenue
recognition  policy for  certain  upfront  payments  received  in  international
licensing arrangements for Periostat. Effective January 1,


                                      -6-
<PAGE>

2000, upfront payments received from licensees, where the Company has continuing
involvement,  are now being deferred and recognized as license  revenue over the
estimated  performance period of the individual license agreements.  In previous
years,  prior to the  Company's  adoption  of SAB 101,  the  Company  recognized
revenue when the upfront payments were received, generally upon the execution of
each agreement. During the three and six months ended June 30, 2001, the Company
recognized $15 and $30,  respectively,  in license  revenues which were deferred
upon the  implementation  of SAB 101. During the three and six months ended June
30, 2000, the Company recognized $9 and $369, respectively,  in license revenues
which were deferred upon the implementation of SAB 101.

     The consolidated  statements of operations and cash flows for the three and
six months ended June 30, 2000 have been restated in the accompanying  financial
statements based on this newly adopted revenue  recognition  policy.  The change
increased  revenue and  decreased  net loss by $281 during the six months  ended
June 30, 2000,  and  decreased  revenue and increased net loss by $89 during the
three months ended June 30, 2000, excluding the cumulative effect of the change.
During the six months  ended June 30,  2000,  the  Company  recorded a charge of
$764, as a result of the cumulative effect of the change in accounting principle
for revenue recognized prior to January 1, 2000.

NOTE 4 -- COMMON STOCK AND DEBT FINANCING:

     On March 12, 2001,  the Company  consummated a private  equity  offering of
1,500,000  shares of Common  Stock for an  aggregate  purchase  price of $7,500,
which  generated  net  proceeds  to the  Company  of  approximately  $6,900.  In
addition,  the  investors  in this  financing  were also issued an  aggregate of
400,000  warrants which are  exercisable  for up to three (3) years into 400,000
shares of the  Company's  Common Stock at an exercise  price per share of $6.00.
The  consideration  received  for such  warrants is  included  in the  aggregate
proceeds  received in the  financing.  The Company also issued to its  financial
advisor in this  financing,  warrants to purchase an aggregate of 150,000 shares
of the Company's  Common  Stock,  exercisable  for up to three (3) years,  at an
exercise price of $5.70 per share. All such warrants may be deemed automatically
exercised in certain  circumstances  based on the  Company's  stock  price.  The
Company is  obligated  to maintain  the  effectiveness  of a shelf  registration
statement  with  respect to all such  shares of Common  Stock  issued and shares
underlying  all such  warrants for a continuous  twenty-four  (24) month period.
Should the  Company  fail to maintain  the  effectiveness  of such  registration
statement,  the investors and the financial  advisor shall receive an additional
27,500 shares of the Company's Common Stock, in the aggregate, for no additional
consideration.  As a  result  of this  financing,  the  conversion  price of the
Preferred Stock has been reduced from $11.00 to $9.94 per share.

     On March 19, 2001, the Company consummated a revolving credit facility (the
"Facility") with Silicon Valley Bank (the "Bank").  The Company may borrow up to
the lesser of $3,000 or 80% of eligible  accounts  receivable,  as defined.  The
amount  available is also reduced by outstanding  letters of credit which may be
issued under this agreement in amounts totaling up to $1,500. The Company is not
obligated to draw amounts  under the  Facility  and any such  borrowings  on the
Facility bear interest,  payable monthly,  at the prime rate plus 1.5% per annum
and may be used only for working  capital  purposes.  Without the consent of the
Bank, the

                                      -7-
<PAGE>

Company,  among other things,  shall not (i) merge or  consolidate  with another
entity;  (ii) acquire assets outside the ordinary  course of business;  or (iii)
pay or declare any cash  dividends on the Company's  Common  Stock.  The Company
must also maintain a certain tangible net worth and a minimum of $2,000 in cash,
net of  borrowings  under  the  Facility,  at all times  during  the term of the
Facility.  In  addition,  the  Company has  secured  its  obligations  under the
Facility  through the granting of a security  interest in favor of the Bank with
respect to all of the Company's assets,  including its intellectual property. As
of June 30,  2001,  the  Company  has an  outstanding  letter of  credit  issued
relating to open purchase  commitments  in the amount of $1,106 and there are no
borrowings outstanding against the Facility.

