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, 2003
                             Commission File Number
                                     0-28308

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

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

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 by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

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

     Indicate  the  number of  shares  outstanding  of each of the  Registrant's
classes of Common Stock as of May 1, 2003:

         Class                                    Number of Shares
--------------------------                     ----------------------
Common Stock $.01 par value                          11,409,641


<PAGE>

<TABLE>
<CAPTION>

                        COLLAGENEX PHARMACEUTICALS, INC.

                                TABLE OF CONTENTS
                                -----------------



                                                                                                            Page

<S>                                                                                                           <C>
PART I.       FINANCIAL INFORMATION..................................................................         1

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

                      Condensed Consolidated Balance Sheets as of March 31, 2003
                           (unaudited) and December 31, 2002.........................................         2

                      Condensed Consolidated Statements of Operations for the Three Months Ended
                            March 31, 2003 and 2002 (unaudited)......................................         3

                      Condensed Consolidated Statements of Cash Flows for the Three Months Ended
                            March 31, 2003 and 2002 (unaudited)......................................         4

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

         Item 2.      Management's Discussion and Analysis of Financial Condition and Results of
                      Operations.....................................................................        10

                      Results of Operations..........................................................        12

                      Liquidity and Capital Resources................................................        16

         Item 3.      Quantitative and Qualitative Disclosures About Market Risk.....................        21

         Item 4.      Controls and Procedures........................................................        21

PART II.      OTHER INFORMATION......................................................................        22

         Item 2.      Changes in Securities and Use of Proceeds......................................        22

         Item 5.      Other Information..............................................................        22

         Item 6.      Exhibits and Reports on Form 8-K...............................................        24

SIGNATURES...........................................................................................        25

CERTIFICATIONS.......................................................................................        26
</TABLE>

<PAGE>

                          PART I. FINANCIAL INFORMATION

                          Item 1. Financial Statements.


                                      -1-
<PAGE>


<TABLE>
<CAPTION>

                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES
                      Condensed Consolidated Balance Sheets
                      March 31, 2003 and December 31, 2002
                  (dollars in thousands, except per share data)

                                                                                 March 31,             December 31,
                                  Assets                                           2003                    2002
                                                                             --------------            -------------
                                                                                (unaudited)

Current assets:
<S>                                                                           <C>                 <C>
   Cash and cash equivalents...........................................       $    10,129         $        10,112
   Accounts receivable, net of allowance of $1,587 and $1,412 at March
     31, 2003 and December 31, 2002, respectively......................             1,352                   2,142
   Inventories.........................................................             1,511                   1,415
   Prepaid expenses and other current assets...........................             2,159                   1,630
                                                                              -------------        ----------------
         Total current assets..........................................            15,151                  15,299
Equipment and leasehold improvements, net..............................               619                     559
Deferred license fees..................................................             1,603                   1,749
Other assets...........................................................                27                      27
                                                                              -------------        ----------------
         Total assets..................................................       $    17,400           $      17,634
                                                                              ==============        ===============

                      Liabilities and Stockholders' Equity

Current liabilities:

   Accounts payable....................................................       $     3,385           $       3,616
   Accrued expenses....................................................             3,670                   4,305
   Preferred dividends payable.........................................                --                     800
                                                                              -------------        ----------------
         Total current liabilities.....................................             7,055                   8,721
                                                                              -------------        ----------------
Deferred revenue.......................................................               351                     561

Commitments and Contingencies

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 March 31, 2003 and December 31, 2002
     (liquidation value of $20,000); 150,000 shares of Series A
     participating preferred stock, $0.01 par value, designated and no
     shares issued and outstanding at March 31, 2003 and December 31,
     2002..............................................................                 2                       2
   Common stock, $0.01 par value; 25,000,000 shares authorized,
     11,406,204 and 11,377,631 shares issued and outstanding at March
     31, 2003 and December 31, 2002, respectively......................               114                     114
   Additional paid in capital..........................................            83,331                  82,917
   Accumulated deficit.................................................           (73,453)                (74,681)
                                                                              -------------        ----------------
         Total stockholders' equity....................................             9,994                   8,352
                                                                              -------------        ----------------
         Total liabilities and stockholders' equity....................       $    17,400           $      17,634
                                                                              =============        ================
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                      -2-

<PAGE>
<TABLE>
<CAPTION>

                                           COLLAGENEX PHARMACEUTICALS, INC.
                                                   AND SUBSIDIARIES
                                    Condensed Consolidated Statements of Operations
                                  For the Three Months Ended March 31, 2003 and 2002
                                     (dollars in thousands, except per share data)
                                                      (unaudited)


                                                                                    Three Months Ended March 31,
                                                                                   ------------------------------
                                                                                     2003                  2002


Revenues:
<S>                                                                            <C>                   <C>
   Net product sales...................................................        $     11,370          $      9,881
   Contract revenues...................................................                 550                   792
   License revenues....................................................                 237                    87
                                                                                -----------           -----------
        Total revenues.................................................              12,157                10,760
                                                                                -----------           -----------

Operating expenses:
   Cost of product sales...............................................               1,914                 1,580
   Research and development............................................               1,023                   829
   Selling, general and administrative - other.........................               7,766                 8,928
   Selling, general and administrative -
     stock compensation charge.........................................                 251                    --
                                                                                -----------           -----------
         Total operating expenses......................................              10,954                11,337
                                                                                -----------           -----------

Other income (expense):
   Interest income.....................................................                  31                    22
   Interest expense....................................................                  --                    (1)
   Other expense.......................................................                  (6)                   (1)
                                                                                -----------           -----------
         Net income (loss).............................................               1,228                  (557)
Preferred stock dividend...............................................                 400                   420
                                                                                -----------           -----------
Net income (loss) allocable to common stockholders.....................        $        828          $       (977)
                                                                                ============          ============

Net income (loss) per basic share allocable to common stockholders.....        $       0.07          $      (0.09)
                                                                                ============          ============
Weighted average shares used in computing net income (loss) per basic
   share allocable to common stockholders..............................          11,394,226            11,078,258
                                                                                ============          ============
Net income (loss) per diluted share allocable to common stockholders...        $       0.07          $      (0.09)
                                                                                ============          ============
Weighted average shares used in computing net income (loss) per diluted
   share allocable to common stockholders..............................          12,181,045            11,078,258
                                                                                ============          ============
</TABLE>

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, 2003 and 2002
                                                 (dollars in thousands)
                                                      (unaudited)
                                                                                      Three Months Ended March 31,
                                                                                    --------------------------------
                                                                                        2003                  2002
                                                                                    --------------------------------
Cash flows from operating activities:
<S>                                                                            <C>                   <C>
   Net income (loss).....................................................      $       1,228         $        (557)
   Adjustments to reconcile net income (loss) to net cash provided
     by (used in) operating activities:
         Non-cash compensation expense...................................                251                    --
         Depreciation and amortization expense...........................                222                    90
         Accounts receivable provisions..................................                175                   156
       Changes in operating assets and liabilities:
         Accounts receivable.............................................                615                (1,376)
         Inventories.....................................................                (96)                  (81)
         Prepaid expenses and other assets...............................               (529)                  (86)
         Accounts payable................................................               (231)                  667
         Accrued expenses................................................               (635)                 (591)
         Deferred revenue................................................               (210)                  (62)
                                                                                -------------          ------------
             Net cash provided by (used in) operating activities.........                790                (1,840)
                                                                                -------------          ------------
Cash flows from investing activities:
   Capital expenditures..................................................               (136)                 (167)
                                                                                -------------          ------------
             Net cash used in investing activities.......................               (136)                 (167)
                                                                                -------------          ------------
Cash flows from financing activities:
   Net proceeds from issuance of common stock............................                163                    51
   Payment of preferred dividends........................................               (800)                   --
   Repayment of long-term debt...........................................                 --                   (20)
                                                                                -------------          ------------
             Net cash provided by (used in) financing activities.........               (637)                   31
                                                                                -------------          ------------
             Net increase (decrease) in cash and cash equivalents........                 17                (1,976)
Cash and cash equivalents at beginning of period.........................             10,112                 6,171
                                                                                -------------          ------------
Cash and cash equivalents at end of period...............................      $      10,129         $       4,195
                                                                                =============          ============
Supplemental schedule of noncash investing and financing
   activities:

