SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q
               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2000
                             Commission File Number
                                     0-28308

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

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

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

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

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

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

      Indicate  the  number of shares  outstanding  of each of the  Registrant's
classes of common stock as of July 15, 2000:

                Class                              Number of Shares
     ---------------------------                   ----------------
     Common Stock $.01 par value                       8,678,904


<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.

                                TABLE OF CONTENTS


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

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

               Condensed Consolidated Balance Sheets as of December
                   31, 1999 and June 30, 2000 (unaudited)............       2

               Condensed Consolidated Statements of Operations for
                   the Three Months Ended June 30, 1999 and 2000
                   (unaudited).......................................       3

               Condensed Consolidated Statements of Operations for
                   the Six Months Ended June 30, 1999 and 2000
                   (unaudited).......................................       4

               Condensed Consolidated Statements of Cash Flows for
                   the Six Months Ended June 30, 1999 and 2000
                   (unaudited).......................................       5

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

      Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations...................       8

               Results of Operations.................................       9

               Liquidity and Capital Resources.......................       12

               Recent Pronouncements.................................       13

      Item 3.  Quantitative and Qualitative  Disclosures  About Market
               Risk..................................................       13

PART II. OTHER INFORMATION...........................................       14

      Item 4.  Submission of Matters to a Vote of Security Holders...       14

      Item 5.  Other Information.....................................       14

      Item 6.  Exhibits and Reports on Form 8-K......................       15

SIGNATURES...........................................................       16

<PAGE>




                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.



                                      -1-



<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                      Condensed Consolidated Balance Sheets
                       December 31, 1999 and June 30, 2000

                                                     December 31,    June 30,
                      Assets                             1999          2000
                                                         ----          ----
                                                                    (unaudited)
                                   (dollars in thousands, except per share data)

Current assets:
  Cash and cash equivalents.....................      $   7,981      $   8,745
  Short term investments........................          6,386          2,081
  Accounts receivable, net of allowance of $386
   and $401 at December 31, 1999 and June 30,
   2000, respectively...........................          2,150          2,699
  Inventories...................................            695            385
  Prepaid expenses and other current assets.....            615            781
                                                      ---------      ---------
      Total current assets......................         17,827         14,691

Equipment and leasehold improvements, net.......            709            740
Other assets....................................             27             27
                                                      ---------      ---------
      Total assets..............................      $  18,563      $  15,458
                                                      =========      =========

       Liabilities and Stockholders' Equity
       ------------------------------------

Current liabilities:
  Current portion of note payable...............      $      65      $      65
  Accounts payable..............................          2,440          3,431
  Accrued expenses..............................          2,335          2,187
                                                      ---------      ---------
      Total current liabilities.................          4,840          5,683
                                                      ---------      ---------
Note payable, less current portion..............            116             82
                                                      ---------      ---------
Commitments

Stockholders' equity:
  Preferred stock, $0.01 par value, 5,000,000
   shares authorized;  200,000 shares of Series D
   cumulative  convertible  preferred stock, $0.01
   par value, issued and outstanding at December 31,
   1999 and June 30, 2000  (liquidation value
   of $20,000 at June 30, 2000).................              2              2
  Common stock, $0.01 par value, 25,000,000 shares
   authorized; 8,622,091 and 8,678,904 shares
   issued and outstanding at December 31, 1999 and
   June 30, 2000, respectively..................             86             87
  Common Stock to be issued (39,188 shares at
   December 31, 1999 and 92,572 shares at June 30,
   2000)........................................            858            849
  Additional paid in capital....................         66,348         67,602
  Deferred compensation.........................            (76)           (43)
  Accumulated deficit...........................        (53,611)       (58,804)
                                                      ---------      ---------
      Stockholders' equity......................         13,607          9,693
                                                      ---------      ---------
      Total liabilities and stockholders'
      equity....................................      $  18,563      $  15,458
                                                      =========      =========

See accompanying notes to unaudited condensed consolidated financial statements.