NOTE 5 -- STOCK OPTION PLAN:

     At the Company's 2001 Annual Meeting of Stockholders  held on May 10, 2001,
the  stockholders of the Company approved a proposal to amend the Company's 1996
Stock Option Plan (the "1996 Stock Option Plan") to increase the maximum  number
of shares of Common Stock  available  for  issuance  under the 1996 Stock Option
Plan from  1,500,000 to 2,000,000  shares and to reserve an  additional  500,000
shares of Common  Stock of the Company for  issuance in  connection  with awards
granted under the 1996 Stock Option Plan.


                                      -8-


<PAGE>




ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

Overview

     CollaGenex  Pharmaceuticals,  Inc. and  subsidiaries  (the  "Company") is a
specialty   pharmaceutical  company  focused  on  providing  innovative  medical
therapies to the dental market. The Company's first product, Periostat(R), is an
orally administered,  prescription  pharmaceutical  product that was approved by
the United States Food and Drug Administration (the "FDA") in September 1998 and
is the first and only  pharmaceutical to treat adult periodontitis by inhibiting
the enzymes that  destroy  periodontal  support  tissues.  In December  2000 and
February  2001,  the  United  Kingdom  Medicines  Control  Agency  and the  FDA,
respectively,  granted  marketing  approval  for a  new  tablet  formulation  of
Periostat.  This new tablet formulation is smaller, easier to swallow and offers
manufacturing  cost advantages  over the Company's  currently  marketed  capsule
formulation and will replace the capsule  formulation during 2001.  Periostat is
indicated as an adjunct to scaling and root planing,  the most prevalent therapy
for adult  periodontitis,  to promote attachment level gain and to reduce pocket
depth in patients with adult  periodontitis.  The Company is marketing Periostat
to the dental community through its own professional dental pharmaceutical sales
force of approximately 120 sales representatives and managers.  This sales force
also co-promotes Vioxx(R), a prescription  non-steroidal  anti-inflammatory drug
developed by Merck & Co., Inc. and, as of June 2001, markets Dentaplex(TM),  the
Company's  professionally-recommended  nutritional supplement formulated to help
maintain   optimal  oral  health.   The  Company  is  actively   pursuing  other
prescription and non-prescription  products to market to the professional dental
community and directly to the consumer.

     The Company began operations in January 1992 and functioned  primarily as a
research and  development  company until 1998.  During this period,  the Company
operated  with  a  minimal   number  of   employees,   and   substantially   all
pharmaceutical  development  activities were contracted to independent  contract
research  and other  organizations.  Following  FDA  approval  of  Periostat  in
September  1998,  the Company  significantly  increased its number of employees,
primarily in the areas of sales and marketing. The Company continues to contract
its  research  and  development   activities  as  well  as   manufacturing   and
distribution functions.

     The  Company  has  incurred  losses  each year since  inception  and had an
accumulated  deficit of $70.3 million at June 30, 2001.  The Company  expects to
continue to incur losses in the  foreseeable  future from  expenditures  on drug
development, marketing, manufacturing and administrative activities.

     Statements  contained or incorporated by reference in this Quarterly Report
on Form  10-Q  that  are not  based  on  historical  fact  are  "forward-looking
statements" within the meaning of Section 21E of the Securities  Exchange Act of
1934,  as amended.  Forward-looking  statements  may be identified by the use of
forward-looking   terminology  such  as  "may,"  "will,"  "expect,"  "estimate,"
"anticipate,"  "continue,"  or similar  terms,  variations  of such terms or the
negative of those terms. This Form 10-Q contains forward-looking statements that
involve risks and

                                      -9-

<PAGE>


uncertainties.  The  Company's  business of selling,  marketing  and  developing
pharmaceutical  products is subject to a number of significant risks,  including
risks relating to the  implementation of the Company's sales and marketing plans
for Periostat,  risks  inherent in research and  development  activities,  risks
associated  with  conducting  business  in a highly  regulated  environment  and
uncertainty  relating to  clinical  trials of products  under  development.  The
success of the Company  depends to a large degree upon the market  acceptance of
Periostat by periodontists,  dental practitioners,  other health care providers,
patients and insurance companies.  Other than Periostat, which has been approved
by the FDA for  marketing  in the United  States and  approved by the  Medicines
Control  Agency for marketing in the United  Kingdom,  there can be no assurance
that any of the  Company's  other  product  candidates  will be  approved by any
regulatory authority for marketing in any jurisdiction or, if approved, that any
such products or that Vioxx will be successfully  commercialized by the Company.
As a  result  of  these  risks,  and  others  expressed  from  time  to  time in
Collagenex's filings with the Securities and Exchange Commission,  the Company's
actual  results  may  differ  materially  from  the  results  discussed  in  the
forward-looking statements contained herein.

