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, 1998.

                             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
     Incorporation or Organization)                   Identification No.)

301 South State Street, Newtown, PA                         18940
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                  (Zip Code)

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

         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  issuer's
classes of common stock as of June 30, 1998:

                   Class                                 Number of Shares
        ---------------------------                      ----------------
        Common Stock $.01 par value                          8,585,329


<PAGE>
<TABLE>
                                                 COLLAGENEX PHARMACEUTICALS, INC.
                                                          AND SUBSIDIARY
                                                 (A Development Stage Enterprise)

                                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                                December 31, 1997 and June 30, 1998



<CAPTION>
                                                                                     December 31,    June 30,
                                                                                         1997          1998
                                                                                     -----------   -----------
                                                                                                   (unaudited)
                                                                                       (in thousands except
                                                                                           share amounts)
<S>                                                                                     <C>        <C>     
ASSETS
------
Current assets:
     Cash and cash equivalents ............................................             $ 16,379   $ 14,620
     Short-term investments ...............................................                6,392      3,496
     Interest receivable ..................................................                   88         66
     Prepaid expenses .....................................................                  190        453
                                                                                        --------   --------
           Total current assets ...........................................               23,049     18,635
Equipment, net ............................................................                  103         98
Other assets ..............................................................                   13         13
                                                                                        --------   --------
           Total assets ...................................................             $ 23,165   $ 18,746
                                                                                        ========   ========

LIABILITIES and STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
     Accounts payable .....................................................             $    551   $    793
     Accrued expenses .....................................................                1,906      1,794
                                                                                        --------   --------
           Total current liabilities ......................................                2,457      2,587
                                                                                        --------   --------

Stockholders' equity:
     Preferred stock, $0.01 par value; 5,000,000 shares
       authorized; none issued and outstanding ............................                 --         --
     Common stock, $0.01 par value; 25,000,000 shares
       authorized; 8,567,579 and 8,585,329 shares issued
       and outstanding in 1997 and 1998, respectively .....................                   86         86
     Additional paid-in capital ...........................................               47,298     47,313
     Deferred compensation ................................................                 (313)      (252)
     Deficit accumulated during the development stage .....................              (26,363)   (30,988)
                                                                                        --------   --------
           Stockholders' equity ...........................................               20,708     16,159
                                                                                        --------   --------
Commitments and contingencies
           Total liabilities and stockholders' equity .....................             $ 23,165   $ 18,746
                                                                                        ========   ========
                         See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>





                                                                2
<PAGE>


<TABLE>

                                                 COLLAGENEX PHARMACEUTICALS, INC.
                                                          AND SUBSIDIARY
                                                 (A Development Stage Enterprise)

                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 For the Three Months and Six Months Ended June 30, 1997 and 1998
                               and for the period from January 10, 1992 (inception) to June 30, 1998
                                                            (Unaudited)

<CAPTION>

                                                                                                              For the Period
                                                                                                               from 1/10/92
                                                 Three Months Ended June 30,    Six Months Ended June 30,     (inception) to
                                                    1997          1998           1997         1998                   6/30/98
                                                           (in thousands, except share and per share amounts)
<S>                                            <C>             <C>            <C>             <C>                 <C>
Revenues:

    License revenues ......................... $     300       $      --      $     300       $        --         $   725
    Contract revenues ........................        --               4             --                 7              16

                                               ---------       ---------       ---------       ----------         -------
       Total revenues ........................       300               4            300                 7             741
                                               ---------       ---------       ---------       ----------         -------
Operating expenses incurred in the
       development stage:
    Research and development ...............       1,379           1,397           2,072            2,396          19,759
    General and administrative .............       1,385           1,397           2,353            2,811          14,602
                                               ---------       ---------       ---------       ----------         -------
         Total operating expenses ..........       2,764           2,794           4,425            5,207          34,361
                                               ---------       ---------       ---------       ----------         -------
              Loss from operations .........       2,464           2,790           4,125            5,200          33,620
Other income (expense): 
    Interest income ........................         382             271             618              574           2,776
    Interest expense .......................          --              --              --               --            (144)
                                               ---------       ---------       ---------       ----------         -------
          Net loss .........................      (2,082)         (2,519)         (3,507)          (4,626)        (30,988)
                                               =========       =========       =========       ==========         =======
Accretion of undeclared dividends
   attributable to mandatorily redeem-
   able convertible preferred stock ........          --              --              --               --           2,597
                                               =========       =========       =========       ==========         =======
Net loss allocable to common
   stockholders ............................  $   (2,082)     $   (2,519)     $   (3,507)     $    (4,626)       $(33,585)
                                               =========       =========       =========       ==========         =======
Net loss per share allocable to common
   stockholders:
    Basic ..................................  $    (0.24)     $    (0.29)     $    (0.44)     $    (0.54)
    Diluted ................................       (0.24)          (0.29)          (0.44)          (0.54)
                                               =========       =========       =========       ==========
Shares used in computing net loss per share 
allocable to common stockholders:
    Basic ..................................   8,521,601       8,574,115       8,030,087       8,571,139
    Diluted ................................   8,521,601       8,574,115       8,030,087       8,571,139
                                               =========       =========       =========       =========


