Exhibit 10.1


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


                                    AGREEMENT



                                     between



                                   ALTANA INC.


                                       and


                        COLLAGENEX PHARMACEUTICALS, INC.






                                  May 24, 2002




<PAGE>


                                TABLE OF CONTENTS

                                                                           PAGE

Article I DEFINITIONS                                                        1


Article II LICENSE GRANTS                                                    6

     Section 2.01.   Exclusive License Grant.................................6
     Section 2.02.   Non-Exclusive License Grant.............................6
     Section 2.03.   Disclosure of Information...............................6
     Section 2.04.   Extension of Patent Life................................7
     Section 2.05.   Improvements............................................7

Article III PAYMENTS AND ROYALTIES                                           7

     Section 3.01.   License Fee.............................................7
     Section 3.02.   Royalty Payments........................................7
     Section 3.03.   Reports, Exchange Rates.................................7
     Section 3.04.   Records and Audits......................................7
     Section 3.05.   Taxes...................................................8
     Section 3.06.   Payment Terms...........................................8
     Section 3.07.   Payment Method..........................................8
     Section 3.08.   No Assurances...........................................8

Article IV TERM AND TERMINATION                                             10

     Section 4.01.   Term...................................................10
     Section 4.02.   Termination By CollaGenex..............................10
     Section 4.03.   Termination By Altana..................................10
     Section 4.04.   Termination Upon Certain Events........................10
     Section 4.05.   Remedies...............................................10
     Section 4.06.   Effect of Termination..................................10

Article V COMMERCIALIZATION OF THE PRODUCT                                  11

     Section 5.01.   CollaGenex's Obligations...............................11

Article VI MANUFACTURE AND SUPPLY                                           12

     Section 6.01.   Agreement to Supply Products...........................12
     Section 6.02.   Quality Assurance......................................12
     Section 6.03.   Altana's Duties........................................12
     Section 6.04.   Failure to Supply......................................13

Article VII PURCHASE AND SALE                                               13

     Section 7.01.   Purchase Price and Payment.............................13
     Section 7.02.   Labeling...............................................13
     Section 7.03.   Purchase Forms.........................................14
     Section 7.04.   Forecasts and Orders...................................14
     Section 7.05.   Confirmation...........................................14
     Section 7.06.   Delivery...............................................14

                                       i
<PAGE>

                               TABLE OF CONTENTS

                                                                           PAGE

     Section 7.07.   Professional Samples...................................15
     Section 7.08.   Return of Products.....................................15

Article VIII WARRANTY, REJECTION AND INSPECTIONS OF SHIPMENTS               15

     Section 8.01.   Altana Warranty........................................15
     Section 8.02.   Rejection of Product or Professional Samples for
                     Failure to Conform to Specifications...................15
     Section 8.03.   CollaGenex Inspections.................................16

Article IX REGULATORY COMPLIANCE                                            16

     Section 9.01.   Maintenance of Regulatory Approvals....................16
     Section 9.02.   Adverse Drug Event Reporting...........................17
     Section 9.03.   Assistance.............................................17
     Section 9.04.   Compliance.............................................17

Article X PATENTS AND TRADEMARKS                                            18

     Section 10.01.   Maintenance of Patents or Marks.......................18
     Section 10.02.   Cooperation...........................................18
     Section 10.03.   Altana to Prosecute Infringement......................18
     Section 10.04.   Infringement Claimed by Third Parties.................18

Article XI REPRESENTATIONS AND WARRANTIES                                   19

     Section 11.01.   Corporate Power.......................................19
     Section 11.02.   Due Authorization.....................................19
     Section 11.03.   Binding Obligation....................................19
     Section 11.04.   Ownership of Patent Rights............................20
     Section 11.05.   Patent Proceedings....................................20
     Section 11.06.   Adverse Properties....................................20
     Section 11.07.   Governmental Approvals................................20
     Section 11.08.   Protection of the Marks...............................20
     Section 11.09.   SOP Conformance.......................................20
     Section 11.10.   Further Actions.......................................20
     Section 11.11.   Limitation of Liability...............................21

Article XII COVENANTS OF COLLAGENEX                                         21

     Section 12.01.   Limitation to the Territory...........................21
     Section 12.02.   Marketing and Instructional Materials.................21
     Section 12.03.   Marketing Expenses....................................21

Article XIII PRODUCT RECALL                                                 21

     Section 13.01.   Product Recalls.......................................21
     Section 13.02.   Recall Costs..........................................22
     Section 13.03.   Notification of Complaints............................22
     Section 13.04.   Notification of Threatened Action.....................23

Article XIV INDEMNIFICATION AND INSURANCE                                   23

     Section 14.01.   CollaGenex Indemnified by Altana......................23

                                       ii
<PAGE>
                               TABLE OF CONTENTS

                                                                           PAGE

     Section 14.02.   Altana Indemnified by CollaGenex......................23
     Section 14.03.   Prompt Notice Required................................23
     Section 14.04.   Indemnitor May Settle.................................24
     Section 14.05.   Insurance.............................................24

Article XV DISPUTE RESOLUTION                                               25

     Section 15.01.   Disputes..............................................25
     Section 15.02.   Mediation.............................................25
     Section 15.03.   Trial Without Jury....................................25
     Section 15.04.   Performance to Continue...............................25
     Section 15.05.   Provisional Remedies..................................26
     Section 15.06.   Determination of Patents and Other Intellectual
                      Property..............................................26

Article XVI CONFIDENTIALITY                                                 26

     Section 16.01.   Confidentiality.......................................26
     Section 16.02.   Publicity Review......................................26

Article XVII MISCELLANEOUS                                                  27

     Section 17.01.   Non-Solicitation and Non-Compete......................27
     Section 17.02.   Commercially Reasonable Efforts.......................28
     Section 17.03.   No Right to Use Names.................................28
     Section 17.04.   Notices...............................................28
     Section 17.05.   Section Headings......................................29
     Section 17.06.   Severability..........................................29
     Section 17.07.   Entire Agreement/Merger...............................30
     Section 17.08.   Amendment.............................................30
     Section 17.09.   Equitable Relief......................................30
     Section 17.10.   Counterparts..........................................30
     Section 17.11.   No Waiver of Rights...................................30
     Section 17.12.   Force Majeure.........................................30
     Section 17.13.   Further Assurances....................................30
     Section 17.14.   Assignment............................................30
     Section 17.15.   Expenses..............................................31
     Section 17.16.   Binding Effect........................................31
     Section 17.17.   Governing Law.........................................31
     Section 17.18.   No Strict Construction................................31
     Section 17.19.   US Dollars............................................31
     Section 17.20.   Independent Contractors...............................31

Exhibit A     --    Patent Rights...........................................A-1
Exhibit B     --    Standard Operating Procedures - Recall..................B-1
Exhibit C     --    Specifications..........................................C-1
Exhibit D     --    Marks...................................................D-1
Exhibit E     --    Standard Operating Procedures - ADE.....................E-1
Exhibit F     --    Product Fixed Price Schedule ...........................F-1
Exhibit G     --    Standard Altana Production Quantities...................G-1
Exhibit H     --    Memorandum..............................................H-1

                                      iii

<PAGE>



                                    AGREEMENT


     This  Agreement  ("Agreement")  is made as of May 24, 2002,  by and between
Altana Inc., a New York  corporation  ("Altana"),  with its  principal  place of
business  located at 60 Baylis  Road,  Melville,  New York 11747 and  CollaGenex
Pharmaceuticals, Inc., a Delaware corporation ("CollaGenex"), with its principal
place of business located at 41 University Drive,  Newtown,  Pennsylvania 18940.
Altana and  CollaGenex  are  sometimes  referred to  collectively  herein as the
"Parties" and individually as a "Party."

     WHEREAS,  Altana licenses  certain  proprietary  information,  intellectual
property, Patents Rights (as defined below) and Know-How (as defined below), and
possesses  manufacturing  capabilities  for the Product (as defined below),  and
subject to the terms of this Agreement, Altana desires to grant to CollaGenex an
exclusive sublicense to market and sell the Product for use in the Territory (as
defined below); and

     WHEREAS,  CollaGenex desires to obtain from Altana an exclusive  sublicense
to advertise, promote, market, distribute, detail and sell the Products.

     NOW,  THEREFORE,  in consideration  of the mutual  promises,  covenants and
agreements hereinafter set forth, the Parties mutually agree to be legally bound
as follows:

                                    ARTICLE I

                                   DEFINITIONS

     The  following  terms as used in the  Agreement  shall,  unless the context
clearly indicates to the contrary, have the meaning set forth below:

     "Act" means the United States Food, Drug and Cosmetic Act, as amended,  and
all regulations thereunder.

     "ADE" means any serious or unexpected adverse event (including adverse drug
experiences,  as  defined  in  Applicable  Laws)  involving  the  Product or the
Professional Samples.

     "Affiliate"  means any entity which  directly or  indirectly  controls,  is
controlled by or is under common control with either  CollaGenex or Altana.  The
term  "control"  means the power to direct or control the affairs of such entity
by reason of ownership of at least fifty  percent (50%) of such entity by voting
stock, equity interest, contract or otherwise.

     "Agreement"  means this Agreement and any written  amendments,  addendum or
modifications hereto.

     "Applicable  Laws" means all applicable laws,  including but not limited to
the Act, rules,  regulations and guidelines within or outside the Territory that
may apply to the import, export, development,  manufacturing, storage, marketing
or sale of the Product or the  performance of either Party's  obligations  under
this Agreement  including all cGMP or current Good Clinical Practices  standards
or  guidelines  promulgated  by  the  FDA or the  Governmental  Authorities  and

                                       1
<PAGE>

including trade association guidelines, where applicable, as well as U.S. export
control laws and the U.S. Foreign Corrupt Practices Act.

     "Altana Technology" means the Patent Rights and the Know-How.

     "Collaboration"  means  the  activities  of  the  Parties  carried  out  in
performance of, and the  relationship  between the Parties  established by, this
Agreement.

     "Generic  Products"  means any  compound or  treatment  with  identical  or
similar  structure  that would  substitute  for,  eliminate the need for,  which
competes with or which would constitute barriers for the Product.

     "Confidential  Information"  means any confidential  information of a Party
relating  to any use,  process,  method,  compound,  research  project,  work in
process, future development, scientific, engineering,  manufacturing, marketing,
business plan,  financial or personnel matter relating to the disclosing  Party,
its  present  or  future  products,  sales,  suppliers,   customers,  employees,
investors or business,  whether in oral,  written,  graphic or electronic  form.
Confidential  Information  shall not include any information which the receiving
Party can prove by competent evidence:

          (a) is now, or hereafter becomes,  through no act or failure to act on
     the part of the receiving Party, generally known or available;

          (b) is known by the  receiving  Party at the  time of  receiving  such
     information, as evidenced by its written records maintained in the ordinary
     course of business;

          (c) is hereafter furnished to the receiving Party by a Third Party, as
     a matter of right and without restriction on disclosure;

          (d) is independently developed by the receiving Party, as evidenced by
     its written records, without knowledge of, and without the aid, application
     or use of, the disclosing Party's Confidential Information; or

          (e) is the subject of a written permission to disclose provided by the
     disclosing Party.

     "Effective Date" means the date specified above in the preamble.

     "FDA" means the United States Food and Drug Administration.

     "First Commercial Sale" means the first sale for use, consumption or resale
of the Product by CollaGenex in the Territory  (excluding  providing the Product
for clinical trials or the distribution of Professional  Samples).  A sale to an
Affiliate  shall not constitute a First  Commercial Sale unless the Affiliate is
the end user of the Product.

     "GAAP" means generally accepted accounting principles, consistently applied
in accordance with past practice.

                                       2
<PAGE>

     "Good Clinical  Practices"  means good clinical  practices as defined in 21
CFR ss.50 et. seq. and ss.312 et. seq., as may be amended.

     "cGMP"  means  current  good  manufacturing  practices  as  defined  in  21
CFR ss.110 et. seq., as may be amended.