Common stock dividends issued or issuable on preferred stock......             $          --         $         420
                                                                                =============          ============
     Issuance of warrants to purchase common stock in connection with
         equity line.....................................................      $          --         $         248
                                                                                =============          ============
Supplemental disclosure of cash flow information:
     Cash paid during the period for interest............................      $          --         $           1
                                                                                =============          ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                      -4-

<PAGE>
                        COLLAGENEX PHARMACEUTICALS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 2003 and 2002
                             (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 accounting  principles
generally  accepted in the United  States of America.  Certain  information  and
footnote  disclosures  normally  included in the annual  consolidated  financial
statements prepared in accordance with accounting  principles generally accepted
in the United States of America 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  2002  audited
consolidated financial statements and footnotes included in its Annual Report on
Form 10-K for the year ended December 31, 2002.

     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,
2003,  their results of operations for the three months ended March 31, 2003 and
2002,  and their cash flows for the three  months ended March 31, 2003 and 2002.
Interim  results are not necessarily  indicative of results  anticipated for the
full fiscal year.

     Statement  of  Financial  Accounting  Standards  (SFAS) No. 123 (SFAS 123),
"Accounting  for  Stock-Based  Compensation,"  encourages  but does not  require
companies to record  compensation  cost for  stock-based  employee  compensation
plans at fair value. Accordingly,  compensation cost for stock options issued to
employees  is  measured  as the  excess,  if any,  of the  market  price  of the
Company's  stock at the date both the  number of shares  and price per share are
known  (measurement date) over the exercise price. Such amounts are amortized on
a straight-line  basis over the respective vesting periods of the option grants.
Transactions with nonemployees, in which goods or services are the consideration
received for the issuance of equity  instruments,  are  accounted  for on a fair
value basis in accordance with SFAS 123 and related interpretations.

     The Company has elected to account for stock-based  compensation  under APB
Opinion No. 25,  "Accounting for Stock Issued to Employees." As set forth below,
the pro forma disclosures of net loss allocable to common  stockholders and loss
per share allocable to common stockholders are as if the Company had adopted the
fair value based method of accounting in

                                      -5-
<PAGE>


accordance with SFAS No. 123, as amended by SFAS No. 148, which assumes the fair
value based method of accounting had been adopted:

                                                            Three Months Ended
                                                                 March 31,
                                                          ---------------------
                                                          2003            2002
                                                          ---------------------
 Net income (loss) allocable to common stockholders:
      As reported..............................          $  828        $  (977)
      Add: Stock-based employee
      compensation expenses included in
      net loss allocable to common
      stockholders reported....................              --             --
      Less: Stock-based employee
      compensation under fair value based method         (1,194)          (934)
                                                        ---------      ---------
      Pro forma................................          $ (366)       $(1,911)

 Basic and diluted net loss per
      share allocable to common
      stockholders:
      As reported..............................          $ 0.07        $ (0.09)
                                                        ==========     =========

      Pro forma................................          $(0.03)       $ (0.17)
                                                        ==========     =========

Note 2 -- Inventories

     Inventories  at March  31,  2003  and  December  31,  2002  consist  of the
following:

                                             2003                     2002
                                   ------------------        ------------------
Raw materials.................      $             119        $             233
Work-in-process...............                     56                       56
Finished goods................                  1,336                    1,126
                                    -----------------        -----------------
                                    $           1,511        $           1,415
                                    =================        =================
Note 3 - Line of Credit

     The Company has a revolving credit facility with Silicon Valley Bank, which
expires on March 15, 2004.  The Company may borrow up to the lesser of $4,000 or
80% of eligible accounts receivable,  as defined under the credit facility.  The
amount available to the Company is also reduced by outstanding letters of credit
which may be issued under the credit facility in amounts  totaling up to $1,500.
On March 26, 2002,  the Company  initially  secured its expected  purchase order
commitments for Periostat from Pharmaceutical Manufacturing Research

                                      -6-
<PAGE>

Services,  Inc., a contract manufacturing company, with a letter of credit under
the credit facility for approximately $1,343. This purchase order commitment was
fulfilled at March 31, 2003. On April 1, 2003, the Company  secured its expected
purchase  order  commitments  for the next twelve months with a letter of credit
for approximately $1,061. As the Company continues to pay down amounts under the
letter of credit,  the amount  available to it under the Facility will increase.
The  Company is not  obligated  to draw  amounts  and any such  borrowings  bear
interest,  payable  monthly,  currently  at the prime rate plus 1.0% to 1.5% per
annum and may be used only for working capital purposes.  Without the consent of
Silicon  Valley Bank,  the Company,  among other things,  shall not (i) merge or
consolidate with another entity; (ii) acquire assets outside the ordinary course
of business;  or (iii) pay or declare any cash dividends on the Company's common
stock.  The Company must also  maintain a certain  tangible net worth of $5,000,
subject to certain upward adjustments,  as defined in the amendment, as a result
of profitable  operations or additional debt or equity  financings and a minimum
of $2,000 in cash at Silicon  Valley Bank,  net of  borrowings  under the credit
facility. In addition,  the Company has secured its obligations under the credit
facility  through the granting of a security  interest in favor of the bank with
respect to all of its assets,  including  intellectual property. As of March 31,
2003, the Company had no borrowings outstanding against the credit facility.

Note 4 -- Commitments and Contingencies

     During 1999, the Company entered into a three-year  co-promotion  agreement
with Merck & Co.,  Inc.  for Vioxx under which the Company is committed to spend
up to $1,000 annually for promotional  expenses.  In September 2002, the parties
amended  this  agreement  and extended the term thereof to December 31, 2003 and
will be required to make certain annual expenditures.

     On August 24, 2001, the Company signed an exclusive  License Agreement (the
"Atrix  License  Agreement")  with Atrix to market  Atrix's  proprietary  dental
products,  Atridox(R),  Atrisorb(R)  FreeFlow and  Atrisorb(R)-D,  to the United
States dental market. Pursuant to the terms of the Atrix License Agreement,  the
Company will be required to make certain  annual  minimum  expenditures  for the
lesser of $4,000 or 30% of the Company's  contribution margin, as defined in the
agreement, relating to a specific Atrix product that the Company markets and the
lesser of $2,000 or 30% of the Company's  contribution margin, as defined in the
agreement,  relating  to a  separate  Atrix  product  that the  Company  markets
commencing  with fiscal year 2003.  Additionally,  the Company  must  maintain a
minimum amount of full time sales  professionals  and make a specific  amount of
sales presentations through August 2003.

