EXECUTION COPY




















                             CO-PROMOTION AGREEMENT

                                     between

                  SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.

                                       and

                        COLLAGENEX PHARMACEUTICALS, INC.









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                             CO-PROMOTION AGREEMENT
                                     between
                  SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.
                                       and
                        COLLAGENEX PHARMACEUTICALS, INC.

1.             DEFINITIONS..............................................
2.             APPOINTMENT..............................................
3.             DUTIES OF THE PARTIES....................................
               3.1.     ROMOTION OF DENAVIR(R)..........................
               3.2.     SALES TRAINING..................................
               3.3.     SAMPLES.........................................
               3.4      OVERSIGHT TEAM..................................
4.             COMPENSATION.............................................
5.             TRADEMARKS...............................................
6.             CLINICAL TRIALS..........................................
7.             COMMUNICATIONS...........................................
8.             ADVERSE EXPERIENCE REPORTING AND
                 REGULATORY MATTERS.....................................
9.             MISCELLANEOUS............................................
10.            RETURN/RECALL............................................
11.            FORCE MAJEURE............................................
12.            SECRECY AND NON-USE......................................
13.            TERM AND TERMINATION.....................................
14.            RECORDKEEPING PROVISIONS.................................
15.            WARRANTIES, REPRESENTATIONS, INSURANCE AND
                 INDEMNIFICATIONS.......................................
16.            WAIVER/MODIFICATION......................................
17.            HEADINGS.................................................
18.            GOVERNING LAW............................................
19.            SEPARABILITY.............................................
20.            ENTIRE AGREEMENT.........................................
21.            NOTICE...................................................
22.            DISPUTE RESOLUTION.......................................
23.            PUBLIC ANNOUNCEMENTS.....................................
24.            ASSIGNMENT...............................................
25.            EXECUTION IN COUNTERPARTS................................
               SIGNATURES...............................................

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                             CO-PROMOTION AGREEMENT
            SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P.-COLLAGENEX
                              PHARMACEUTICALS, INC.



         THIS CO-PROMOTION AGREEMENT (hereinafter "AGREEMENT"),  effective as of
October 13, 1998 (hereinafter  "EFFECTIVE  DATE"), is entered into by CollaGenex
Pharmaceuticals,  Inc., a company  organized and existing  under the laws of the
state of Delaware,  U.S.A.,  and having its principal  office at 301 South State
Street,  Newtown,  Pennsylvania  18940 (hereinafter  "COMPANY"),  and SmithKline
Beecham Consumer  Healthcare,  L.P., a Delaware limited  partnership  having its
principal office at 100 Beecham Drive, Pittsburgh, PA 15230 (hereinafter "SB").

        WHEREAS,  the  COMPANY  desires to obtain the right from SB to engage in
the  direct  PERSONAL  SELLING  (as  hereinafter   defined)  and  PROMOTION  (as
hereinafter defined) in the TERRITORY (as hereinafter defined) of DENAVIR(R) (as
hereinafter defined) to TARGET PRESCRIBERS (as hereinafter defined); and

        WHEREAS,  SB desires to grant COMPANY such right for a certain period of
time on the terms and conditions set forth in this AGREEMENT;

        NOW,  THEREFORE,  in  consideration  of the  covenants  and  obligations
expressed  herein,  and intending to be legally bound, and otherwise to be bound
by proper and reasonable conduct, the parties agree as follows









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1.       DEFINITIONS

1.1      "AFFILIATE(S)" shall mean any corporation,  firm,  partnership or other
         entity, whether de jure or de facto, which directly or indirectly owns,
         is owned by or is under common ownership with a party to this AGREEMENT
         where "owns" or "ownership"  means possession of at least fifty percent
         (50%) of the equity (or such  lesser  percentage  which is the  maximum
         allowed  to  be  owned  by  a  foreign   corporation  in  a  particular
         jurisdiction)  having the power to vote on or direct the affairs of the
         entity and any person, firm,  partnership,  corporation or other entity
         actually  controlled  by,  controlling  or under common  control with a
         party to this AGREEMENT.

1.2      "AGENCY(IES)"  shall  mean any and all state and  federal  governmental
         regulatory  authority(ies)  in the TERRITORY  responsible  for granting
         approvals for the sale of pharmaceutical products,  including,  without
         limitation, DENAVIR(R).

1.3      "PERSONAL SALE" shall mean a face-to-face  meeting, in an individual or
         group practice setting, between a TARGET PRESCRIBER, and a professional
         sales  representative  of COMPANY,  as  documented  by  COMPANY's  call
         reporting  system,  during which a MAJOR  PRESENTATION of DENAVIR(R) is
         made to such  health  care  professional,  provided  that  for any such
         meeting to be within  the scope of the term  `PERSONAL  SALE',  no more
         than two (2)  MAJOR  PRESENTATIONS  and,  when  appropriate,  one minor
         presentation  of  Periocheck  (a  chair-side  assay  that tests for the
         presence of neutral protease  enzymes) may be carried out. When used as
         a verb, "PERSONAL SELLING" shall mean to engage in a PERSONAL SALE.

1.4      "DENAVIR(R)"  shall mean SB's prescription  brand of penciclovir cream,
         in all dosage forms and package  configurations,  and all  prescription
         indications for which SB has received all requisite marketing approvals
         from the AGENCIES as of the EFFECTIVE DATE, or receives during the TERM
         OF THE  AGREEMENT.  For the avoidance of doubt,  the term  "DENAVIR(R)"
         shall not  include  penciclovir  cream,  in any dosage  form or package
         configuration, for any over-the-counter indications.

1.5      "DENAVIR(R)  PROMOTION  INITIATION  DATE "  shall  mean  the  date,  as
         confirmed  by COMPANY in writing to SB, of  COMPANY's  commencement  of
         PERSONAL SELLING and PROMOTION of DENAVIR(R) in the TERRITORY to TARGET
         PRESCRIBERS,  provided such  commencement  is on or before the date set
         forth in paragraph 3.1.3.

1.6      "DENAVIR(R)  PRESCRIPTION  BASELINE"  shall  mean,  for any  particular
         period,  the number of  prescriptions  of  DENAVIR(R)  attributable  to
         TARGET  PRESCRIBERS  which are projected to be generated as a result of
         SB marketing  tactics  during such period and  seasonal and  historical
         business  trends.  For  the  first  PROMOTION  PERIOD,  the  DENAVIR(R)
         PRESCRIPTION  BASELINE  shall  be  equal  to    *     prescriptions  of
         DENAVIR(R).  DENAVIR(R)  PRESCRIPTION BASELINE for additional PROMOTION
         PERIODS,  if any,  shall be mutually  agreed upon by the  parties.  The
         calculation  of the

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*    Confidential  information  has been omitted and filed  separately  with the
     Securities and Exchange Commission.

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         DENAVIR(R)  PRESCRIPTION  BASELINE  for the first  PROMOTION  PERIOD is
         attached hereto as Appendix A.

1.7      "GROSS  PRESCRIPTIONS"  shall mean, for any particular time period, the
         number of prescriptions for DENAVIR(R) which are attributable to TARGET
         PRESCRIBERS  for the particular  time period,  as reported to SB by the
         NDC Monthly  Prescriber by Specialty  Report, or such other third party
         reporting system mutually agreed upon by the parties.

1.8      "INCREMENTAL  RX" shall mean,  for any  particular  time period,  GROSS
         PRESCRIPTIONS during such time period minus the DENAVIR(R) PRESCRIPTION
         BASELINE  for such  time  period  (as  determined  in  accordance  with
         Paragraph 1.6).

1.9      "PERIOSTAT(R)" shall mean COMPANY's brand of doxycycline, in all dosage
         forms and package configurations, and all indications for which COMPANY
         may receive all requisite  marketing  approvals from the AGENCIES prior
         to or during the TERM OF THE AGREEMENT.