RESULTS OF OPERATIONS

     From its founding through the quarter ended September 30, 1998, the Company
had no revenues  from sales of its own  products.  During the fourth  quarter of
1998,  the Company  achieved  net product  sales of $3.1 million  following  the
commercial  launch  of  Periostat  in  November  1998.  Most of the  1998  sales
represented  initial  wholesale  and  retail  stocking.  During  the year  ended
December 31, 1999, the Company  achieved net product sales of $15.2 million from
sales of  Periostat.  In  addition,  in 1999 the Company  generated  $770,000 in
contract  revenues from two (2)  co-promotion  agreements (one (1) of which, the
Company's  agreement  with  respect  to  Denavir(R),  a  prescription  cold sore
medication  owned  by  Novartis  Pharmaceuticals   Corporation,  was  terminated
effective  April 13, 2001) and $100,000 in license fees  relating to the signing
of a  distribution  agreement  for  Periostat  in Canada.  During the year ended
December 31, 2000, the Company  achieved net product sales of $20.5 million from
sales of Periostat.  In addition,  in 2000 the Company generated $3.2 million in
contract revenues from two (2) co-promotion agreements (one (1) of which was for
Denavir)  and  $530,000  in license  and  milestone  fees from  various  foreign
distribution  and  marketing  agreements  for  Periostat.  This amount  included
$397,000 of license revenues that were deferred upon the implementation of Staff
Accounting  Bulletin ("SAB 101"),  effective January 1, 2000. These amounts were
previously  recognized as license  revenues in prior years under the  historical
revenue recognition policy prior to the adoption of SAB 101.

     During the three  months  ended June 30,  2001,  the Company  achieved  net
product  sales of $7.3 million from the sale of Periostat.  In addition,  during
the three  months  ended June 30, 2001,  the Company  generated  $1.0 million in
contract revenues from its two (2) co-promotion agreements (one (1) of which was
for  Denavir)  and  $420,000 in license and  milestone  fees from certain of the
Company's  European  partners.  The milestone  fees were earned when  CollaGenex
International  Limited,  the Company's  wholly-owned  United Kingdom subsidiary,
completed the official  filings for the  registration of Periostat  tablets with
the European Union.

     To broaden awareness of and increase Periostat usage, the Company initiated
a direct-to-

                                      -10-
<PAGE>

consumer  ("DTC")  advertising  test  program  in the  fall  of  2000.  DTC is a
relatively  new but  highly  effective  marketing  tool  used by  pharmaceutical
companies  to  build  patient  awareness  of  prescription  drugs  and to  drive
prescription  and revenue growth.  In October 2000, the Company  launched a test
DTC campaign in Tampa and St. Louis to evaluate the potential  effectiveness  of
this tool for  increasing  Periostat  prescription  growth.  During  the  fourth
quarter of 2000, new Periostat  prescriptions in the test cities were 48% higher
than the third  quarter of 2000  compared to a 1.4%  increase  in new  Periostat
prescriptions  in the rest of the  United  States.  Based on these  results,  in
January  2001 the Company  expanded  its DTC  campaign to include  Philadelphia,
Washington,  Houston and Chicago and in April 2001  launched  such a campaign in
New York City, Denver, Detroit and Boston.

     The  Company  realized  a net loss  during  the first  six  months of 2001,
resulting  primarily from increased sales and marketing expenses associated with
the Company's  investment in DTC  advertising  for  Periostat.  Total  operating
expenses consist of the cost of product sales, research and development expenses
and selling, general and administrative expenses. Cost of product sales consists
primarily  of  direct  manufacturing   expenses  and  royalties.   Research  and
development  expenses  consist  primarily  of funds  paid to  contract  research
organizations  for the provision of services and materials for drug development,
ongoing manufacturing and formulation enhancements and clinical trials. Selling,
general and administrative  expenses consist primarily of personnel salaries and
benefits,  direct marketing costs,  professional and consulting fees,  insurance
and general office expenses.