     On February 11, 2002, the Company executed a Co-operation,  Development and
Licensing  Agreement  pursuant to which the  Company  was granted an  exclusive,
sublicenseable, transferable license with respect to the Restoraderm(TM) topical
drug  delivery  system which the Company  intends to develop for  dermatological
applications.  Pursuant to the terms of such  agreement,  upon the occurrence of
certain events,  the Company will be required to pay certain future  consulting,
royalty and milestone  payments in the aggregate amount of up to $3,700,  and no
more than $2,650 and $1,037 of which  shall be payable  prior to January 1, 2004
and January 1, 2005, respectively.  The Company paid $38 under this Agreement in
the three  months ended March 31,  2003.  The term of such  agreement is for the
life of any patent that may be

                                      -7-
<PAGE>


issued to the Company for the first product the Company develops  utilizing such
technology,  or, if the Company does not acquire any patentable products,  seven
years.

     On June 10, 2002, we executed a Development  and Licensing  Agreement  with
Shire Laboratories,  Inc. pursuant to which the Company was granted an exclusive
worldwide  license  (including the right to sublicense) to develop,  make,  have
made, use, supply, export, import,  register and sell products for the treatment
of various inflammatory  disorders.  In addition,  under the agreement,  certain
product development functions shall be performed for the Company. Also under the
agreement,  the Company has  committed to payments,  in cash or at the Company's
option,  a  combination  of cash  and  the  Company's  common  stock,  upon  the
achievement  of certain  clinical  and  regulatory  milestones  in the event the
Company pursues certain  applications of the technology  which could total up to
$8,200 in the aggregate.  Pursuant to the terms of such  agreement,  the Company
shall also pay a percentage of certain net sales of products,  if any, utilizing
any part of the  technology.  The Company may terminate the agreement upon sixty
days notice.

     On November 18,  2002,  the Company  filed a complaint  and on February 13,
2003, the Company filed a preliminary  injunction in the United States  District
Court  for the  Eastern  District  of New  York  seeking  to  prevent  West-ward
Pharmaceutical  Corporation from selling 20 mg. capsules of doxycycline  hyclate
to treat  periodontal  disease,  which the  Company  believes  infringe  patents
covering the Company's Periostat product.

     The  Company's  suit  alleges  infringement  on  patents to which it is the
exclusive licensee.  The Company anticipates that its future legal costs in this
matter will be  reimbursed by SUNY  pursuant to a Technology  License  Agreement
with the  University.  During the three months ended March 31, 2003, the Company
incurred $198 in legal defense costs,  all of which were deducted from royalties
payable to SUNY.

Note 5 -- Succession Plan for Chief Executive Officer

     On March 19, 2003, the Company  announced that Brian M.  Gallagher,  Ph.D.,
the Company's chairman,  chief executive officer and president,  will be leaving
the Company to pursue other interests. Dr. Gallagher has agreed to remain in his
current  position until a successor is appointed,  and will work as a consultant
for a period of time thereafter to ensure a smooth transition.

     The Company has executed an agreement with Dr. Gallagher, pursuant to which
Dr. Gallagher will be compensated  for, among other things,  his services during
the  transition  period and to recognize  his  historical  contributions  to the
Company.  As a result of this  agreement,  the Company has recognized a non-cash
compensation  charge relating to certain  modifications of Dr. Gallagher's stock
option agreements of approximately  $251 during the three months ended March 31,
2003.  The  Company  has  also  entered  into a  consulting  agreement  with Dr.
Gallagher  pursuant to which he will provide  consulting  services to CollaGenex
for a period of 24 months  following  the  employment  of a new chief  executive
officer.

                                      -8-
<PAGE>

Note 6 -- Termination of License Agreement

     On March 14, 2003, the Company  terminated its license agreement with Roche
S.P.A. As a result of the termination of the agreement, during the first quarter
of 2003,  the Company  accelerated  the  recognition  of the  remaining  $222 of
unamortized  deferred  revenue related to the $400 up-front  payment received in
1996.

                                      -9-

<PAGE>


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

Overview

     CollaGenex   Pharmaceuticals,   Inc.  and   subsidiaries   is  a  specialty
pharmaceutical   company  currently  focused  on  providing  innovative  medical
therapies  to  the  dental  and   dermatology   markets.   Our  first   product,
Periostat(R),  is an orally administered,  prescription  pharmaceutical  product
that was approved by the United States Food and Drug Administration in September
1998 and is the first and only  pharmaceutical  to treat adult  periodontitis by
inhibiting the enzymes that destroy periodontal support tissues.

     We are marketing Periostat and other pharmaceutical  products to the dental
and dermatology  communities through our own professional  pharmaceutical  sales
force of approximately 115 sales  representatives  and managers.  Pursuant to an
exclusive  License and Marketing  Agreement  with Atrix  Laboratories,  Inc., we
began, in October 2001, to actively market Atrix's  proprietary dental products,
Atridox(R) and Atrisorb FreeFlow(R),  and, in February 2002,  Atrisorb-D(R),  to
the United States dental market. In May 2002, we executed a sublicense agreement
with Altana Inc. to, among other things,  market and  distribute,  in the United
States and Puerto Rico, Pandel(R),  a mid-potency topical corticosteroid product
developed  by Altana Inc. In March 2003,  we executed a  co-promotion  agreement
with Sirius Laboratories, Inc. pursuant to which we have begun to jointly market
Sirius' AVAR(TM) product line and Pandel to dermatologists in the United States.
We distribute  Periostat and Pandel  through drug  wholesalers  and large retail
chains in the United  States.  Periostat  is also sold through  wholesalers  and
direct to dentists in the United Kingdom  through our  wholly-owned  subsidiary,
CollaGenex  International  Ltd.,  and by  distributors  and licensees in certain
other  overseas  markets.  The Atrix  dental  products are  distributed  through
specialty  distributors who sell these products directly to dental practitioners
in the United States and Puerto Rico. Our sales force also co-promotes Vioxx(R),
a prescription  non-steroidal,  anti-inflammatory drug developed by Merck & Co.,
Inc.,  in the United  States,  and,  effective  October 1, 2002,  Denavir(R),  a
topically  applied  prescription  medication for the treatment of recurrent cold
sores in adults, for Novartis Consumer Health, Inc.

     With the exception of the year ended December 31, 2002 and the three months
ended March 31,  2003,  during  which year and quarter we achieved net income of
approximately $900,000 and $828,000,  respectively, we have incurred losses each
year since  inception and have an accumulated  deficit of $73.5 million at March
31, 2003.

     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.  Our  business  of  selling,  marketing  and
developing  pharmaceutical products is subject to a number of significant risks,
including  risks  relating  to the  implementation  of  CollaGenex's  sales  and
marketing plans for Periostat and other products that we market,  risks inherent
in research and development activities, risks associated with enforcement of our

                                      -10-
<PAGE>

intellectual  property  rights,  including  risks  relating  to the  outcome and
consequences  of  our  patent  litigation   against   West-ward   Pharmaceutical
Corporation,  risks  that the FDA will  approve  products,  such as  West-ward's
product,  that will  compete  with and limit the  market  for  Periostat,  risks
associated  with  conducting  business  in a highly  regulated  environment  and
uncertainty   relating  to  clinical  trials  of  products  under   development.
CollaGenex's  success  depends to a large degree upon the market  acceptance  of
Periostat by periodontists,  dental practitioners,  other health care providers,
patients and insurance  companies.  There can be no assurance that  CollaGenex's
product  candidates (other than the FDA's approval of Periostat for marketing in
the United States,  the United Kingdom  Medicines  Control Agency's  approval of
Periostat for marketing in the United Kingdom and Periostat's marketing approval
in Austria,  Finland,  Switzerland,  Ireland,  Israel,  Italy,  the Netherlands,
Portugal and Canada) will be approved by any regulatory  authority for marketing
in any jurisdiction or, if approved, that any such products will be successfully
commercialized  by  CollaGenex.  In  addition,  there can be no  assurance  that
CollaGenex  will  successfully   promote  Vioxx,   Denavir,   Pandel,   Atridox,
Atrisorb-FreeFlow,  Atrisorb-D  or the AVAR  product  line.  As a result of such
risks and others  expressed from time to time in  CollaGenex's  filings with the
Securities  and  Exchange  Commission,  CollaGenex's  actual  results may differ
materially  from the  results  discussed  in or implied  by the  forward-looking
statements contained herein.