1.10     "MAJOR   PRESENTATION"  shall  mean  a  full   pharmaceutical   product
         presentation  during which key  attributes of such  product,  including
         without limitation safety and efficacy, are verbally presented.

1.11     "PROMOTION"  shall  mean  those  activities  normally  undertaken  by a
         pharmaceutical  company's sales force to implement  marketing plans and
         strategies  aimed at encouraging  the  appropriate  use of a particular
         prescription  pharmaceutical  product.  When used as a verb,  "PROMOTE"
         shall mean to engage in such activities.

1.12     "PROMOTION   PERIOD"  shall  mean  a  period  of  time  established  in
         accordance with this Agreement. The first PROMOTION PERIOD shall be the
         period of time  following  the  DENAVIR(R)  PROMOTION  INITIATION  DATE
         through March 31, 1999.  Subsequent PROMOTION PERIODS, if any, shall be
         mutually agreed upon by the parties.

1.13     "TARGET PRESCRIBERS: shall mean board eligible/certified dentists.

1.14     "TERM OF THE AGREEMENT"  shall mean the period of time beginning on the
         EFFECTIVE DATE and ending March 31, 1999, unless extended in accordance
         with Paragraph 13.1.

1.15     "TERRITORY"  shall mean the fifty (50)  states of the United  States of
         America and the District of Columbia.

1.16     "THIRD  PARTY(IES)"  shall  mean any party  other  than a party to this
         AGREEMENT or an AFFILIATE.

2.       APPOINTMENT

2.1      During  the TERM OF THE  AGREEMENT,  SB  grants  COMPANY  the  right to
         directly  PROMOTE and conduct  PERSONAL SELLING of DENAVIR(R) to TARGET

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         PRESCRIBERS  in  the  TERRITORY,  in  accordance  with  the  terms  and
         conditions  set forth in this  AGREEMENT.  For the  avoidance of doubt,
         COMPANY shall have no rights to PROMOTE or conduct  PERSONAL SELLING of
         DENAVIR(R) as an over-the-counter product pursuant to this AGREEMENT.

3.       DUTIES OF THE PARTIES
         ---------------------

3.1      PROMOTION OF DENAVIR(R)

         3.1.1    During  the  TERM  OF  THE  AGREEMENT   after  the  DENAVIR(R)
                  PROMOTION  INITIATION DATE,  COMPANY shall diligently  PROMOTE
                  and  conduct   PERSONAL   SELLING  of   DENAVIR(R)  to  TARGET
                  PRESCRIBERS in the TERRITORY.  COMPANY warrants and represents
                  that any professional  sales  representatives  (or equivalents
                  thereof)  used by  COMPANY  to  PROMOTE  DENAVIR(R)  to TARGET
                  PRESCRIBERS,  in  furtherance of this  AGREEMENT,  shall do so
                  solely in accordance with the provisions of this AGREEMENT.

                  3.1.1.1  During the TERM OF THE AGREEMENT, the position of the
                           MAJOR  PRESENTATION of DENAVIR(R) during all PERSONAL
                           SALES to  TARGET  PRESCRIBERS  shall be either in the
                           first or in the second position.

                  3.1.1.2  Notwithstanding   Paragraph  3.1.1.1,   COMPANY  will
                           employ its expertise, best professional judgment, and
                           working relationship with TARGET PRESCRIBERS,  in the
                           TERRITORY to ensure that its professional sales force
                           positions  DENAVIR(R) to ensure maximum  prescription
                           generation within each PERSONAL SALE.

         3.1.2    During  the  TERM  OF  THE  AGREEMENT   after  the  DENAVIR(R)
                  PROMOTION   INITIATION  DATE,   COMPANY's  management  of  its
                  professional  representatives  shall reflect its commitment to
                  the  PROMOTION of  DENAVIR(R)  to TARGET  PRESCRIBERS,  in the
                  TERRITORY as a major priority to COMPANY.

         3.1.3    COMPANY  shall  commence  PROMOTION  and  PERSONAL  SELLING of
                  DENAVIR(R)  to TARGET  PRESCRIBERS  in the  TERRITORY no later
                  than one (1) week after COMPANY completes its  launch/training
                  meeting for DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY.
                  The  launch/training  meeting of DENAVIR(R) is scheduled to be
                  held on October  13,  1998 in  Philadelphia,  PA (the  "Launch
                  Meeting").

         3.1.4    Except as specifically set forth herein,  SB shall retain full
                  control  of  all   activities   with  respect  to  DENAVIR(R),
                  including,  without  limitation,  all  regulatory,   clinical,
                  marketing,   distribution  and   manufacturing   matters.   In
                  particular,  SB shall  retain  full  control of the  following
                  matters:

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                  3.1.4.1  The types of  promotional  materials  and  literature
                           (including quantities) and other support that will be
                           provided by SB,  provided  that such support shall be
                           in accordance with Paragraph 3.1.5.

                  3.1.4.2  The quantity and timing of distribution of samples of
                           DENAVIR(R)   to  be  used  by   COMPANY   to  PROMOTE
                           DENAVIR(R) to TARGET  PRESCRIBERS  in the  TERRITORY,
                           provided  that such  support  shall be in  accordance
                           with Paragraph 3.1.3; and

                  3.1.4.3  The guidelines  for the use of promotional  materials
                           and literature by COMPANY's  professional sales force
                           in their PERSONAL SELLING and PROMOTION of DENAVIR(R)
                           to TARGET PRESCRIBERS in the TERRITORY.

         3.1.5    All promotional  materials,  literature and samples to be used
                  by COMPANY in the TERRITORY in  connection  with the PROMOTION
                  of DENAVIR(R) to the TARGET  PRESCRIBERS  shall be supplied to
                  COMPANY by SB. The parties  shall share the costs and expenses
                  for the production of promotional  materials and literature in
                  accordance with Paragraph  3.1.12.  The storage by COMPANY and
                  distribution of such  promotional  materials and literature to
                  COMPANY's  professional  representatives shall be at COMPANY's
                  expense.  Sample storage and  distribution  will be handled in
                  accordance with Paragraph 3.3.

                  3.1.5.1  The determination  of the content of the promotional
                           materials  and  literature  related to  DENAVIR(R) to
                           TARGET  PRESCRIBERS in the TERRITORY  shall be solely
                           within the control of SB. The quantity and the method
                           of  distribution  of such materials shall be mutually
                           agreed upon by the parties; provided that in no event
                           shall such  materials be  distributed to COMPANY less
                           often than SB's standard  promotional cycles for such
                           materials.  SB shall periodically  provide guidelines
                           to  COMPANY   concerning  the  distribution  of  such
                           materials to TARGET PRESCRIBERS. The parties agree to
                           discuss in good faith the  desirability of having the
                           names  and  logos of both SB and  COMPANY  appear  on
                           certain promotional materials.

                  3.1.5.2  In connection with the PERSONAL SELLING and PROMOTION
                           of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY,
                           COMPANY  warrants and represents  that (a) it and its
                           professional  sales  representatives  shall  use only
                           promotional   materials,   literature,   and  samples
                           provided  by  SB  under  this  AGREEMENT,   (b)  such
                           materials,  literature,  and samples shall be used by
                           COMPANY only for the purposes of this AGREEMENT,  (c)
                           all  materials,  literature and samples which are not
                           used  during  the  TERM  OF THE  AGREEMENT  shall  be
                           returned  to SB as  soon  as  practicable  after  the
                           expiration or termination of this AGREEMENT,  and (d)
                           any promotional material, promotional

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                           literature,  and samples  supplied by SB shall not be
                           misbranded,  changed, altered or adulterated prior to
                           their  distribution  by COMPANY  or its  professional
                           sales   representatives.   All  copyright  and  other
                           intellectual  property  rights  as well as any  other
                           rights and interests with respect to such  materials,
                           literature and samples shall remain vested in SB.

