UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C.

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                        For the transition period from to

                         COMMISSION FILE NUMBER 1-10352

                           COLUMBIA LABORATORIES, INC.
                           ---------------------------
               (Exact name of Company as specified in its charter)

        DELAWARE                                               59-2758596
        --------                                               ----------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

   2665 SOUTH BAYSHORE DRIVE, PH II-B
            MIAMI, FLORIDA                                        33133
 --------------------------------------                           -----
(Address of principal executive offices)                        (Zip Code)

Company's telephone number, including area code: (305) 860-1670

Securities registered pursuant to Section 12(b) of the Act:

COMMON STOCK, $.01 PAR VALUE                   AMERICAN STOCK EXCHANGE
----------------------------                   -----------------------
  (Title of each class)                   (Name of exchange where registered)

        Indicate by check mark whether the Company (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 Company
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

        The aggregate market value of Columbia Laboratories, Inc. Common Stock,
$.01 par value, held by non-affiliates, computed by reference to the price at
which the stock was sold as of February 28, 1997: $379,321,110

        Number of shares of Common Stock of Columbia Laboratories, Inc. issued
and outstanding as of February 28, 1997: 28,112,436


<PAGE>


                                     PART I

ITEM 1. BUSINESS

GENERAL DESCRIPTION OF BUSINESS

        Columbia Laboratories, Inc. (the "Company") was incorporated as a
Delaware corporation in December 1986. The Company's objective is to develop
unique pharmaceutical products that treat female specific diseases and
conditions including menopause, fertility, contraception, sexually transmitted
diseases, premenstrual syndrome and dysmenorrhea. Columbia's products primarily
utilize the Company's patented bioadhesive delivery technology, the Bioadhesive
Delivery System.

        Formulated products utilizing the Bioadhesive Delivery System consist
principally of a polymer, polycarbophil, and an active ingredient. The
Bioadhesive Delivery System is based upon the principle of bioadhesion, a
process by which the polymer adheres to epithelial surfaces and to mucin, a
naturally occurring secretion of the mucous membranes. The polymer remains
attached to epithelial surfaces and/or the mucin and is discharged upon normal
cell turnover or upon the detachment of the mucin from the mucous membranes, a
physiological process which, depending upon the area of the body, occurs every
12 to 72 hours. This extended period of attachment permits the Bioadhesive
Delivery System to be utilized in products when extended duration of
effectiveness is desirable or required.

        The Company has focused on women's health care because of the
significant number of women whose health and hygiene needs have not been met by
available products and because the Company has found vaginal delivery to be
particularly effective. The Company intends to continue to develop products that
improve the delivery of previously approved drugs.

        The Company is currently engaged solely in one business segment -- the
development and sale of pharmaceutical products and cosmetics. See footnote 6 to
the consolidated financial statements for information on foreign operations.

        The Company's principal executive offices are located at 2665 South
Bayshore Drive, Miami, Florida 33133, and its telephone number is (305)
860-1670. The Company's subsidiaries, all of which are wholly-owned, are
Columbia Laboratories (Bermuda) Ltd. ("Columbia Bermuda"), Columbia Laboratories
(France) SA ("Columbia France"), Columbia Laboratories (UK) Limited ("Columbia
UK"), Columbia Laboratories (Ireland) Limited ("Columbia Ireland") and Columbia
Research Laboratories, Inc. ("Columbia Research").

        Except for historical information contained herein, the matters
discussed in this document are forward looking statements made pursuant to the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Such
statements involve risks and uncertainties, including but not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products and prices, and other factors discussed
elsewhere in this report.

PRODUCTS

        CRINONE(/trademark/). The Company's first prescription drug is a
sustained release, vaginally delivered, natural progesterone product. Crinone
utilizes the Company's patented Bioadhesive Delivery System which enables the
progesterone to achieve a "First Uterine Pass Effect"(C). Crinone is the first
product to deliver progesterone directly to the uterus, thereby maximizing
therapeutic benefit and avoiding side effects seen with orally-delivered
synthetic progestins. If cleared for marketing by the FDA, Crinone will be the
first vaginally-delivered natural progesterone gel available in the U.S.