     Periostat(R),  Metastat(R),  Dermostat(R),   Nephrostat(R),   Osteostat(R),
Arthrostat(R),  Rheumastat(R), Corneostat(R), Gingistat(R), IMPACS(TM), PS20(R),
The Whole Mouth Treatment(R), Restoraderm(TM) and Dentaplex(R) are United States
trademarks  of CollaGenex  Pharmaceuticals,  Inc.  Periostat(R),  Nephrostat(R),
Optistat(R),  Xerostat(R)  and IMPACS(TM) are European  Community  trademarks of
CollaGenex  Pharmaceuticals,  Inc.  Periostat(R),   Nephrostat(R),  Optistat(R),
Xerostat(R),   IMPACS(R),   Dentaplex(R),    Restoraderm(R),    Dermastat(R)   ,
Periocycline(R),  Periostatus(R)  and Periostan(R) are United Kingdom trademarks
of our wholly-owned  subsidiary,  CollaGenex  International Ltd.  CollaGenex(R),
PS20(R), "C" Logo(R) and The Whole Mouth Treatment(R) are European Community and
United Kingdom trademarks of CollaGenex International Ltd.  Periocycline(TM) and
Periostan(TM) are European Community Trademarks of CollaGenex International Ltd.
All other trade names,  trademarks or service marks  appearing in this Quarterly
Report are the  property  of their  respective  owners and are not  property  of
CollaGenex Pharmaceuticals, Inc. or any of our subsidiaries.

     Critical Accounting Policies and Estimates

     Management's  discussion and analysis of its financial position and results
of operations are based upon our consolidated  financial statements,  which have
been prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires management
to make  judgments  and  estimates  that affect the reported  amounts of assets,
liabilities,  revenues and expenses and related  disclosure of contingent assets
and liabilities.  Management believes the critical accounting policies and areas
that  require the most  significant  judgments  and  estimates to be used in the
preparation  of  the  consolidated   financial  statements  pertain  to  revenue
recognition.

     We recognize product sales revenue upon shipment, net of estimated returns,
provided  that  collection  is  determined  to be  probable  and no  significant
obligations  remain.  Sales  revenue from our customers is subject to agreements
allowing limited rights of return, rebates and price

                                      -11-
<PAGE>

protection.  Accordingly,  we reduce  revenue  recognized  for estimated  future
returns,  rebates  and  price  protection  at the time the  related  revenue  is
recorded.  The  estimates  for  returns  are  adjusted  periodically  based upon
historical rates of returns,  inventory  levels in the distribution  channel and
other related factors.  While management believes it can make reliable estimates
for these matters, unsold products in these distribution channels may be exposed
to expiration.  Accordingly,  it is possible that these estimates will change in
the future or that the actual amounts could vary  materially  from our estimates
and that the amounts of such  changes  could  impact our results of  operations,
financial  condition  and our  business.  Our contract  revenues  are  fee-based
arrangements where revenue is earned as prescriptions are written.  Accordingly,
since  we never  take  title  to the  product  being  promoted,  no  significant
obligations  exist beyond the point that the fee is earned and is  recognized as
revenue.

     Since our  inception,  a portion of our  revenue  has been  generated  from
license and distribution agreements for our products. We recognize nonrefundable
signing or license fees that are not dependent on future performance under these
agreements as revenue when received and over the term of the  arrangement  if we
have continuing performance  obligations.  Any amounts deferred are amortized to
revenue over the expected performance period of each underlying  agreement.  The
expected  performance  period  is based on  management's  best  estimate  and is
subject  to  change  based  on  current  market  conditions.   Deferred  revenue
represents the portion of up front license  payments  received that has not been
earned.  Milestone  revenue  from  licensing  arrangements  is  recognized  upon
completion  of  the  milestone   event  or  requirement  if  it  represents  the
achievement  of a significant  step in the research,  development  or regulatory
process.

Results of Operations

     During the three months ended March 31, 2003, we achieved net product sales
of $11.4  million  from  the  sale of  Periostat,  Atridox,  Atrisorb  FreeFlow,
Atrisorb-D  and Pandel.  In  addition,  during the three  months ended March 31,
2003, we generated  $550,000 in contract  revenues mainly from our  co-promotion
activities  with  respect to Vioxx and  Denavir and  $237,000  in  international
licensing revenues.

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenues

-------------------------------------------------------------------------------
Revenues
(dollars in thousands)        2003             Change            2002
-------------------------------------------------------------------------------
Net Product Sales........ $      11,370         15.1%        $       9,881
-------------------------------------------------------------------------------
Contract Revenues........           550        (30.6%)                 792
-------------------------------------------------------------------------------
License Revenues.........           237        172.4%                   87
                          -------------                      -------------
-------------------------------------------------------------------------------
     Total............... $      12,157         13.0%        $      10,760
-------------------------------------------------------------------------------

     Total  revenues  during the three  months  ended  March 31, 2003 were $12.2
million,  representing  a 13.0%  increase  over total  revenues of $10.8 million
during the three  months  ended  March 31,  2002.  Such 2003  revenues  included
approximately $11.4 million in net product sales of Periostat, Atridox, Atrisorb
FreeFlow, Atrisorb-D and Pandel, $550,000 in contract revenues,

                                      -12-
<PAGE>

which were derived from our  co-promotion of Vioxx and Denavir,  and $237,000 of
international licensing revenues for Periostat. Net product sales increased $1.5
million,  or 15.1% to $11.4 million during the three months ended March 31, 2003
compared to $9.9  million  during the three  months  ended March 31, 2002 due to
higher sales of Periostat and the addition of Pandel,  which we launched on July
1, 2002.

     Contract  revenues for the three months ended March 31, 2003 declined 30.6%
to  $550,000  from  $792,000  during  the three  months  ended  March 31,  2002,
primarily  due to the  absence  of  Pandel  contract  revenues  during  2003 and
slightly  lower  Vioxx-related  revenues,  which  were  partially  offset by the
addition of Denavir contract revenues in 2003.

     We recorded $15,000 and $16,000 in licensing  revenues for the three months
ended  March  31,  2003 and March  31,  2002,  respectively.  This  revenue  was
attributable to our recognition of previously  recognized  up-front license fees
received for various  agreements that were deferred and are being  recognized as
licensing  revenue over the expected  performance  period of the agreements.  We
also recorded licensing revenues of $222,000 and $46,000 during the three months
ended March 31, 2003 and 2002, respectfully,  that represent previously deferred
foreign up-front licensing fees where the recognition of revenue was accelerated
in connection with certain  licensing  agreements that were mutually  terminated
during the  respective  quarters.  Additionally,  during the three  months ended
March 31, 2002, we recognized  $25,000 in license milestone fees received from a
foreign licensing partner.