                                      -2-
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations
                For the Three Months Ended June 30, 1999 and 2000
                                   (unaudited)
                                                    Three Months Ended June 30,
                                                    ---------------------------
                                                         1999          2000
                                                        -------       ------
                                  (dollars in thousands, except per share data)
Revenues:
  Product sales.................................      $   3,210      $   5,723
  Contract revenues.............................            128            878
  License revenues..............................            100            100
                                                      ---------      ---------
      Total revenues............................          3,438          6,701
                                                      ---------      ---------
Operating expenses:
  Cost of product sales.........................            710          1,127
  Research and development......................          1,291            965
  Selling, general and administrative...........          5,677          6,669
                                                      ---------      ---------
      Total operating expenses..................          7,678          8,761
                                                      ---------      ---------
      Operating loss............................         (4,240)        (2,060)

Other income (expense):
Interest income.................................            245            165
Interest expense................................           (145)            (4)
Other expense...................................             (2)            (2)
                                                      ---------      ---------
      Net loss..................................      $  (4,142)     $  (1,901)
                                                      =========      =========
Preferred stock dividend........................            235            426
                                                      ---------      ---------
Net loss allocable to common stockholders.......         (4,377)        (2,327)
                                                      =========      =========
  Basic and diluted net loss per share allocable
  to common stockholders........................      $   (0.51)    $    (0.27)
                                                      =========      =========

  Shares used in computing basic and diluted net
  loss per share allocable to common stockholders     8,589,704      8,678,073
                                                      =========      =========


See accompanying notes to unaudited condensed consolidated financial statements.

                                      -3-
<PAGE>



                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations
                 For the Six Months Ended June 30, 1999 and 2000
                                   (unaudited)
                                                     Six Months Ended June 30,
                                                         1999          2000
                                  (dollars in thousands, except per share data)
Revenues:
  Product sales.................................      $   5,620      $  11,233
  Contract revenues.............................            136          1,528
  License revenues..............................            100            100
                                                      ---------      ---------
      Total revenues............................          5,856         12,861
                                                      ---------      ---------
Operating expenses:
  Cost of product sales.........................          1,253          2,297
  Research and development......................          2,229          1,812
  Selling, general and administrative...........         11,772         13,436
                                                      ---------      ---------
      Total operating expenses..................         15,254         17,545
                                                      ---------      ---------

      Operating loss............................         (9,398)        (4,684)

Other income (expense):
Interest income.................................            359            351
Interest expense................................           (189)            (8)
Other expense...................................             (2)            (2)
                                                      ---------      ---------
      Net loss..................................      $  (9,230)     $  (4,343)
                                                      =========      =========

Preferred stock dividend........................            235            849
                                                      ---------      ---------
Net loss allocable to common stockholders.......         (9,465)        (5,192)
                                                      =========      =========
  Basic and diluted net loss per share allocable
  to common stockholders........................      $    (1.10)   $    (0.60)
                                                      ==========    ==========

  Shares used in computing basic and diluted net
  loss per share allocable to common stockholders     8,589,371      8,664,835
                                                      =========      =========


See accompanying notes to unaudited condensed consolidated financial statements.

                                      -4-
<PAGE>



                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Cash Flows
                 For the Six Months Ended June 30, 1999 and 2000
                                   (unaudited)
                                                      Six Months Ended June 30,
                                                      -------------------------
                                                           1999          2000
                                                          ------        ------
                                                         (dollars in thousands)
Cash flows from operating activities:
  Net loss........................................     $  (9,230)    $  (4,343)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Noncash compensation expense.................            58           358
     Depreciation and amortization expense........            66           113
     Change in assets and liabilities:
      Accounts receivable.........................         2,009          (549)
      Inventories.................................          (292)          310
      Prepaid expenses and other assets...........            61          (166)
      Accounts payable............................           (44)          991
      Accrued expenses............................           463          (148)
                                                       ---------     ---------
            Net cash used in operating
            activities............................        (6,909)       (3,434)
                                                       ---------     ---------

Cash flows from investing activities:
  Capital expenditures............................          (412)         (144)
  Proceeds from the sale of short term investments         7,464         5,638
  Purchase of short term investments..............          (500)       (1,333)
                                                       ---------     ---------
            Net cash provided by investing
            activities............................         6,552         4,161
                                                       ---------     ---------


