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 March 31, 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 of             (I.R.S. Employer Identification No.)
Incorporation or Organization)


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


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


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

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

      Indicate  the  number of shares  outstanding  of each of the  Registrant's
classes of common stock as of March 31, 2000:

                Class                              Number of Shares
     ---------------------------               ---------------------------
     Common Stock $.01 par value                       8,668,279


<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 March 31, 2000 (unaudited)...............   2

               Condensed Consolidated Statements of Operations for
                   the Three Months Ended March 31, 1999 and 2000
                   (unaudited)...........................................   3

               Condensed Consolidated Statements of Cash Flows for
                   the Three Months Ended March 31, 1999 and 2000
                   (unaudited)..........................................    4

               Notes to Condensed Consolidated Financial Statements
                   (unaudited)..........................................    5

      Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operations......................    7

               Results of Operations....................................    8

               Liquidity and Capital Resources..........................    9

               Recently Issued Accounting Standards.....................   11

               Year 2000 Issues.........................................   11

      Item 3.  Quantitative and Qualitative Disclosures About Market
               Risk.....................................................   11

PART II. OTHER INFORMATION..............................................   12

      Item 5.  Other Information........................................   12

      Item 6.  Exhibits and Reports on Form 8-K.........................   12

SIGNATURES..............................................................   13



                                     - i -
<PAGE>















                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS.














                                     - 1 -
<PAGE>


<TABLE>
<CAPTION>
                                COLLAGENEX PHARMACEUTICALS, INC.
                                        AND SUBSIDIARIES

                              Condensed Consolidated Balance Sheets
                              December 31, 1999 and March 31, 2000
                          (dollars in thousands, except per share data)


                                                                       December 31,   March 31,
                                                                           1999         2000
                                                                         --------     --------
                                                                                     (unaudited)
                      Assets
<S>                                                                      <C>          <C>
Current assets:
   Cash and cash equivalents .........................................   $  7,981     $  8,300
   Short term investments ............................................      6,386        3,818
   Accounts receivable, net of allowance of $386
     and $375 at December 31, 1999 and March 31, 2000, respectively ..      2,150        2,281
   Inventories .......................................................        695          381
   Prepaid expenses and other current assets .........................        615          719
                                                                         --------     --------
         Total current assets ........................................     17,827       15,499
Equipment and leasehold improvements, net ............................        709          711
Other assets .........................................................         27           26
                                                                         --------     --------
         Total assets ................................................   $ 18,563     $ 16,236
                                                                         ========     ========

                   Liabilities and Stockholders' Equity

Current liabilities:
   Current portion of note payable ...................................   $     65     $     65
   Accounts payable ..................................................      2,440        2,945
   Accrued expenses ..................................................      2,335        1,848
                                                                         --------     --------
         Total current liabilities ...................................      4,840        4,858
                                                                         --------     --------
Note payable, less current portion ...................................        116           99

Commitments

Stockholders' equity:
   Preferred stock, $0.01 par value, 5,000,000 shares authorized;
     200,000 shares of Series D cumulative  convertible  preferred
     stock issued and outstanding at December 31, 1999 and March
     31, 2000 (liquidation value $20,000 on March 31, 2000) ..........          2            2
   Common stock, $0.01 par value;  25,000,000 shares  authorized,
     8,622,091 and 8,668,279 shares issued and outstanding at
     December 31, 1999 and March 31, 2000, respectively ..............         86           87
   Additional paid in capital ........................................     67,206       67,298
   Deferred compensation .............................................        (76)         (54)
   Accumulated deficit ...............................................    (53,611)     (56,054)
                                                                         --------     --------
         Stockholders' equity ........................................     13,607       11,279
                                                                         --------     --------
         Total liabilities and stockholders' equity ..................   $ 18,563     $ 16,236
                                                                         ========     ========

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


                                             - 2 -
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

                 Condensed Consolidated Statements of Operations
               For the Three Months Ended March 31, 1999 and 2000
                  (dollars in thousands, except per share data)
                                   (unaudited)