     "Governmental  Approval"  means all permits,  licenses and  authorizations,
including but not limited to a NDA and other Regulatory  Approvals,  required by
the  FDA  or  any  other  Governmental   Authority  as  a  prerequisite  to  the
Manufacturing,  packaging,  marketing and selling of the Product or Professional
Samples.

     "Governmental Authority" means any foreign,  federal, state, local or other
government,  administrative or regulatory agency,  authority,  body, commission,
court, tribunal or similar entity within the Territory.

     "Improved  Product"  means  Products which are derived from or arise out of
any Improvements.

     "Improvement"  means any  enhancements,  reformulations or modifications to
the Altana Technology or Product, which include but not limited to, preparation,
presentation,  means  of  delivery,  dosage,  packaging  or any new or  expanded
therapeutic  indications  and  which  are  made by  CollaGenex  or any  agent of
CollaGenex.

     "Know-How" means all know-how, trade secrets,  inventions, data, processes,
techniques, procedures,  compositions, devices, methods, formulas, protocols and
information,  whether or not patentable, which are not generally publicly known,
including,  without limitation, all chemical,  biochemical,  toxicological,  and
scientific research  information,  whether in written,  graphic or video form or
any other form or format.

     "Manufacture"  or  "Manufacturing  Process"  means the  storage,  handling,
production, processing and packaging of the Product or a Professional Sample, in
accordance with this Agreement and Applicable Laws.

     "Marks" means any trademark(s)  proposed,  chosen, used, owned, licensed or
controlled by Altana in connection with the Product, alone or accompanied by any
logo or design and any foreign language equivalents in sound or meaning, whether
registered or not.

     "Net Sales" means the invoice amounts  actually  received for sales of each
Product and/or Improved Product by CollaGenex or its Affiliates to a Third Party
in a bona fide  arm's  length  transaction,  less the  following  items (a) cash
discounts and trade  allowances  actually  granted,  (b) rebates and chargebacks
required by Applicable Laws or made pursuant to agreements  with customers,  (c)
credits or allowances  actually  granted upon claims,  damaged  goods,  outdated
goods, rejections or returns of such Product and/or Improved Product,  including
recalls,  (d)  taxes,   tariffs  and  similar   obligations,   duties  or  other
governmental  charges (other than income taxes) levied on, absorbed or otherwise
imposed on sales of such  Product  and/or  Improved  Product  in the  Territory.
Components of Net Sales shall be determined in the ordinary course of

                                       3
<PAGE>

business in accordance with historical  practice and using the accrual method of
accounting in accordance with GAAP.

     "NDA" means a New Drug Application, as defined in the Act, that is required
to be approved by the FDA before marketing a Product and which is held under the
name of Savage Laboratories.

     "Packaging  Specifications" means the packaging and labeling specifications
for the  Product or  Professional  Sample as mutually  determined  by Altana and
CollaGenex from time to time, and in compliance with Applicable Laws.

     "Patent Rights" means all rights under patents and patent applications, and
any and all  patents  issuing  therefrom  (including  utility,  model and design
patents and certificates of invention), together with any and all substitutions,
extensions  (including  supplemental  protection  certificates),  registrations,
confirmations,  reissues,  divisionals,  continuations,   continuations-in-part,
re-examinations,  renewals and foreign  counterparts  of the  foregoing  and all
improvements,  supplements,  modifications or additions. The Patent Rights as of
the  Effective  Date are set  forth in  Exhibit  A,  which  is  incorporated  by
reference.

     "Product" means Pandel(R)  Cream. The Product shall include all three sizes
of the  Pandel(R)  Cream which is comprised of,  fifteen (15) grams,  forty five
(45) grams and eighty (80) grams.

     "Professional  Samples"  means  samples used to  demonstrate  the manner in
which Product is prepared and used, and which are labeled  "professional  sample
for trial purposes only, not for resale."

     "Regulatory  Approval"  means  all  necessary  and  appropriate  regulatory
approvals to place the Product on the market in the Territory.

     "Shipment" or "Shipped" means each individual  group of Product received by
CollaGenex from Altana.

     "Specifications"  means the specifications for each Product attached hereto
as Exhibit C, which is incorporated by reference.

     "Standard Operating Procedure" or "SOP" means Altana's company policies and
procedures which have been implemented by Altana  detailing  Altana's  response,
responsibilities  and  obligations in day to day management of Altana and in the
event of certain  occurrences,  including  but not limited to ADE  reporting and
Recalls.

     "Taisho"  means  Taisho  Corporation,   a  Japanese  corporation  with  its
headquarters located at 24-1, Takata 3-chome, Toshima-ku, Tokyo 171, Japan.

     "Territory" means the United States and Puerto Rico.

     "Third  Party"  means any entity  other  than  Altana or  CollaGenex  or an
Affiliate of Altana or CollaGenex.

                                       4
<PAGE>


     Each of the  following  terms is defined in the Section set forth  opposite
such term below:

    Force Majeure..........................................Section 17.12
    Indemnitee.............................................Section 14.03
    Indemnitor.............................................Section 14.03
    Initiating Group.......................................Section 17.01
    Inventory Stock.........................................Section 7.06
    Loss...................................................Section 14.01
    Marketing Materials....................................Section 12.02
    Purchase Price..........................................Section 7.01
    Other Group............................................Section 17.01
    Recall.................................................Section 13.01
    Representatives........................................Section 16.01
    Royalty Payment Date....................................Section 3.06
    Royalty Statement.......................................Section 3.03
    SEC....................................................Section 16.02
    Supply Failure..........................................Section 6.04
    Term....................................................Section 4.01

          (a)  Interpretation.  The Section headings contained in this Agreement
     are for  reference  purposes  only and  shall not  affect  the  meaning  or
     interpretation of this Agreement. Except where the context clearly requires
     to the  contrary:  (i) each  reference  in this  Agreement  to a designated
     "Section" or "Exhibit" is to the corresponding  Section or Exhibit of or to
     this Agreement;  (ii) instances of gender or  entity-specific  usage (e.g.,
     "his" "her" "its"  "person" or  "individual")  shall not be  interpreted to
     preclude  the  application  of  any  provision  of  this  Agreement  to any
     individual  or  entity;  (iii) the word "or"  shall not be  applied  in its
     exclusive   sense;   (iv)  "including"   shall  mean  "including,   without
     limitation";  (v) references to laws,  regulations  and other  governmental
     rules,  as well as to contracts,  agreements and other  instruments,  shall
     mean such rules and  instruments as in effect at the time of  determination
     (taking into account any amendments  thereto effective at such time without
     regard to  whether  such  amendments  were  enacted  or  adopted  after the
     effective date of this Agreement) and shall include all successor rules and
     instruments  thereto;  (vi)  references to "$" or "dollars"  shall mean the
     lawful  currency of the United  States;  (vii)  references  to "Federal" or
     "federal"  shall be to laws,  agencies  or other  attributes  of the United
     States  (and not to any State or locality  thereof);  (viii) the meaning of
     the terms  "domestic" and "foreign" shall be determined by reference to the
     United  States;  (ix)  references to "days" shall mean calendar  days;  (x)
     references  to months or years  shall be to the actual  calendar  months or
     years at issue  (taking into account the actual  number of days in any such
     month  or  year);  (xi)  days,  Business  Days and  times  of day  shall be
     determined by reference to local time in Newtown,  Pennsylvania;  (xii) the
     English  language  version of this Agreement  shall govern all questions of
     interpretation  relating  to  this  Agreement,  notwithstanding  that  this
     Agreement may have been translated  into, and executed in, other languages;
     and  (xiii)  the  terms  "Product"  and  "Products"  shall  refer  to  each
     individual  formulation of the Product and all  formulations of the Product
     collectively, unless the context clearly indicates otherwise.

                                       5
<PAGE>

                                   ARTICLE II

                                 LICENSE GRANTS

     SECTION 2.01. EXCLUSIVE LICENSE GRANT.

          (a) Subject to the terms of this  Agreement,  Altana  hereby grants to
     CollaGenex an exclusive sublicense  (exclusive even as to Altana) under the
     Altana Technology to create Improvements,  use, market, advertise, promote,
     distribute, offer for sale and sell the Product in the Territory.

          (b)  Subject to the terms and  conditions  of this  Agreement,  Altana
     hereby grants to CollaGenex an exclusive royalty-free sublicense to use the
     Marks solely in connection with the use, detail and sale of the Product.

          (c)  CollaGenex  acknowledges  that the  Marks  being  sublicensed  to
     CollaGenex  belong to Altana or Taisho  and that  CollaGenex  shall have no
     rights in such Marks except  pursuant to the sublicense.  CollaGenex  shall
     use the Marks as depicted on Exhibit D, which is incorporated by reference,
     or  otherwise  in  the  exact  form  used  by  Altana,   including  without
     limitation,  the (R) symbol or (TM) symbol, as applicable. Any other use of
     the Marks shall be subject to the prior written approval of Altana.

          (d)  CollaGenex  shall have the right to use Third Party  distributors
     and sales force  organizations  under this  Agreement  and such Third Party
     distributors  and  sales  force   organizations  shall  not  be  considered
     CollaGenex's  sublicensees but independent  Third Party service  providers.
     Further, CollaGenex shall have a right to use the services of Third Parties
     to  create   Improvement  and  such  Third  Parties  shall  not  be  deemed
     CollaGenex's sublicensees but independent Third Party service providers.

     SECTION 2.02. NON-EXCLUSIVE LICENSE GRANT.

     In the event that the use, advertising, distribution, marketing, promotion,
offering  for sale or sale of the  Product  would  infringe a claim of an issued
patent,  and/or any patent  rights which Altana or Taisho own or have the rights
to license or sublicense,  as  applicable,  and which patents are not covered by
the grant in Section 2.01,  Altana hereby grants a  non-exclusive,  royalty-free
sublicense in the Territory  under such issued  patents or patent rights to use,
market, advertise,  promote,  distribute, offer for sale and sell the Product or
shall ensure that Taisho grants CollaGenex the same.

     SECTION 2.03. DISCLOSURE OF INFORMATION.

     Upon  CollaGenex's  request,  but not more than once per year, Altana shall
disclose to  CollaGenex  in  writing,  or via  electronic  media  acceptable  to
CollaGenex,  sales information,  marketing  information,  protocols,  processes,
formulation information,  or scientific information that might assist CollaGenex
in the marketing of the Product or in the development of an Improved Product.

                                       6
<PAGE>

     SECTION 2.04. EXTENSION OF PATENT LIFE

     The Parties agree to use commercially  reasonable  efforts to work together
to extend the life of the Patent Rights under the Altana Technology.

     SECTION 2.05. IMPROVEMENTS

     Altana  agrees to  discuss  payment  of license  fees to  CollaGenex,  or a
reduction  in  CollaGenex's  Pandel  royalty  payment  on sales of the  Improved
Product,  for the rights to market Improved Product made by CollaGenex,  if any,
for Altana  and/or Third Party  licensees of the Product.  Taisho also agrees to
discuss with  CollaGenex  the payment of license fees or royalties to CollaGenex
for the rights to market Improved Product made by CollaGenex, if any, so long as
the fees or royalties are consistent  with the terms set forth in the Memorandum
by Taisho and Altana, referenced herein under Exhibit H.

                                  ARTICLE III

                             PAYMENTS AND ROYALTIES

     SECTION 3.01. LICENSE FEE.

     In partial  consideration  for the sublicenses  granted under Section 2.01,
CollaGenex  shall pay to Altana two (2)  sublicense  fee  payments  totaling One
Million  Seven  Hundred  Thousand  Dollars  ($1,700,000)  by  wire  transfer  of
available  funds to an account  designated by Altana to CollaGenex  prior to the
initial payment date and in accordance with the following schedule: a payment of
Eight Hundred  Thousand  Dollars  ($800,000) on May 31, 2002 and payment of Nine
Hundred Thousand Dollars ($900,000) on May 31, 2003.

     SECTION 3.02. ROYALTY PAYMENTS.