Cash flows from financing activities:
  Proceeds from the issuance of convertible note
   payable........................................        10,000             -
  Repayment of convertible note payable...........       (10,000)            -
  Proceeds from the issuance of preferred stock...        18,500             -
  Net proceeds from the issuance of common stock..             3            71
  Proceeds from the issuance of note payable......           219             -
  Payments on note payable........................           (11)          (34)
                                                       ---------     ---------
            Net cash provided by financing
            activities............................        18,711            37
                                                       ---------     ---------

Net increase in cash and cash equivalents.........        18,354           764

Cash and cash equivalents at beginning of period..         3,286         7,981
                                                       ---------     ---------
Cash and cash equivalents at end of period........     $  21,640     $   8,745
                                                       =========     =========
Supplemental schedule of non-cash financing
activities:
  Common stock dividend declared on preferred
  stock...........................................     $     235     $     849
                                                       =========     =========
Supplemental disclosure of cash flow information:
  Cash paid during the quarter for interest.......     $     189     $       8
                                                       =========     =========

See accompanying notes to unaudited condensed consolidated financial statements.

                                      -5-
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 1999 and 2000
                             (dollars in thousands)
                                   (Unaudited)


Note 1 -- Basis of Presentation:

     The unaudited condensed  consolidated  financial statements included herein
have been prepared by the Company,  pursuant to the rules and regulations of the
Securities  and Exchange  Commission and in accordance  with generally  accepted
accounting  principles.  Certain information and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  These unaudited condensed consolidated financial statements should
be read in conjunction  with the Company's 1999 audited  consolidated  financial
statements and footnotes.

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

     In the opinion of the  Company's  management,  the  accompanying  unaudited
condensed  consolidated  financial  statements  have  been  prepared  on a basis
substantially  consistent with the audited consolidated financial statements and
contain adjustments, all of which are of a normal recurring nature, necessary to
present fairly their  financial  position as of June 30, 2000,  their results of
operations  for the three and six months ended June 30, 1999 and 2000, and their
cash flows for the six months ended June 30, 1999 and 2000.  Interim results are
not necessarily indicative of results anticipated for the full fiscal year.

     Certain  amounts in the December 31, 1999  Consolidated  Balance Sheet have
been reclassified to conform with the June 30, 2000 presentation.

Note 2 -- Inventories:

      Inventories  at  December  31,  1999  and  June 30,  2000  consist  of the
following:

                                           1999       2000
                                           ----       ----
                  Raw materials           $ 254     $  168
                  Finished goods            441        217
                                          -----     ------
                                          $ 695     $  385
                                          =====     ======

                                      -6-
<PAGE>

                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 1999 and 2000
                             (dollars in thousands)
                                   (Unaudited)
                                   (Continued)

Note 3 -- Recent Pronouncements:

     In December  1999,  the staff of the  Securities  and  Exchange  Commission
issued a Staff  Accounting  Bulletin  ("SAB") No. 101,  "Revenue  Recognition in
Financial  Statements"  ("SAB 101").  SAB 101 summarizes  certain of the staff's
views  in  applying   generally  accepted   accounting   principles  to  revenue
recognition in financial statements, including the recognition of non-refundable
fees  received  upon  entering  into  arrangements.  We are in  the  process  of
evaluating this SAB and the effect it will have in our financial  statements and
current  revenue  recognition  policy.  SAB 101, as amended,  must be adopted no
later than the fourth  quarter of 2000 with any impact  reported as a cumulative
effect  adjustment  calculated  as of  January  1, 2000.  Certain  license  fees
recognized  as revenue  during the three and six months  ended June 30, 2000 may
need to be  deferred  once SAB 101 is  adopted  and  amortized  over a yet to be
estimated expected period of benefit.