Cost of Product Sales

-------------------------------------------------------------------------------
Cost of Product Sales                          2003        Change        2002
(dollars in thousands)
-------------------------------------------------------------------------------
Cost of Product Sales....................   $  1,914       21.1%      $  1,580
-------------------------------------------------------------------------------
Percent of Net Product Sales.............       16.8%       N/A           16.0%
-------------------------------------------------------------------------------

     Cost of product sales includes product  packaging,  third-party  royalties,
amortization  of  product  licensing  fees,  and the costs  associated  with the
manufacturing,  storage  and  stability  of  Periostat,  Pandel  and  the  Atrix
products.

     Cost of product sales were $1.9  million,  or 16.8% of product sales during
the three  months ended March 31, 2003,  compared to $1.6  million,  or 16.0% of
product  sales during the three  months  ended March 31, 2002.  During the three
months ended March 31, 2003, cost of product sales increased in absolute dollars
as a result of sales  increases  and as a  percentage  of  product  sales due to
product mix, compared to the three months ended March 31, 2002, primarily due to
increased cost of sales associated with Pandel,  which was launched in July 2002
and which has lower gross margins than Periostat.

Research and Development

-------------------------------------------------------------------------------
Research and Development                       2003        Change        2002
(dollars in thousands)
-------------------------------------------------------------------------------
Research and development..................   $  1,023       23.4%     $   829
-------------------------------------------------------------------------------
Percentage of Total revenues..............        8.4%       N/A          7.7%
-------------------------------------------------------------------------------

                                      -13-

<PAGE>


     Research and development  expenses consist primarily of funds paid to third
parties  for the  provision  of services  and  materials  for drug  development,
manufacturing  and  formulation  enhancements,   clinical  trials,   statistical
analysis and report writing and regulatory compliance costs.

     Research and development  expenses  increased  $194,000,  or 23.4%, to $1.0
million  during the three months ended March 31, 2003 from  $829,000  during the
three months ended March 31, 2002.

     Development projects conducted during the three months ended March 31, 2003
included  our  continuing   formulation   development   work  for  a  once-a-day
formulation  of Periostat  and  formulation  and  stability  testing for several
potential products utilizing our licensed Restoraderm technology,  which totaled
$320,000  and  $49,000,  respectively.  Future  development  of  the  once-a-day
technology  will be  contingent  on the  outcome  of the  initial  phase  of the
project,  which  should  be  determined  by the  end  of  2003.  If  successful,
additional expenses could be as much as $4.4 million through 2006.

     Clinical  projects totaling $248,000 were conducted during the three months
ended March 31, 2003 and  included  several  Phase IV studies for  Periostat  in
various dental indications and continued  clinical  development work relating to
Periostat in  dermatological  indications and including a Phase III trial in 150
patients to evaluate  Periostat for the treatment of rosacea.  Until the outcome
of these  trials is  determined,  it is  premature  to estimate the future costs
associated with the development of Periostat for any indication.

     Other research and  development  expenses  incurred during the three months
ended March 31, 2003  included  $11,000 in regulatory  consulting  and legal and
filing fees under the Mutual  Recognition  Procedure  in Europe and $162,000 for
various regulatory costs, including annual FDA filing fees, legal and regulatory
expenses in the United  States.  Direct  salaries and other  personnel  expenses
incurred   during  the  three  months  ended  March  31,  2003  were   $140,000.
Additionally,  during such period we incurred $93,000 in consulting,  travel and
other office expenses.

     Development  projects  contracted  during the three  months ended March 31,
2002  included  our   continuation  of  a  feasibility   study  and  formulation
development  work for a once-a-day  formulation of Periostat and our Restoraderm
technology, which totaled $155,000 and $70,000, respectively.

     Clinical  projects totaling $273,000 were conducted during the three months
ended March 31, 2002 and  included  several  Phase IV studies for  Periostat  in
various dental indications and the continuation of clinical trials for Periostat
in dermatological indications.

     Other research and  development  expenses  incurred during the three months
ended March 31, 2002 included  $44,000 in regulatory  consulting and filing fees
under the  Mutual  Recognition  Procedure  in Europe  and  $61,000  for  various
regulatory  costs,  including  annual FDA filing  fees and legal and  regulatory
expenses in the United States. Research and development expenses incurred during
the three months ended March 31, 2002 also included

                                      -14-

<PAGE>

$145,000 in direct  salaries and other  personnel  related  expenses and $81,000
relating to travel and other office expenses.

Selling, General and Administrative
--------------------------------------------------------------------------------
Selling, General and Administrative           2003        Change         2002
(dollars in thousands)
-------------------------------------------------------------------------------
Selling, General and Administrative -
other.....................................  $ 7,766       (13.0%)       $ 8,928
-------------------------------------------------------------------------------
Selling, General and Administrative -
stock compensation charge.................      251         100%             --
-------------------------------------------------------------------------------
Subtotal..................................    8,017       (10.2%)         8,928
-------------------------------------------------------------------------------
Percentage of Total Revenues..............     65.9%         N/A           83.0%
-------------------------------------------------------------------------------

     Selling,  general and  administrative,  other expenses consist primarily of
personnel salaries and benefits, direct marketing costs, professional, legal and
consulting fees, insurance and general office expenses.

     Selling,  general and  administrative  - other expenses  decreased 13.0% to
$7.8  million  during the three  months  ended March 31, 2003 from $8.9  million
during the three months ended March 31, 2002.  This decrease of $1.1 million was
primarily  the  result of a $1.7  million  reduction  in selling  and  marketing
expenditures  for  Periostat,  offset  in  part  by  approximately  $300,000  in
additional  promotional  expenses for the Atrix  dental  products and Pandel and
$300,000 in increased administrative costs.

     Significant  components  of  selling,  general and  administrative  - other
expenses  incurred  during the three months ended March 31, 2003  included  $4.0
million in direct selling and sales training expenses, $2.1 million in marketing
expenses (including  advertising and promotion  expenditures for Periostat,  the
Atrix products and co-promotion  expenses relating to Vioxx and Pandel) and $1.7
million  in  general  and  administrative   expenses,   which  include  business
development,  finance  and  corporate  activities.   Significant  components  of
selling, general and administrative expenses during the three months ended March
31, 2002 included  $4.4 million in direct  selling and training  expenses,  $3.2
million  in   marketing   expenses   (including   Periostat   Direct-to-Consumer
advertising   expenditures,   launch   expenses  for  the  Atrix   products  and
co-promotion  expenses  related to Vioxx and Pandel) and $1.4 million in general
and administrative expenses, which included business,  development,  finance and
corporate activities.

     Selling, general and administrative - stock compensation charge of $251,000
during the three months ended March 31, 2003 resulted from certain modifications
made to stock option agreements held by Brian M. Gallagher, Ph.D., our chairman,
chief executive officer and president, in connection with a Transition Agreement
we executed  with Dr.  Gallagher  on March 18, 2003.


                                      -15-
<PAGE>

Other Income/Expense

-------------------------------------------------------------------------------
Other Income/Expense                     2003          Change             2002
-------------------------------------------------------------------------------
Interest income...................   $    31,000         40.9%      $    22,000
-------------------------------------------------------------------------------
Interest expense..................   $        --          100%      $     1,000
-------------------------------------------------------------------------------
Other expense.....................   $     6,000          500%      $     1,000
-------------------------------------------------------------------------------

     Interest  income  increased to $31,000 for the three months ended March 31,
2003  compared  to $22,000  for the three  months  ended  March 31,  2002.  This
increase was due to higher average investment balances in 2003. Interest expense
for the three months  ended March 31, 2003 was zero,  compared to $1,000 for the
three months ended March 31, 2002.  Other  expenses  increased to $6,000 for the
three months ended March 31, 2003  compared to $1,000 for the three months ended
March 31, 2002. Such increase was attributable to foreign  currency  transaction
gains.