     During the Term,  CollaGenex  will pay Altana a royalty of (i) [**] percent
([**]%) of the Net Sales on the Product.  CollaGenex shall make such payments in
accordance with this Article III.

     SECTION 3.03. REPORTS, EXCHANGE RATES.

     CollaGenex  shall  furnish  to  Altana  a  quarterly   written  report  (in
sufficient  detail to determine the relevant amounts and dates specified in this
Section 3.03) on (a) the calculation of Net Sales; (b) royalties payable in U.S.
dollars,  if any, which shall have accrued  hereunder based upon Net Sales;  (c)
withholding  taxes, if any,  required by law to be deducted with respect to such
sales;  and (d) the  date  of the  First  Commercial  Sale of the  Product  (the
"Royalty  Statement").  Reports  shall be due on the sixtieth (60) day following
the close of each quarter.

     SECTION 3.04. RECORDS AND AUDITS.

     During  the Term and for a period of two (2) years  thereafter,  CollaGenex
shall keep complete and accurate  records in sufficient  detail to permit Altana
to confirm the  completeness  and accuracy of: (i) the information  presented in
each Royalty Statement and all payments due

                                       7
<PAGE>

hereunder;  and (ii) the  calculation of Net Sales.  CollaGenex  shall permit an
independent,  certified public accountant reasonably acceptable to CollaGenex to
audit and/or inspect those records of CollaGenex  (including  financial records)
that relate to Net Sales and  Royalty  Statements  for the sole  purpose of: (A)
verifying  the  completeness  and  accuracy of the Royalty  Statements;  and (B)
verifying  the  calculation  of Net Sales.  Such  inspection  shall be conducted
during  CollaGenex's normal business hours, no more than once in any twelve (12)
month period and upon at least fifteen (15) days prior written  notice by Altana
to  CollaGenex.  If such  accounting  firm  concludes  that such  payments  were
underpaid for the preceding year,  CollaGenex shall pay Altana the amount of any
such  underpayments  for the preceding  year within thirty (30) days of the date
Altana delivers to CollaGenex  such accounting  firm's report so concluding that
such payments were  underpaid for the preceding  year. If such  accounting  firm
concludes that such payments were overpaid for the preceding year,  Altana shall
pay to CollaGenex  the amount of any such  overpayments  for the preceding  year
within  thirty  (30)  days  of the  date  Altana  delivers  to  CollaGenex  such
accounting  firm's report so concluding that such payments were overpaid for the
preceding year.  Altana shall bear the full cost of such audit unless such audit
discloses an  underpayment  by more than ten percent (10%) of the amount due for
the preceding  year. In such case,  CollaGenex  shall bear the full cost of such
audit. In the event CollaGenex receives royalty payments from Altana pursuant to
Section  4.06(a),  CollaGenex  shall be entitled  to perform  audits of Altana's
records pursuant to this Section 3.04.

     SECTION 3.05. TAXES.

     All taxes levied on account of the  payments  accruing to Altana under this
Agreement  shall be paid by Altana for its own account,  including  taxes levied
thereon as income to  Altana.  If  provision  is made in law or  regulation  for
withholding,  such tax shall be deducted  from the payment  made by  CollaGenex,
paid to the proper taxing  authority and a receipt of payment of the tax secured
and promptly delivered to Altana. Each Party agrees to assist the other Party in
claiming  exemption  from such  deductions  or  withholdings  under  any  double
taxation or similar agreement or treaty from time to time in force.

     SECTION 3.06. PAYMENT TERMS.

     Royalties  shown to have  accrued by each  Royalty  Statement  provided for
under  Section  3.03 shall be due and  payable  sixty (60) days after the end of
each calendar quarter (each a "Royalty Payment Date").

     SECTION 3.07. PAYMENT METHOD.

     Except as otherwise  agreed  between the Parties,  all  royalties and other
payments due  hereunder  shall be paid in U.S.  dollars and shall be  originated
from an United  States  bank  located in the United  States and shall be made by
bank wire transfer in available  funds to such account as Altana shall designate
before such payment is due.

     SECTION 3.08. NO ASSURANCES

     COLLAGENEX MAKES NO REPRESENTATION OR WARRANTY,  EITHER EXPRESS OR IMPLIED,
THAT (i) IT WILL BE ABLE TO SUCCESSFULLY

                                       8
<PAGE>

COMMERCIALIZE  ANY PRODUCT OR IMPROVED  PRODUCTS,  OR (ii) THAT THE  PRODUCTS OR
IMPROVED PRODUCTS, IF ANY, WILL ACHIEVE ANY PARTICULAR SALES LEVEL.

                                   ARTICLE IV

                              TERM AND TERMINATION

     SECTION 4.01. TERM.

     This  Agreement  will take effect on the Effective  Date and shall continue
until terminated in accordance with the terms contained herein (the "Term").

     SECTION 4.02. TERMINATION BY COLLAGENEX.

     CollaGenex may terminate the Agreement by notice to Altana as follows:

          (a) at any time,  without cause, upon twelve (12) months prior written
     notice to Altana;

          (b) if Altana  shall  commit  any  willful or  material  breach of the
     provisions of this Agreement; or

          (c) if Altana  shall  cease to  Manufacture  or supply the  Product to
     CollaGenex  pursuant  to this  Agreement,  except  as  otherwise  set forth
     herein;

provided  however,  that with  respect to  Sections  4.02(b)  and (c) that:  (i)
CollaGenex  has first given Altana notice  specifying the details of the breach,
and (ii) Altana has not cured such breach within ninety (90) days of the receipt
of notice of such breach.

     SECTION 4.03. TERMINATION BY ALTANA.

     Altana may terminate this  Agreement by notice to  CollaGenex,  upon any of
the following conditions:

          (a) if  CollaGenex  shall fail to make any  payments  to Altana on the
     date on which such payments are due  hereunder  and such failure  continues
     for more than thirty (30) business days after notice;

          (b) if CollaGenex shall fail to deliver to Altana a Royalty  Statement
     by the  Royalty  Payment  Date and shall fail to cure such  default  within
     thirty (30) days after notice from Altana with respect thereto;

          (c) if CollaGenex  shall commit any willful or material  breach of the
     provisions of this Agreement;

                                       9
<PAGE>


          (d) if CollaGenex shall cease to offer the Product for distribution to
     its customers, except as may be provided for herein; or

          (e) at any time,  without cause, upon twelve (12) months prior written
     notice to CollaGenex;

provided  however,  that with  respect to Sections  4.03(c) and (d),  Altana has
first  given  CollaGenex  notice  specifying  the  details  of the  breach,  and
CollaGenex  has not cured such breach  within ninety (90) days of the receipt of
notice of such breach.

     SECTION 4.04. TERMINATION UPON CERTAIN EVENTS.

     This  Agreement may be terminated by the Party  specified  below  forthwith
upon prior written  notice to the other Party of the occurrence of either of the
following events:

          (a) by either Party upon a cessation of  operations of the other Party
     or the  institution  by or against  such Party as debtor of any  proceeding
     (whether  voluntary  or  involuntary)  in  bankruptcy  or for  dissolution,
     liquidation, reorganization,  arrangement or the appointment of a receiver,
     trustee  or  judicial  administrator  (or  the  equivalent  thereof  in the
     jurisdiction  in  question) or any other  proceeding  under the law for the
     relief of debtors, if, in the case of an involuntary  proceeding,  the same
     shall not have been  dismissed  or stayed  within sixty (60) days after its
     institution; or

          (b) by either  Party if the other  Party makes an  assignment  for the
     benefit of, or arrangement with, its creditors or becomes unable to pay its
     debts as they become due.

     A Party's  failure  to  terminate  this  Agreement  for any of the  reasons
specified  in this  Section 4.04 shall not in any way be deemed a waiver of such
Party's rights in respect  thereof or otherwise  limit its rights to enforce the
obligations hereunder.

     SECTION 4.05. REMEDIES.

     All of the  non-breaching  Party's  remedies shall be  cumulative,  and the
exercise of one remedy hereunder by the non-defaulting Party shall not be deemed
to be an election of remedies.  These remedies  shall include the  non-breaching
Party's  right to sue for  damages  for such  breach  without  terminating  this
Agreement.

     SECTION 4.06. EFFECT OF TERMINATION.

          (a) In the event  CollaGenex  terminates  this Agreement  prior to the
     expiration of the US patent for the Product pursuant to Section 4.02 (other
     than according to subsection  4.02(a)) or Section 6.04 or Altana terminates
     pursuant to Section 4.03(e), all monies paid by CollaGenex to Altana (other
     than  royalty  payments  pursuant  to Section  3.02) shall  immediately  be
     refunded to  CollaGenex,  including  the fees paid by CollaGenex in Section
     3.01.  In the  event  CollaGenex  terminates  this  agreement  prior to the
     expiration  of the US patent for the Product  pursuant to 4.02 (a), none of
     the monies paid by  CollaGenex  to Altana,  pursuant  to Sections  3.01 and
     3.02, shall be refunded to CollaGenex.

                                       10
<PAGE>

               (b) In the event Altana  terminates  this Agreement under Section
          4.03  (other  than  pursuant  to  subsection  4.03(e))  or  CollaGenex
          terminates  pursuant  to  Section  4.02(a),  all  rights to the Altana
          Technology shall revert to Altana; provided,  however, CollaGenex may,
          in  its  sole  discretion,   elect  to  sell  off  or  distribute,  as
          applicable,  its existing inventory of Product and Professional Sample
          in accordance with the terms of this Agreement, including CollaGenex's
          payment obligation to Altana;  provided,  however, Altana shall have a
          first right to purchase all of the  existing  inventory at fair market
          value.

               (c) In the  event  CollaGenex  terminates  this  Agreement  under
          Section 4.04 or this Agreement is otherwise  terminated  under Section
          4.04,  the Parties agree that  CollaGenex,  as a licensee of rights to
          "intellectual  property"  under this  Agreement,  shall retain and may
          fully exercise all of its rights and obligations under this Agreement.

               (d) Except as otherwise provided in this Agreement, expiration or
          termination  of this  Agreement  shall not  relieve the Parties of any
          obligation accruing prior to such expiration or termination. Except as
          set forth below or elsewhere in this  Agreement,  the  obligations and
          rights of the Parties under  Sections 3.03,  3.06,  10.04 and Articles
          IV,  VIII,  IX, XI, XII,  XIII,  XIV,  XV, XVI and XVII shall  survive
          expiration or termination of this Agreement.

               (e) Subject to the  provision of Article XVI,  within thirty (30)
          days following the expiration or termination of this  Agreement,  each
          Party shall  return to the other Party,  or destroy,  upon the written
          request of the other Party,  any and all  Confidential  Information of
          the other Party in its  possession  and upon a Party's  request,  such
          destruction  (or delivery) shall be confirmed in writing to such Party
          by a responsible officer of the other Party.

                                   ARTICLE V

                        COMMERCIALIZATION OF THE PRODUCT

     SECTION 5.01. COLLAGENEX'S OBLIGATIONS.

          (a)  Marketing   Efforts.   CollaGenex   agrees  to  use  commercially
     reasonable  efforts to timely promote the sale,  marketing and distribution
     of  the  Product  in  the  Territory,  consistent  with  accepted  business
     practices,  devoting  the same  level of  efforts  as it devotes to its own
     products of comparable  market  potential.  "Comparable  market  potential"
     shall  be  fairly  determined  by  CollaGenex  in good  faith  and  without
     limitation  may be based  upon  market  size,  price,  competition,  patent
     rights,   product  liability  issues  and  general  marketing   parameters.
     CollaGenex  shall promptly  advise Altana of any issues that materially and
     adversely  affect  CollaGenex's  ability  to  market  the  Product  in  the
     Territory.  In such event, senior executives of CollaGenex and Altana shall
     meet and in good faith  discuss  what  actions  should be taken in light of
     such issues.