                                      -7-
<PAGE>




                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

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

Overview
--------

     CollaGenex  Pharmaceuticals,  Inc. and  subsidiaries  (the  "Company") is a
specialty   pharmaceutical  company  focused  on  providing  innovative  medical
therapies to the dental market.  The Company's  first product,  Periostat,  is a
prescription  pharmaceutical capsule that was approved by the United States Food
and Drug  Administration  (the "FDA") in September 1998 as an adjunct to scaling
and root  planing,  the most  prevalent  therapy for  periodontitis,  to promote
attachment  level  gain and to  reduce  pocket  depth  in  patients  with  adult
periodontitis.  The  Company is  marketing  Periostat  to the  dental  community
through its own professional dental  pharmaceutical sales force of approximately
135 sales  representatives  and  managers.  This sales  force  also  co-promotes
Vioxx(R), a prescription non-sterodial anti-inflammatory drug developed by Merck
& Co., Inc.  ("Merck")  and  Denavir(R),  a  prescription  cold sore  medication
developed  by  SmithKline  Beecham  Consumer   Healthcare,   L.P.   ("SmithKline
Beecham"),  and the Company is actively  seeking other products to market to the
dental community.

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

     The  Company  has  incurred  losses  each year since  inception  and had an
accumulated  deficit of $58.8 million at June 30, 2000.  The Company  expects to
continue to incur losses in the foreseeable  future from  expenditures on sales,
marketing, manufacturing, drug development, and administrative activities.

     Statements  contained or incorporated by reference in this Quarterly Report
on Form  10-Q  that  are not  based  on  historical  fact  are  "forward-looking
statements" within the meaning of Section 21E of the Securities  Exchange Act of
1934,  as amended.  Forward-looking  statements  may be identified by the use of
forward-looking   terminology  such  as  "may,"  "will,"  "expect,"  "estimate,"
"anticipate,"  "continue,"  or similar  terms,  variations  of such terms or the
negative of those terms. This Form 10-Q contains forward-looking statements that
involve risks and uncertainties.  The Company's  business of selling,  marketing
and  developing  pharmaceutical  products is subject to a number of  significant
risks, including risks relating to the implementation of the Company's sales and
marketing  plans for  Periostat,  risks  inherent  in research  and  development
activities,  risks  associated  with conducting  business in a highly  regulated
environment  and  uncertainty  relating  to clinical  trials of  products  under
development.  The  success of the  Company  depends to a large  degree  upon the
market acceptance of Periostat by


                                      -8-
<PAGE>

periodontists,  dental practitioners,  other health care providers, patients and
insurance  companies.  Other than  Periostat,  which has been FDA  approved  for
marketing  in the  United  States,  there  can be no  assurance  that any of the
Company's other product candidates will be approved by any regulatory  authority
for  marketing in any  jurisdiction  or, if approved,  that any such products or
that Vioxx or Denavir will be successfully  commercialized  by the Company.  The
Company's actual results may differ materially from the results discussed in the
forward-looking statements contained herein.

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

     From its founding through the quarter ended September 30, 1998, the Company
had no revenues  from sales of its own  products.  During the fourth  quarter of
1998,  the Company  achieved  net product  sales of $3.1 million  following  the
commercial  launch  of  Periostat  in  November  1998.  Most of the  1998  sales
represented  initial  wholesale  and  retail  stocking.  During  the year  ended
December 31, 1999, the Company  achieved net product sales of $15.2 million from
sales of  Periostat.  In  addition,  in 1999 the Company  generated  $770,000 in
contract revenues from its co-promotion agreements and $100,000 in license fees.
During the six months  ended June 30,  2000,  the Company  achieved  net product
sales of $11.2 million from the sales of Periostat. In addition,  during the six
months  ended June 30,  2000,  the Company  generated  $1.5  million in contract
revenues from its co-promotion agreements and $100,000 in license revenues.

     The  Company  realized  a net  loss  during  the  second  quarter  of 2000,
resulting  primarily  from  higher  revenue  offset  by  higher  planned  sales,
marketing  and  administrative  expenses  incurred  during  such  period.  Total
operating  expenses  consist  of  the  cost  of  product  sales,   research  and
development expenses and selling,  general and administrative  expenses. Cost of
product sales consists primarily of direct manufacturing expenses and royalties.
Research and development  expenses  consist  primarily of funds paid to contract
research  organizations  for the  provision of services and  materials  for drug
development,  ongoing  manufacturing  and formulation  enhancements and clinical
trials.  Selling,  general and  administrative  expenses  consist  primarily  of
personnel  salaries and  benefits,  direct  marketing  costs,  professional  and
consulting fees, insurance and general office expenses.

Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
-----------------------------------------------------------------------------

     REVENUES.  The Company  realized  $6.7 million in net  revenues  during the
three  months  ended June 30,  2000  compared to $3.4  million  during the three
months ended June 30, 1999.  Revenues  for the second  quarter of 2000  included
$5.7 million in net sales of Periostat, $878,000 in contract revenues which were
derived  from the  Company's  co-promotion  of Vioxx for Merck and  Denavir  for
SmithKline Beecham, and $100,000 in Periostat license revenues. Revenues for the
three  months  ended  June  30,  1999  included  $3.2  million  in net  sales of
Periostat,  $128,000 in contract revenues primarily for Denavir co-promotion and
$100,000 in Periostat license revenues. During the three month period ended June
30, 2000, net revenues  included $1.2 million in stocking orders from one of the
Company's  major  customers,   which  may  have  significantly   increased  that
customer's weeks of sales in inventory at the end of such period.  There were no
significant  stocking  orders received by the Company for the three months ended
June 30, 1999.


                                   -9-
<PAGE>


     COST OF  PRODUCT  SALES.  Cost of  product  sales for  Periostat  were $1.1
million,  or 19.7% of net product  sales,  for the three  months  ended June 30,
2000, compared to $710,000,  or 22.1% of net product sales, for the three months
ended June 30, 1999. This decrease resulted  primarily from the absence of trade
allowances realized on product sales in the three months ended June 30, 2000.

     RESEARCH  AND  DEVELOPMENT  EXPENSES.  Research  and  development  expenses
decreased  25.3% to $1.0 million in the second quarter of 2000 from $1.3 million
in the second  quarter of 1999.  This  decrease  resulted  primarily  from fewer
expenses  related to Phase 3b clinical  studies to support the future  marketing
activities for Periostat,  decreased  manufacturing and formulation  development
work for  Periostat  tablets and reduced  research and  development  activities.
These decreases were partially offset by a $302,000 non-cash compensation charge
incurred  during the quarter  related to  accelerating  the vesting  schedule on
stock options granted to certain non-employees in 1999. Expenditures made during
the three  months  ended  June 30,  2000  included,  among  other  expenditures,
regulatory  and  consulting   fees   associated  with  the  Company's  New  Drug
Application for Periostat  tablets  submitted to the FDA in the first quarter of
2000.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative expenses increased 17.5% to $6.7 million in the second quarter of
2000 from $5.7  million in the second  quarter of 1999.  This  increase  was due
primarily to higher recruiting and continued  training expenses  associated with
new sales personnel hired earlier in 2000. The Company also incurred advertising
and promotional expenses for Vioxx during the second quarter of 2000 as a result
of its co-promotional agreement with Merck signed in September 1999.

     OTHER  INCOME/EXPENSE.  Interest income decreased to $165,000 in the second
quarter of 2000 from $245,000 in the second  quarter of 1999.  This decrease was
due to lower  average  balances  in cash and  short-term  investments.  Interest
expense was $4,000 in the second quarter of 2000. This expense was primarily due
to interest on the  outstanding  balances  on the note  payable  executed by the
Company in April 1999.  Interest  expense was $145,000 in the second  quarter of
1999 due primarily to interest on the $10.0 million short term  convertible note
executed  by the Company in March 1999 which was repaid in  connection  with the
Company's Financing (as defined below) in May 1999.

     PREFERRED STOCK  DIVIDENDS.  Preferred stock dividends were $426,000 in the
second  quarter of 2000 as a result of the Company's  obligations  in connection
with the  issuance  of its  Series  D Stock  (as  defined  below)  in May  1999.
Preferred stock dividends in the second quarter of 1999 were $235,000,  and were
accrued  during  the  portion  of that  quarter  that  the  Series  D Stock  was
outstanding.