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

     Revenues.  The Company  realized  $8.7 million in net  revenues  during the
three  months  ended June 30,  2001  compared to $6.6  million  during the three
months ended June 30, 2000.  Revenues  for the second  quarter of 2001  included
$7.3 million in net sales of Periostat,  $1.0 million in contract revenues which
were derived from the Company's  co-promotion of Vioxx and Denavir, and $420,000
in foreign license and milestone  revenues  related to Periostat.  Revenues from
Denavir accounted for approximately $122,000 of such contract revenues. Revenues
for the three months ended June 30, 2000  included  $5.7 million in net sales of
Periostat,  $878,000 in contract revenues, which were derived from the Company's
co-promotion of Vioxx and Denavir,  and $11,000 in foreign license and milestone
revenues for  Periostat.  Revenues  from  Denavir  accounted  for  approximately
$175,000 of such contract revenues.  Novartis, the owner of Denavir,  terminated
its  co-promotion  agreement with the Company with respect to Denavir  effective
April 13,  2001.  In  accordance  with SAB 101,  which was adopted on January 1,
2000, the license revenues  recorded during the three months ended June 30, 2001
and 2000 were attributable, in part, to the recognition of up-front license fees
received for various  agreements  which are being  recognized  over the expected
term of these  agreements.  License  revenues during the quarters ended June 30,
2001 and 2000 include $15,000 and $11,000 that were recorded in periods prior to
the adoption of SAB 101 which were deferred as a result of the cumulative effect
of a change in accounting principle as of January 1, 2000.

     Cost of  Product  Sales.  Cost of  product  sales for  Periostat  were $1.5
million,  or 20.9% of net product  sales,  for the three  months  ended June 30,
2001,  compared to $1.1 million,  or 19.7% of net product  sales,  for the three
months ended June 30, 2000. This increase in cost of product


                                      -11-

<PAGE>


sales for Periostat,  as a percentage of net product sales,  resulted  primarily
from increases in contracted product production cost.

     Research  and  Development  Expenses.  Research  and  development  expenses
decreased  9.4% to  $874,000  for the  three  months  ended  June 30,  2001 from
$965,000  for the three  months  ended June 30,  2000.  This  decrease  resulted
primarily from lower deferred compensation expenses recorded in 2001. During the
three  months  ended June 30,  2000,  the Company  recorded a $302,000  non-cash
compensation  charge  relating to  accelerating  the  vesting  schedule on stock
options granted to certain  non-employees in 1999. During the three months ended
June 30,  2001,  contracted  clinical  trial  expenses  for  Metastat  increased
$150,000 from the prior year offsetting, in part, the decrease from 2000.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased  36.0% to $9.1  million for the three months
ended June 30, 2001 from $6.7  million for the three months ended June 30, 2000.
This  increase  was due  primarily  to increased  sales and  marketing  expenses
associated with the Company's investment in DTC advertising for Periostat.

     Other  Income/Expenses.  Interest  income  decreased to $74,000  during the
three  months  ended June 30, 2001 from  $165,000  during the three months ended
June 30,  2000.  This  decrease  was due to lower  average  balances in cash and
short-term  investments.  Interest  expense for the three  months ended June 30,
2001 was $2,000  compared to $4,000 for the three  months  ended June 30,  2000.
These  expenses  were  primarily  due to interest on the  $219,000  note payable
executed by the Company in April 1999.  Other  expense of $4,000 was  recognized
during  the three  months  ended June 30,  2001 as a result of foreign  currency
transactions.

     Preferred  Stock  Dividends.  Preferred  stock  dividends of $420,000  were
recorded  during  the  three  months  ended  June 30,  2001 as a  result  of the
Company's  obligations in connection with the issuance of its Series D Stock (as
defined below) in May 1999.  Similarly,  preferred  stock  dividends of $426,000
were recorded during the three months ended June 30, 2000.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

     Revenues. The Company realized $15.7 million in net revenues during the six
months ended June 30, 2001 compared to $13.1 million during the six months ended
June 30, 2000.  Revenues for the six months ended June 30, 2001  included  $13.4
million in net sales of Periostat,  $1.9 million in contract revenues which were
derived from the Company's  co-promotion  of Vioxx and Denavir,  and $456,000 in
foreign  license and  milestone  revenues for  Periostat.  Revenues from Denavir
accounted for approximately $297,000 of such contract revenues. Revenues for the
six months ended June 30, 2000 included $11.2 million in net sales of Periostat,
$1.5  million  in  contract  revenues  which  were  derived  from the  Company's
co-promotion of Vioxx and Denavir, and $381,000 in foreign license and milestone
revenues for  Periostat.  Revenues  from  Denavir  accounted  for  approximately
$350,000 of such contract revenues.  Novartis, the owner of Denavir,  terminated
its  co-promotion  agreement with the Company with respect to Denavir  effective
April 13,  2001.  In  accordance  with SAB 101,  which was adopted on January 1,
2000, the license  revenues  recorded  during the six months ended June 30, 2001
and