          (b)  Packaging.   Packaging  and  labeling  of  the  Product  and  the
     Professional  Samples  shall comply with the Packaging  Specifications  and
     Applicable Laws. Altana

                                       11
<PAGE>


     shall be responsible for assuring that such packaging and labeling  conform
     with  all  Applicable   Laws  of  the  FDA  for  selling  the  Product  and
     distributing  the Professional  Samples in the United States,  and that the
     Professional   Samples  comply  with  the  Packaging   Specifications   and
     Applicable  Laws where  such  Product is to be  distributed  for sale.  All
     additional  incremental  costs  resulting  from  changes  to the  Packaging
     Specifications,  including  artwork  and  labeling  made at the  request of
     CollaGenex shall be borne by CollaGenex.

          (c) Customer Leads.  Promptly after the Effective  date,  Altana shall
     provide to  CollaGenex  all  customer  lists for the  Product and all known
     customer leads. To the extent practical,  Altana shall assign to CollaGenex
     any  customer  contracts  and  purchase  orders for the  Product as soon as
     reasonably  practical  after the Effective  Date.  During the Term,  Altana
     shall promptly  forward to CollaGenex any customer leads Altana develops or
     receives related to the Product.

                                   ARTICLE VI

                             MANUFACTURE AND SUPPLY

     SECTION 6.01. AGREEMENT TO SUPPLY PRODUCTS.

     Subject  to the terms of this  Agreement,  CollaGenex  agrees  to  purchase
exclusively  from  Altana,  and  Altana  agrees  to  Manufacture  for,  and sell
exclusively to CollaGenex during the Term,  CollaGenex's  total requirements for
the  Product  and the  Professional  Samples in the  Territory  on the terms and
conditions  set  forth  herein.   Altana  may   subcontract   any  part  of  the
Manufacturing  Process  for the Product  and the  Professional  Samples to Third
Parties  provided  the  Product,  the  Professional  Samples and the  facilities
continue to meet the requirements as defined in this Agreement. Altana will bear
the cost of validation and necessary stability work for all such subcontracting.

     SECTION 6.02. QUALITY ASSURANCE.

     Altana shall Manufacture the Product in accordance with the Specifications.
Altana shall promptly notify  CollaGenex in writing of any changes required by a
Governmental  Authority  in the  Specifications  or Altana's  quality  assurance
procedures  that  would  render  Altana  unable to  supply  the  Product  and/or
Professional Samples in accordance with the terms of this Agreement. The Parties
agree to develop  and  execute an  appropriate  action  plan in such  situation.
Altana shall be solely responsible for the costs of any changes required by such
Governmental Authority.

     SECTION 6.03. ALTANA'S DUTIES.

     Altana  agrees to furnish  every  Shipment of Product and the  Professional
Samples  in  accordance  with  all  Applicable  Laws  and all  other  regulatory
requirements specified in the NDA.

                                       12
<PAGE>


     SECTION 6.04. SECOND MANUFACTURING SOURCE

     Altana shall have the right to validate,  qualify and obtain all  requisite
Government  Approvals for a Third Party as a second source (the "Second Source")
to  manufacture  and label the  Product  for sale in the  Territory.  Upon prior
written notice to Altana,  CollaGenex shall have the right, at its sole cost and
expense, to inspect and audit the Second Source's facilities used to manufacture
the Product to confirm that such  facilities are in compliance  with  Applicable
Laws and Governmental Approvals.  Altana, at its sole cost and expense, may have
a  representative(s)  accompany  CollaGenex's   representative(s)  on  any  such
inspection or audit.

     SECTION 6.05. FAILURE TO SUPPLY.

     Altana shall immediately  notify CollaGenex if Altana is unable to fill any
order placed by CollaGenex pursuant to Section 7.05 and advise CollaGenex of the
revised delivery date.  CollaGenex shall then have the option of terminating the
Purchase  Order  without  obligation  of payment  or of  accepting  the  revised
delivery  date.  If Altana is unable to cure such  failure  within  fifteen (15)
business  days after such notice,  Altana may  outsource to the Second Source to
satisfy  CollaGenex's  supply  requirements.  If Altana elects to use the Second
Source, Altana shall, within five (5) business days after the expiration of such
cure  period,  make  arrangements  with the Second  Source to take  commercially
reasonable  steps to  commence  the  manufacture  of the  Product and to sell to
Altana (for resale to CollaGenex) the Product until such time as Altana is again
able to Manufacture  the Product;  provided  however any consequent  incremental
costs which result by reason of the use of the Second  Source under this Article
6 shall be the sole cost and liability of Altana.

                                  ARTICLE VII

                                PURCHASE AND SALE

     SECTION 7.01. PURCHASE PRICE AND PAYMENT.

     Altana shall sell and CollaGenex  shall purchase the Product at the prices,
including  possible price increases,  set forth on the Price Schedule,  attached
hereto as Exhibit F (the "Purchase Price"). Altana shall invoice CollaGenex upon
shipment  for all  Products  and  Professional  Samples  shipped  by  Altana  to
CollaGenex  and payment,  without cash  discounts,  shall be due sixty (60) days
from the receipt of the invoice.

     SECTION 7.02. LABELING.

     Altana  will  be  solely   responsible   for  generating  all   prescribing
information  included  with the Product and  labeling of the Product and artwork
included on the Product and/or packages.  Altana will be solely  responsible for
obtaining all  Governmental  Approval for prescribing  information,  artwork and
labeling.  The  prescribing  information  and  labeling  shall  comply  with all
Applicable  Laws.  CollaGenex  shall  have a right  to  modify  the  prescribing
information, artwork and labeling and shall inform Altana of such modifications.
Altana  shall  obtain all  Governmental  Approvals  for such  modifications,  at
CollaGenex'  expense Upon expiration of the

                                       13
<PAGE>


Term,  CollaGenex  shall  have a fully  paid  and  perpetual  right  to use such
prescribing information, artwork and labeling.

     SECTION 7.03. PURCHASE FORMS.

     Purchase orders,  purchase order releases,  confirmations,  acceptances and
similar documents submitted by a Party in conducting the activities contemplated
under this Agreement are for  administrative  purposes only and shall not add to
or  modify  the  terms  of the  Agreement.  To the  extent  of any  conflict  or
inconsistency  between this Agreement and any such  document,  the terms of this
Agreement shall govern.

     SECTION 7.04. FORECASTS AND ORDERS.

          (a) All  Product and  Professional  Sample  forecasts  will be made by
     CollaGenex  to Altana in good faith based upon standard  Altana  production
     batch sizes,  as set forth in Exhibit G, attached  hereto and  incorporated
     herein by reference.  On or prior to the Effective  Date,  CollaGenex  will
     provide  Altana with 2-year  forecasts of  CollaGenex's  requirement of the
     Product,  on a  formulation-by-formulation  basis,  including  Professional
     Samples. The 2-year forecasts shall be provided quarterly,  no later than 7
     days after the start of each calendar  quarter.  Calendar quarters begin on
     January 1, April 1, July and October 1. Changes to the forecast can be made
     more frequently than every quarter , as needed, to meet demand. Any changes
     to the forecast and  corresponding  purchase  orders must  accommodate  the
     9-month  (270-day)  lead  time  needed by Altana  to  acquire  Product  and
     Professional sample manufacturing components.  Although Altana will attempt
     to fill purchase  order changes that are submitted by CollaGenex  with less
     than a 9-month (270-day) lead time, Altana is under no obligation to do so.
     Said requirements will be based on standard  production planning parameters
     including sales forecasts,  sales demand forecasts,  promotional forecasts,
     inventory requirements, and the like.

          (b)  It is  understood  that  Altana  will  not  maintain  Product  or
     Professional  Sample  inventory,  but will produce Products or Professional
     Sample  upon  receipt  of  that  portion  of  CollaGenex's  forecasts  that
     constitute firm orders to purchase.

     SECTION 7.05. CONFIRMATION.

     Altana shall confirm each purchase order within ten (10) business days from
the date of receipt of a purchase  order and shall  supply the Product  within a
maximum  of two  hundred  seventy  (270) days from the date of  acceptance  of a
purchase  order,  or later if so  specified in the  purchase  order.  Failure of
Altana to confirm any purchase  order shall not relieve Altana of its obligation
to supply Products ordered by CollaGenex in conformity with this Agreement.

     SECTION 7.06. DELIVERY.

     Delivery  terms  for the  Product  and  Professional  Samples  shall be FOB
Melville,  NY, in the relevant purchase order. Altana shall ship the Product and
Professional  Samples in accordance with CollaGenex's  purchase order form, plus
or minus ten percent (10%) of the

                                       14
<PAGE>

original  purchase  order  quantity,  or as otherwise  directed by CollaGenex in
writing.  Title to any Product or Professional  Samples  purchased by CollaGenex
shall pass to  CollaGenex  or its agent upon the delivery of such Product to the
facility  requested by CollaGenex in the relevant Purchase Order. When delivered
to a common  carrier,  the Product shall have an expiration date of no less than
twenty one (21) months. Within three (3) months after the Effective Date, Altana
shall, free of charge, provide all Product that was manufactured for sale in the
Territory  and which is in Altana's and its  Affiliates'  and agent's  inventory
("Inventory  Stock").  CollaGenex  shall accept the Inventory  Stock;  provided,
however,  acceptance shall be subject to Sections 8.01 and 8.02 and all units of
the  Product  have at  least a one (1)  year  expiration  date  from the date of
receipt of the Product by CollaGenex.

     SECTION 7.07. PROFESSIONAL SAMPLES.

     Altana shall supply to  CollaGenex  free of charge  Fourteen  Thousand Nine
Hundred  (14,900)  packets of Professional  Samples on a yearly basis to be used
solely for promotional purposes (and not for sale). CollaGenex shall specify the
percentage  of each  sample  that will  comprise  the  aforementioned  quantity.
Professional  Samples in excess of the aforementioned  quantity shall be sold by
Altana to CollaGenex at the price specified in Exhibit F.  CollaGenex  shall not
use the  Professional  Samples for any  purpose  other than as set forth in this
Section 7.07.

     SECTION 7.08. RETURN OF PRODUCTS.

     Each party shall be liable for the costs  associated with the return of any
Product sold by such party to its customers, wholesalers,  distributors or other
entities  to  whom  such  party  has  sold  the  Product.  CollaGenex  shall  be
responsible  for the  costs  associated  with  refunds  of any  Product  sold by
CollaGenex after the Effective Date, including any sales of the Inventory Stock.
Altana shall be  responsible  for the costs  associated  with the refunds of any
Product sold by Altana prior to the Effective Date. This Section 7.08 applies to
all sales made within the Territory only.

                                  ARTICLE VIII

                WARRANTY, REJECTION AND INSPECTIONS OF SHIPMENTS

     SECTION 8.01. ALTANA WARRANTY.

     Altana represents and warrants to CollaGenex that (i) the Product delivered
pursuant to this Agreement  shall comply with the  Specifications,  Governmental
Approval,  Applicable  Laws and conform to the  certificate of analysis for such
Product;  (ii) are not adulterated or misbranded under Applicable Laws; (iii) at
the time of Manufacture and delivery to CollaGenex, the Product and Professional
Samples  will be free from any  failure  or  defects;  and (iv)  Altana  has not
received the right from Taisho to permit Altana's  sublicensees to grant further
sublicenses to the Altana Technology and Marks.

     SECTION 8.02.  REJECTION OF PRODUCT OR PROFESSIONAL  SAMPLES FOR FAILURE TO
CONFORM TO SPECIFICATIONS.