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
-------------------------------------------------------------------------

     REVENUES. The Company realized $12.9 million in net revenues during the six
months ended June 30, 2000 compared to $5.9 million  during the six months ended
June 30, 1999.  Revenues for the six months ended June 30, 2000  included  $11.2
million in net sales of Periostat,  $1.5 million in contract revenues which were
derived  from the  Company's  co-promotion  of Vioxx for Merck and  Denavir  for
SmithKline Beecham, and $100,000 in Periostat license

                                      -10-
<PAGE>

revenues.  Revenues for the six months ended June 30, 1999 included $5.6 million
in net sales of Periostat,  $136,000 in contract revenues  primarily for Denavir
co-promotion and $100,000 in Periostat  license  revenues.  During the six month
period  ended June 30,  2000,  net  revenues  included  $2.3 million in stocking
orders from one of the Company's major customers,  which may have  significantly
increased that customer's weeks of sales in inventory at the end of such period.
During the six month period ended June 30, 1999,  this  customer  placed  orders
totalling  $839,000,  which  also  may  have  increased  its  weeks  of sales in
inventory at June 30, 1999.

     COST OF  PRODUCT  SALES.  Cost of  product  sales for  Periostat  were $2.3
million,  or 20.4% of net product sales, for the six months ended June 30, 2000,
compared  to $1.3  million,  or 22.3% of net product  sales,  for the six months
ended June 30, 1999. This decrease resulted  primarily from the absence of trade
allowances realized on product sales in the six months ended June 30, 2000.

     RESEARCH  AND  DEVELOPMENT  EXPENSES.  Research  and  development  expenses
decreased 18.7% to $1.8 million for the six months ended June 30, 2000 from $2.2
million for the six months ended June 30, 1999. This decrease resulted primarily
from fewer expenses  related to Phase 3b clinical  studies to support the future
marketing  activities for Periostat,  decreased  manufacturing  and  formulation
development  work for  Periostat  tablets and reduced  research and  development
activities.  These  decreases  were  partially  offset  by a  $324,000  non-cash
compensation  charge  incurred  during the period  related to  accelerating  the
vesting  schedule on stock  options  granted to certain  non-employees  in 1999.
Expenditures  made  during the six months  ended June 30, 2000  included,  among
other expenditures, regulatory and consulting fees associated with the Company's
New Drug  Application  for  Periostat  tablets  submitted  to the FDA during the
period.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses  increased  14.1% to $13.4  million  for the six months
ended June 30, 2000 from $11.8  million for the six months  ended June 30, 1999.
This increase was due  primarily to higher  recruiting  and  continued  training
expenses  associated  with new sales  personnel  hired in 2000. The Company also
incurred  advertising and  promotional  expenses for Vioxx during the six months
ended  June 30,  2000 as a result of its  co-promotional  agreement  with  Merck
signed in September 1999.

     OTHER  INCOME/EXPENSE.  Interest  income  decreased  to $351,000 in the six
months ended June 30, 2000 from  $359,000 in the six months ended June 30, 1999.
This decrease was due to slightly lower average  balances in cash and short-term
investments  during  2000.  Interest  expense was $8,000 in the six months ended
June 30, 2000.  This expense was  primarily  due to interest on the  outstanding
balance on the note  payable  executed by the  Company in April  1999.  Interest
expense was  $189,000  for the six months  ended June 30, 1999 due  primarily to
interest  on the $10.0  million  short term  convertible  note  executed  by the
Company  in March  1999  which  was  repaid  in  connection  with the  Company's
Financing in May 1999.

     PREFERRED STOCK  DIVIDENDS.  Preferred stock dividends were $849,000 in the
six  months  ended June 30,  2000 as a result of the  Company's  obligations  in
connection with the issuance of its Series D Stock in May 1999.  Preferred stock
dividends for the six months ended June 30,

                                      -11-
<PAGE>


1999 were $235,000,  and were accrued during the portion of that period that the
Series D Stock was outstanding.

Liquidity and Capital Resources
-------------------------------

     Since its origin in January 1992,  the Company has financed its  operations
through  private  placements  of preferred  stock and common  stock,  an initial
public  offering  of  2,000,000  shares of common  stock,  which  generated  net
proceeds to the Company of approximately  $18.0 million after  underwriting fees
and related  expenses,  and a subsequent  public offering of 1,000,000 shares of
common stock, which generated net proceeds to the Company of approximately $11.6
million  after  underwriting  fees and related  expenses.  On May 12, 1999,  the
Company  consummated a $20.0 million  financing  (the  "Financing")  through the
issuance of its Series D Cumulative  Convertible  Preferred Stock (the "Series D
Stock"), which generated net proceeds to the Company of $18.5 million. A portion
of the  proceeds of such  Financing  were used to repay a $10.0  million  Senior
Secured  Convertible  Note provided by one of the investors on March 19, 1999 in
connection with the Financing.