                                                    Three Months Ended March 31,
                                                         1999           2000
                                                      ---------      ---------
Revenues:
  Product sales...................................    $   2,410      $   5,510
  Contract revenues...............................            8            650
                                                      ---------      ---------
      Total revenues..............................        2,418          6,160
                                                      ---------      ---------
Operating expenses:
  Cost of product sales...........................          543          1,170
  Research and development........................          938            847
  Selling, general and administrative.............        6,096          6,767
                                                      ---------      ---------
      Total operating expenses....................        7,577          8,784
                                                      ---------      ---------
      Operating loss..............................        5,159          2,624
Other income (expense):
  Interest income.................................          114            186
  Interest expense................................          (44)            (5)
                                                      ---------      ---------
      Net loss....................................    $  (5,089)     $  (2,443)
                                                      =========      =========
Preferred stock dividend..........................           --            423
                                                      ---------      ---------
Net loss allocable to common stockholders.........    $  (5,089)     $  (2,866)
                                                      =========      =========
Basic and diluted net loss per share allocable
  to common stockholders...........................   $   (0.59)     $   (0.33)
                                                      =========      =========

Shares used in computing basic and diluted net
  loss per share allocable to common stockholders..   8,589,037      8,651,597
                                                      =========      =========

See accompanying notes to unaudited condensed consolidated financial statements.


                                     - 3 -
<PAGE>
<TABLE>
<CAPTION>


                             COLLAGENEX PHARMACEUTICALS, INC.
                                     AND SUBSIDIARIES

                      Condensed Consolidated Statements of Cash Flows
                    For the Three Months Ended March 31, 1999 and 2000
                                    (dollars in thousands)
                                        (unaudited)


                                                             Three Months Ended March 31,
                                                                   1999         2000
                                                                  --------    --------
<S>                                                               <C>         <C>
Cash flows from operating activities:
   Net loss ...................................................   $ (5,089)   $ (2,443)
   Adjustments to reconcile net loss to net cash used in
     operating activities:
       Noncash compensation expense ...........................         30          45
       Depreciation and amortization expense ..................         33          56
       Change in assets and liabilities:
         Accounts receivable ..................................        856        (131)
         Inventories ..........................................       (186)        314
         Prepaid expenses and other assets ....................        172        (103)
         Accounts payable .....................................        289         505
         Accrued expenses .....................................       (145)       (487)
                                                                  --------    --------
                  Net cash used in operating activities .......     (4,040)     (2,244)
                                                                  --------    --------
Cash flows from investing activities:
   Capital expenditures .......................................        (28)        (58)
   Proceeds from the sale of short term investments ...........      4,492       3,417
   Purchase of short term investments .........................       (500)       (849)
                                                                  --------    --------
                  Net cash provided by investing  activities ..      3,964       2,510
                                                                  --------    --------
Cash flows from financing activities:
   Proceeds from the issuance of note payable .................     10,000          --
   Net proceeds from issuance of common stock .................          3          70
   Repayment of long-term debt ................................         --         (17)
                                                                  --------    --------
                  Net cash provided by financing activities ...     10,003          53
Net increase in cash and cash equivalents .....................      9,927         319
Cash and cash equivalents at beginning of period ..............      3,286       7,981
                                                                  --------    --------
Cash and cash equivalents at end of period ....................   $ 13,213    $  8,300
                                                                  ========    ========
Supplemental schedule of noncash financing activities:
     Common stock dividends on preferred stock ................   $     --    $    423
                                                                  ========    ========
Supplemental disclosure of cash flow information:
     Cash paid during the quarter for interest ................   $     --    $      5
                                                                  ========    ========

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


                                          - 4 -
<PAGE>


                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 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 annual  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 consolidation.

      In the opinion of the Company's  management,  the  accompanying  unaudited
condensed  consolidated  financial  statements  have  been  prepared  on a basis
substantially  consistent with the audited consolidated financial statements and
contain adjustments, all of which are of a normal recurring nature, necessary to
present  fairly the Company's  consolidated  financial  position as of March 31,
2000,  their results of operations for the three months ended March 31, 1999 and
2000,  and their cash flows for the three  months ended March 31, 1999 and 2000.
Interim  results are not necessarily  indicative of results  anticipated for the
full fiscal year.