                                       15
<PAGE>

     CollaGenex  shall  have a right  to test or  have a Third  Party  test  any
Shipment to determine  conformity of the Shipment to the  Specifications  and/or
Applicable  Laws. If CollaGenex  exercises such right,  it shall promptly notify
Altana of its decision and shall have  forty-five (45) days after the receipt of
any  Shipment  to conduct  such  testing.  If testing of such  Shipment  shows a
failure of the  Shipment  to meet the  Specifications  and/or  Applicable  Laws,
CollaGenex may return the entire Shipment,  or any portion thereof, to Altana at
Altana's expense within a reasonable time following the above described testing,
provided  that notice of  non-conformity  is received by Altana from  CollaGenex
within forty-five (45) days of CollaGenex's receipt of said Shipment. CollaGenex
shall have the right to request that Altana provide to CollaGenex, within thirty
(30) days after such notice is received by it, Product or  Professional  Samples
that  meet  the  Specifications  and  Applicable  Laws  or to  promptly  provide
CollaGenex  with full credit for the Purchase  Price paid by CollaGenex  for the
returned  Product or Professional  Samples.  The cost of freight and handling to
return or replace  the goods shall be at the  expense of Altana.  If  CollaGenex
does not notify  Altana of the  non-conformity  of the  Product or  Professional
Samples within forty-five (45) days of receipt of said Shipment,  the Product or
Professional  Samples shall be deemed to meet the Specifications,  the Packaging
Specifications and Applicable Laws.  Notwithstanding  anything in this Agreement
to  the  contrary,  the  Parties  may  agree  to a  return  of  the  Product  or
Professional  Samples or an adjustment in the Purchase Price in the event of any
failure or defect in the  Product or  Professional  Samples.  Should  there be a
discrepancy  between  CollaGenex's  test  results  and the  results  of  testing
performed by Altana,  such  discrepancies  shall be finally  resolved by testing
performed by an independent  Third Party mutually  agreed upon by CollaGenex and
Altana.  The costs of such testing  shall be borne by the Party against whom the
discrepancy is resolved.  In the event the Product or Professional  Samples have
been  previously  returned to Altana and an independent  Third Party  determines
that the Product or  Professional  Samples meet the  Specifications,  CollaGenex
shall be responsible for all costs associated with the return.

     SECTION 8.03. COLLAGENEX INSPECTIONS.

     Altana  shall  upon  reasonable  (but not less  than ten (10)  days)  prior
written notice by CollaGenex and during normal business hours,  allow CollaGenex
to inspect and audit Altana's facilities used to Manufacture the Product and the
Professional  Samples,  twice annually,  to confirm that the Altana's facilities
and the equipment, personnel and operating and testing procedures used by Altana
in the  Manufacture,  testing,  storage and  distribution  of the Product are in
compliance with Applicable Laws and Governmental  Approvals;  provided that such
inspection does not interfere with Altana's normal operations.

                                   ARTICLE IX

                              REGULATORY COMPLIANCE

     SECTION 9.01. MAINTENANCE OF REGULATORY APPROVALS.

     Altana will own all Regulatory  Approvals in the Territory.  Altana agrees,
at its sole cost and expense,  to maintain the  Regulatory  Approvals  including
obtaining any variations or renewals  thereof,  including all fees and licenses,
including user fees,  related to the Manufacture

                                       16
<PAGE>


of the Product by Altana.  Each Party agrees that neither it nor its  Affiliates
will do anything to adversely affect a Regulatory Approval.

     SECTION 9.02. ADVERSE DRUG EVENT REPORTING.

     The Parties  agree that  Altana  Inc.  will be  responsible  for  reporting
Pandel-related  adverse drug events (ADE) to the FDA and that CollaGenex will be
responsible for  communicating  in a reasonable time to Altana Inc. any customer
complaints  or  ADE  reports  that  CollaGenex  may  receive,  according  to the
procedures attached hereto as Exhibit E, which is incorporated by reference.

     SECTION 9.03. ASSISTANCE.

     Each Party shall provide reasonable  assistance to the other at the other's
request,  in  connection  with their  obligations  pursuant to this  Article IX,
subject to  reimbursement  of all of its  out-of-pocket  costs by the requesting
Party;  provided,  however,  Altana  shall  free of  charge,  upon  CollaGenex's
request,   provide  CollaGenex's  personnel  with  training  regarding  Altana's
policies and procedures specified in the SOP regarding an ADE, including but not
limited to reporting and filing for an ADE.

     SECTION 9.04. COMPLIANCE.

     CollaGenex shall be responsible for compliance with Applicable Laws and the
Government  Approvals relating to the possession,  promotion,  marketing,  sale,
advertising and distribution of the Product and distribution of the Professional
Samples, as applicable,  including (i) obtaining all necessary permits, licenses
and any other requirements relating to CollaGenex's sale and distribution of the
Product and Professional  Samples,  (ii) arranging for CollaGenex's  warehousing
and distribution of the Product, and (iii) all billing and collection activities
with respect to the Product.  Altana shall be responsible  for  compliance  with
Applicable Laws and Government  Approvals  relating to the Regulatory  Approval,
clinical  trials,  Manufacture,  design and  production  of the  Product and the
Professional  Samples, as applicable,  and with cGMP relating to the Manufacture
and  testing  of the  Product  and  the  Professional  Samples,  as  applicable.
CollaGenex  and Altana  shall comply with all  Applicable  Laws,  including  the
provision of information  by CollaGenex  and Altana to each other  necessary for
Altana and CollaGenex to comply with any applicable reporting requirements. Each
Party  shall  promptly  notify the other  Party of any  comments,  responses  or
notices  received  from,  or  inspections  by,  the  FDA,  or  other  applicable
Governmental  Authorities,  which  relate to or may  impact  the  Product or the
Manufacture of the Product or the sales and marketing of the Product,  and shall
promptly  inform the other Party of any responses to such  comments,  responses,
notices or  inspections  and the  resolution  of any issue  raised by the FDA or
other Governmental Authorities.

                                       17
<PAGE>

                                   ARTICLE X

                             PATENTS AND TRADEMARKS

     SECTION 10.01. MAINTENANCE OF PATENTS OR MARKS.

     Altana  shall,  at Altana's  expense,  (i)  maintain and protect the Patent
Rights and the Marks in the Territory,  or (ii) ensure that Taisho maintains and
protects the Patent Rights and Marks in the Territory;  provided  however,  that
upon  written  request by  Altana,  CollaGenex  shall,  at no cost or expense to
CollaGenex,  provide such  assistance  as may be  necessary to enable  Altana to
comply with the  administrative  formalities  necessary  to maintain  any Patent
Rights or the Marks.

     SECTION 10.02. COOPERATION.

     CollaGenex shall, at Altana's expense,  reasonably make available to Altana
or its authorized attorneys, agents or representatives, its employees, agents or
consultants  necessary or  appropriate  to enable Altana to file,  prosecute and
maintain  patent  applications  for a period of time  sufficient  for  Altana to
obtain the assistance it needs from such personnel.

     SECTION 10.03. ALTANA TO PROSECUTE INFRINGEMENT.

     During the Term,  each Party shall give  prompt  notice to the other of any
Third  Party  act  which  may  infringe  the  Patent  Rights  or Marks and shall
cooperate with each other to terminate  such  infringement  without  litigation.
Altana shall, at its sole expense,  (i) prosecute the judicial or administrative
proceedings  against such Third Party  infringement,  or (ii) ensure that Taisho
prosecutes the judicial or administrative  proceedings  against such Third Party
infringement. CollaGenex shall provide such assistance and cooperation to Altana
as may be necessary to  successfully  prosecute  any action  against Third Party
infringement  at Altana's  expense and may deduct the expenses  thereof from any
amounts payable to Altana under this Agreement.

     In the event  Altana  fails or cannot  compel  Taisho  to  institute  legal
proceedings  to terminate any Third Party  infringement  of the Patent Rights or
Marks,  CollaGenex  may take  such  action  as it deems  appropriate,  including
without  limitation,  the  filing of a lawsuit  against  such  Third  Party,  in
CollaGenex's  own name and at its own cost and expense.  Should  CollaGenex file
any such suit,  Altana will cooperate  fully in the prosecution of such suit and
any damages  awarded or costs recovered in connection with such suit will be for
the account of CollaGenex.

     SECTION 10.04. INFRINGEMENT CLAIMED BY THIRD PARTIES.

     In the event a Third Party commences,  or threatens to commence, a judicial
or  administrative  proceeding  against  a Party  to  this  Agreement  and  such
proceeding  claims that the Altana  Technology or the Marks infringes such Third
Party's intellectual  property rights, the Party against whom such proceeding is
threatened  or commenced  shall give prompt  notice to the other  Party.  Altana
shall,  at its sole  expense,  defend,  indemnify and hold  CollaGenex  harmless
against such claims or proceedings and CollaGenex  shall provide such assistance
and cooperation to Altana as may be necessary to successfully defend,  indemnify
and hold

                                       18
<PAGE>

CollaGenex  harmless  against any such claim or proceeding at Altana's  expense.
Altana may settle any such claim so long as the terms of such  settlement do not
impair  CollaGenex's  rights  hereunder,  or  increase  the costs to  CollaGenex
hereunder.

                                   ARTICLE XI

                         REPRESENTATIONS AND WARRANTIES

     SECTION 11.01. CORPORATE POWER.

     Each Party hereby represents and warrants that such Party is duly organized
and validly  existing under the laws of the state of its  incorporation  and has
full corporate power and authority to enter into this Agreement and to carry out
the provisions hereof.

     SECTION 11.02. DUE AUTHORIZATION.

     Each  Party  hereby  represents  and  warrants  that  such  Party  is  duly
authorized to execute and deliver this Agreement and to perform its  obligations
hereunder.

     SECTION 11.03. BINDING OBLIGATION.

     Each Party hereby  represents  and warrants that this  Agreement is a legal
and valid  obligation  binding upon it and is enforceable in accordance with its
terms.  The execution,  delivery and performance of this Agreement by such Party
does not conflict  with any  agreement,  instrument  or  understanding,  oral or
written, to which it is a party or by which it may be bound, nor violate any law
or regulation of any court,  governmental body or administrative or other agency
having authority over it.

     SECTION 11.04. OWNERSHIP OF PATENT RIGHTS.

     As of the Effective Date, Altana represents and warrants that (a) it is the
exclusive  licensee  of all  right,  title  and  interest  in and to the  Altana
Technology and Marks in the Territory, (b) except to CollaGenex,  Altana has not
granted any sublicense  under the Altana  Technology or Mark in the Territory to
any Third Party and is under no  obligation  to grant any such  sublicense,  (c)
Taisho  has not  granted  any  licenses  other  than to  Altana,  to the  Altana
Technology and Marks in the Territory,  and (d) there are no outstanding  liens,
encumbrances,  agreements or understanding of any kind, either written,  oral or
implied,  regarding the Altana  Technology or Marks which are inconsistent or in
conflict  with  this  Agreement.  As of the  Effective  Date  and to the best of
Altana's knowledge, Taisho is the sole owner of all right, title and interest in
and to the Altana Technology and Marks.

     SECTION 11.05. PATENT PROCEEDINGS.

     Altana  represents and warrants that (a) no patent  application  within the
Altana  Technology  is the  subject  of any  pending  interference,  opposition,
cancellation or other protest proceeding, and (b) the Altana Technology or Marks
do not infringe the intellectual property rights of any Third Party.

                                       19
<PAGE>

     SECTION 11.06. ADVERSE PROPERTIES.

     Altana represents and warrants that it knows of no adverse effects or other
properties that may raise  objections from the FDA or other health  registration
authorities  or may  affect the use,  effectiveness  or  merchantability  of the
Product.

     SECTION 11.07. GOVERNMENTAL APPROVALS.

     Altana  represents  and  warrants  that it has  obtained  all  required and
necessary  Governmental Approvals for the use, marketing and sale of the Product
in the Territory.

     SECTION 11.08. PROTECTION OF THE MARKS.

     The Parties  covenant  and agree that  neither  Party nor their  Affiliates
shall  publish,  employ nor cooperate in the  publication  of, any misleading or
deceptive  advertising  material  with  regard to the  Parties,  or the Marks or
CollaGenex's trademarks for the Product.

     SECTION 11.09. SOP CONFORMANCE.

     Altana  represents and warrants that the SOPs will be in  conformance  with
all Applicable Laws and be in conformance with all Governmental Approvals.

     SECTION 11.10. FURTHER ACTIONS.