                                      -2-

<PAGE>

        In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary amenorrhea (loss of menstrual
period). In November 1996, the Company submitted a second NDA for clearance to
market Crinone for use in Assisted Reproductive Technologies ("ART") procedures,
including IN-VITRO fertilization, ovum donation and stimulated cycles. The FDA
granted the ART filing a priority review. In addition, in February 1997, the FDA
approved the Company's Treatment Protocol under its Investigational New Drug
Application ("IND") for the use of Crinone in assisted fertility procedures. As
a result, through leads generated by the Wyeth-Ayerst institutional sales force,
Columbia has begun distributing Crinone to leading infertility clinics
throughout the United States.

        The first regulatory approval for Crinone as a prescription drug was
received in the U.K. in June 1995. Approved indications in the U.K. include the
prevention of hyperplasia and endometrial cancer in post-menopausal women
receiving hormone replacement therapy ("HRT"), use in IN VITRO fertilization
procedures, reduction of the symptoms of premenstrual syndrome ("PMS"),
menstrual irregularities, dysmenorrhea and dysfunctional uterine bleeding, and
infertility due to inadequate luteal phase (insufficient progesterone
production). Regulatory authorities in Finland and Ireland have also approved
Crinone for these indications. In France, Crinone is approved for use in IN
VITRO fertilization procedures and approvals for additional indications are
expected during 1997. Approvals in Germany, Italy, Brazil, Belgium, Holland,
Scandinavia, Greece and Portugal are also expected during 1997.

        In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Product Corporation
("AHP") under which the Wyeth-Ayerst division of AHP will market Crinone. Under
the terms of the agreement, the Company has received $10.5 million in milestone
payments to date and will continue to receive additional milestone payments and
a percentage of sales.

        ADVANTAGE 24(/registered/). Advantage 24, the Company's 24 hour
sustained release contraceptive gel, is sold in the United States by Lake
Consumer Products, Inc., under the existing FDA monograph for nonoxynol-9
spermicidal products. Roberts Pharmaceuticals markets Advantage 24 in Canada.

        Among Advantage 24's benefits is its slow release characteristic which
permits the spermicide to be effective for up to 24 hours, in contrast with
conventional spermicides that must be applied at most two hours prior to
intercourse. The slow release feature is derived from the Company's Bioadhesive
Delivery System, which enables the nonoxynol-9 to adhere to the cervix. Broader
claims relating to prevention of sexually transmitted diseases (STD's) will be
requested upon completion, if successful, of clinical studies now underway. In
Europe, the Company intends to register Advantage 24 as an over-the-counter
drug.

        Additionally, the United Nations Global Program on AIDS (formerly known
as the World Health Organization Global Program on AIDS) has completed a 600
women safety study on Advantage 24. Analysis of the data generated indicates
that Advantage 24, as used in the study, was free of any serious side effects.
In addition, Advantage 24 was shown to be safer than any other nonoxynol-9
product studied. Studies to determine the efficacy of Advantage 24 in preventing
the heterosexual transmission of HIV and other STD's have recently begun in a
National Institutes of Health sponsored study in Kenya. Additional U.N. studies
are scheduled to begin shortly in Thailand, India and the Ivory Coast.

        REPLENS(/registered/). Replens replenishes vaginal moisture on a
sustained basis and relieves the discomfort associated with vaginal dryness.
Replens was the first product utilizing the Bioadhesive Delivery System. Replens
is marketed by various pharmaceutical companies throughout the world.

        OTHER PRODUCTS. The Company also markets Advanced Formula Legatrin
PM(/registered/), for the relief of occasional pain and sleeplessness associated
with minor muscle aches such as night leg cramps; Vaporizer in a
bottle(/registered/), a portable cough suppressant for the temporary relief of a
cough due to the common cold; and Diasorb(/registered/), a pediatric
antidiarrheal product. These products do not utilize the Bioadhesive Delivery
System.

                                      -3-

<PAGE>

RESEARCH AND DEVELOPMENT

        The Company expended $10,942,065 in 1996, $7,812,488 in 1995 and
$8,976,047 in 1994, on research and development activities. The increase in
expenditures are primarily the result of costs associated with contracting for,
supervising and administering the clinical studies on the Company's Crinone and
Advantage 24 products. These studies are coordinated from the Company's New York
and Paris offices.