                                      -12-

<PAGE>

2000 were  attributable,  in part, to the  recognition of up-front  license fees
received for various  agreements  which are being  recognized  over the expected
term of these agreements.  License revenues during the six months ended June 30,
2001 and 2000 include  $30,000 and $281,000  that were recorded in periods prior
to the  adoption of SAB 101 which were  deferred  as a result of the  cumulative
effect of a change in accounting principle as of January 1, 2000.

     Cost of  product  sales.  Cost of  product  sales for  Periostat  were $2.9
million,  or 21.5% of net product sales, for the six months ended June 30, 2001,
compared  to $2.3  million,  or 20.4% of net product  sales,  for the six months
ended June 30, 2000. This increase in cost of product sales for Periostat,  as a
percentage of net product sales, resulted primarily from increases in contracted
product production cost.

     Research and Development  Expenses.  Research and development expenses were
$1.8  million  for both the six months  ended  June 30,  2001 and the six months
ended June 30, 2000. Expenses incurred during the six months ended June 30, 2001
included approximately $300,000 in Metastat contract clinical trial expenses and
$65,000 in development  costs for Dentaplex while expenses incurred in the first
half of 2000 included a $324,000 non-cash compensation charge primarily relating
to  accelerating  the vesting  schedule on certain  non-employee  stock  options
granted in 1999, and $180,000 in additional formulation  development charges for
Periostat tablets initiated in 2000.

     Selling,  General  and  Administrative   Expenses.   Selling,  general  and
administrative  expenses  increased  23.2% to $16.5  million  for the six months
ended June 30, 2001 from $13.4  million for the six months  ended June 30, 2000.
This  increase  was due  primarily  to increased  sales and  marketing  expenses
associated with the Company's investment in DTC advertising for Periostat.

     Other  Income/Expenses.  Interest  income  decreased to $136,000 in the six
months ended June 30, 2001 from  $351,000 in the six months ended June 30, 2000.
This  decrease  was  due to  lower  average  balances  in  cash  and  short-term
investments during 2001. Interest expense for the six months ended June 30, 2000
was $5,000  compared to $8,000 for the three months  ended June 30, 2000.  These
expenses were primarily due to interest on the $219,000 note payable executed by
the Company in April 1999. Other income of $8,000 was recognized  during the six
months ended June 30, 2001 as a result of foreign currency transactions.

     Preferred  Stock  Dividends.  Preferred  stock  dividends of $840,000  were
recorded  during the six months ended June 30, 2001 as a result of the Company's
obligations  in  connection  with the issuance of its Series D Stock (as defined
below) in May 1999.  Preferred  stock dividends of $849,000 were recorded during
the six months ended June 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

     Since its origin in January 1992,  the Company has financed its  operations
through  private  placements  of preferred  stock and common  stock,  an initial
public  offering  of  2,000,000  shares of common  stock,  which  generated  net
proceeds to the Company of approximately  $18.0 million after  underwriting fees
and related expenses, and a subsequent public offering of 1,000,000

                                      -13-
<PAGE>

shares  of  common  stock,  which  generated  net  proceeds  to the  Company  of
approximately $11.6 million after underwriting fees and related expenses. On May
12,  1999,  the  Company  consummated  a  $20.0  million  financing  (the  "1999
Financing")  through  the  issuance  of  its  Series  D  Cumulative  Convertible
Preferred  Stock (the  "Series D Stock"),  which  generated  net proceeds to the
Company of $18.5  million.  The issuance of the Series D Stock was approved by a
majority  of the  Company's  stockholders  at the  Company's  Annual  Meeting of
Stockholders  on May 11, 1999.  A portion of the proceeds of the 1999  Financing
were used to repay a $10.0 million Senior Secured  Convertible  Note provided by
one of the  investors on March 19, 1999 in connection  with the 1999  Financing.
The remaining  proceeds have been and will be used for general  working  capital
purposes.