                         See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>

                                                                3
<PAGE>
<TABLE>

                                                 COLLAGENEX PHARMACEUTICALS, INC.
                                                          AND SUBSIDIARY
                                                 (A Development Stage Enterprise)

                                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          For the Six Months Ended June 30, 1997 and 1998
                               and for the period from January 10, 1992 (inception) to June 30, 1998
                                                            (Unaudited)

<CAPTION>

                                                                                                            For the Period from
                                                                               Six Months Ended                 from 1/10/92 
                                                                                   June 30,                   (inception) to
                                                                     -------------------------------              6/30/98
                                                                          1997               1998           -------------------
                                                                     -----------         -----------
                                                                                       (in thousands)
<S>                                                                  <C>                 <C>                  <C>        
Cash flows from operating activities:
   Net loss ......................................................   $   (3,507)         $   (4,626)          $  (30,988)
   Adjustments to reconcile net loss to net cash used in operating
     activities:
       Non-cash research and development expense .................           --                  --                  514
       Non-cash compensation expense .............................           49                  61                  358
       Non-cash consulting expense ...............................           --                  --                   15
       Depreciation and amortization expense .....................           16                  18                   73
       Change in assets and liabilities:
           (Increase) decrease in interest receivable ............          (97)                 22                  (66)
           Increase in prepaid expenses ..........................          (24)               (263)                (453)
           Increase in other assets ..............................           --                  --                  (13)
           Increase in accounts payable ..........................          421                 242                  793
           Increase (decrease) in accrued expenses ...............          636                (112)               1,794
                                                                     ----------          ----------           ----------
Net cash used in operating activities ............................       (2,506)             (4,658)             (27,973)
                                                                     ----------          ----------           ----------
Cash flows from investing activities:
   Organizational costs ..........................................           --                  --                   (5)
   Capital expenditures ..........................................          (43)                (13)                (166)
   Purchase of short-term investments (available for
     sale) .......................................................      (15,587)             (2,493)             (38,210)
   Proceeds from the sale of short-term investments
     (available for sale) ........................................       11,351               5,389               34,714
                                                                     ----------          ----------           ----------
Net cash provided by (used in) investing activities ..............       (4,279)              2,883               (3,667)
                                                                     ----------          ----------           ----------
(Continued)
                         See accompanying notes to unaudited condensed consolidated financial statements.

</TABLE>

                                                                4
<PAGE>

<TABLE>

                                                 COLLAGENEX PHARMACEUTICALS, INC.
                                                          AND SUBSIDIARY
                                                 (A Development Stage Enterprise)

                                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          For the Six Months Ended June 30, 1997 and 1998
                               and for the period from January 10, 1992 (inception) to June 30, 1998
                                                            (Unaudited)

(Continued from preceding page)