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

     All or a portion  of the shares of Series D Stock  shall,  at the option of
the  Company  (as  determined  by the  Board  of  Directors),  automatically  be
converted into fully paid, registered and non-assessable shares of common stock,
if the following two conditions are met: (i) the last sale price, or, in case no
such sale takes  place on such day,  the  average of the  closing  bid and asked
prices on the Nasdaq is at least 200% of the conversion price then in effect (as
of June 30, 2000, $11.00 per share) for forty consecutive trading days; and (ii)
a shelf  registration  is in effect for the shares of common  stock to be issued
upon conversion of the Series D Stock. Without written approval of a majority of
the holders of record of the Series D Stock,  the Company,  among other  things,
shall not:  (i)  declare or pay any  dividend or  distribution  on any shares of
capital  stock of the Company other than  dividends on the Series D Stock;  (ii)
make any loans,  incur any indebtedness or guarantee any  indebtedness,  advance
capital  contributions  to,  or  investments  in any  person,  issue or sell any
securities  or  warrants  or other  rights to  acquire  debt  securities  of the
Company,  except that the Company may incur such  indebtedness in any amount not
to exceed $10.0  million in the  aggregate  outstanding  at any time for working
capital requirements in the ordinary course of business;  or (iii) make research
and development  expenditures in excess of $7.0 million in any continuous twelve
month  period,  unless the Company  has  reported  positive  net income for four
consecutive quarters immediately prior to such twelve month period.

                                      -12-
<PAGE>


     At June 30, 2000,  the Company had cash,  cash  equivalents  and short-term
investments of approximately  $10.8 million, a decrease of $3.6 million from the
$14.4  million  balance at December  31,  1999,  due  primarily to the loss from
operations during the six months ended June 30, 2000.

     In accordance with investment guidelines approved by the Company's Board of
Directors,  cash balances in excess of those  required to fund  operations  have
been invested in short-term  United States  Treasury  securities  and commercial
paper with a credit rating no lower than A1/P1. The Company's working capital at
June 30,  2000 was $9.0  million,  a  decrease  of $4.0  million  from the $13.0
million balance at December 31, 1999.  This decrease was primarily  attributable
to the  Company's  cash used for normal  operations  during the six months ended
June 30, 2000.

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

     The  Company   anticipates  that  its  existing  working  capital  will  be
sufficient to fund the Company's operations through at least 2000. The Company's
future capital  requirements and the adequacy of its available funds will depend
on many factors,  including the size and scope of the Company's marketing effort
and sales of  Periostat,  the terms of  agreements  entered into with  corporate
partners,  if any, and the results of research and development and  pre-clinical
and clinical  studies for other  applications of the Company's core  technology.
Over the long-term, the Company's liquidity is dependent on market acceptance of
its products and technology.

Recent Pronouncements
---------------------

     In December  1999,  the staff of the  Securities  and  Exchange  Commission
issued a Staff  Accounting  Bulletin  ("SAB") No. 101,  "Revenue  Recognition in
Financial  Statements"  ("SAB 101").  SAB 101 summarizes  certain of the staff's
views  in  applying   generally  accepted   accounting   principles  to  revenue
recognition in financial statements, including the recognition of non-refundable
fees  received  upon  entering  into  arrangements.  We are in  the  process  of
evaluating this SAB and the effect it will have in our financial  statements and
current  revenue  recognition  policy.  SAB 101, as amended,  must be adopted no
later than the fourth  quarter of 2000 with any impact  reported as a cumulative
effect  adjustment  calculated  as of  January  1, 2000.  Certain  license  fees
recognized  as revenue  during the three and six months  ended June 30, 2000 may
need to be  deferred  once SAB 101 is  adopted  and  amortized  over a yet to be
estimated expected period of benefit.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

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

                                      -13-
<PAGE>

                           PART II. OTHER INFORMATION


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

      The Annual Meeting of Stockholders was held on May 8, 2000.