        SPC3 (SYNTHETIC POLYMERIC CONSTRUCTION #3). In December 1993, the
Company entered into an Option and License Agreement with a French research
group based in Marseille, France, pursuant to which it was granted an option to
obtain an exclusive license to the North and South American rights to a
potential AIDS treatment. In May 1996, this agreement was amended such that
Columbia now has the right to obtain an exclusive license to the worldwide
rights. A phase I/II clinical trial in humans is now underway in the U.S. The
purpose of this trial is to determine the optimal dosage of SPC3 in late stage
seropositive patients. The options, which must be exercised upon the occurrence
of certain events, expire in December 1998. Upon exercise of the options, the
Company will be required to pay an additional $7 million. If the Company does
not exercise its options upon the occurrence of certain events, the Company's
rights to the options are terminated.

PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY INFORMATION

        The Company purchased the patents underlying the Bioadhesive Delivery
System from Bio-Mimetics, Inc. ("Bio-Mimetics"). The basic patent that covers
the Bioadhesive Delivery System was issued in the United States in 1986 and by
the European Patent Office in 1992. The Company has the exclusive right to the
use of the Bioadhesive Delivery System subject to certain third party licenses
issued by Bio-Mimetics that have been assigned to the Company and certain
restrictions on the assignment of the patents. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."

        During 1996, the Company was granted United States patents covering
vaginal moisturization and the direct transport of progesterone to the uterus.
In addition, a patent covering the treatment of ischemia through the delivery of
Crinone was filed in the United States. The Company is continuing to develop the
core Bioadhesive Delivery System and has filed additional patent applications
covering tissue moisturization, vaginal moisturization, progesterone delivery
and use of nonoxynol-9 in an anti-sexually transmitted disease formulation
throughout the world. While patent applications do not ensure the ultimate
issuance of a patent, it is the Company's belief that patents based on these
applications will issue.

        Because the Company operates on a worldwide basis, the Company seeks
worldwide patent protection for its technology and products. While having patent
protection cannot ensure that no competitors will emerge, this is a fundamental
step in protecting the technologies of the Company.

        The Company has filed "Replens", "Advantage 24" and "Crinone" as
trademarks in countries throughout the world. Applications for the registration
of trademarks do not ensure the ultimate registration of these marks. The
Company believes these marks will be registered. In addition, there can be no
assurance that such trademarks will afford the Company adequate protection or
that the Company will have the financial resources to enforce its rights under
such trademarks.

        The Company also relies on confidentiality and nondisclosure agreements.
There can be no assurance that other companies will not acquire information
which the Company considers to be proprietary. Moreover, there can be no
assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.

                                      -4-

<PAGE>

MANUFACTURING

        Crinone, Advantage 24 and Replens are currently being manufactured and
packaged by third-party manufacturers in Europe utilizing the "form, fill and
seal" single step manufacturing process.

        Medical grade, cross-linked polycarbophil, the polymer used in the
Company's products utilizing the Bioadhesive Delivery System, is currently
available from only one supplier, B.F. Goodrich Company ("Goodrich"). The
Company believes that Goodrich will supply as much of the material as the
Company may require because the Company's products rank among the highest
value-added uses of the polymer. There can be no assurance that Goodrich will
continue to supply the product. In the event that Goodrich cannot or will not
supply enough of the product to satisfy the Company's needs, the Company will be
required to seek alternative sources of polycarbophil. There can be no assurance
that an alternative source of polycarbophil will be obtained.

        All of the other raw materials used by the Company for its products
utilizing the Bioadhesive Delivery System are available from several sources.

OVER-THE-COUNTER DRUGS

        GENERAL. The Company currently markets three over-the-counter drugs:
Advanced Formula Legatrin PM, for the relief of occasional pain and
sleeplessness associated with minor muscle aches such as night leg cramps;
Diasorb, a pediatric antidiarrheal product; and Vaporizer in a bottle, a
portable cough suppressant. These over-the-counter drugs are manufactured by
third-party manufacturers. All of the raw materials used by the Company for its
over-the-counter drugs are available from several sources.

        The over-the-counter drugs are sold to drug wholesalers and chain drug
stores. The Company utilizes approximately 20 drug manufacturers' representative
firms to make calls on the Company's trade customers. The manufacturers'
representatives receive commissions based on sales made within their respective
territories. The Company supports the activities of the manufacturers'
representatives by advertising in consumer publications and convention
participation.

SALES

        The following table sets forth the percentage of the Company's
consolidated net sales by product, for each product accounting for 15% or more
of consolidated net sales in any of the three years ended December 31, 1996.