NOTE 2 -- INVENTORIES:

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

                                        1999      2000
                                       -----     -----
                   Raw materials       $ 254     $ 179
                   Finished goods        441       202
                                       -----     -----
                                       $ 695     $ 381


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


                                     - 5 -
<PAGE>

                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            March 31, 1999 and 2000
                             (dollars in thousands)
                                  (Unaudited)
                                  (Continued)


evaluating this SAB and the effect it will have in our financial  statements and
current  revenue  recognition  policy.  SAB 101 must be  adopted  by the  second
quarter  of 2000  and  any  impact  will  be  recorded  as a  cumulative  effect
adjustment effective January 1, 2000.



                                     - 6 -
<PAGE>


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


OVERVIEW

      CollaGenex  Pharmaceuticals,  Inc. and  subsidiaries  (the "Company") is a
specialty   pharmaceutical  company  focused  on  providing  innovative  medical
therapies to the dental market.  The Company's  first product,  Periostat,  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., 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 $56.1 million at March 31, 2000. The Company  expects to
continue to incur losses in the  foreseeable  future from  expenditures  on drug
development, marketing, manufacturing and administrative activities.

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


                                     - 7 -
<PAGE>


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 three months ended March 31, 2000,  the Company  achieved net product
sales of $5.5 million from the sales of Periostat. In addition, during the three
months ended March 31, 2000, the Company generated $650,000 in contract revenues
from its co-promotion agreements. During the three-month periods ended March 31,
1999  and  2000,   net  revenues   included   $0.8  million  and  $1.1  million,
respectively,  in stock 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 each such period.

      The  Company  realized  a net  loss  during  the  first  quarter  of 2000,
resulting  primarily  from  higher  revenues  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 March 31, 2000 Compared to Three Months Ended March 31, 1999
-------------------------------------------------------------------------------

      Revenues.  The Company  realized  $6.2 million in net revenues  during the
three  months  ended March 31, 2000  compared to $2.4  million  during the three
months ended March 31, 1999.  Revenues  for the first  quarter of 2000  included
$5.5  million in net sales of  Periostat  and  $650,000  in  contract  revenues.
Revenues for the three months ended March 31, 1999  included $2.4 million in net
sales of  Periostat  and $8,000 in  contract  revenues.  During the  three-month
periods  ended March 31, 2000 and 1999,  net revenues  included $1.1 million and
$800,000,  respectively,  in  stock  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 each such period.

      Cost of Product  Sales.  Cost of product  sales were $1.2  million for the
three  months  ended March 31,  2000,  compared to $543,000 for the three months
ended March 31, 1999.  This  improvement  in gross  margin,  as a percentage  of
sales,  resulted  primarily  from the  absence of trade  allowances  realized on
product sales in the three months ended March 31, 2000.


                                     - 8 -
<PAGE>


      Research and Development  Expenses.  Research and development expenses for
the three months ended March 31, 2000 were $847,000 compared to $938,000 for the
three  months  ended March 31,  1999.  This  decrease  resulted  primarily  from
decreased  expenses  related to Phase 3b clinical  studies to support the future
marketing  activities  for  Periostat,  ongoing  manufacturing  and  formulation
development work for Periostat and research and development activities funded by
the  Company.  Expenditures  made during the three  months  ended March 31, 2000
include,  among other  expenditures,  regulatory and consulting  fees associated
with the Company's New Drug  Application for a tablet  formulation for Periostat
submitted to the FDA during the quarter.

      Selling,  General  and  Administrative  Expenses.   Selling,  general  and
administrative  expenses  increased  to $6.8  million for the three months ended
March 31, 2000 from $6.1 million for the three months ended March 31, 1999. This
increase was due primarily to higher recruiting and training expenses associated
with new sales  personnel  hired during the quarter.  The Company also  incurred
advertising  and  promotional  expenses  for Vioxx during the three months ended
March 31, 2000 as a result of its co-promotional  agreement with Merck signed in
September 1999.

      Other  Income/Expenses.  Interest income  increased to $186,000 during the
three  months ended March 31, 2000 from  $114,000  during the three months ended
March 31, 1999.  This increase was due to higher balances in cash and short-term
investments as a result of the completion of the Financing (as defined below) in
May 1999. Interest expense for the three months ended March 31, 2000 was $5,000.
This expense was primarily due to interest on the $219,000 note payable executed
by the Company in April 1999.  Interest expense was $44,000 for the three months
ended March 31, 1999 for 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 increased to $423,000
during  the  three  months  ended  March 31,  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.  No  dividends  were  accrued or  declared  during the three
months  ended March 31, 1999 as no shares of  preferred  stock were  outstanding
during that period.