Preferred Stock Dividend

     Preferred  stock  dividends  were $400,000 and $420,000  during each of the
three  months  ended  March  31,  2003 and March 31,  2002,  respectively.  Such
preferred  stock  dividends,  paid in shares of our Common Stock through May 11,
2002, and  thereafter in cash,  are the result of our  obligations in connection
with the issuance of our Series D preferred stock in May 1999. As more fully set
forth in the Amended  Certificate of Designation,  Preferences and Rights of the
Series D Cumulative  Convertible  Preferred  Stock,  after May 11,  2002,  we no
longer pay  dividends  on the Series D  preferred  stock in shares of our Common
Stock at a rate of 8.4%, and we became  obligated to pay such dividends in cash,
at a rate equal to 8% per annum.

Liquidity and Capital Resources

     On May 12, 1999,  we  consummated  a $20.0  million  financing  through the
issuance of our Series D preferred stock,  which generated net proceeds to us of
$18.5  million.  The issuance of the Series D preferred  stock was approved by a
majority of our  stockholders  at our Annual Meeting of  Stockholders on May 11,
1999.  A portion of the  proceeds  of the  Series D  preferred  stock  financing
consummated  in May 1999  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  such  financing.  The  remaining  proceeds  have been used for
general working capital purposes.

     The Series D preferred  stock is convertible at any time into shares of our
common stock at a current  conversion price of $9.89 per share, which conversion
price reflects a decrease from the initial  conversion price of $11.00 per share
as a result of certain  subsequent equity issuances by us. Such conversion price
is not  subject to reset  except in the event that we should fail to declare and
pay dividends  when due or we 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  preferred  stock.
During  the first  three  years  following  issuance,  holders  of the  Series D
preferred stock received  dividends payable in shares of fully registered common
stock at a rate of 8.4% per annum. Thereafter, and beginning on

                                      -16-
<PAGE>

May 12,  2002,  we began  paying  such  dividends  in cash at a rate of 8.0% per
annum.

     All or a portion of the shares of Series D preferred  stock  shall,  at our
option (as  determined by our 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  askedprices on
the  Nasdaq  National  Market is at least 200% of the  conversion  price then in
effect (as of March 31,  2003,  such  conversion  price was $9.89 per share) for
forty consecutive  trading days; and (ii) a shelf  registration  statement is in
effect for the shares of common stock to be issued upon conversion of the Series
D  preferred  stock.  Without  written  approval of a majority of the holders of
record of the Series D preferred stock,  we, among other things,  shall not: (i)
declare or pay any dividend or  distribution  on any shares of our capital stock
other than dividends on the Series D preferred 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  our debt  securities,  except  that we 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 we have  reported
positive  net income for four  consecutive  quarters  immediately  prior to such
twelve month period.

     We have a revolving  credit facility with Silicon Valley Bank which expires
on March 15,  2004.  We may  borrow up to the  lesser of $4.0  million or 80% of
eligible accounts receivable,  as defined under the credit facility.  The amount
available  to us is also reduced by  outstanding  letters of credit which may be
issued  under the credit  facility in amounts  totaling up to $1.5  million.  On
March 26, 2002, we initially secured our expected purchase order commitments for
Periostat from Pharmaceutical  Manufacturing Research Services, Inc., a contract
manufacturing  company,  with a letter of credit  under the credit  facility for
approximately  $1.3 million.  This purchase  order  commitment  was fulfilled at
March 31,  2003.  On April 1,  2003,  we secured  our  expected  purchase  order
commitments for the next twelve months with a letter of credit for approximately
$1.1 million. As we continue to pay down amounts under the letter of credit, the
amount available to us under the Facility will increase. We are not obligated to
draw amounts and any such borrowings bear interest,  payable monthly,  currently
at the prime  rate plus 1.0% to 1.5% per annum and may be used only for  working
capital  purposes.  Without the consent of Silicon  Valley Bank, we, among other
things,  shall not: (i) merge or consolidate  with another entity;  (ii) acquire
assets outside the ordinary course of business; or (iii) pay or declare any cash
dividends  on our common  stock.  We must also  maintain a certain  tangible net
worth of $5.0 million, subject to certain upward adjustments,  as defined in the
amendment,  as a result of profitable  operations  or additional  debt or equity
financings  and a minimum of $2.0 million in cash at Silicon Valley Bank, net of
borrowings  under  the  credit  facility.  In  addition,  we  have  secured  our
obligations  under the  credit  facility  through  the  granting  of a  security
interest in favor of the bank with respect to all of our assets,  including  our
intellectual  property.  As of March 31, 2003, we had no borrowings  outstanding
against the credit facility.

     On August 24, 2001, we signed a License and Marketing  Agreement with Atrix
Laboratories,  Inc. to market  Atrix's  proprietary  dental  products,  Atridox,
Atrisorb FreeFlow and


                                      -17-
<PAGE>



Atrisorb-D,  to the United States dental  market.  Pursuant to the terms of this
agreement,  among other things:  (i) Atrix will  manufacture the dental products
for us at an agreed upon transfer price and will receive royalties on future net
sales of the products each calendar  year;  (ii) we paid to Atrix a $1.0 million
licensing fee to market such  products;  (iii) we committed to no less than $2.0
million in advertising and selling expenses related to the Atrix products during
the fiscal  year  beginning  January 1, 2002  (which  requirement  we met during
2002); (iv) we have agreed to maintain,  through August 2003, a force of no less
than ninety full time dental consultants and divisional and regional managers to
make sales and product recommendation calls on dental professionals;  and (v) we
agreed  that the Atrix  products  would be the  subject of a specific  number of
detail calls in the United  States during 2002,  which we achieved.  We are also
required  to make  certain  annual  minimum  expenditures  for  advertising  and
promotional activities over the term of the agreement beginning January 1, 2003,
including:  (i) the lesser of $4.0 million or 30% of our contribution margin, as
defined in the  agreement,  relating to a specific Atrix product that we market,
and (ii) the  lesser  of $2.0  million  or 30% of our  contribution  margin,  as
defined in the agreement, relating to a separate Atrix product that we market.

     At March 31, 2003 and December 31, 2002,  we had cash and cash  equivalents
of  approximately  $10.1  million.  In  accordance  with  investment  guidelines
approved by our 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.  Our
working capital at March 31, 2003 was $8.1 million,  an increase of $1.5 million
from $6.6 million at December 31, 2002. This increase was primarily attributable
to operating  profitability.  During the three  months ended March 31, 2003,  we
generated  $790,000 in cash from our operating  activities  principally from net
income of $1.2  million  less  changes in certain  assets  and  liabilities.  We
invested $136,000 in capital expenditures and received $163,000 in proceeds from
the exercise of stock options and warrants to purchase  common stock and we paid
$800,000 in cash dividends to the holders of our Series D preferred stock.