<CAPTION>

                                                                                                            For the Period from
                                                                               Six Months Ended                 from 1/10/92 
                                                                                   June 30,                   (inception) to
                                                                     -------------------------------              6/30/98
                                                                          1997               1998           -------------------
                                                                     -----------         -----------
                                                                                       (in thousands)
<S>                                                                  <C>                <C>                  <C>        
Cash flows from financing activities:
   Proceeds from issuance of preferred stock....................            --                 --                 13,508
   Proceeds from issuance of common stock.......................        11,610                 16                 29,727
   Proceeds from issuance of promissory notes...................            --                 --                  3,150
   Repayment of promissory note.................................            --                 --                   (125)
                                                                     ---------          ---------            -----------
Net cash provided by financing activities.......................        11,610                 16                 46,260
                                                                     ---------          ---------            -----------
Net increase (decrease) in cash and cash equivalents............         4,825             (1,759)                14,620
Cash and cash equivalents at beginning of period................         9,848             16,379                     --
                                                                     ---------          ---------            -----------
Cash and cash equivalents at end of period......................     $  14,673          $  14,620            $    14,620
                                                                     =========          =========            ===========
Supplemental disclosure of cash flows information:
   Cash paid for interest.......................................     $      --          $      --            $        23
                                                                     =========          =========            ===========
Supplemental schedule of non-cash financing activities:
   Conversion of mandatorily redeemable convertible preferred
     stock to common stock......................................     $      --          $      --            $    19,628
                                                                     =========          =========            ===========
   Accretion of undeclared dividends attributable
     to mandatorily redeemable convertible preferred
     stock......................................................     $      --          $      --            $     2,597
                                                                     =========          =========            ===========
Conversion of promissory notes to preferred stock...............     $      --          $      --            $     2,904
                                                                     =========          =========            ===========
Deferred compensation...........................................     $      --          $      --            $       611
                                                                     =========          =========            ===========
Preferred stock issued in connection with technology license
   agreements...................................................     $      --          $      --            $       498
                                                                     =========          =========            ===========

                         See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>

                                                                5
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                 AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 1997 and 1998
                                   (Unaudited)

(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  1997  audited
consolidated financial statements and footnotes.

         The accompanying  unaudited condensed consolidated financial statements
include the results of the Company and its wholly-owned  subsidiary  (CollaGenex
International,  Ltd.).  All  intercompany  accounts and  transactions  have been
eliminated.

         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 financial position as of June 30, 1998, its results
of operations  for the three and six months ended June 30, 1997 and 1998 and for
the period January 10, 1992 (inception) to June 30, 1998, and its cash flows for
the six months ended June 30, 1997 and 1998 and for the period  January 10, 1992
(inception) to June 30, 1998. Interim results are not necessarily  indicative of
results anticipated for the full fiscal year.

(2)      New Accounting Pronouncements
---      -----------------------------

         Effective  January 1, 1998, the Company adopted  Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 requires that all items defined as comprehensive  income,  including changes
in the amounts of certain items such as foreign currency translation adjustments
and  gains  and  losses  on  certain  securities,  be  shown as a  component  of
comprehensive income in a financial  statement.  The adoption of SFAS 130 had no
effect on the Company's unaudited condensed  consolidated  financial  statements
contained herein, as the Company had no items of comprehensive income during any
period presented therein.




                                       6
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                 AND SUBSIDIARY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 1997 and 1998
                                   (Unaudited)
                                   (Continued)


         Statement of Financial  Accounting  Standards  No. 128,  "Earnings  Per
Share"  ("SFAS  128"),  was  adopted by the  Company on December  31,  1997.  In
accordance  with SFAS 128,  all  earnings  per share data for  periods  prior to
adoption should be restated to conform to the new standard.  There was no change
in the  previously  reported  net loss per share for the  three  months  and six
months ended June 30, 1997 as computed under SFAS 128.




                                       7
<PAGE>





                        COLLAGENEX PHARMACEUTICALS, INC.
                                 AND SUBSIDIARY

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview
--------

         The  Company  began  operations  in January  1992 and is engaged in the
development and  commercialization of innovative,  proprietary medical therapies
for the  treatment  of  periodontal  disease  and other  pathologies.  Since its
origin,  the Company has had no revenues  from sales of its own products and has
funded  its  operations  primarily  from the  proceeds  of  public  and  private
issuances of equity securities.  Substantially all of the Company's expenditures
to date have been for  pharmaceutical  development  activities  and  general and
administrative expenses.

         Since  inception,  the Company has  operated  with a minimal  number of
employees.  Substantially all pharmaceutical  development activities,  including
clinical trials, have been contracted to independent contract research and other
organizations.  The Company anticipates that it will significantly  increase the
number of its employees  over the next several  years,  primarily in general and
administrative  areas,  following  regulatory  approval  of  Periostat(R),   the
Company's  lead drug for the treatment of periodontal  disease.  There can be no
assurance,  however,  that the Company will obtain such regulatory approval on a
timely basis, if at all.

         The Company has incurred  losses each year since  inception  and had an
accumulated  deficit of $31.0 million at June 30, 1998.  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   uncertainties.   The  Company's   business  of  developing
pharmaceutical  products is subject to a number of significant risks,  including
risks inherent in research and development activities and in conducting business
in a highly regulated environment. The success of the Company depends to a large
degree upon obtaining United States Food & Drug  Administration  (the "FDA") and
foreign  regulatory  approval to market products  currently  under  development.
There can be no assurance that any of the Company's  product  candidates will be
approved by any regulatory  authority for marketing in any  jurisdiction  or, if
approved,  that any such products  will be  successfully  commercialized  by the
Company.  The Company's  actual results may differ  materially  from the results
discussed in the forward-looking statements contained herein.