                                 1996          1995          1994
                                 ----          ----          ----
        Replens                   12%           30%           39%
        Advantage 24              18             5             6
        Legatrin PM/Legatrin      55            52            49
        Other products            15            13             6
                                 ---           ---           ---
                                 100%          100%          100%
                                 ===           ===           ===

The Company anticipates the percentage of sales attributable to Legatrin PM and
the other products to decrease in future years as additional products utilizing
the Bioadhesive Delivery System are introduced. Warner-Lambert accounted for
approximately 21% and 27% of 1995 and 1994 consolidated net sales, respectively.
A retail customer accounted for approximately 18%, 16% and 14% of 1996, 1995 and
1994 consolidated net sales, respectively. Another customer accounted for
approximately 13%, 5% and 6% of 1996, 1995 and 1994 consolidated net sales,
respectively.

                                      -5-

<PAGE>

COMPETITION

        While the Company has entered into the strategic alliance agreements for
the marketing of its women's health care products, there can be no assurance
that the Company and its partners will have the ability to compete successfully.
The Company's success to a great extent is dependent on the marketing efforts of
its strategic alliance partners, over which the Company has limited ability to
influence. The markets which the Company and its strategic alliance partners
operate in or intend to enter are characterized by intense competition. The
Company and its partners compete against established pharmaceutical and consumer
product companies which market products addressing similar needs. In addition,
numerous companies are developing or, in the future, may develop enhanced
delivery systems and products competitive with the Company's present and
proposed products. Some of the Company's and its partners' competitors possess
greater financial, research and technical resources than the Company or its
partners. Moreover, these companies may possess greater marketing capabilities
than the Company or its partners, including the resources to implement extensive
advertising campaigns.

        Although the Company is not aware of any product incorporating
rate-controlled technology with respect to vaginal lubrication, the Company
believes that Replens competes in the same markets as K-Y Jelly(/registered/)
and Gyne-Moisturin(/registered/), vaginal lubricants marketed by Johnson &
Johnson Products, Inc. and Schering-Plough Corporation, respectively. The
Company also believes that Advantage 24, Legatrin PM and Diasorb compete against
numerous products in their respective categories and that Vaporizer in a
bottle(/registered/) competes against Vicks Vaporsteam, a product distributed by
Richardson-Vicks, Inc.

GOVERNMENT REGULATION

        The Company is subject to both the applicable regulatory provisions of
the FDA in the United States and the applicable regulatory agencies in those
foreign countries where its products are manufactured and/or distributed.

        As in the United States, a number of foreign countries require
premarketing approval by health regulatory authorities. Requirements for
approval may differ from country to country and may involve different types of
testing. There can be substantial delays in obtaining required approvals from
regulatory authorities after applications are filed. Even after approvals are
obtained, further delays may be encountered before the products become
commercially available.

        In the United States, manufacturers of pharmaceutical products are
subject to extensive regulation by various Federal and state governmental
entities relating to nearly every aspect of the development, manufacture and
commercialization of such products. The FDA, which is the principal regulatory
authority in the United States for such products, has the power to seize
adulterated or misbranded products and unapproved new drugs, to require their
recall from the market, to enjoin further manufacture or sale and to publicize
certain facts concerning a product. As a result of FDA regulations, pursuant to
which new pharmaceuticals are required to undergo extensive and rigorous
testing, obtaining premarket regulatory approval requires extensive time and
cash expenditures. The manufacturing of the Company's products which are either
manufactured and/or sold in the United States, is subject to current Good
Manufacturing Practices prescribed by the FDA. The labeling of over-the-counter
drugs in the United States, as well as advertising relating to such products,
are subject to the review of the Federal Trade Commission ("FTC") pursuant to
the general authority of the FTC to monitor and prevent unfair or deceptive
trade practices.

PRODUCT LIABILITY

        The Company may be exposed to product liability claims by consumers.
Although the Company presently maintains product liability insurance coverage in
the amount of $15 million, there can be no assurance that such insurance will be
sufficient to cover all possible liabilities. In the event of a successful suit
against the Company, insufficiency of insurance coverage could have a materially
adverse effect on the Company.

                                      -6-

<PAGE>

EMPLOYEES

        As of February 28, 1997, the Company had 38 employees, 4 in management,
16 in research and development administration, 3 in manufacturing, 4 in
marketing, and 11 in support functions. None of the Company's employees are
represented by a labor union. The Company believes that its relationship with
its employees is satisfactory.