     Upon the terms and subject to the  conditions  hereof,  each of the Parties
hereto shall use its commercially reasonable efforts to (i) take, or cause to be
taken, all appropriate action and do, or cause to be done, all things necessary,
proper or advisable  under  Applicable  Law or otherwise to consummate  and make
effective the  transactions  contemplated  by this  Agreement,  (ii) obtain from
Governmental Authorities any consents,  licenses,  permits, waivers,  approvals,
authorizations  or orders  required  to be  obtained  or made by the  Parties in
connection with the authorization,  execution and delivery of this Agreement and
the  consummation of the  transactions  contemplated by this Agreement and (iii)
make all necessary filings, and thereafter make any other required  submissions,
with respect to this  transaction  under any Applicable Law,  including the Hart
Scott  Rodino  Act.  The  Parties  hereto  shall  cooperate  with each  other in
connection with the making of all such filings, including by providing copies of
all  such  documents  to the  other  Party's  counsel  (subject  to  appropriate
confidentiality  restrictions)  prior to filing and, if requested,  by accepting
all  reasonable   additions,   deletions  or  changes  suggested  in  connection
therewith.  Without  limiting the generality of the foregoing,  each Party shall
take or omit to take such action as the other Party shall reasonably  request to
cause the  Parties  to obtain any  material  Governmental  Approvals  and/or the
expiration of applicable waiting periods,  provided that the foregoing shall not
obligate either Party to take or to omit to take any action (including,  without
limitation,  the  expenditure  of funds or any holding  separate and agreeing to
sell or otherwise  dispose of assets,  categories of assets or businesses) as in
the good faith opinion of such Party, would cause a material adverse effect on a
Party.

                                       20
<PAGE>


     SECTION 11.11. LIMITATION OF LIABILITY.

     NEITHER  PARTY  SHALL BE  ENTITLED  TO  RECOVER  FROM THE  OTHER  PARTY ANY
SPECIAL,  INCIDENTAL,  CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS
AGREEMENT OR ANY SUBLICENSE GRANTED HEREUNDER.

                                  ARTICLE XII

                             COVENANTS OF COLLAGENEX

     SECTION 12.01. LIMITATION TO THE TERRITORY.

     CollaGenex  hereby  covenants  that it will not,  without the prior written
authorization of Altana:  (i) promote or actively solicit sale of the Product or
advertise the Product,  outside of the Territory;  (ii) contact the Governmental
Authorities or other entity about the Product,  except as required by Applicable
Laws  or as may be  necessary  or  appropriate  to  carry  out  its  obligations
hereunder;  and (iii)  knowingly  sell or  distribute  for  resale  the  Product
purchased  hereunder  to a  Third  Party  who  intends  to sell  outside  of the
Territory.

     SECTION 12.02. MARKETING AND INSTRUCTIONAL MATERIALS.

     Altana shall  cooperate  with  CollaGenex in the creation of  instructional
materials  for the customers of CollaGenex to enable the customers of CollaGenex
to use the Product  correctly.  Altana also agrees to assist  CollaGenex  in the
training of CollaGenex's sales force. In addition, on the Effective Date, Altana
shall  transfer  to  CollaGenex  all  marketing,   promotional  and  advertising
materials  ("Marketing  Materials")  for the  Product in Altana's  control.  The
copyright for all materials  developed by CollaGenex shall be owned  exclusively
by  CollaGenex;  however,  Altana or Taisho,  as  applicable,  shall  retain the
exclusive copyright to all Marketing Materials transferred to CollaGenex.

     SECTION 12.03. MARKETING EXPENSES.

     CollaGenex  acknowledges  that,  except  as  otherwise  specified  in  this
Agreement,   CollaGenex   shall  be   solely   responsible   for  the  cost  and
implementation  of all  marketing,  sales,  promotional  and related  activities
concerning the marketing, sale and promotion of the Product and the distribution
of the Professional Samples.

                                  ARTICLE XIII

                                 PRODUCT RECALL

     SECTION 13.01. PRODUCT RECALLS.

     If at any  time or from  time to time  any  Governmental  Authority  of any
country  within the  Territory  requests  a Party to recall the  Product or if a
voluntary recall of the Product is contemplated by either Party (collectively, a
"Recall"),   then  the  Party  to  whom  such  request  is  made  or  the  Party

contemplating  such  Recall,  as the case may be, shall  immediately  notify the

                                       21
<PAGE>

other Party. A voluntary recall of Product shall be Altana's sole decision.  Any
Recall in the Territory  shall be carried out pursuant to Altana's SOP regarding
Recalls and in as  expeditious a manner as  reasonably  possible to preserve the
goodwill and  reputation  of the Product and the goodwill and  reputation of the
Parties.  A copy of the Recall SOP is attached hereto as Exhibit B. Altana shall
free of charge, upon CollaGenex's request, and at a time convenient for Altana's
personnel,   provide  CollaGenex's  personnel  with  one  (1)  training  session
regarding  Altana's  policies and procedures  specified in the SOP regarding any
Recall.

     SECTION 13.02. RECALL COSTS.

     Unless otherwise  specified in the SOP, CollaGenex shall be responsible for
conducting  any  Recall in the  Territory  and the cost and  expense of a Recall
shall be allocated as follows:

          (a) if such Recall is a voluntary  Recall or shall be due to tampering
     or other  cause,  other than a  manufacturer's  defect,  but not due to the
     negligence or  misconduct  of the Parties,  or the breach by a Party of its
     warranties or obligations hereunder,  then CollaGenex and Altana shall each
     bear fifty percent  (50%) of the costs and expenses  incurred by CollaGenex
     in connection with such Recall, including,  without limitation, all product
     credits and  returns,  freight  and  shipping  costs and  product  disposal
     expenses.  In such event,  Altana agrees to pay CollaGenex  within ten (10)
     days after its receipt from CollaGenex of any invoice(s)  assessing  Altana
     its 50% share of these said costs, as listed above;

          (b)  if  such  Recall  shall  be due to  Manufacturing  defect  or the
     negligence  or the  breach  by  Altana  of its  warranties  or  obligations
     hereunder or the misconduct of Altana, all such costs and expenses shall be
     borne and paid solely by Altana and Altana will  reimburse  CollaGenex  for
     any such  costs and  expenses  paid by  CollaGenex  within ten (10) days of
     receipt of an invoice for such costs and expenses from  CollaGenex,  and if
     not so paid CollaGenex  shall have the right to offset such amounts against
     amounts otherwise due by CollaGenex to Altana hereunder; and

          (c)  if  such  Recall  is  due to the  negligence  or  the  breach  by
     CollaGenex of its warranties or obligations  hereunder or the misconduct of
     CollaGenex,  all such costs and expenses  shall be borne and paid solely by
     CollaGenex  and  CollaGenex  will  reimburse  Altana for any such costs and
     expenses  paid by Altana  within  thirty (30) days of receipt of an invoice
     and appropriate documentation for such costs and expenses from Altana.

     SECTION 13.03. NOTIFICATION OF COMPLAINTS.

     Each  Party  agrees  that  throughout  the Term,  and with  respect  to all
Products or  Professional  Samples  supplied or purchased  under this Agreement,
after the  termination  of this  Agreement,  it will (i) notify the other  Party
immediately  of all available  information  concerning  any  complaint,  Product
defect reports, and similar notices received by either Party with respect to the
Product or Professional Samples, whether or not determined to be attributable to
the Product or Professional Samples and (ii) with respect to an ADE, comply with
the provisions of Section 9.02.

                                       22
<PAGE>

     SECTION 13.04. NOTIFICATION OF THREATENED ACTION.

     Throughout  the duration of this Agreement and with respect to all Products
or Professional  Samples  supplied or purchased under this Agreement,  after the
termination of this  Agreement,  each Party shall  immediately  notify the other
Party of any information it receives regarding any threatened or pending action,
inspection or communication by or from a concerned  Governmental Authority which
may affect the safety or efficacy claims of the Product or Professional  Samples
or the continued  marketing of the Product or distribution  of the  Professional
Samples.  Upon receipt of such information,  the Parties shall consult with each
other in an effort  to arrive at a  mutually  acceptable  procedure  for  taking
appropriate action.

                                  ARTICLE XIV

                          INDEMNIFICATION AND INSURANCE

     SECTION 14.01. COLLAGENEX INDEMNIFIED BY ALTANA.

     Altana shall  indemnify and hold  CollaGenex  harmless from and against any
liabilities or obligations,  damages,  losses,  claims,  encumbrances,  costs or
expenses  (including  reasonable  attorneys'  fees) (any or all of the foregoing
herein referred to as "Loss")  insofar as a Loss or actions in respect  thereof,
whether  existing or occurring prior to, on or subsequent to the Effective Date,
arises out of or is based upon (a) any misrepresentation or breach of any of the
warranties,  covenants or agreements made by Altana in this  Agreement;  (b) the
Manufacture of any Product or Professional Sample that is identifiable as having
been Manufactured by or on behalf of Altana;  (c) not limiting Section 14.01(a),
any  claims  that the  Product  (as a  result  of the use of  Altana  Technology
therein)  or its  Manufacture  (as a  result  of the  use of  Altana  Technology
therein), use or sale infringes the patent,  trademark or proprietary right of a
Third Party.

     SECTION 14.02. ALTANA INDEMNIFIED BY COLLAGENEX.

     CollaGenex  shall  indemnify and hold harmless  Altana from and against any
Loss insofar as such Loss or actions in respect thereof occurs subsequent to the
Effective Date,  whether existing or occurring prior to, on or subsequent to the
date hereof,  arises out of or is based upon (a) any misrepresentation or breach
of any of the  warranties,  covenants or  agreements  made by CollaGenex in this
Agreement;  (b) CollaGenex's  marketing,  sale, distribution or promotion of the
Product or the  Professional  Samples (except if such Loss arises as a result of
matters  described  in  Section  14.01);  (c) the use of  CollaGenex's  name and
trademark  in the (i)  packaging  and  labeling of the  Product or  Professional
Samples; and (ii) marketing,  sale,  distribution or promotion of the Product or
Professional Samples.

     SECTION 14.03. PROMPT NOTICE REQUIRED.

     No claim for indemnification  hereunder shall be valid unless notice of the
matter  which  may give  rise to such  claim is  given  in  writing  by the (the
"Indemnitee")  to the persons  against whom  indemnification  may be sought (the
"Indemnitor")  as soon as reasonably  practical  after such  Indemnitee  becomes
aware of such claim; provided that the failure to notify the Indemnitor

                                       23
<PAGE>

shall not  relieve  it from any  liability  which it may have to the  Indemnitee
otherwise  than  under  this  Article  XIV.  Such  notice  shall  state that the
Indemnitor is required to indemnify the  Indemnitee for a Loss and shall specify
the amount of Loss and relevant  details  thereof.  The Indemnitor  shall notify
Indemnitee  no later than sixty (60) days from such notice of its  intention  to
assume the defense of any such claim. In the event the Indemnitor  fails to give
such  notice  within  that time the  Indemnitor  shall no longer be  entitled to
assume such defense.

     SECTION 14.04. INDEMNITOR MAY SETTLE.

     The  Indemnitor  shall at its expense,  have the right to settle and defend
any  action  which may be  brought  in  connection  with all  matters  for which
indemnification  is  available.  In such  event  the  Indemnitee  of the Loss in
question and any  successor  thereto shall permit the  Indemnitor  full and free
access  to its  books  and  records  and  otherwise  fully  cooperate  with  the
Indemnitor in connection with such action;  provided that this Indemnitee  shall
have the right fully to  participate  in such  defense at its own  expense.  The
defense by the  Indemnitor  of any such actions  shall not be deemed a waiver by
the Indemnitor of its right to assert a claim with respect to the responsibility
of the Indemnitor  with respect to the Loss in question.  The  Indemnitor  shall
have the right to settle or compromise any claim against the Indemnitee  without
the consent of the Indemnitee  provided that the terms thereof:  (a) provide for
the  unconditional  release  of the  Indemnitee;  (b)  require  the  payment  of
compensatory  monetary  damages by Indemnitor only; and (c) expressly state that
neither the fact of settlement nor the settlement agreement shall constitute, or
be construed or  interpreted  as, an admission by the  Indemnitee  of any issue,
fact,  allegation or any other aspect of the claim being settled.  No Indemnitee
shall pay or  voluntarily  permit the  determination  of any liability  which is
subject to any such action while the  Indemnitor is  negotiating  the settlement
thereof or contesting the matter,  except with the prior written  consent of the
Indemnitor,  which consent shall not be unreasonably withheld or delayed. If the
Indemnitor  fails to give Indemnitee  notice of its intention to defend any such
action as  provided  herein,  the  Indemnitee  involved  shall have the right to
assume the  defense  thereof  with  counsel of its choice,  at the  Indemnitor's
expense, and defend, settle or otherwise dispose of such action. With respect to
any such  action  which  the  Indemnitor  shall  fail to  promptly  defend,  the
Indemnitor  shall  not  thereafter  question  the  liability  of the  Indemnitor
hereunder  to the  Indemnitee  for any Loss  (including  counsel  fees and other
expenses of defense).