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.


                                     - 9 -
<PAGE>



      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 will be  entitled to receive  dividends  payable in shares of
fully registered common stock at a rate of 8.4% per annum. Thereafter, dividends
will be payable in cash at a rate of 8.0% per annum.

      All or a portion of the shares of Series D Stock  shall,  at the option of
the  Company  (as  determined  by the  Board  of  Directors),  automatically  be
converted into fully paid, registered and non-assessable shares of common stock,
if the following two conditions are met: (i) the last sale price, or, in case no
such sale takes  place on such day,  the  average of the  closing  bid and asked
prices on the Nasdaq is at least 200% of the conversion price then in effect (as
of March 31, 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.

      At March 31, 2000, the Company had cash,  cash  equivalents and short-term
investments of approximately  $12.1 million, a decrease of $2.3 million from the
$14.4 million balance at December 31, 1999.

      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
March 31,  2000 was $10.6  million,  a decrease of $2.4  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 three months ended
March 31, 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

                                     - 10 -
<PAGE>


interest.  The note is secured by a third party  irrevocable  standby  letter of
credit for an amount not less than 90% of the financed property.

      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.


RECENTLY ISSUED ACCOUNTING STANDARDS

      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 must be  adopted  by the  second
quarter  of 2000  and  any  impact  will  be  recorded  as a  cumulative  effect
adjustment effective January 1, 2000.


YEAR 2000 ISSUES

      The Company  believes that material Year 2000  compliance  problems  would
have arisen on or immediately after January 1, 2000. As of the date hereof,  the
Company  is not  aware of any Year  2000-related  problems  associated  with its
internal systems or software or that of its vendors,  suppliers,  manufacturers,
distributors and marketing partners. It is possible,  however, that further Year
2000-related problems will arise in the future.

      Other than time spent by the Company's own personnel,  to date the Company
has not incurred any significant  costs in identifying and remediating Year 2000
problems.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-------------------------------------------------------------------

      The Company believes that it is not subject to a material market risk.


                                     - 11 -
<PAGE>


                           PART II. OTHER INFORMATION


ITEM 5. OTHER INFORMATION.
--------------------------

      On March 31, 2000, the Company received  notification  from  Laboratories
Pharmascience S.A. ("Laboratories  Pharmascience")  terminating the 1998 License
Agreement by and between the Company and Laboratories  Pharmascience pursuant to
which  Laboratories   Pharmascience  was  to  market  and  distribute  Periostat
following the  requisite  regulatory  approval on an exclusive  basis in France,
Morocco,  Algeria,  Tunisia and other countries of French speaking  Africa.  The
Company is engaged in ongoing  discussions  with  Laboratories  Pharmascience to
determine   whether  and  to  what  extent  the  parties  will  continue   their
relationship in the future, if at all.

      On March 31,  2000,  the  Company  announced  that it had filed a New Drug
Application with the FDA for a new dosage form of Periostat. The new dosage form
is a small,  film-coated  tablet  containing  the same active  ingredient as the
currently marketed product (20mg doxycycline hyclate). The Company believes that
this new dosage form is the bioequivalent to the current capsule formulation.

      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.

      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.


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

      (a)   Exhibits

            27 -  Financial Data Schedule.

      (b)   Reports on Form 8-K.

      During the  quarter  ended  March 31,  2000,  the Company did not file any
Current Reports on Form 8-K with the Securities and Exchange Commission.


                                     - 12 -
<PAGE>


                                   SIGNATURES


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

                                    CollaGenex Pharmaceuticals, Inc.



Date: May 12, 2000                By:  /s/ Brian M. Gallagher, Ph.D.
                                         -----------------------------
                                         Brian M. Gallagher, Ph.D.
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)



Date: May 12, 2000                By:  /s/ Nancy C. Broadbent
                                         ----------------------
                                         Nancy C. Broadbent
                                         Chief Financial Officer (Principal
                                         Financial and Accounting Officer)