     The Series D Stock is  convertible  at any time into shares of common stock
of the  Company  at a  current  conversion  price  of  $9.94  per  share,  which
conversion price reflects a decrease from the initial conversion price of $11.00
per share as a result of the 2001 Financing (as defined  below).  The conversion
price is not subject to reset  except in the event that the Company  should fail
to declare and pay  dividends  when due or the Company  should  issue new equity
securities or convertible securities at a price per share or having a conversion
price per share lower than the then applicable  conversion price of the Series D
Stock. During the first three years following issuance,  holders of the Series D
Stock  will be  entitled  to  receive  dividends  payable  in  shares  of  fully
registered common stock at a rate of 8.4% per annum. Thereafter,  dividends will
be payable in cash at a rate of 8.0% per annum.

     All or a portion  of the shares of Series D Stock  shall,  at the option of
the  Company  (as  determined  by the  Board  of  Directors),  automatically  be
converted into fully paid, registered and non-assessable shares of common stock,
if the following two conditions are met: (i) the last sale price, or, in case no
such sale takes  place on such day,  the  average of the  closing  bid and asked
prices on the Nasdaq is at least 200% of the conversion price then in effect (as
of June 30, 2001, $9.94 per share) for forty consecutive  trading days; and (ii)
a shelf  registration  is in effect for the shares of common  stock to be issued
upon conversion of the Series D Stock. Without written approval of a majority of
the holders of record of the Series D Stock,  the Company,  among other  things,
shall not:  (i)  declare or pay any  dividend or  distribution  on any shares of
capital  stock of the Company other than  dividends on the Series D Stock;  (ii)
make any loans,  incur any indebtedness or guarantee any  indebtedness,  advance
capital  contributions  to,  or  investments  in any  person,  issue or sell any
securities  or  warrants  or other  rights to  acquire  debt  securities  of the
Company,  except that the Company may incur such  indebtedness in any amount not
to exceed $10.0  million in the  aggregate  outstanding  at any time for working
capital requirements in the ordinary course of business;  or (iii) make research
and development  expenditures in excess of $7.0 million in any continuous twelve
month  period,  unless the Company  has  reported  positive  net income for four
consecutive quarters immediately prior to such twelve month period.

     In April 1999, the Company received  $219,000 in proceeds from the issuance
of a note  payable.  The proceeds of such note were used to fund the purchase of
equipment,  fixtures  and  furniture  for the  Company's  corporate  offices  in
Newtown,  Pennsylvania.  The term of the note is three years at 9.54% per annum,
with monthly minimum payments of principal and interest.

     On March 12, 2001,  the Company  consummated a private  equity  offering of
1,500,000

                                      -14-
<PAGE>

shares of Common Stock for an aggregate  purchase  price of $7.5 million,  which
generated net proceeds to the Company of  approximately  $6.8 million (the "2001
Financing").  Such  proceeds  will  be used  primarily  for  the  Company's  DTC
advertising campaign and for general working capital purposes. In addition,  the
investors in such  financing  were also issued an aggregate of 400,000  warrants
which  are  exercisable  for up to three (3) years  into  400,000  shares of the
Company's   Common  Stock  at  an  exercise  price  per  share  of  $6.00.   The
consideration  received for such warrants is included in the aggregate  proceeds
received in the 2001 Financing. The Company also issued to its financial advisor
in such  financing  warrants to purchase an aggregate  of 150,000  shares of the
Company's  Common  Stock  exercisable  for up to three (3) years at an  exercise
price of $5.70 per share,  as partial  consideration  for  services  rendered in
connection with the 2001 Financing.  These warrants may be deemed  automatically
exercised in certain  circumstances  based upon the  Company's  stock price.  In
connection  with the 2001  Financing,  the Company is  obligated to maintain the
effectiveness of a shelf registration  statement with respect to all such shares
of Common Stock issued and shares  underlying all such warrants for a continuous
twenty-four  (24) month period,  or the Company will be required to issue to the
investors and the financial advisor an additional 27,500 shares of the Company's
Common Stock, in the aggregate, for no additional consideration.