         3.1.6    COMPANY hereby warrants and represents  that, in the course of
                  its PERSONAL  SELLING and  PROMOTION of  DENAVIR(R)  to TARGET
                  PRESCRIBERS in the TERRITORY,  it will (a) limit its claims of
                  efficacy  and  safety  for   DENAVIR(R)  to  those  which  are
                  consistent with SB's approved product circular for DENAVIR(R),
                  (b) not delete or modify  claims of efficacy and safety in the
                  PROMOTION of  DENAVIR(R) so that they are different in any way
                  from  those  which  are  contained  in SB's  approved  product
                  circular for  DENAVIR(R),  or make any changes in  promotional
                  materials and  literature  provided by SB, and (c) PROMOTE and
                  make PERSONAL SALES of DENAVIR(R) to TARGET PRESCRIBERS in the
                  TERRITORY in strict adherence to regulatory, professional, and
                  legal requirements and the American Medical  Association Gifts
                  to Physicians From Industry Guidelines.

         3.1.7    COMPANY  further  warrants and represents  that, in connection
                  with its  PERSONAL  SELLING and  PROMOTION  of  DENAVIR(R)  to
                  TARGET PRESCRIBERS in the TERRITORY,  it shall comply with all
                  of the  applicable  state and federal laws and  regulations of
                  the  TERRITORY,  and shall not  knowingly  or  negligently  do
                  anything  which will  jeopardize the goodwill or reputation of
                  DENAVIR(R).

         3.1.8    The professional  representatives  of COMPANY who are utilized
                  by COMPANY in  accordance  with this  AGREEMENT  shall  remain
                  exclusively  under the  authority  of  COMPANY's  field  sales
                  management. Except as otherwise provided in Paragraphs 3.1 and
                  3.2,   COMPANY   shall  have  full   responsibility   for  the
                  dissemination  of  information  for the  PERSONAL  SELLING and
                  PROMOTION of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY
                  to its professional sales representatives based on information
                  provided to COMPANY by SB under this AGREEMENT.

         3.1.9    The  parties  shall   cooperate  in  conventions  and  related
                  educational   activities,   when  such  cooperation  would  be
                  mutually beneficial, for the PROMOTION of DENAVIR(R) to TARGET
                  PRESCRIBERS in the TERRITORY where effective  synergies can be
                  attained,  as mutually agreed upon by the parties. The funding
                  of expenses  related to such  activities  will be  apportioned
                  between  the parties  pursuant to terms to be mutually  agreed
                  upon.

         3.1.10   SB  shall   have  the  sole  right  and   responsibility   for
                  establishing  and  modifying  the  terms and  conditions  with
                  respect to the sale of DENAVIR(R) in the TERRITORY,  including
                  the  selling  price,  as  well  as any  terms  and  conditions
                  relating to or

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                  affecting  the  price at which  DENAVIR(R)  will be sold,  any
                  discount attributable to payments on receivables, distribution
                  of  DENAVIR(R)  in the  TERRITORY,  credit  to be  granted  or
                  refused, and the like.

         3.1.11   All sales of  DENAVIR(R)  in the  TERRITORY,  including  those
                  attributable to TARGET PRESCRIBERS, shall be booked by SB.

         3.1.12   SB shall be responsible for the costs and expenses  related to
                  the production of promotional material,  literature, and sales
                  aids  for  the  PERSONAL  SALES  reasonably   expected  to  be
                  conducted  in the  period  from  the  EFFECTIVE  DATE  through
                  December 31, 1998. Thereafter, the parties shall equally share
                  the  costs  and  expenses   related  to  the   production   of
                  promotional  material,  literature,  sales aids; provided that
                  neither  party  shall be  obligated  to  contribute  more than
                  $50,000 in the  aggregate  toward such costs and  expenses for
                  the remainder of the first PROMOTION PERIOD,  unless otherwise
                  agreed upon by the parties.

3.2      SALES TRAINING

         3.2.1    COMPANY  shall pay for all expenses  incurred by COMPANY which
                  are  associated  with the Launch  Meeting  and all  subsequent
                  training meetings for its professional representatives, except
                  as otherwise  provided in Paragraph  3.2.2.  SB shall bear all
                  expenses   incurred  by  SB  which  are  associated  with  its
                  participation in the Launch Meeting.

         3.2.2    SB shall, at its expense,  provide the COMPANY's current sales
                  representatives   with  promotional   training  regarding  the
                  PERSONAL   SELLING  and  PROMOTION  of  DENAVIR(R)  to  TARGET
                  PRESCRIBERS in the TERRITORY at the Launch  Meeting,  provided
                  that  such  training  shall  be at the same  level of  product
                  training  as that which  would be  provided  to SB's own sales
                  representatives who have previous professional  pharmaceutical
                  sales experience.  After the Launch Meeting,  SB shall provide
                  promotional    training   of   newly   hired   COMPANY   sales
                  representatives  regarding the PERSONAL  SELLING and PROMOTION
                  of  DENAVIR(R)  at regularly  scheduled  meetings  that SB has
                  organized  for its own sales  force.  COMPANY  shall  bear all
                  travel and living expenses  incurred by COMPANY related to all
                  such training of its professional sales representatives.

         3.2.3    During the TERM OF THE  AGREEMENT,  COMPANY  shall  obtain all
                  training  materials it may reasonably  require  related to the
                  promotion of DENAVIR(R) to TARGET PRESCRIBERS in the TERRITORY
                  from SB The training  materials  used by SB in the training of
                  COMPANY sales  representatives  in accordance  with Paragraphs
                  3.2.1 and 3.2.2 shall be provided to COMPANY at SB's expense.

         3.2.4    During the TERM OF THE  AGREEMENT,  COMPANY  shall train their
                  sales  representatives and clinical safety  representatives on
                  the collection of data for

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                  Adverse  Experiences  (as defined in Paragraph  8.1),  and the
                  reporting thereof to SB, in accordance with the procedures and
                  timelines set out in Article 8.

3.3      SAMPLES

         3.3.1    Samples  of  DENAVIR(R)  to be  used  by  COMPANY  under  this
                  AGREEMENT  shall be sent to  COMPANY or its  designees  at the
                  expense  (internally  charged standard unit cost plus shipping
                  and  handling)  of SB. The  storage and  distribution  of such
                  samples to professional  representatives shall be at COMPANY's
                  expense.

         3.3.2    COMPANY shall receive amounts of such samples as determined by
                  SB, and at appropriate  intervals which reasonably  comply, to
                  the extent  possible,  with both SB's and  COMPANY's  shipping
                  schedules.   SB  shall   periodically   provide  COMPANY  with
                  guidelines  concerning the  distribution  of samples to TARGET
                  PRESCRIBERS.

         3.3.3    COMPANY  warrants  and  represents  that it  shall  establish,
                  maintain  and  adhere to  written  procedures  to assure  that
                  COMPANY's  receipt,  storage and distribution of samples,  and
                  all of its  professional  sales  representatives  to whom such
                  samples are  distributed,  comply with all requirements of the
                  AGENCIES including the Prescription Drug Marketing Act of 1987
                  (as such may be subsequently  modified), as well as reasonable
                  compliance  with  the  U.S.  Food  and  Drug  Administration's
                  proposed regulations,  published at 59 Fed. Reg. p11842, March
                  14,  1994.  Specifically,  such  procedures  shall  include  a
                  requirement  that  COMPANY  shall notify SB  immediately  upon
                  learning  that any samples  shipped by SB to COMPANY have been
                  lost or have not been received as scheduled. Furthermore, such
                  procedures  shall include a requirement  that COMPANY shall be
                  responsible for reporting  directly to the relevant AGENCY any
                  known  thefts or  significant  losses of  samples,  as such is
                  required by AGENCY  policy or  regulation,  and COMPANY  shall
                  promptly  provide SB with a complete  copy of any such report.
                  In  the  event  that  COMPANY  or  any  of  its   professional
                  representatives fails to comply or causes SB to fail to comply
                  with  any  of  the  requirements  of  the  Prescription   Drug
                  Marketing Act of 1987 (as such may be  subsequently  modified)
                  and a  civil  penalty  is  assessed  against  SB or any of its
                  AFFILIATES or employees,  then COMPANY shall hold harmless and
                  indemnify SB, its  AFFILIATES and their  officers,  directors,
                  shareholders,  employees,  successors  and  assigns  from  and
                  against  any such  civil  penalty  or other  damages or losses
                  related thereto, including attorneys' fees.