     SECTION 14.05. INSURANCE.

     Each Party shall,  at its sole cost and  expense,  obtain and keep in force
comprehensive liability insurance, with bodily injury, death and property damage
limits of Five Million and 00/100 ($5,000,000.00) per occurrence and Ten Million
and 00/100  Dollars  ($10,000,000.00)  in the aggregate,  including  contractual
liability and product liability coverage. Upon execution of this Agreement, each
Party  shall  furnish the other with a  certificate  of  insurance  signed by an
authorized  representative of such Party's insurance underwriter  evidencing the
insurance  coverage required by this Agreement and providing for at least thirty
(30)  days  prior  written  notice  to the  other  Party  of  any  cancellation,
termination or reduction of such insurance coverage.

                                       24
<PAGE>

                                   ARTICLE XV

                               DISPUTE RESOLUTION

     SECTION 15.01. DISPUTES.

     The Parties  recognize that disputes as to certain matters may from time to
time  arise  during  the Term,  which  relate to either  Party's  rights  and/or
obligations  hereunder.  It  is  the  objective  of  the  Parties  to  establish
procedures to facilitate the resolution of disputes arising under this Agreement
in an expedient  manner by mutual  cooperation and without resort to litigation.
To accomplish  this  objective,  the Parties agree to follow the  procedures set
forth in this Article XV if and when a dispute arises under this Agreement.

     Unless otherwise specifically recited in this Agreement, disputes among the
Parties will be resolved as recited in this Article XV. Any disputes relating to
the  Collaboration  hereunder  shall be first referred to the Director  Business
Development of each Party at any time after such dispute has arisen. If the Vice
Presidents  are unable to resolve  such a dispute  within  fifteen  (15) days of
commencement  of  discussions,  the  matter  shall  be  presented  to the  chief
executive officers of Altana and CollaGenex,  or their respective designees, for
resolution.  In the  event  that the chief  executive  officers  of  Altana  and
CollaGenex, or their respective designees, cannot resolve the dispute within ten
(10) days of being requested by a Party to resolve a dispute,  either Party may,
by written notice to the other, invoke the provisions of Section 15.02.

     SECTION 15.02. MEDIATION.

     If a dispute  under this  Agreement  is not  resolved  in  accordance  with
Section  15.01,  the  Parties  agree to  submit  the  dispute  to  mediation  in
accordance  with the  Commercial  Mediation  Rules of the  American  Arbitration
Association.  The Parties will jointly appoint a mutually  acceptable  mediator,
seeking assistance in such regard from the American Arbitration Association,  if
they have been  unable to agree to upon such  appointment  within  ten (10) days
from the conclusion of the negotiation  period (as provided in this  Agreement).
The  Parties  agree  to  participate  in good  faith  in the  mediation  and the
negotiations  related thereto for a period of thirty (30) days. The costs of the
mediation, including fees and expenses, shall be borne equally by the Parties.

     SECTION 15.03. TRIAL WITHOUT JURY.

     If the  Parties  fail  to  resolve  the  dispute  through  negotiation  and
mediation in accordance with Sections 15.01 or 15.02,  each Party shall have the
right to pursue any of the  remedies  legally  available to resolve the dispute;
provided, however, that the Parties expressly waive any right to a jury trial in
any legal proceedings under this Article XV.

     SECTION 15.04. PERFORMANCE TO CONTINUE.

     Each Party shall continue to perform its  obligations  under this Agreement
pending  final  resolution  of any  dispute  arising  out of or  related to this
Agreement; provided, however, that a

                                       25
<PAGE>

Party may suspend  performance of its obligations during any period in which the
other Party fails or refuses to perform its obligations.

     SECTION 15.05. PROVISIONAL REMEDIES.

     Although  the  procedures  specified  in this  Article  XV are the sole and
exclusive procedures for the resolution of disputes arising out of or related to
this  Agreement,  either  Party  may  seek a  preliminary  injunction  or  other
provisional  equitable relief,  if, in its reasonable  judgment,  such action is
necessary  to avoid  irreparable  harm to itself or to preserve its rights under
this Agreement.

     SECTION 15.06. DETERMINATION OF PATENTS AND OTHER INTELLECTUAL PROPERTY.

     Notwithstanding the foregoing, any dispute relating to the determination of
validity of claims,  infringement or claim interpretation  relating to a Party's
patents shall be submitted exclusively to federal court.

                                  ARTICLE XVI

                                 CONFIDENTIALITY

     SECTION 16.01. CONFIDENTIALITY.

     During the Term and for a period of five (5) years  thereafter,  each Party
shall maintain all  Confidential  Information of the other Party as confidential
and shall not disclose any such  Confidential  Information to any Third Party or
use any such Confidential  Information for any purpose,  except (a) as expressly
authorized by this Agreement,  (b) as required by law, rule, regulation or court
order (provided that the disclosing Party shall first notify the other Party and
shall use commercially  reasonable efforts to obtain  confidential  treatment of
any such information required to be disclosed), or (c) to its Affiliates and its
employees, agents, consultants and other representatives  ("Representatives") to
accomplish the purposes of this Agreement,  so long as such persons are under an
obligation of confidentiality  no less stringent than as set forth herein.  Each
Party may use such  Confidential  Information  only to the  extent  required  to
accomplish  the  purposes of this  Agreement.  Each Party shall use at least the
same standard of care as it uses to protect its own Confidential  Information to
ensure that it and its  Affiliates and  Representatives  do not disclose or make
any unauthorized use of the other Party's Confidential  Information.  Each Party
shall be responsible  for any breach of this  Agreement by its  Representatives.
Each  Party  shall  promptly  notify  the  other  Party  upon  discovery  of any
unauthorized use or disclosure of the other Party's Confidential Information.

     SECTION 16.02. PUBLICITY REVIEW.

     The Parties  agree that the public  announcement  of the  execution of this
Agreement shall be in the form of a press release to be agreed upon on or before
the  Effective  Date and  thereafter  each Party  shall be  entitled  to make or
publish any public statement  consistent with the contents thereof.  Thereafter,
the Parties  will jointly  discuss and agree,  based on the  principles  of this
Section  16.02,  on any statement to the public  regarding this Agreement or any
aspect of this

                                       26
<PAGE>

Agreement,  subject  in each case to  disclosure  otherwise  required  by law or
regulation  as  determined  in good faith by each Party.  When a Party elects to
make any such  statement  it will give the other  Party at least  three (3) days
notice  to  review  and  comment  on such  statement.  In the  event of a public
disclosure  required by law prior to the end of such three (3) day  period,  the
Party required to make such disclosure,  if it legally may, shall give the other
Party at least two (2) business  days to review and comment on such  disclosure.
If a Party was not legally able to give notice under the previous  sentence,  it
will furnish the other Party with a copy of its  disclosure as soon as practical
after the making thereof.  The Parties  acknowledge the importance of supporting
each other's efforts to publicly  disclose results and significant  developments
regarding the Product. The principles to be observed by Altana and CollaGenex in
such public disclosures will be: accuracy,  the requirements for confidentiality
under Section  16.01,  compliance  with FDA  regulations  and other FDA guidance
documents,  the advantage a competitor of Altana or CollaGenex may gain from any
public statements under this Section 16.02, and the standards and customs in the
biotechnology  and  pharmaceutical  industries for such disclosures by companies
comparable  to Altana and  CollaGenex.  The terms of this  Agreement may also be
disclosed to: (a) government  agencies where required by law,  including filings
required  to be made by law with  the  United  States  Securities  and  Exchange
Commission ("SEC"),  national  securities  exchanges or the Nasdaq Stock Market,
(b) Third  Parties  with the prior  written  consent of the other  Party,  which
consent shall not be unreasonably  withheld, or (c) lenders,  investment bankers
and other financial  institutions of its choice solely for purposes of financing
the business operations of such Party, so long as such disclosure in (b) and (c)
above is made under a binder of  confidentiality  at least as restrictive as the
confidentiality  provisions in Section 16.01, so long as highly  sensitive terms
and  conditions  such as  financial  terms  are  extracted  from  the  Agreement
(including  in any  disclosure  required by law or the SEC) or deleted  upon the
request of the other Party, and so long as the disclosing Party gives reasonable
advance  notice  of  the  disclosure  under  the  circumstances   requiring  the
disclosure.

                                  ARTICLE XVII

                                  MISCELLANEOUS

     SECTION 17.01. NON-SOLICITATION AND NON-COMPETE.

          (a) Neither Party nor its Affiliates  (collectively,  the  "Initiating
     Group")  shall,  directly  or  through  its  representatives,  solicit  for
     employment any officer, director, employee or consultant of the other Party
     or its  subsidiaries  or controlled  affiliates  (collectively,  the "Other
     Group") with whom the Initiating  Group has contact in connection  with, or
     who  otherwise  is known by the  Initiating  Group to  participate  in, the
     transactions contemplated by this Agreement. The Initiating Group shall not
     be  precluded  from hiring any such person who has been  terminated  by the
     Other Group prior to  commencement of employment  discussions  between such
     person  and the  Initiating  Group or its  representatives.  "Solicitation"
     shall  not  include  any  generalized  public  advertisement  or any  other
     solicitation  by the Initiating  Group or its  representatives  that is not
     specifically directed toward any such employee of the Other Group or toward
     any group of such employees of the Other Group.

                                       27
<PAGE>


          (b) Altana  agrees,  during the Term and for a period of two (2) years
     thereafter, not to, directly or indirectly, Manufacture, market, advertise,
     promote,  distribute,  offer for sale, import or export any Generic Product
     in the Territory.

     SECTION 17.02. COMMERCIALLY REASONABLE EFFORTS.

     Each  Party  shall use  commercially  reasonable  and  diligent  efforts to
perform its  responsibilities  under this  Agreement.  As used herein,  the term
"commercially  reasonable and diligent efforts" means,  unless the Parties agree
otherwise,  those efforts consistent with the exercise of prudent scientific and
business  judgment,  as applied to other  products  of  similar  scientific  and
commercial potential within the relevant product lines of the Parties.

     SECTION 17.03. NO RIGHT TO USE NAMES.

     Except as  otherwise  provided  herein,  no right,  express or implied,  is
granted by the Agreement to use in any manner the name "Altana," "CollaGenex" or
any other  trade  name or  trademark  of the other  Party or its  Affiliates  in
connection with the performance of the Agreement.

     SECTION 17.04. NOTICES.

     All notices, requests and other communications to any party hereunder shall
be in writing  and shall be deemed to have been given if  delivered  personally,
mailed by certified mail (return receipt  requested) or sent by cable,  telegram
or  recognized  overnight  delivery  service  to the  parties  at the  following
addresses  or at such  other  addresses  as,  specified  by the  parties by like
notice:

            If to CollaGenex:     Mr. Jeff Day
                                  CollaGenex Pharmaceuticals, Inc.
                                  41 University Drive
                                  Newtown, Pennsylvania 18940
                                  Facsimile: (215) 579-7388
                                  Telephone: (215) 579-8577

            If to Altana:         Mr. George Cole
                                  Altana Inc.
                                  60 Baylis Road
                                  Melville, New York 11747
                                  Facsimile: (631) 454-6389
                                  Telephone: (631) 454-7677, extension 2002


     Notice so given shall be deemed given and received (i) if by  international
mail on the seventh (7th) day after posting; (ii) by cable,  telegram,  telex or
personal  delivery  on  the  date  of  actual  transmission,  with  evidence  of
transmission acceptance, or (as the case may be) personal or other delivery; and
(iii) if by  international  courier,  on the fourth (4th) business day following

                                       28
<PAGE>

the day such notice is delivered to the international  courier service,  or such
earlier delivery date as may be confirmed to the sender by such courier service.