     Prior to the  third  quarter  of 2002,  we had  negative  cash  flows  from
operations  and have used the net proceeds of public and private  placements  of
our equity to fund operations.  We currently believe that projected increases in
sales of our United States  marketed  products in combination  with contract and
license  revenues,  working capital at March 31, 2003 and available cash inflows
from our revolving  credit  facility  with Silicon  Valley Bank will allow us to
fund  our  operations,   capital   expenditures  and  preferred  stock  dividend
requirements into 2004. At this time,  however, we cannot accurately predict the
effect of certain  developments  on future  product  sales such as the degree of
market acceptance of our products and technology, competition, the effectiveness
of our  sales  and  marketing  efforts  and  the  outcome  of our  research  and
development to demonstrate the utility of Periostat in indications  beyond those
already  included in the FDA  approved  label.  Contract  and  license  revenues
include receipts from co-promotion  agreements and performance  milestones.  The
continuation of any of these agreements is subject to the achievement of certain
milestones and to periodic review by the parties involved.

     We  believe  that other key  factors  that could  affect our  internal  and
external sources of cash are:

          o Revenues and margins from sales of Periostat and other  products and
            contracted services;

                                      -18-

<PAGE>


          o The success of our dermatology franchise;

          o The success of our pre-clinical, clinical and development programs;

          o The receptivity of the capital markets to future financings;

          o Our ability to enter into additional strategic collaborations and to
            maintain existing and new collaborations and the success of such
            collaborations; and

          o Our ability to meet the covenant  requirements  under our  revolving
            credit facility.

Contractual Obligations

     Our major outstanding  contractual  obligations relate to cash dividends on
our outstanding Series D preferred stock,  operating leases for our office space
and contractual  commitments with our marketing partners for certain selling and
promotional  expenses  associated with the products we are currently  detailing.
Additionally,  we also  expect  to make  certain  inventory  purchases  from our
contract  manufacturer  of Periostat,  guaranteed by our  irrevocable  Letter of
Credit with Silicon Valley Bank.

         Below is a table which presents our contractual obligations and
commercial commitments as of March 31, 2003:

<TABLE>
<CAPTION>

                                                             Payments Due by Period

----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>               <C>              <C>
 Contractual Obligations          Total                2003            2004 and          2006 and         2008 and
                                                                         2004              2007             after
----------------------------------------------------------------------------------------------------------------------
Operating Leases(1)......       $2,137,000           $245,000          $678,000          $684,000         $530,000
----------------------------------------------------------------------------------------------------------------------
Unconditional Purchase                                (3) (4)
   Obligations...........       $1,061,000         $1,061,000(2)          (4)              (4)              (4)
----------------------------------------------------------------------------------------------------------------------
Cash Dividends on
   Series D Preferred
   Stock.................     $7,200,000(5)         $800,000(5)      $3,200,000(5)    $3,200,000(5)         (5)
----------------------------------------------------------------------------------------------------------------------
Consulting Payments......      $649,000(6)              (6)           $649,000(6)          - -              - -
----------------------------------------------------------------------------------------------------------------------
Total Contractual              $11,047,000          $2,106,000        $4,527,000      $3,884,000          $530,000
   Obligations...........
----------------------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Such amounts  primarily include minimum rental payments for our office
          lease in Newtown, Pennsylvania.

     (2)  Such  amount  represents  purchase  order  commitments  for  inventory
          purchases with various suppliers.

     (3)  Under the terms of our  Co-Promotion  Agreement with Merck & Co., Inc.
          for Vioxx,  which expires December 31, 2003, we are obligated to spend
          up to $1.0 million annually

                                      -19-
<PAGE>


          for promotional  expenses, or such lesser amount as will be determined
          by mutual agreement of the parties.

     (4)  We will be required to make certain  annual minimum  expenditures  for
          advertising and promotional activities amounting to: (i) the lesser of
          $4.0  million or 30% of our  contribution  margin  (as  defined in the
          agreement)  relating to a specific  Atrix product that we market,  and
          (ii) the lesser of $2.0 million or 30% of our contribution  margin (as
          defined in the agreement) relating to a separate Atrix product that we
          market.  See  further  information  regarding  the Atrix  License  and
          Marketing   Agreement   under  the  heading   "Liquidity  and  Capital
          Resources."

     (5)  Pursuant to the terms of our Series D Cumulative Convertible preferred
          stock and unless earlier converted  pursuant to its terms, the holders
          of the Series D preferred  stock are entitled to dividends  payable in
          cash at a rate of 8.0% per annum.  See further  information  regarding
          our Series D preferred stock under the heading  "Liquidity and Capital
          Resources."

     (6)  Such  amount  represents  consulting  payments  to be made to Brian M.
          Gallagher,  our  chief  executive  officer  and  president,  upon  his
          separation  from the Company and pursuant to the terms of a consulting
          agreement executed March 18, 2003.

     In May 1999, we entered into a lease agreement relating to our office space
in Newtown,  Pennsylvania.  The lease has an initial term of ten years.  Rent is
expected  to be  approximately  $318,000  per  year  and is  subject  to  market
adjustments in 2004.

     On February 11, 2002, we executed a Co-operation, Development and Licensing
Agreement  pursuant  to  which we were  granted  an  exclusive,  sublicenseable,
transferable  license with respect to the Restoraderm(TM)  topical drug delivery
system which we intend to develop for dermatological  applications.  Pursuant to
the terms of such agreement,  upon the occurrence of certain events,  we will be
required to pay certain future consulting, royalty and milestone payments in the
aggregate  amount of up to $3.7 million,  and no more than $2.7 million and $1.0
million of which shall be payable  prior to January 1, 2004 and January 1, 2005,
respectively.  The term of such agreement is for the life of any patent that may
be issued to us for the first product we develop utilizing such technology,  or,
if we do not acquire any patentable products, seven years.

     On June 10, 2002, we executed a Development  and Licensing  Agreement  with
Shire  Laboratories,  Inc.  pursuant  to  which  we were  granted  an  exclusive
worldwide  license  (including the right to sublicense) to develop,  make,  have
made, use, supply, export, import,  register and sell products for the treatment
of various inflammatory  disorders.  In addition,  under the agreement,  certain
product  development  functions shall be performed for us. Pursuant to the terms
of such  agreement,  we will pay to Shire a  percentage  of certain net sales of
products,  if any,  utilizing  any part of  Shire's  technology.  Also under the
agreement,  we  have  committed  to  payments,  in  cash  or at  our  option,  a
combination  of cash and our  common  stock,  upon the  achievement  of  certain
clinical and regulatory  milestones in the event we pursue certain  applications
of the technology which could total up to $8.2 million in the aggregate.

                                      -20-
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     We had cash  equivalents  at March 31, 2003 which are exposed to the impact
of interest  rate changes and our  interest  income  fluctuates  as our interest
rates change.  Due to the short-term  nature of our  investments in money market
funds, the carrying values of our cash equivalents  approximate their fair value
at March 31, 2003.

Item 4. Controls and Procedures.

     (a)  Evaluation  of  disclosure  controls  and  procedures.  Based on their
evaluation  of our  disclosure  controls  and  procedures  (as  defined in Rules
13a-14(c) and 15d-14(c) under the Securities  Exchange Act of 1934) as of a date
within 90 days of the filing  date of this  Quarterly  Report on Form 10-Q,  our
chief  executive  officer and chief  financial  officer have  concluded that our
disclosure  controls  and  procedures  are  designed to ensure that  information
required to be  disclosed  by us in the reports that we file or submit under the
Exchange Act is recorded,  processed,  summarized  and reported  within the time
periods specified in the SEC's rules and forms and are operating in an effective
manner.