         3.3.4    Upon  reasonable  advance  notice  to  COMPANY,  SB  shall  be
                  entitled,  at SB's expense, to conduct an inspection and audit
                  of COMPANY's  sample  allocation at any of COMPANY's  owned or
                  controlled  facilities  where samples of  DENAVIR(R)  received
                  from SB under this  AGREEMENT are stored.  The purpose of such
                  inspection and audit shall be solely to ensure compliance with
                  the applicable  provisions of the Prescription  Drug Marketing
                  Act of 1987 (as such 

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                  may be subsequently  modified) and with the provisions of this
                  AGREEMENT,  as well  as to copy  records  relating  to  sample
                  receipt, storage and distribution.

         3.3.5    Upon the  termination or expiration of the AGREEMENT,  COMPANY
                  shall  promptly  return,   at  COMPANY'S   expense,   to  SB's
                  designated  distribution  center,  any  samples of  DENAVIR(R)
                  received  by COMPANY  from SB under this  AGREEMENT  which are
                  still in its or its sales representatives possession.

         3.3.6    The parties  understand and acknowledge  that COMPANY does not
                  currently  have the  procedures  in place  to  receive,  store
                  and/or distribute  samples to TARGET PRESCRIBERS in accordance
                  with the terms of this Agreement.  Therefore,  until such time
                  as COMPANY is able to receive, store and/or distribute samples
                  to TARGET  PRESCRIBERS  in  accordance  with the terms of this
                  Agreement,  COMPANY shall not be required to do so;  provided,
                  however,  that COMPANY  agrees to use good faith efforts to be
                  able to  receive,  store  and  distribute  samples  to  TARGET
                  PRESCRIBERS  in  accordance  with the terms of this  Agreement
                  prior to January 1, 1999.

3.4      OVERSIGHT TEAM

         3.4.1    Within  fifteen (15) days  following the EFFECTIVE  DATE,  the
                  parties   shall  form  a  team  which  shall  have   oversight
                  responsibility   for  the   parties'   performance   of  their
                  respective obligations under this AGREEMENT. The team shall be
                  known as the "Oversight Team", and it shall be composed of, at
                  least,  a  product  manager  representative  from  each  party
                  ("Product Manager").  The Product Manager for each party shall
                  be the  point  person  for  such  party  with  respect  to all
                  activities  related to the  training,  PROMOTION  and PERSONAL
                  SELLING  of  DENAVIR(R)   under  this   AGREEMENT,   including
                  assisting  sales  training  personnel  and  product  and sales
                  management    teams.   The   Product   Managers   shall   meet
                  periodically,   as  often  as  is   necessary,   formally   or
                  informally,  with face-to-face meetings alternating between SB
                  facilities  and COMPANY  facilities,  provided  that the first
                  such  meeting  shall be held no later  than  thirty  (30) days
                  after the EFFECTIVE  DATE.  Each party may replace its Product
                  Manager  at any  time,  upon at  least  one (1)  week's  prior
                  written notice to the other party.

4.       COMPENSATION

         4.1      SB shall pay COMPANY compensation during each PROMOTION PERIOD
                  according  to  the   following   procedure.   The   DENAVIR(R)
                  PRESCRIPTION  BASELINE  applicable  to such  PROMOTION  PERIOD
                  shall be subtracted from the amount of GROSS PRESCRIPTIONS for
                  such  PROMOTION  PERIOD,  and COMPANY  shall be entitled to an
                  amount equal to INCREMENTAL RX multiplied by       *         .

         4.2      For the  first  PROMOTION  PERIOD,  SB shall pay  COMPANY  the
                  payments  outlined  in  Paragraph  4.1 within  sixty (60) days
                  after  the  end  of  the  first  PROMOTION  PERIOD.   For  any
                  subsequent  PROMOTION  PERIODS (if any) during the TERM OF THE

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*    Confidential  information  has been omitted and filed  separately  with the
     Securities and Exchange Commission.

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                  AGREEMENT,  SB shall pay  COMPANY  the  payments  outlined  in
                  Paragraph 4.1 in quarterly  installments,  each installment to
                  be paid within sixty (60) days after the end of the quarter.

         4.3      In the event that the first PROMOTION PERIOD does not commence
                  until after  November  1, 1998,  the  DENAVIR(R)  PRESCRIPTION
                  BASELINE  for such period shall be  proportionally  reduced to
                  reflect  the  reduced  period of time of the  first  PROMOTION
                  PERIOD, as mutually agreed upon by the parties.

         4.4      In  the  event  this  AGREEMENT  is  terminated  prior  to the
                  completion of any PROMOTION PERIOD, the amount of compensation
                  that SB will be obligated  to pay COMPANY  shall be based upon
                  an adjusted DENAVIR(R) PRESCRIPTION BASELINE that reflects the
                  reduced  term of the  PROMOTION  PERIOD.  In  particular,  the
                  DENAVIR(R)  PRESCRIPTION  BASELINE and GROSS PRESCRIPTIONS for
                  the  abbreviated   PROMOTION  PERIOD  shall  be  appropriately
                  reduced based on the actual number of months that have elapsed
                  during  the  PROMOTION  PERIOD as  compared  to the  number of
                  months in the original PROMOTION PERIOD.

         4.5      In  the  event  SB  terminates  this  AGREEMENT   pursuant  to
                  Paragraph  13.4 below,  SB shall be  obligated  to pay COMPANY
                  compensation  for an additional one month period following the
                  effective date of such termination. Such compensation shall be
                  calculated in accordance with this Section 4.

5.       TRADEMARKS

         5.1      DENAVIR(R)  shall be PROMOTED and PERSONAL SALES shall be made
                  by COMPANY to TARGET  PRESCRIBERS  in the TERRITORY  under the
                  trademark "DENAVIR(R)", which trademark is owned by SB.

         5.2      This  AGREEMENT  does not  constitute  a grant of any property
                  right or  interest  to COMPANY,  by license or  otherwise,  in
                  DENAVIR(R)  or in  any  other  trademarks  owned  by SB or any
                  AFFILIATE,  or to use any  such  trademark  for  any  purpose,
                  except  to the  extent  that such use is  necessary  to enable
                  COMPANY to PROMOTE and make  PERSONAL  SALES of  DENAVIR(R) in
                  accordance  with  this  AGREEMENT.  COMPANY  hereby  expressly
                  acknowledges  its  recognition of the validity of the title of
                  SB or its  AFFILIATES to the trademarks and trade names in the
                  TERRITORY  used by SB or its  AFFILIATES  in  connection  with
                  DENAVIR(R),  whether  registered or not. SB shall own all such
                  trademarks  and trade names and shall  retain  such  ownership
                  upon termination or expiration of this AGREEMENT

         5.3      COMPANY  shall not  undertake  any  action in  respect  of the
                  registration,  renewal,  or infringement of SB's trademarks or
                  trade names without SB's written consent.

6.       CLINICAL TRIALS

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         6.1      During the TERM OF THE AGREEMENT, COMPANY shall not conduct or
                  commission  pre-clinical,  clinical,  or other studies  and/or
                  trials with respect to DENAVIR(R).

7.       COMMUNICATIONS

         7.1      COMPANY  shall   promptly   communicate  to  SB  all  material
                  comments,  requests and inquiries of the medical profession or
                  any  other  THIRD  PARTIES  and all  information  relating  to
                  DENAVIR(R),  including without  limitation,  market and safety
                  information,  within the TERRITORY, of which it becomes aware.
                  All  responses to the medical  profession  or such other THIRD
                  PARTIES  shall be  handled  solely by SB.  The  parties  shall
                  cooperate  with one another to the extent  necessary  to fully
                  respond to such communications.