        The Company has employment agreements with certain employees, some of
whom are also stockholders of the Company. See "Executive
Compensation--Employment Agreements."

ITEM 2. PROPERTIES

        As of February 28, 1997, the Company leases the following properties:

                                                                         ANNUAL
 LOCATION                USE             SQUARE FEET      EXPIRATION      RENT
 --------                ---             -----------      ----------     ------

Miami, FL         Corporate office          3,900       September 1998  $ 92,000
Paris, France     Research admin office     9,500       April 1999       330,000
Paris, France     Business residence        2,000       June 2001         70,000
New York, NY      Residential office        1,000       April 1998        44,000


ITEM 3. LEGAL PROCEEDINGS

        Certain law suits have been filed against the Company with respect to
product liability. In the opinion of management and counsel, none of these
lawsuits are material and they are all adequately reserved for or covered by
insurance or, if not so covered, are without any or have little merit or involve
such amounts that if disposed of unfavorably would not have a material adverse
effect on the Company.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       The annual meeting of stockholders of the Company was held on October 2,
1996 for the purpose of electing seven directors, ratifying the appointment of
Arthur Andersen LLP as independent public accountants for the Company and
approving the Columbia Laboratories, Inc.
1996 Long-term Performance Plan.


                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

       The Company's $.01 par value Common Stock ("Common Stock") trades on the
American Stock Exchange under the symbol COB. The following table sets forth the
high and low sales prices of the Common Stock on the American Stock Exchange, as
reported on the Composite Tape.

                                                        HIGH           LOW
                                                        -----         -----
FISCAL YEAR ENDED DECEMBER 31, 1995
-----------------------------------

        First Quarter                                   $5.63         $4.06
        Second Quarter                                   8.50          4.00
        Third Quarter                                    9.88          6.63
        Fourth Quarter                                   9.50          6.25

                                      -7-

<PAGE>

                                                       HIGH            LOW
                                                       -----          -----
FISCAL YEAR ENDED DECEMBER 31, 1996
-----------------------------------

        First Quarter                                  $12.38         $7.14
        Second Quarter                                  15.13         10.00
        Third Quarter                                   14.50          9.88
        Fourth Quarter                                  15.25         10.88


        At February 28, 1997, there were 485 shareholders of record of the
Company's Common Stock, although the Company estimates that there are
approximately 6,000 beneficial owners, 4 shareholders of record of the Company's
Series A Convertible Preferred Stock ("Series A Preferred Stock") and 3
shareholders of record of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock").

        The Series A Preferred Stock pays cumulative dividends at a rate of 8%
per annum payable quarterly. As of December 31, 1996, dividends of $108,693 have
been earned but have not been declared and are included in other long-term
liabilities in the accompanying consolidated balance sheet. Upon conversion of
any shares of Series A Preferred Stock, the Company is obligated to issue
additional shares of Common Stock having a market value equal to accrued but
unpaid dividends on the Series A Preferred Stock at the time of conversion.

        The Company has never paid a cash dividend on its Common Stock and does
not anticipate the payment of cash dividends in the foreseeable future. The
Company intends to retain any earnings for use in the development and expansion
of its business.

        Applicable provisions of the Delaware General Corporation Law may affect
the ability of the Company to declare and pay dividends on its Common Stock as
well as on its Preferred Stock. In particular, pursuant to the Delaware General
Corporation Law, a company may pay dividends out of its surplus, as defined, or
out of its net profits, for the fiscal year in which the dividend is declared
and/or the preceding year. Surplus is defined in the Delaware General
Corporation Law to be the excess of net assets of the company over capital.
Capital is defined to be the aggregate par value of shares issued.


ITEM 6. SELECTED FINANCIAL DATA

        The following consolidated selected financial data of the Company for
the five years ended December 31, 1996 (not covered by the auditors' report),
should be read in conjunction with the consolidated financial statements and
related notes thereto. See "Item 8. Financial Statements and Supplementary
Data."