                                       8
<PAGE>




Results of Operations
---------------------

         From its founding  through  June 30, 1998,  the Company had no revenues
from sales of its own  products.  Operating  expenses  consist of  research  and
development  expenses  and general and  administrative  expenses.  Research  and
development  expenses  consist  primarily  of funds  paid to  contract  research
organizations  for the provision of services and materials for drug  development
and clinical trials.  General and  administrative  expenses consist primarily of
personnel  salaries and benefits,  professional and consulting fees,  insurance,
facilities and general office expenses. The Company anticipates that general and
administrative  expenses will increase  during the next several years due to the
expansion of its commercial infrastructure, primarily in sales and marketing.

         The Company  earned $7,000 and $4,000 in contract  revenues for the six
months and the three  months  ended  June 30,  1998,  respectively,  and did not
recognize  contract  revenues in either of the comparable year earlier  periods.
The  Company  earned no  licensing  revenue  in either of the six month or three
month periods ending June 30, 1998, respectively, as compared to an aggregate of
$300,000 for the comparable year earlier periods. Licensing revenues achieved in
1997 were attributable to the Company's  licensing  arrangements with Boehringer
Mannheim Italia.

         Research and development  expenses  increased  $324,000,  or 15.6%, and
$18,000, or 1.3%,  respectively,  for the six months and three months ended June
30, 1998,  over the comparable  year earlier  periods.  Such increases  resulted
primarily  from  expenses  relating to the  initiation  of certain  pre-clinical
studies for Nephrostat(TM), the Company's compound for the treatment of diabetic
complications,  additional costs associated with the Company's  amendment to its
new drug  application  (the "NDA") for  Periostat  submitted to the FDA in March
1998 and a Phase 3b clinical trial  initiated  during the first quarter of 1998.
The Company anticipates that the results from such clinical trial, if favorable,
will be used to support marketing  activities for Periostat following regulatory
approval.  There can be no assurance  that the Company will obtain such approval
on a timely basis, if at all.

         General and administrative  expenses increased $458,000,  or 19.5%, and
$12,000, or 0.9%,  respectively,  for the six months and three months ended June
30,  1998,  over the  comparable  year  earlier  periods.  Such  increases  were
primarily  due to the  Company's  pre-launch  marketing  activities  related  to
Periostat  and  sales and  marketing  efforts  related  to  certain  contractual
marketing  arrangements entered into during 1997, offset in part by the reversal
of certain accruals for marketing expenses.

         Interest income  decreased  $44,000,  or 7.1%, and $111,000,  or 29.1%,
respectively,  for the six months and three months ended June 30, 1998, over the
comparable  year earlier  periods.  Such decreases were due to lower balances in
cash and short-term investments as a result of normal operating activities since
the Company's follow-on public offering of Common Stock in April 1997.




                                       9
<PAGE>


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 shares of
common stock, which generated net proceeds to the Company of approximately $11.6
million after  underwriting  fees and related  expenses.  At June 30, 1998,  the
Company had cash, cash  equivalents and short-term  investments of approximately
$18.1  million,  a decrease of $4.7  million from the $22.8  million  balance at
December 31, 1997.  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  U.S.  Treasury  securities  and
commercial paper with a credit rating no lower than A1/P1. The Company's working
capital of $16.0  million at June 30, 1998  reflected a decrease of $4.6 million
in working capital from December 31, 1997.

         The  Company  had no debt or capital  leases  outstanding  (other  than
accounts  payable and accrued  expenses) at June 30, 1998. On June 26, 1997, the
Company  entered into a credit  arrangement  consisting of a $5,000,000  line of
credit (the "LOC") to support the future  working  capital needs of the Company.
The LOC will be unsecured as long as the Company's cash and investment  balances
maintained  with the lender or an  affiliate of the lender equal or exceed $10.0
million. At the Company's option, the LOC will bear interest at either the prime
rate  charged by the lender or LIBOR plus 2.15%.  The LOC is  terminable  by the
lender at any time. No balance was outstanding under the LOC at June 30, 1998.

         The Company  anticipates  that its  existing  working  capital  will be
sufficient to fund the Company's operations through at least 1998. The Company's
future capital  requirements and the adequacy of its available funds will depend
on many factors,  including the timing of FDA approval, if any, of the Company's
NDA for Periostat, such NDA having been submitted to the FDA in August 1996, the
size and  scope of the  Company's  sales  and  marketing  effort,  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.