         7.2      The  parties  shall  assist one another  (as  requested)  with
                  respect to communications  from AGENCIES.  All  communications
                  with  AGENCIES  concerning  DENAVIR(R),   including,   without
                  limitation,  all  communications  related to adverse  reaction
                  reporting, shall be the sole responsibility of SB. The parties
                  shall fully cooperate with one another to the extent necessary
                  to fully respond to such communications.

         7.3      COMPANY  shall  promptly   notify  SB  of  market,   economic,
                  regulatory  and other  developments  of which COMPANY  becomes
                  aware  which  may  affect  the sale of  DENAVIR(R)  to  TARGET
                  PRESCRIBERS in the TERRITORY. SB shall promptly notify COMPANY
                  of any Adverse  Experiences  (as defined in Paragraph 8 below)
                  of which it becomes aware.

8.       ADVERSE EXPERIENCE REPORTING AND REGULATORY MATTERS

         8.1      The term  "Adverse  Experience(s)"  as used in this  Article 8
                  shall mean any noxious,  pathological or unintended  change in
                  anatomical,  physiological or metabolic  function as indicated
                  by  physical  signs,   symptoms  and/or   laboratory   changes
                  occurring in clinical trials,  post-marketing surveillance, or
                  clinical  practice  during use of DENAVIR(R),  or published in
                  the medical  literature,  whether or not  considered  causally
                  related to the DENAVIR(R).  This includes an exacerbation of a
                  pre-existing    condition,    intercurrent    illness,    drug
                  interaction,   significant   worsening  of  a  disease   under
                  investigation  or  treatment,   and  significant   failure  of
                  expected pharmacological or biological action.

         8.2      With respect to Adverse Experiences, the following shall apply
                  in all circumstances:

           (a)  During  the  TERM  OF  THE  AGREEMENT  SB  will  have  exclusive
        responsibility and authority to report Adverse  Experiences  reported to
        it in respect of DENAVIR(R) to the appropriate AGENCIES in the TERRITORY
        in accordance with the laws and regulations thereof.
           (b) An Adverse  Experience will be considered  'serious' if it is any
        one or more of the following, i.e., fatal, life threatening,  persistent
        or significant  disability or 

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         incapacity,    results   in    hospitalization   or   prolongation   of
         hospitalization, a congenital abnormality/birth defect, a carcinoma, or
         an  overdose.  In addition,  any Adverse  Experience  which  suggests a
         significant  hazard,  contraindication,   side  effect,  precaution  or
         requires  surgical  intervention  to prevent one of the outcomes listed
         above  that  may be  associated  with  the  use of  DENAVIR(R)  will be
         considered a serious  Adverse  Experience.  

           (c) All  Adverse  Experience  reports  and  queries  for SB should be
         addressed  to SmithKline Beecham Product Information,  Attention:  Roya
         Behbahani FP 1015, One  Franklin Plaza,  Philadelphia,  PA 19101 (phone
         800-366-8900  x6337)  (fax  1-215-751-3148)  and for COMPANY  should be
         addressed to  Mary  Granados,  Collagenex  Pharmaceuticals,  Inc.,  301
         South State  Street, Newtown, Pennsylvania 18940 (phone 1-888-339-5678)
         (fax  1-770-693-9300),  or  such other safety  representative as may be
         designated by SB for SB or by COMPANY for COMPANY.

           (d) The  local U.S.  safety  department  of each  party will  report 
         to  the local U.S.  safety  department  of the other  party all Adverse
         Experiences  reported to  it in respect of DENAVIR(R)  as follows:
               (i)  fatal  unexpected  and  life-threatening  unexpected Adverse
         Experiences  by telephone  or facsimile within  one (1) calendar day of
         receipt; 
               (ii) all other serious Adverse Experiences in writing within five
         (5) calendar days of  receipt; 
               (iii) a summary of  all  Adverse  Experiences, serious  and  non-
         serious,  in writing on a monthly  basis, indicating those cases  which
         have  previously  been  reported to the other party.
         Further information  received on any serious Adverse Experience (or any
         information  which  changes an Adverse  Experience from  non-serious to
         serious)  will also  be reported  to the other party  within one (1) or
         five (5 ) calendar  days of receipt by the central  safety  department,
         according to the above criteria.

8.3      The parties agree throughout the duration of this AGREEMENT to maintain
         records and otherwise  establish  procedures to assure  compliance with
         all regulatory,  professional, and other legal requirements which apply
         the promotion and marketing of DENAVIR(R).

9.       MISCELLANEOUS

9.1      SB shall be exclusively  responsible for accepting and filling purchase
         orders,  billing,  and returns  with respect to  DENAVIR(R),  except as
         otherwise  provided in Paragraph 10.1. COMPANY shall immediately direct
         any inquiries  related to orders or matters related thereto it receives
         for DENAVIR(R) to SB for acceptance or rejection,  which  acceptance or
         rejection shall be at SB's sole discretion.

9.2      The  appointment  of COMPANY  under  Article 2 shall not create a joint
         venture,  or an  employer-employee  relationship  or a  principal-agent
         relationship  other than as

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         specifically  provided  in this  AGREEMENT,  with  respect to terms and
         conditions  of the  PROMOTION  and PERSONAL  SELLING of  DENAVIR(R)  to
         TARGET PRESCRIBERS in the TERRITORY.

9.3      Nothing in this AGREEMENT shall be deemed to authorize  either party to
         act for,  represent,  or bind the other party or any of its  AFFILIATES
         other than as specifically provided by this AGREEMENT.

9.4      Neither  party shall have any  responsibility  for the hiring,  firing,
         compensation or benefits of the other party's employees. No employee or
         representative  of a party shall have any authority to bind or obligate
         the  other  party  to  this  AGREEMENT  for  any  sum or in any  manner
         whatsoever,  or to create or impose any  contractual or other liability
         on the other party without said party's authorized written approval.

10.      RETURN/RECALL

10.1     Any DENAVIR(R) or DENAVIR(R) related items returned to COMPANY shall be
         shipped by COMPANY to SB's  facility  identified by SB as the point for
         receiving returned goods, with any reasonable or authorized shipping or
         other documented direct cost to be paid by SB.

10.2     At SB's  request,  COMPANY will  promptly  assist SB in  obtaining  and
         receiving any samples of  DENAVIR(R)  or DENAVIR(R)  related items that
         have been recalled,  and any reasonable and necessary direct documented
         costs incurred by COMPANY with respect to  participating in such recall
         shall be reimbursed by SB.

11.      FORCE MAJEURE

11.1     Neither of the parties shall be liable or be in breach of any provision
         of this  AGREEMENT  for any  failure or omission on its part to perform
         any obligation because of force majeure,  including, but not limited to
         war, riot, fire, explosion,  flood, sabotage,  accident or breakdown of
         machinery;  unavailability of fuel, labor, containers or transportation
         facilities; accidents of navigation or breakdown or damages of vessels,
         or  other  conveyances  for  air,  land or sea;  other  impediments  or
         hindrances to transportation;  strike or other labor  disturbances;  or
         any other cause beyond the control of the party; and provided that such
         failure or omission  resulting from one of the above causes is cured as
         soon  as  practicable  after  the  occurrence  of  one or  more  of the
         above-mentioned.

12.      SECRECY AND NON-USE

12.1     All confidential information which is received by either party from the
         other party during the TERM OF THE  AGREEMENT  shall be  maintained  in
         strict confidence by the receiving party. All confidential  information
         whether  generated by SB or COMPANY  shall be  disclosed  only to SB or
         COMPANY  employees and  consultants  who have been  instructed to treat
         such information in strict  confidence and on a  "need-to-know"  basis.
         This  information  shall be protected from  disclosure to THIRD PARTIES
         with at least  the

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         same  degree of care used by such  employees  when  dealing  with their
         employer's  confidential  information,   but  in  no  event  less  than
         reasonable care.  Further,  such information  shall not be disclosed to
         any other person, firm, or AGENCY, governmental or private, or used for
         purposes other than set forth herein, without the prior written consent
         of the disclosing party except to the extent that the information:

         12.1.1   is known at the time of its receipt by the receiving party and
                  is documented in its tangible records, or

         12.1.2   is properly in the public domain, or

         12.1.3   is  subsequently  disclosed to the receiving  party by a THIRD
                  PARTY who may lawfully do so, or

         12.1.4   is independently developed by the receiving party, or

         12.1.5   is  required  by  law  or   regulation   to  be  disclosed  to
                  governmental agencies.