                                      -8-


<PAGE>
<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                   ----------------------------------------------------------
                                     1996       1995        1994         1993          1992
                                   --------    -------     --------     --------      -------
<S>                                <C>         <C>         <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:

NET SALES                          $  5,646    $ 9,905     $  8,769     $  8,150      $ 9,173
NET INCOME (LOSS)(1)                (13,079)      (959)     (12,994)     (10,453)      (8,536)
INCOME (LOSS) PER COMMON SHARE        (0.47)     (0.04)       (0.58)       (0.49)       (0.51)
WEIGHTED AVERAGE NUMBER
  OF COMMON SHARES OUTSTANDING       27,615     25,487       22,530       21,380       16,880

BALANCE SHEET DATA:

WORKING CAPITAL (DEFICIENCY)       $    720    $(1,968)     $(3,858)     $ 2,888      $(4,443)
TOTAL ASSETS                          9,980      7,687        6,808       13,870        9,833
LONG-TERM DEBT                         --         --          6,218        5,474           58
STOCKHOLDERS' EQUITY (DEFICIT)        4,673      1,556       (6,192)       1,475       (6,991)
<FN>
-------------------------
(1) 1996 and 1995 net income (loss) are net of approximately $2 million and
$8 million, respectively, of license fee income.
</FN>
</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

        Cash and cash equivalents increased from approximately $1.6 million at
December 31, 1995 to approximately $3.6 million at December 31, 1996, primarily
as a result of a private placement in March 1996 of 1,358,000 shares of Common
Stock which raised net proceeds of approximately $12 million and approximately
$4 million received from the exercise of options and warrants offset by
approximately $13 million of net cash used in operations and approximately
$750,000 used to purchase property and equipment.

        In May 1995, the Company entered into a worldwide, except for South
Africa, license and supply agreement with American Home Product Corporation
("AHP") under which the Wyeth-Ayerst division of AHP will market Crinone. Under
the terms of the agreement, as of February 28, 1997, the Company has received
$10.5 million in milestone payments and will continue to receive additional
milestone payments and a percentage of sales, which sales are expected to
commence during the second quarter of 1997.

        In July 1996, Columbia submitted a New Drug Application ("NDA") to the
U.S. Food and Drug Administration ("FDA") for clearance to market Crinone as a
hormonal therapy for patients with secondary amenorrhea (loss of menstrual
period). In November 1996, the Company submitted a second NDA for clearance to
market Crinone for use in Assisted Reproductive Technologies ("ART") procedures,
including IN-VITRO fertilization, ovum donation and stimulated cycles. The FDA
granted the ART filing a priority review. In addition, in February 1997, the FDA
approved the Company's Treatment Protocol under its Investigational New Drug
Application ("IND") for the use of Crinone in assisted fertility procedures. As
a result, through leads generated by the Wyeth-Ayerst institutional sales force,
Columbia has begun distributing Crinone to leading infertility clinics
throughout the United States.

        In December 1993, the Company entered into an Option and License
Agreement with a French research group based in Marseille, France, pursuant to
which it was granted an option to obtain an exclusive license to the North and
South American rights to a potential AIDS treatment. In May 1996, this agreement
was amended such that Columbia now has the right to obtain an exclusive license
to the worldwide rights. A phase I/II clinical trial in humans is now underway
in the U.S. The purpose of this trial is to determine the optimal dosage of SPC3
in late stage

                                      -9-

<PAGE>

seropositive patients. The options, which must be exercised upon the occurrence
of certain events, expire in December 1998. Upon exercise of the options, the
Company will be required to pay an additional $7 million. If the Company does
not exercise its options upon the occurrence of certain events, the Company's
rights to the options are terminated.

        In connection with the 1989 purchase of the assets of Bio-Mimetics,
Inc., which assets consisted of the patents underlying the Company's Bioadhesive
Delivery System, other patent applications and related technology, the Company
pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of
products based on the Bioadhesive Delivery System, to an aggregate of $7.5
million. The Company is required to prepay a portion of the remaining royalty
obligation, in cash or stock at the option of the Company, if certain conditions
are met.

        The Company believes that sales and liquidity will increase when Crinone
is approved by the FDA and other regulatory authorities and Wyeth-Ayerst
subsequently launches the product in mid 1997. Upon the approval of the use of
Crinone as a hormonal therapy for patients with secondary amenorrhea by the FDA,
Columbia will receive a $3 million milestone payment from AHP. The Company is
unaware of any problem concerning the NDA for Crinone, and in addition, the
Company believes the application is progressing through the review process at
the FDA as would be expected for an application granted priority review.
Accordingly, the Company expects that Crinone will be approved on a timely
basis. The foregoing are forward looking statements which could be impacted by
when the FDA and other approvals are received, when Wyeth-Ayerst launches the
product, the marketing support Wyeth-Ayerst gives to the product and the
ultimate acceptance of Crinone by the consumers, all of which the Company has
limited ability to influence.