     (b) Changes in internal controls.  There were no significant changes in our
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of their most recent evaluation.


                                      -21-
<PAGE>


                           PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds.

Changes in Securities

     The following  information relates to all securities of the Company sold by
the  Company  within  the past  quarter  which  were not  registered  under  the
securities laws at the time of grant, issuance and/or sale:

     Option Grants

     During the first quarter of 2003, we granted stock options  pursuant to our
1996 Stock Plan which were not  registered  under the Securities Act of 1933, as
amended (the  "Securities  Act").  All of such option grants were granted at the
then current fair market value of the Common  Stock.  The  following  table sets
forth certain information regarding such grants during the quarter:

                                                     Weighted
                   Number                             Average
                 of Shares                        Exercise Price
                 ---------                        --------------

                  432,400                            $10.0421

     We did not employ an  underwriter  in  connection  with the issuance of the
securities  described  above.  We believe  that the  issuance  of the  foregoing
securities  was exempt from  registration  under  either (i) Section 4(2) of the
Securities  Act as  transactions  not  involving  any public  offering  and such
securities  having  been  acquired  for  investment  and  not  with  a  view  to
distribution,  or (ii) Rule 701 under the  Securities Act as  transactions  made
pursuant  to a  written  compensatory  benefit  plan or  pursuant  to a  written
contract  relating  to  compensation.  All  recipients  had  adequate  access to
information about the Company.

Item 5. Other Information.

Data Evaluating Periostat Presented

     On March 13, 2003, we announced that data from four studies  evaluating the
use of Periostat to treat  patients with dental and medical  disorders  would be
presented at the American  Association for Dental Research (AADR) annual meeting
in San Antonio,  Texas, March 12-15, 2003. Two independent  studies document the
adjunctive  use of Periostat in the  treatment of  periodontitis  patients  with
diabetes,  a third  abstract  describes the impact of Periostat on biomarkers of
systemic  inflammation  in patients with acute  coronary  syndromes and a fourth
paper  describes  the use of  Periostat  to modulate  wound  healing in patients
undergoing a form of periodontal surgery called Access Flap Surgery.

                                      -22-
<PAGE>

Succession Plan for Chief Executive Officer

     On March 19, 2003, we announced that Brian M. Gallagher, Ph.D., chairman of
the board,  chief executive officer and president of the Company will be leaving
the Company to pursue other interests. Dr. Gallagher has agreed to remain in his
current  position until a successor is appointed,  and he will work closely with
the Company as a consultant  for a period of time  thereafter to ensure a smooth
transition.

     We have executed an agreement with Dr. Gallagher  pursuant to which we will
compensate  Dr.  Gallagher  for,  among other  things,  his services  during the
transition period and to recognize his historical  contributions to the Company.
As a result of this  agreement,  we  recognized a non-cash  compensation  charge
relating to certain  modifications of Dr. Gallagher's stock option agreements of
approximately  $251,000 in the first  quarter of 2003.  We also  entered  into a
consulting  agreement  with Dr.  Gallagher  pursuant  to  which he will  provide
consulting  services  to the  Company  for a period of 24 months  following  the
appointment of a new chief executive officer.

Co-Promotion Agreement

     On March 20,  2003,  we announced  that we had entered into a  Co-Promotion
Agreement  with Sirius  Laboratories,  Inc.,  pursuant to which we will  jointly
market Sirius' AVAR(TM) product line and Pandel to  dermatologists in the United
States.

Phase II Metastat Clinical Trial Enrollment

     On March 28, 2003, we announced that the AIDS Malignancy  Consortium  (AMC)
had completed  enrollment  in and closed to accrual a Phase II study  evaluating
the efficacy of Metastat, an orally-active  angiogenesis  inhibitor developed by
the  Company  in  treating  HIV-related  Kaposi's  sarcoma.  This study is being
sponsored by the National  Cancer  Institute  (NCI) pursuant to our  Cooperative
Research and Development Agreement with the NCI for Metastat.

Marketing Authorizations

     On April 1, 2003, we announced that we had received marketing authority for
Periostat  from  the  Swiss  regulatory  authority,  SwissMedic.  As  previously
announced,  we executed an exclusive  marketing and distribution  agreement with
Karr Dental Ltd., a  Zurich-based  company,  with respect to the  marketing  and
distribution  of  Periostat  tablets  in  Switzerland.  It is  anticipated  that
Periostat will be introduced in Switzerland in approximately 6 months, following
completion of product labeling in the German, Italian and French languages.

     On  April 3,  2003,  we  announced  that our  Canadian  licensing  partner,
Pharmascience Inc., had received marketing  authorization for Periostat from the
Canadian Therapeutic Products Program of Health Canada.  Pharmascience Inc. will
be responsible for all sales activity for Periostat in the Canadian  market.  We
will receive  royalties on sales of Periostat in Canada,  along with  milestones
associated with the achievement of certain specific commercial objectives.


                                      -23-

<PAGE>


Publication of Periostat Acne Data in Archives of Dermatology

     On April 22, 2003, we announced  that the April issue of the  peer-reviewed
journal, Archives of Dermatology,  features a report describing the outcome of a
multi-center,   randomized,   placebo-controlled  Phase  II  clinical  trial  of
Periostat in the  treatment of moderate  facial acne.  The study was designed to
determine whether Periostat  improved clinical outcome in patients with moderate
acne compared to placebo,  without causing negative effects on the skin flora or
significant side effects.

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

     (a) Exhibits

          99.1 Certification Pursuant to 18 U.S.C. Section 1350.

     (b) Reports on Form 8-K.

          On February 14, 2003,  we filed a Current  Report on Form 8-K with the
          Securities and Exchange  Commission  relating to our patent litigation
          against West-ward Pharmaceutical Corporation.

          On March  19,  2003,  we filed a  Current  Report on Form 8-K with the
          Securities and Exchange Commission relating to the succession plan for
          our chief executive officer and president, Brian M. Gallagher, Ph.D.

                                      -24-

<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 15, 2003                By: /s/ Brian M. Gallagher, Ph.D.
                                         -------------------------------------
                                         Brian M. Gallagher, Ph.D.
                                         President and Chief Executive Officer
                                         (Principal Executive Officer)



Date:    May 15, 2003                By:/s/ Nancy C. Broadbent
                                        --------------------------------------
                                        Nancy C. Broadbent
                                        Chief Financial Officer (Principal
                                        Financial and Accounting Officer)


<PAGE>




                                  CERTIFICATION

I,  Brian  M.  Gallagher,   Ph.D.,   Chief   Executive   Officer  of  CollaGenex
Pharmaceuticals, Inc., certify that:

     1.   I have  reviewed  this  quarterly  report on Form  10-Q of  CollaGenex
          Pharmaceuticals, Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.





                                     /s/ Brian M. Gallagher, Ph.D.
                                     ------------------------------------
Dated:   May 15, 2003                Brian M. Gallagher, Ph.D.
                                     Chief Executive Officer


<PAGE>


                                  CERTIFICATION

I, Nancy C. Broadbent,  Chief Financial  Officer of CollaGenex  Pharmaceuticals,
Inc., certify that:

     1.   I have  reviewed  this  quarterly  report on Form  10-Q of  CollaGenex
          Pharmaceuticals, Inc.;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and we have:

          a)   designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

          b)   evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent function):

          a)   all  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

          b)   any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.



                                       /s/ Nancy C. Broadbent
                                      ----------------------------------
Dated:   May 15, 2003                  Nancy C. Broadbent
                                       Chief Financial Officer