     SECTION 17.05. SECTION HEADINGS.

     The  titles,  headings  or captions  of  sections  and  paragraphs  in this
Agreement do not define, limit, extend,  explain or describe the scope or extent
of this Agreement or any of its terms or conditions  and therefore  shall not be
considered in the interpretation, construction or application of this Agreement.

     SECTION 17.06. SEVERABILITY.

     Whenever possible, each clause,  subclause,  provision or condition of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable  law,  but if any clause,  subclause,  provision or condition of this
Agreement  should be prohibited or invalid  under  applicable  law, such clause,
subclause,  provision or condition  shall be  considered  separate and severable
from this  Agreement to the extent of such  prohibition  or  invalidity  without
invalidating  the remaining  clauses,  subclauses,  provisions and conditions of
this Agreement.

     SECTION 17.07. ENTIRE AGREEMENT/MERGER.

     This Agreement sets forth the entire  agreement  between the Parties hereto
pertaining  to the  subject  matter  hereof  and  supersedes  all  negotiations,
preliminary agreements,  memoranda or letters of proposal or intent, discussions
and  understandings  of the Parties hereto in connection with the subject matter
hereof.  All  discussions  between  the  Parties  have  been  merged  into  this
Agreement,  and  neither  Party  shall be bound  by any  definition,  condition,
understanding,  representation,  warranty,  covenant or provision  other than as
expressly  stated in or contemplated by this Agreement or as subsequently  shall
be set forth in writing and executed by a duly authorized  representative of the
Party to be bound  thereby.  In the event of any  conflict  between the terms of
this Agreement and any  attachment  hereto,  the terms of this  Agreement  shall
govern.

     SECTION 17.08. AMENDMENT.

     No amendment,  change or  modification  of any of the terms,  provisions or
conditions  of this  Agreement  shall be  effective  unless  made in writing and
signed on behalf of the Parties hereto by their duly authorized representatives.

     SECTION 17.09. EQUITABLE RELIEF.

     The  Parties  understand  and  agree  that  because  of the  difficulty  of
measuring economic losses to the non-breaching  Party as a result of a breach of
the  covenants  set forth in Article XVI and Section  17.01,  and because of the
immediate and irreparable  damage that may be caused to the non-breaching  Party
for which monetary damages would not be a sufficient  remedy,  the Parties agree
that the  non-breaching  Party will be  entitled to seek  specific  performance,
temporary and permanent  injunctive relief, and such other equitable remedies to
which it may then be entitled  against the breaching  Party.  This Section 17.09
shall not limit any other legal or

                                       29
<PAGE>

equitable  remedies that the non-breaching  Party may have against the breaching
Party for violation of the covenants set forth in Article XVI and Section 17.01.
The  Parties  agree that the  non-breaching  Party  shall have the right to seek
relief for any  violation  or  threatened  violation  of Article XVI and Section
17.01 by the  breaching  Party from any court of competent  jurisdiction  in any
jurisdiction  authorized to grant the relief necessary to prohibit the violation
or  threatened  violation of Article XVI and Section  17.01.  This Section 17.09
shall apply with equal force to the breaching Party's Affiliates.

     SECTION 17.10. COUNTERPARTS.

     This Agreement may be executed in one or more  counterparts,  each of which
shall be deemed to be an original document,  but all such separate  counterparts
shall constitute only one and the same instrument.  This Agreement may be signed
and delivered to the other Party by facsimile signature; such transmission shall
be deemed a valid signature.

     SECTION 17.11. NO WAIVER OF RIGHTS.

     No waiver of any term, provision,  or condition of this Agreement,  whether
by conduct or otherwise, in any one or more instances,  shall be deemed to be or
construed  as a further or  continuing  waiver of any such term,  provision,  or
condition of this Agreement.

     SECTION 17.12. FORCE MAJEURE.

     Neither Party shall be liable  hereunder to the other Party nor shall be in
breach for failure to deliver,  provided  failure to deliver is no greater  than
the delay in time  caused by  circumstances  beyond  control  for either  Party,
including acts of God, fires, floods, riots, wars, civil disturbances, sabotage,
accidents, labor disputes, shortages,  government actions (including priorities,
requisitions,  allocations and price adjustment  restrictions)  and inability to
obtain  material,  equipment,  labor  or  transportation  (collectively,  "Force
Majeure").

     SECTION 17.13. FURTHER ASSURANCES.

     The Parties  hereto shall each perform such acts,  execute and deliver such
instruments  and  documents  and do all such other  things as may be  reasonably
necessary to accomplish the transactions contemplated in this Agreement.

     SECTION 17.14. ASSIGNMENT.

     Neither  this  Agreement  nor  any of the  rights,  interests,  options  or
obligations  hereunder  may be  assigned or  delegated  by either of the Parties
without the prior written consent of the other Party,  provided,  however,  that
either CollaGenex or Altana may, without such consent, assign this Agreement and
its rights and obligations  hereunder in connection with the transfer or sale of
all or substantially all of its business pertaining to this Agreement, or in the
event  of  its  merger  or   consolidation  or  change  in  control  or  similar
transaction. Any permitted assignee shall assume all obligations of its assignor
under this  Agreement or that Party may assign or sublicense  any and all of its
rights,  interests,  options,  and delegate all  obligations  hereunder,  to any
Affiliate of such Party (and such  Affiliate  may further  assign or  sublicense
this Agreement to

                                       30
<PAGE>

such Party or any other  Affiliate  of such  Party)  without  the consent of the
other Party.  In the event of an assignment  or sublicense to an Affiliate,  the
assigning Party shall guarantee the performance of such assignee or sublicensee.
The assignment or sublicense to an Affiliate  shall not operate to discharge the
assignor or sublicensor from any obligation under this Agreement. Any assignment
which contravenes this Section 17.14 shall be null and void.

     SECTION 17.15. EXPENSES.

     The Parties hereto shall each bear their own costs and expenses  (including
attorneys'  fees) incurred in connection with the negotiation and preparation of
this Agreement and consummation of the transactions contemplated hereby.

     SECTION 17.16. BINDING EFFECT.

     This  Agreement,  and all of the terms,  provisions and conditions  hereof,
shall be binding  upon and shall inure to the benefit of the Parties  hereto and
their respective permitted successors and assigns.

     SECTION 17.17. GOVERNING LAW.

     This Agreement shall be construed and interpreted  accordance with the laws
of the State of New York, without regard to conflicts of law provisions.

     SECTION 17.18. NO STRICT CONSTRUCTION.

     This  Agreement  has  been  prepared  jointly  and  shall  not be  strictly
construed against either Party.

     SECTION 17.19. US DOLLARS.

     All dollar amounts referred to in this Agreement are United States dollars.

     SECTION 17.20. INDEPENDENT CONTRACTORS.

     The status of the Parties under this Agreement shall be that of independent
contractor. No Party shall have the right to enter into any agreements on behalf
of the other Party nor shall it  represent  to any Person that it has such right
or authority.

                                    ********

                                       31
<PAGE>

     IN WITNESS WHEREOF the Parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the Effective Date.


COLLAGENEX PHARMACEUTICALS, INC.                ALTANA INC.


By:/s/ Jeffrey Day                              By: /s/ George Cole
   ------------------------------                   ---------------------------

Name: Jeffrey Day                               Name: George Cole
      ---------------------------                    --------------------------

Title: Vice President Dermatology               Title: President
       --------------------------                      ------------------------

       /s/ Christopher Powala                            /s/ Arthur Dulik
       Senior Director                                   Senior Vice PResident



                                       32
<PAGE>



                                    EXHIBIT A

                                  PATENT RIGHTS



                              U.S. Patent 4,794,106



                                      A-1
<PAGE>




                                    EXHIBIT B

                     STANDARD OPERATING PROCEDURES - RECALLS



                                 To be provided.



                                      B-1

<PAGE>


                                    EXHIBIT C

                                 SPECIFICATIONS



                                 To be provided.



                                      C-1

<PAGE>

                                    EXHIBIT D

                                      MARKS


                    UNITED STATES PATENT AND TRADEMARK OFFICE


PANDEL

Word Mark       PANDEL
Translations    THE FOREIGN CHARTERS IN THE MARK TRANSLITERATE TO PANDEL.
Goods and       IC 005. US 018.G & S: TOPICAL CORTICOSTEROID PREPARATIONS FOR
Services        USE AS ANTI-INFLAMMATORY AGENTS SOLD ONLY ON PRESCRIPTION
Mark Drawing
Code            (3) DESIGN PLUS WORDS, LETTERS, AND/OR NUMBERS
Design Search
Code            280103
Serial Number   73506106
Filing Date     October 29, 1984
Published for
Opposition      April 9, 1985
Registration
Number          1439767
Registration
Date            May 19, 1987
Owner           (REGISTRANT) TAISHO PHARMACEUTICAL CO., LTD. CORPORATION
                JAPAN NO. 24-1 TAKATA 3-CHOME TOSHIMA-KU, TOKYO JAPAN
Attorney of     JESS M. COLLEN


Record
Section 44      SECT44
Indicator
Type of Mark    TRADEMARK
Register        PRINCIPAL
Affidavit Text  SECT 8 (6-YR)
Live/Dead
Indicator       LIVE


                                      D-1
<PAGE>



                                    EXHIBIT E

                       STANDARD OPERATING PROCEDURES - ADE



                                 To be provided.


                                      E-1
<PAGE>

                                    EXHIBIT F

                          PRODUCT FIXED PRICE SCHEDULE


                             PRODUCT PURCHASE PRICE


       Strength                                             Price

       15g                                                  $[**]/tube

       45g                                                  $[**]/tube

       80g                                                  $[**]/tube


                                           PROFESSIONAL SAMPLE PURCHASE PRICE

       Strength                                             Price

       2g X 36 tubes                                        $[**]/box



               These Pandel prices to CollaGenex are based directly [**].  Price
          increases to CollaGenex,  if any, will be based on any increases [**],
          if any,  not to exceed  [**]%  per year.  Pandel  price  increases  to
          CollaGenex may [**], on a percentage  basis,  than the increases [**].
          Altana  agrees  to  provide   CollaGenex  with  Pandel  standard  cost
          information,  including the bases on which the Pandel  standard  costs
          were calculated.


                                      F-1
<PAGE>


                                    EXHIBIT G

                      STANDARD ALTANA PRODUCTION QUANTITIES



                            PRODUCT ORDER QUANTITIES

     The minimum  order  quantity for Product,  whether for a single size or for
any combination of the three (3) Product sizes, is based on a 1000kg batch size.
They yields from a 1000kg  batch for each of the three (3) Product  sizes are as
follows:



             15g:                       [**] tubes

             45g:                       [**] tubes

             80g:                       [**] tubes


     Purchase  orders by  CollaGenex  to Altana must be in  quantities  for each
Product  size such  that the  total  amount of  Product  ordered  in any  single
purchase order is based on a 1000kg batch size, or a 2000kg batch size.



                      PROFESSIONAL SAMPLE ORDER QUANTITIES

     The minimum order  quantity for  Professional  Samples is based on a 1000kg
batch size. The yield from a 1000kg batch size for the Professional Sample is as
follows:


             2g X 36 tubes:             [**] Boxes



     Purchase  orders by  CollaGenex  to Atlanta must be in  quantities  of [**]
boxes for Professional Samples.


                                      G-1

<PAGE>

                                   EXHIBIT H

                                   MEMORANDUM


                                To be provided.

                                      H-1