     On March 19, 2001, the Company consummated a revolving credit facility (the
"Facility") with Silicon Valley Bank (the "Bank").  The Company may borrow up to
the lesser of $3.0 million or 80% of eligible  accounts  receivable,  as defined
under the Facility.  The amount available is also reduced by outstanding letters
of credit which may be issued under the Facility in amounts  totaling up to $1.5
million. The Company is not obligated to draw amounts under the Facility and any
such  borrowings on the Facility bear interest,  payable  monthly,  at the prime
rate plus 1.5% per annum and may be used only for working capital purposes.  The
Company  intends to secure its purchase  order  commitments  for Periostat  from
Pharmaceutical  Manufacturing Research Services,  Inc., a contract manufacturing
company, with a letter of credit under the Facility.  Without the consent of the
Bank, the Company,  among other things,  shall not (i) merge or consolidate with
another entity; (ii) acquire assets outside the ordinary course of business;  or
(iii) pay or declare any cash  dividends  on the  Company's  Common  Stock.  The
Company  must also  maintain a certain  tangible net worth and a minimum of $2.0
million in cash, net of borrowings  under the Facility,  at all times during the
term of the Facility. In addition, the Company has secured its obligations under
the Facility  through the  granting of a security  interest in favor of the Bank
with  respect  to  all of  the  Company's  assets,  including  its  intellectual
property.

     At June 30, 2001,  the Company had cash,  cash  equivalents  and short-term
investments of approximately $7.2 million,  an increase of $1.8 million from the
$5.4  million  balance  at  December  31,  2000.  This  increase  was  primarily
attributable  to the net proceeds of $6.8 million from the 2001  Financing  less
cash used to fund  operating  activities for the six months ended June 30, 2001.
In accordance  with  investment  guidelines  approved by the Company's  Board of
Directors,  cash balances in excess of those  required to fund  operations  have
been invested in short-term  United States  Treasury  securities  and commercial
paper with a credit rating no lower than A1/P1. The Company's working capital at
June 30, 2001 was $6.9 million, an increase of $1.6 million from $5.3 million at
December 31, 2000. This increase was primarily  attributable to the net proceeds
of $6.8 million from the 2001 Financing less cash used to fund operations

                                      -15-
<PAGE>


during the six months ended June 30, 2001.

     The  Company   anticipates  that  its  existing  working  capital  will  be
sufficient to fund the Company's operations through at least the middle of 2002.
The  Company's  future  capital  requirements  and the adequacy of its available
funds will depend on many factors, including the size and scope of the Company's
marketing  effort and sales of Periostat,  the terms of agreements  entered into
with corporate partners, if any, and the results of research and development and
pre-clinical and clinical  studies for other  applications of the Company's core
technology.  Over the long-term,  the Company's liquidity is dependent on market
acceptance of its products and technology.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     The Company  believes  that it is not  subject to a material  impact to its
financial position or results of operations relating to market risk.


                                      -16-

<PAGE>




                           PART II. OTHER INFORMATION

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

     The Annual Meeting of Stockholders was held on May 10, 2001.

     There were present at the Annual Meeting in person or by proxy stockholders
holding an aggregate of 7,522,654  shares of Common Stock and 200,000  shares of
Series  D Stock,  which  shares  of  Series D Stock  account  for an  additional
2,012,599  shares of Common Stock on an as converted to Common Stock basis.  The
results of the vote taken at such Annual Meeting with respect to the election of
the nominees to be the Common Stock directors were as follows:

  Common Stock Nominees                For                      Withheld
  ---------------------                ---                      --------
  Brian M. Gallagher, Ph.D.      7,199,754 Shares            322,900 Shares
  Peter R. Barnett, D.M.D.       7,199,754 Shares            322,900 Shares
  Robert C. Black                7,199,754 Shares            322,900 Shares
  James E. Daverman              7,199,754 Shares            322,900 Shares
  Robert J. Easton               7,199,754 Shares            322,900 Shares
  W. James O'Shea                7,199,754 Shares            322,900 Shares


     The results of the vote taken at such Annual  Meeting  with  respect to the
election of the nominee to be the Series D Director,  Stephen A. Kaplan, were as
follows:  2,012,599 shares of Series D Stock (on an as converted to Common Stock
basis) were voted FOR the Series D Stock nominee, with no shares voting against.

     A vote of the stockholders was taken at such Annual Meeting with respect to
the  proposal to amend the  Company's  1996 Stock  Option  Plan to increase  the
maximum  aggregate  number  of shares of Common  Stock  available  for  issuance
thereunder  from  1,500,000  to  2,000,000  shares and to reserve an  additional
500,000  shares of Common Stock of the Company for issuance in  connection  with
awards  granted under the 1996 Stock Option Plan. For the purposes of such vote,
the  holders of shares of Common  Stock and the holders of Series D Stock (on an
as converted to Common Stock basis) voted  together as a single  class.  Of such
shares  8,841,791  shares voted in favor of such  proposal,  596,388 shares were
voted against such proposal and 97,074 shares abstained from voting.