                                       10
<PAGE>

                           PART II. OTHER INFORMATION
                           --------------------------

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

         The Annual meeting of  Shareholders  of the Company (the "Meeting") was
held on May 11, 1998.

         There were  present at the  Meeting in person or by proxy  shareholders
holding an  aggregate of 7,723,741  shares of Common  Stock.  The results of the
vote taken at such Meeting  with  respect to each  nominee for director  were as
follows:

        Common Stock Nominees                    For                  Withheld
        ---------------------                    ---                 --------
Helmer P.K. Agersborg, Ph.D.              6,920,016 Shares        803,725 Shares
Brian M. Gallagher, Ph.D.                 6,920,016 Shares        803,725 Shares
Peter R. Barnett, D.M.D.                  6,920,016 Shares        803,725 Shares
Robert J. Easton                          6,920,016 Shares        803,725 Shares
James E. Daverman                         6,920,016 Shares        803,725 Shares
Stephen W. Ritterbush, Ph.D.              6,920,016 Shares        803,725 Shares
Pieter J. Schiller                        6,920,016 Shares        803,725 Shares
Terence E. Winters, Ph.D.                 6,920,016 Shares        803,725 Shares


         In addition, a vote of the shareholders was taken at the Meeting on the
proposal to ratify the  appointment of KPMG Peat Marwick LLP as the  independent
auditors of the Company for the fiscal year ending  December  31,  1998.  Of the
shares present at the meeting in person or by proxy,  7,715,441 shares of Common
Stock were voted in favor of such  proposal,  4,250  shares of Common Stock were
voted  against such  proposal and 4,050  shares of Common Stock  abstained  from
voting.

Item 5.  Other Information
-------  -----------------

         New Drug Application

         On January 28,  1998,  the Company  announced  that it had received its
second  action  letter from the FDA  regarding  the NDA. In such letter,  and in
subsequent  discussions  with the  Company,  the FDA raised new issues about the
NDA. At a meeting with the FDA in March 1998, the Company addressed these issues
and provided a review of summary  clinical  results from its recently  completed
scaling and root planing  (SRP) trial.  The FDA and the Company then agreed that
the Company  would seek a claim for Periostat  based on the  submission of a NDA
amendment containing the results from this trial. On March 31, 1998, the Company
announced that it had completed its submission of such amendment to the FDA. The
FDA has committed to review the amendment  within six months of such  submission
and such review is ongoing.  There can be no assurance  that the  Company's  NDA
with respect to Periostat  will be approved by the FDA on a timely basis,  if at
all. Failure to obtain FDA approval of a NDA for

                                        11
<PAGE>

Periostat  would  have a  material  adverse  effect on the  Company's  business,
financial condition and results of operations.

         Research and Development Agreement

         On April 28, 1998, the Company  entered into a Research and Development
Agreement with Quintiles Scotland Ltd. ("Quintiles") pursuant to which Quintiles
will perform certain research and development activities in 1998 with respect to
Nephrostat(TM),   the   Company's   compound  for  the   treatment  of  diabetic
complications.  The  Company  expects  to incur  approximately  $1.0  million in
research and  development  expenses in  connection  with such  agreement,  which
expenses shall be incurred over the remainder of the 1998 fiscal year.

         Evaluation Testing Agreement

         On  May 1,  1998,  the  Company  entered  into  an  Evaluation  Testing
Agreement  with the  Research  Foundation  of the State  University  of New York
("SUNY")  pursuant to which SUNY will, over the course of three years,  evaluate
certain compounds supplied by the Company.

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

(a)      Exhibits

         10.1   - Contract  between  Quintiles  Scotland  Ltd.  and the Company,
                  dated April 28, 1998.

         27     - Financial Data Schedule.

(b)      Reports on Form 8-K.

         No  reports on Form 8-K were  filed  during  the  quarter to which this
report on Form 10-Q relates.



                                       12
<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, 1998                By:/s/  Brian M. Gallagher
                                           -----------------------
                                           Brian M. Gallagher, Ph.D.
                                           President and Chief Executive Officer
                                           (Principal Executive Officer)



Date:    August 14, 1998                By:/s/  Nancy C. Broadbent
                                           -----------------------
                                           Nancy C. Broadbent
                                           Chief Financial Officer (Principal
                                           Financial and Accounting Officer)