         This provision shall survive termination of this AGREEMENT for a period
         of five (5) years.








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12.2     Upon termination or expiration of this AGREEMENT,  and upon the request
         of the  disclosing  party,  the  receiving  party shall return all such
         information  and copies  thereof  in its  possession,  except  that the
         receiving  party  may keep one copy of such  information  in its  legal
         department  confidential  files  solely  for  archival  purposes.  Such
         archival copy will be deemed to be the confidential  information of the
         disclosing  party,  and will not be copied or distributed in any manner
         without the express prior written  permission of the disclosing  party,
         except as otherwise provided in Paragraph 12.1.

13.      TERM AND TERMINATION

13.1     The TERM OF THE  AGREEMENT  is as defined in  Paragraph  1.14,  and the
         AGREEMENT  shall expire upon the  expiration of the period  outlined in
         Paragraph 1.14 unless the parties mutually agree, in writing, to extend
         the TERM OF THE  AGREEMENT  in  accordance  with  Paragraph  13.6.  The
         AGREEMENT may be terminated  earlier than the expiration of the TERM OF
         THE AGREEMENT as provided in this Article 13.

13.2     Notwithstanding Paragraph 13.3 below, SB may terminate the AGREEMENT at
         any  time,  upon  five  (5)  days  written  notice,  if  SB  reasonably
         determines  that COMPANY has  breached  any warranty or  representation
         made by COMPANY under this AGREEMENT,  including,  without  limitation,
         those outlined in Paragraphs  3.1.1,  3.1.5.2,  3.1.6,  3.1.7, or if SB
         reasonably determines that COMPANY is otherwise acting illegally in the
         manner in which it is PERSONAL  SELLING or PROMOTING  DENAVIR(R) in the
         TERRITORY,  or if SB reasonably  determines that COMPANY is interfering
         with SB's rights under Paragraph 3.1.10.

13.3     If either  party  materially  fails or  neglects  to  perform  material
         covenants or  provisions  of this  AGREEMENT and if such default is not
         corrected  within thirty (30) days after receiving  written notice from
         the other party with  respect to such  default,  such other party shall
         have the right to terminate  this AGREEMENT by giving written notice to
         the party in default  provided the notice of termination is given prior
         to correction of the default.

13.4     SB may terminate  the AGREEMENT at any time by giving  COMPANY at least
         thirty  (30) days  written  notice  thereof for  business or  strategic
         reasons, including, without limitation, in the event:

                  (a)  DENAVIR(R)  is approved by the  appropriate  AGENCIES for
         sale in the TERRITORY as an over-the-counter product; or
                  (b) SB determines,  in its sole  discretion,  to embark upon a
         direct to consumer  advertising effort for DENAVIR(R) in the TERRITORY;
         or
                  (c) SB determines, in its sole discretion, to directly conduct
         PERSONAL  SALES and PROMOTE  DENAVIR(R)  to TARGET  PRESCRIBERS  in the
         TERRITORY.

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13.5     COMPANY may  terminate  the AGREEMENT at any time by giving SB at least
         thirty  (30) days  written  notice  thereof for  business or  strategic
         reasons.

13.6     In the event that the AGREEMENT  expires in accordance  with  Paragraph
         13.1,  or is  terminated  by either SB or  COMPANY in  accordance  with
         Paragraphs 13.4 or 13.5, respectively,  SB and COMPANY agree to discuss
         in good  faith for no more  than  thirty  (30) days (or such  longer or
         shorter period as may be mutually agreed upon by the parties) the terms
         and  conditions of an  arrangement  pursuant to which the parties would
         continue to work together to promote  and/or market  products to TARGET
         PRESCRIBERS including, without limitation, DENAVIR(R) and PERIOSTAT(R);
         provided,  however,  that it is  expressly  understood  and agreed that
         neither  party  shall be under  any  obligation  to enter  into such an
         arrangement.  The parties acknowledge and understand that the terms and
         conditions of such an arrangement may be  substantially  different than
         the terms of this  AGREEMENT  as a result of changes in  circumstances,
         including,  without  limitation,  the  approval  of  DENAVIR(R)  by the
         appropriate  AGENCIES  for  marketing  and  sale  in the  TERRITORY  as
         over-the-counter product.

13.7     Either party may terminate  this  AGREEMENT if, at any time,  the other
         party  shall  file in any court or agency  pursuant  to any  statute or
         regulation  of any  state or  country,  a  petition  in  bankruptcy  or
         insolvency  or for  reorganization  or for an  arrangement  or for  the
         appointment of a receiver or trustee of the party or of its assets,  or
         if the other  party  proposes a written  agreement  of  composition  or
         extension  of its debts,  or if the other party shall be served with an
         involuntary  petition  against it, filed in any insolvency  proceeding,
         and such petition shall not be dismissed with sixty (60) days after the
         filing  thereof,  or if the other party shall  propose or be a party to
         any  dissolution  or  liquidation,  or if the other party shall make an
         assignment for the benefit of creditors.

13.8     SB may terminate  this AGREEMENT upon thirty (30) day written notice in
         the event  either  party is the subject of a "Change of  Control."  For
         purposes of this  Paragraph,  a "Change of Control"  shall mean (i) the
         sale or conveyance of all or substantially all of the party's property,
         business or assets, whether tangible or intangible,  or (ii) the merger
         or consolidation  with any other corporation  (other than an AFFILIATE)
         or (iii)  the  completion  of any  transaction  or  series  of  related
         transactions in which more than fifty percent (50%) of the voting power
         or equity interests of the party are disposed of.

13.9     During any period  preceding the effective  date of  termination,  each
         party shall  continue to  diligently  fulfill all  obligations  of this
         AGREEMENT,  which  shall  continue  to  apply  during  such  period  in
         accordance with the provisions of this AGREEMENT.

13.10    The termination of this AGREEMENT shall not affect SB's  obligations to
         pay any amount owing to COMPANY  which  accrued  prior to the effective
         date of termination.  Termination or expiration of this AGREEMENT shall
         terminate all  obligations  and rights between the parties arising from
         this AGREEMENT except those described in Article 12 and Paragraphs 4.5,
         13.6,  13.10,  14.3,  15.2,  15.3,  15.4 and 15.5, as well as any other
         provision  which, by its terms, is stated to survive the termination or
         expiration of this

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         AGREEMENT.  In addition,  any other provision required to interpret and
         enforce the parties' rights and  obligations  under this AGREEMENT also
         shall  survive  to the extent  required  for the full  observation  and
         performance of this AGREEMENT by the parties hereto.

14.      RECORDKEEPING PROVISIONS

14.1     As a courtesy,  COMPANY  agrees to use good faith  efforts to submit to
         SB, within twenty (20) days of the end of each month during the TERM OF
         THIS  AGREEMENT,  an accounting  of all PERSONAL  SALES made by COMPANY
         sales  representatives  for  DENAVIR(R)  to TARGET  PRESCRIBERS  in the
         TERRITORY  made  during  such  month,  and  any  other  information  in
         COMPANY's  possession which SB reasonably deems necessary regarding all
         such PERSONAL SALES;  provided,  however,  that is expressly understood
         and agreed that  failure of COMPANY to provide such reports to SB shall
         not be deemed a material breach of this Agreement (so long COMPANY uses
         good faith efforts to provide such reports). The PERSONAL SALES reports
         shall be in a form mutually  acceptable  to both parties.  In the event
         SB, in good  faith,  believes  that  such  information  is  inaccurate,
         COMPANY  and SB shall  promptly  meet to  attempt  to reach a  mutually
         acceptable  conclusion on such matter.  In the event the parties cannot
         reach  such  mutually  acceptable  conclusion,  SB may pursue its audit
         option under Paragraph 14.2.