     In addition,  a vote of the stockholders was taken at the Annual Meeting on
the proposal to ratify the appointment of KPMG LLP as the  independent  auditors
of the Company for the fiscal year ending  December 31, 2001. For the purpose of
such vote,  the  holders of shares of Common  Stock and the  holders of Series D
Stock (on an as converted  to Common  Stock  basis)  voted  together as a single
class. Of such shares 9,499,725  shares voted in favor of such proposal,  29,900
shares were voted against such proposal and 5,628 shares abstained from voting.

                                      -17-
<PAGE>

ITEM 5. OTHER INFORMATION.

     On June 18,  2001,  the Company  announced  that its  wholly-owned,  United
Kingdom subsidiary,  CollaGenex  International  Limited,  completed the official
filings for the registration of Periostat tablets with the European Union Member
States and Norway.  Periostat  tablets were approved for marketing by the United
Kingdom  Medicines  Control  Agency (the "UKMCA") in February 2001 and the UKMCA
has acted as  Reference  Member  State in the  preparation  of the  registration
filings in fifteen additional European  countries.  The Company earned milestone
payments from certain of its European partners as a result of such filings.

     On June 19, 2001, the Company  announced the availability of Dentaplex(TM),
the Company's professionally-recommended nutritional supplement to help maintain
optimal oral health. Dentaplex is marketed as a dietary supplement and, as such,
subjects the Company to an additional regulatory scheme under the Food, Drug and
Cosmetic  Act  and  implementing  regulations.  The  Company  and  its  products
otherwise  continue  to be  regulated  as set  forth in the  Company's  periodic
filings with the Securities and Exchange Commission.

     On June 25, 2001, the Company announced that Periostat had been awarded the
ADA Seal of  Acceptance  by the  American  Dental  Association.  The ADA Seal of
Acceptance  is  awarded  to  products  that  have  been  shown to meet the ADA's
criteria for safety and effectiveness.

     On July 2, 2001, the Company  announced the launch of a tablet  formulation
of  Periostat.  In  December  2000 and  February  2001,  the  UKMCA and the FDA,
respectively,   granted  marketing   approval  for  the  tablet  formulation  of
Periostat.

     On August 9, 2001,  the Company  announced  that its  wholly-owned,  United
Kingdom subsidiary,  CollaGenex  International  Limited, had been advised by the
Department of Health in England that  Periostat  tablets have been placed on the
Dental Practitioners Formulary for prescribing under the National Health Service
as of  September  1,  2001.  Prior  to  inclusion  in the  Dental  Practitioners
Formulary,  Periostat was only available to periodontitis patients in England by
private  prescription.  Patients in the United Kingdom  contribute a co-pay as a
prescription  charge for drugs that are prescribed by a dental  practitioner  or
doctor,  with the cost of the drugs being met by the  National  Health  Service,
although many patients are exempt from the co-pay.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits

          10.1 - Letter  Agreement  dated as of June 26, 2001 by and between the
          Company and Pharmaceutical Manufacturing Research Services, Inc.


                                      -18-
<PAGE>


     (b)  Reports on Form 8-K.

          On March 16, 2001, the Company filed a current report on Form 8-K with
          the Securities and Exchange Commission relating to the issuance by the
          Company of  1,500,000  shares of Common Stock and warrants to purchase
          shares of the Company's  Common Stock for an aggregate  purchase price
          of $7.5  million.  The Company  amended such Form 8-K by filing a Form
          8-K/A on April 3, 2001.

          On July 20, 2001,  the Company filed a current report on Form 8-K with
          the  Securities  and  Exchange  Commission  relating to its  Dentaplex
          product  and the  related  governmental  regulation  with  respect  to
          dietary supplements.

                                      -19-

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                   CollaGenex Pharmaceuticals, Inc.



Date:  August 14, 2001          By: /s/ Nancy C. Broadbent
                                   -------------------------------------------
                                   Nancy C. Broadbent
                                   As Chief Financial Officer, Treasurer and
                                   Secretary on behalf of the Registrant and as
                                   the Registrant's Principal Financial and
                                   Accounting Officer


<PAGE>





                                  EXHIBIT 10.1

          LETTER AGREEMENT DATED AS OF JUNE 26, 2001 BY AND BETWEEN THE
        COMPANY AND PHARMACEUTICAL MANUFACTURING RESEARCH SERVICES, INC.