     There were present at the Annual Meeting in person or by proxy stockholders
holding an aggregate of 6,542,240  shares of Common Stock and 189,000  shares of
Series  D Stock,  which  shares  of  Series D Stock  account  for an  additional
1,718,182  shares of Common Stock on an as converted to Common Stock basis.  The
results of the vote taken at such Annual Meeting with respect to the election of
the nominees to be the Common Stock directors were as follows:

       Common Stock Nominees                   For                Withheld
       ---------------------                   ---                --------

Brian M. Gallagher, Ph.D.               6,446,190 Shares        96,050 Shares
Helmer P.K. Agersborg, Ph.D.            6,535,260 Shares         6,980 Shares
Peter R. Barnett, D.M.D.                6,446,190 Shares        96,050 Shares
Robert C. Black                         6,535,260 Shares         6,980 Shares
James E. Daverman                       6,535,260 Shares         6,980 Shares
Robert J. Easton                        6,535,260 Shares         6,980 Shares
Terence E. Winters, Ph.D.               6,535,260 Shares         6,980 Shares


     The results of the vote taken at such Annual  Meeting  with  respect to the
election of the nominee to be the Series D Director,  Stephen A. Kaplan, were as
follows:  1,718,182 shares of Series D Stock (on an as converted to Common Stock
basis) were voted FOR the Series D Stock nominee,  with no shares voting against
or abstaining.

     In addition,  a vote of the stockholders was taken at the Annual Meeting on
the proposal to ratify the appointment of KPMG LLP as the  independent  auditors
of the Company for the fiscal year ending  December 31, 2000. For the purpose of
such vote,  the  holders of shares of Common  Stock and the  holders of Series D
Stock (on an as converted  to Common  stock  basis)  voted  together as a single
class. Of such shares, 8,256,045 shares of Common Stock and Series D Stock voted
in favor of such  proposal,  2,500 shares were voted  against such  proposal and
1,877 shares abstained from voting.

Item 5.  Other Information.

     On May 2, 2000, the Company  announced that it had filed an application for
a  Marketing  Authorization  for  Periostat  tablets  with  the  United  Kingdom
Medicines  Control Agency (MCA). The MCA granted a marketing  authorization  for
Periostat  capsules in  February  2000.  The  Company  intends to use the United
Kingdom as its Reference Member State to apply for  registrations  for Periostat
tablets in all of the countries of the European Union and Norway.

                                      -14-
<PAGE>

     On May 2,  2000,  the  Company  also  announced  that  it had  executed  an
exclusive  marketing  and  distribution  agreement  with ISDIN  S.A.,  a Spanish
company,  with respect to the marketing and distribution of Periostat tablets in
Spain and Portugal.

     On June 9, 2000, the Company  announced that it had executed  marketing and
distribution  agreements with Willvonseder & Marchesani Ges.m.b.H.  & Co. KG., a
Vienna based company, and Karr Dental Ltd., a Zurich based company, with respect
to  the  marketing  and  distribution  of  Periostat   tablets  in  Austria  and
Switzerland, respectively.

     On August 9, 2000, the Company  announced that it had executed an exclusive
marketing  and supply  agreement  with Showa  Yakuhin  Kako Co. Ltd., a Japanese
company, with respect to the marketing and supply of Periostat tablets in Japan.

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

      (a)   Exhibits

            27 -  Financial Data Schedule.

      (b)   Reports on Form 8-K.

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


                                      -15-


<PAGE>




                                   SIGNATURES


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


                                    CollaGenex Pharmaceuticals, Inc.



Date: August 14, 2000               By:  /s/ Brian M. Gallagher, Ph.D.
                                         ---------------------------------
                                         Brian M. Gallagher, Ph.D.
                                         Chairman, President and Chief Executive
                                         Officer
                                         (Principal Executive Officer)



Date: August 14, 2000               By:  /s/ Nancy C. Broadbent
                                         ---------------------------------
                                         Nancy C. Broadbent
                                         Chief Financial Officer (Principal
                                         Financial and Accounting Officer)