14.2     SB,  at  its  expense,   may  request  and  COMPANY   shall  permit  an
         independent,  certified public  accountant,  except one to whom COMPANY
         has a reasonable  objection,  to have access during  ordinary  business
         hours to COMPANY's  records  necessary to determine the  correctness of
         any  data  supplied  to  SB  by  COMPANY  under  Paragraph  14.1.  Such
         examination  shall  not take  place  more  than  once  for  each  given
         PROMOTION PERIOD.

14.3     SB shall  keep  accurate  records  in  sufficient  detail to enable the
         amount due to COMPANY under Article 4 to be determined. In this regard,
         SB shall submit to COMPANY, within sixty (60) days after the end of the
         first  PROMOTION  PERIOD and after each quarter during each  subsequent
         PROMOTION PERIOD, if any, a statement of all GROSS PRESCRIPTIONS during
         such period and the calculation of INCREMENTAL RX for such period. Upon
         COMPANY's request,  and at its expense, SB shall permit an independent,
         certified  public  accountant,  except one to whom SB has a  reasonable
         objection,  to have  access  during  ordinary  business  hours  to SB's
         records,  but only to the extent necessary to determine the correctness
         of any report or payment.  Such  examination  shall not take place more
         than once for any given PROMOTION  PERIOD.  These requests with respect
         to any PROMOTION  PERIOD shall  terminate  twelve (12) months after the
         end of such  PERIOD.  No  information  other than a statement as to the
         correctness  of any report or payment  shall be  supplied to COMPANY by
         such  accountant.  In the event of a determination  by the independent,
         certified public accountant that there has been an inaccurate report or
         payment made hereunder,  an appropriate adjustment shall be made to the
         next  payment  due to  COMPANY.  In the  event  the  audit  reveals  an
         underpayment  by SB  of  greater  than  five  percent  (5%),  SB  shall
         reimburse COMPANY for the reasonable costs and expenses associated with
         the audit.

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15.      WARRANTIES, REPRESENTATIONS, INDEMNIFICATIONS & INSURANCE

15.1     Each party  warrants and  represents  to the other that it has the full
         right and  authority to enter into this  AGREEMENT,  and that it is not
         aware of any  impediment  that would inhibit its ability to perform any
         of its obligations under this AGREEMENT.

15.2     SB shall defend,  indemnify and hold  harmless  COMPANY,  its officers,
         directors,  shareholders,  employees,  successors  and assigns from and
         against all claims,  complaints, or lawsuits for damages that arise (i)
         as a result of the  activities of any employee or agent of SB or anyone
         acting  on  behalf  of SB,  such  as any of its  employees,  agents  or
         representatives, including, but not limited to, negligence, malfeasance
         or willful  misconduct,  (ii) as a result of personal injury,  death or
         tangible  personal  property damage that is alleged to have been caused
         by or  attributed  to any  DENAVIR(R)  which  is  dispensed,  utilized,
         ingested, and/or administered in the TERRITORY, provided:

            (a) SB shall not be obligated under this Paragraph if it is shown by
        evidence  acceptable  in a court  of law  having  jurisdiction  over the
        subject  matter and  meeting  the  appropriate  degree of proof for such
        action,  that (i) the injury was the  result of the  performance  by any
        employee or agent of COMPANY or anyone acting on behalf of COMPANY, such
        as any of its employees,  agents or representatives,  including, but not
        limited to, negligence,  malfeasance or willful  misconduct,  unless the
        primary legal theory of the complaint is related to a product defect due
        to a failure  to inform  and  COMPANY  has  followed  the  training  and
        instructions provided by SB under this AGREEMENT, or (ii) the injury was
        the result of the  failure to adhere to the terms of this  AGREEMENT  by
        any employee or agent of COMPANY or anyone  acting on behalf of COMPANY,
        such as any of its employees, agents or representatives,  including, but
        not limited to, negligence,  malfeasance or willful misconduct, or (iii)
        the injury was the result of a breach of any warranty or representation,
        whether express or implied, made by COMPANY under this AGREEMENT;
            (b) SB shall have no obligation  under this Paragraph unless COMPANY
        (i) gives SB prompt  written  notice  of any claim or  lawsuit  or other
        action for which it seeks to be indemnified  under this AGREEMENT,  (ii)
        SB is granted full  authority  and control  over the defense,  including
        settlement,  against  such claim or lawsuit or other  action,  and (iii)
        COMPANY cooperates fully with SB and its agents in defense of the claims
        or lawsuit or other action; and
            (c) COMPANY  shall have the right to  participate  in the defense of
        any such claim, complaint,  suit, proceeding or cause of action referred
        to in this  Paragraph  utilizing  attorneys  of its  choice,  at its own
        expense,  provided,  however,  that SB shall  have  full  authority  and
        control to handle any such claim,  complaint,  suit, proceeding or cause
        of action,  including any settlement or other disposition  thereof,  for
        which COMPANY seeks indemnification under this Paragraph.

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15.3     COMPANY  shall  defend,  indemnify  and hold harmless SB, its officers,
         directors,  shareholders,  employees,  successors  and assigns from and
         against all claims,  complaints, or lawsuits for damages that arise (i)
         as a result of the  activities  of any  employee or agent of COMPANY or
         anyone  acting  on  behalf of  COMPANY,  such as any of its  employees,
         agents or representatives,  including,  but not limited to, negligence,
         malfeasance or willful  misconduct,  or (ii) as a result of the failure
         to adhere to the terms of this  AGREEMENT  by any  employee or agent of
         COMPANY  or anyone  acting on  behalf  of  COMPANY,  such as any of its
         employees,  agents or representatives,  including,  but not limited to,
         negligence,  malfeasance or willful misconduct, or (iii) as a result of
         a breach of any warranty or representation, whether express or implied,
         made by COMPANY under this AGREEMENT, provided that:

            (a) COMPANY  shall not be  obligated  under this  Paragraph if it is
        shown by evidence  acceptable in a court of law having jurisdiction over
        the subject matter and meeting the appropriate  degree of proof for such
        action,  that  the  injury  was the  result  of the  performance  by any
        employee or agent of SB or anyone acting on behalf of SB, such as any of
        its employees, agents or representatives, including, but not limited to,
        negligence, malfeasance or willful misconduct;
            (b) COMPANY shall have no obligation  under this Paragraph unless SB
        (i) gives COMPANY prompt written notice of any claim or lawsuit or other
        action for which it seeks to be indemnified  under this AGREEMENT,  (ii)
        COMPANY  is  granted  full  authority  and  control  over  the  defense,
        including settlement, against such claim or lawsuit or other action, and
        (iii) SB cooperates  fully with COMPANY and its agents in defense of the
        claims or lawsuit or other action; and
            (c) SB shall  have the right to  participate  in the  defense of any
        such claim,  complaint,  suit, proceeding or cause of action referred to
        in this Paragraph utilizing attorneys of its choice, at its own expense,
        provided, however, that COMPANY shall have full authority and control to
        handle any such claim,  complaint,  suit, proceeding or cause of action,
        including any  settlement  or other  disposition  thereof,  for which SB
        seeks indemnification under this Paragraph.

15.4     Notwithstanding  the provisions of Paragraphs 15.2 and 15.3,  above, SB
         and  COMPANY  agree  and  understand  that,  in the  event  of a claim,
         complaint,  suit,  proceeding  or cause of action  brought  against one
         party containing allegations of liability based on activities for which
         such party was responsible, such party shall control and bear financial
         responsibility  for its own  defense;  unless the other party agrees to
         control and bear financial responsibility of such defense.

15.5     Immediately upon DENAVIR(R) PROMOTION INITIATION DATE, and for a period
         of five (5) years after the expiration of this AGREEMENT or the earlier
         termination   thereof,   each  party  shall  obtain  and/or   maintain,
         respectively, at its sole cost and expense, product liability insurance
         in amounts,  respectively,  which are  reasonable  and customary in the
         U.S.  pharmaceutical  industry  for  companies of  comparable  size and
         activities  at the 

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         respective  place of  business of each party.  Such  product  liability
         insurance  shall  insure  against  all  liability,  including  personal
         injury,  physical  injury,  or  property  damage  arising  out  of  the
         manufacture,  sale,  distribution  or  marketing of  DENAVIR(R)  in the
         TERRITORY.  Each party shall provide  written proof of the existence of
         such insurance to the other party upon request.

16.      WAIVER/MODIFICATION

16.1     Any term or  condition of this  AGREEMENT  may be waived or modified at
         any time by the party  entitled  to the  benefit  thereof  by a written
         instrument executed by both parties. No delay or failure on the part of
         any party in exercising  any rights  hereunder and no partial or single
         exercise  thereof,  will  constitute  a waiver of such rights or of any
         rights hereunder.

17.      HEADINGS

17.1     The headings used in this  AGREEMENT are intended for guidance only and
         shall not be considered part of the written  understanding  between the
         parties hereto.

18.      GOVERNING LAW

18.1     This  AGREEMENT  shall be construed  and the  respective  rights of the
         parties  hereto  determined   according  to  substantive  laws  of  the
         Commonwealth of Pennsylvania  notwithstanding the provisions  governing
         conflict of laws under such law to the contrary.

19.      SEPARABILITY

19.1     In the event any portion of this AGREEMENT shall be held illegal,  void
         or ineffective,  the remaining  portions shall remain in full force and
         effect.

19.2     If any of the terms or  provisions  of this  AGREEMENT  are in conflict
         with  any  applicable  statute  or rule  of law,  then  such  terms  or
         provisions  shall be deemed  inoperative  to the  extent  that they may
         conflict  therewith  and shall be deemed to be modified to conform with
         such statute or rule of law.

19.3     In the event  that the  terms  and  conditions  of this  AGREEMENT  are
         materially  altered as a result of Paragraphs 19.1 or 19.2, the parties
         will  renegotiate the terms and conditions of this AGREEMENT to resolve
         any inequities.

20.      ENTIRE AGREEMENT

20.1     This  AGREEMENT  contains the entire  agreement  between the parties in
         respect of the subject  matter  hereof and  supersedes  and cancels all
         previous agreements, negotiations, commitments and writings between the
         parties  hereto in respect of the subject  matter hereof and may not be
         changed or modified in any manner or released, discharged, abandoned or
         otherwise   terminated  unless  in  writing  and  signed  by  the  duly
         authorized officers or representatives of the parties.

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21.      NOTICE

21.1     Any notice or request  required or permitted to be given in  connection
         with this AGREEMENT shall be deemed to have been sufficiently  given if
         sent  by  pre-paid  registered  mail  or  telecopier  to  the  intended
         recipient at the address set forth below or such other business address
         as may have been furnished in writing by the intended  recipient to the
         sender.  The date of mailing or  telecopying  shall be deemed to be the
         effective date on which notice was given,  provided that all telecopies
         shall contain a provision  requiring the intended  recipient to confirm
         receipt and such telecopy shall not be effective unless confirmation of
         its  receipt  is  received  within   twenty-four   (24)  hours  of  its
         transmission.

         Any notice required to be given to COMPANY shall be addressed to:

                 Collagenex Pharmaceuticals, Inc.
                 301 South State Street
                 Newtown, Pennsylvania 18940
                 Attention:  President

         Any notice required to be given to SB shall be addressed to:

                 SmithKline Beecham Consumer Healthcare
                 100 Beecham Drive
                 Pittsburgh, PA  15230
                 Attention:  Director, Medical Sales

                 Copy to:
                 SmithKline Beecham Corporation
                 One Franklin Plaza (FP2360)
                 P.O. Box 7929
                 Philadelphia, Pennsylvania 19101
                 Attention:  Corporate Legal

22.      DISPUTE RESOLUTION

22.1     Any dispute,  controversy  or claim  arising out of or relating to this
         AGREEMENT (hereinafter  collectively referred to as "Dispute") shall be
         attempted to be settled by the parties,  in good faith,  by  submitting
         each such Dispute to the  Oversight  Committee in an effort to effect a
         mutually  acceptable  resolution  thereof.  In the  event  no  mutually
         acceptable  resolution is achieved  within  fourteen (14) calendar days
         after  submission  to  the  Oversight  Committee,  then  the  Oversight
         Committee  shall submit each such  Dispute to the  President of SB's US
         Consumer  Healthcare  (with a copy to SB's Corporate Legal  Department)
         and to the  Office  of  President  & CEO of  COMPANY  (with  a copy  to
         
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         COMPANY's  legal   department)  in  an  effort  to  effect  a  mutually
         acceptable  resolution  thereof.  In the event no  mutually  acceptable
         resolution  is  achieved  within  fourteen  calendar  (14)  days  after
         submission to such  persons,  then each party shall be entitled to seek
         relief for such Dispute by using any appropriate mechanism which may be
         available, such as, but not limited to, judicial relief.

23.      PUBLIC ANNOUNCEMENTS

23.1     No public  announcement or other disclosure to THIRD PARTIES concerning
         the  existence  of or terms  of this  AGREEMENT  shall be made,  either
         directly or indirectly,  by any party to this AGREEMENT,  except as may
         be legally  required  or as may be  required  for  recording  purposes,
         without  first  obtaining the approval of the other party and agreement
         upon the nature and text of such announcement or disclosure.  The party
         desiring to make any such public announcement or other disclosure shall
         inform the other party of the proposed  announcement  or  disclosure in
         reasonably  sufficient time prior to public release,  and shall provide
         the other  party with a written  copy  thereof,  in order to allow such
         other party to comment upon such announcement or disclosure. Each party
         agrees that it shall cooperate fully with the other with respect to all
         disclosures   regarding  this  AGREEMENT  to  the  Securities  Exchange
         Commission and any other governmental or regulatory agencies, including
         requests for  confidential  treatment  of  proprietary  information  of
         either party  included in any such  disclosure.  The parties agree that
         the material financial terms of this Agreement are sensitive commercial
         information for which confidential treatment should be obtained.

24.      ASSIGNMENT

24.1     This AGREEMENT and the promotion rights herein granted shall be binding
         upon and inure to the  benefit of the  successors  in  interest  of the
         respective  parties.  Neither this AGREEMENT nor any interest hereunder
         shall be  assignable  (including  by  operation of law) by either party
         without the prior written consent of the other; provided, however, that
         SB may assign this  AGREEMENT to any AFFILIATE,  or to any  corporation
         with which it may merge or  consolidate or to which it may transfer all
         or  substantially  all of its assets to which this  AGREEMENT  relates,
         without obtaining the consent of COMPANY.

25.      EXECUTION IN COUNTERPARTS

25.1     This AGREEMENT may be executed in any number of  counterparts,  each of
         which  shall be  deemed an  original  but all of which  together  shall
         constitute one and the same instrument.

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IN WITNESS  WHEREOF,  the parties  have caused this  AGREEMENT to be executed by
their duly authorized officers or representatives.



COLLAGENEX PHARMACEUTICALS, INC.


By: /s/  BM Gallagher
   ------------------------------------------

Title: President & CEO
      ---------------------------------------



SMITHKLINE BEECHAM CONSUMER HEALTHCARE, L.P., a Delaware Limited Partnership

By: /s/  Illegible
   ------------------------------------------

Title: VP & Director, Medical Marketing and Sales
      -------------------------------------------

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                                   APPENDIX A

   Calculation of the DENAVIR(R) PRESCRIPTION BASELINE for the first PROMOTION
                                     PERIOD

















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