        As of December 31, 1996, the Company has outstanding exercisable options
and warrants that, if exercised, would result in approximately $16 million of
additional capital. However, there can be no assurance that such options or
warrants will be exercised.

        Significant expenditures anticipated by the Company in the near future
are concentrated on production commitments and research and development related
to new products. The Company has committed to spend an aggregate of
approximately $100,000 on additional equipment at its suppliers during 1997.

        As of December 31, 1996, the Company had available net operating loss
carryforwards of approximately $48 million to offset its future U.S. taxable
income.

        In accordance with Statement of Financial Accounting Standards No. 109,
as of December 31, 1996 and 1995, other assets in the accompanying consolidated
balance sheet include deferred tax assets of approximately $17 million and $14
million, respectively, (comprised primarily of a net operating loss
carryforward) which have been fully reserved as their ultimate realizability is
not assured.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1996 VERSUS DECEMBER 31, 1995
VERSUS DECEMBER 31, 1994

        Sales decreased in 1996 as compared to 1995 because Warner-Lambert did
not order any Replens during 1996, combined with the fact that 1995 sales
included the initial stocking orders of Legatrin PM. Sales increased in 1995 as
compared to 1994 primarily as a result of Advantage 24 being available on drug
store shelves throughout the U.S., renewed sales activity from the Company's OTC
segment, including the introduction of Advanced Formula Legatrin PM, as well as
revenue from a research agreement which began in late 1994.

        Gross profit as a percentage of sales was higher in 1995 as compared to
1996 and 1994 primarily as a result of a change in product mix sold.
Specifically, 1995 sales includes approximately $600,000 of revenue from a
research agreement which agreement had a higher gross profit than that earned on
the sale of the Company's pharmaceutical products. No similar revenues were
recorded in 1996 and 1994.

                                      -10-

<PAGE>

        Selling and distribution expenses increased in 1995 as a result of the
costs associated with the introduction of Legatrin PM. The Company's strategic
alliance partners are responsible for all marketing and distribution costs of
Crinone, Advantage 24 and Replens in their territories. There can be no
assurance that any of the companies with whom the Company has entered into these
agreements will aggressively or successfully market the products. The Company's
success is dependent to a great extent on the marketing efforts of its strategic
alliance partners, which the Company has limited ability to influence.

        Research and development expenditures have increased in 1996 as compared
to 1995 and 1994 primarily as a result of costs incurred in connection with the
pivotal studies required for filing the New Drug Applications in the United
States.

        License fees primarily represent upfront and milestone payments received
in connection with the licensing agreement with AHP.

        Interest income increased in 1996 as a result of interest earned on the
monies received in the private placement completed in March 1996.

        Interest expense decreased in 1995 primarily as a result of the
repayment of debt in late 1994 and early 1995 through the issuance of Common
Stock.

        As a result, the net loss for 1996 was $13,078,984 or $.47 per share as
compared to net losses in 1995 of $959,472 or $.04 per share and $12,993,889 or
$.58 per share in 1994.

IMPACT OF INFLATION

        Sales revenues, manufacturing costs, selling and distribution expenses,
general and administrative expenses and research and development costs tend to
reflect the general inflationary trends.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The financial statements of the Company are annexed to this report on
pages F-1 through F-17. An index to the financial statements appears on page
F-1. The financial statement schedules are also annexed to this report on pages
S-1 through S-3. An index to the financial statement schedules appears on page
S-1.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

        None.

                                      -11-

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

        The executive officers and directors of the Company as of February 28,
1997 are as follows:

        NAME                AGE          POSITION
        ----                ---          --------

William J. Bologna          54      Chairman of the Board

Nicholas A. Buoniconti      56      Vice Chairman of the Board and Chief
                                    Operating Officer

Norman M. Meier             57      President, Chief Executive Officer and
                                    Director

Margaret J. Roell           37      Vice President--Finance and Administration,
                                    Chief Financial Officer, Secretary and
                                    Treasurer

Dominique de Ziegler, MD    49      Vice President--Pharmaceutical Development

Annick Blondeau, Ph.D.      51      Vice President--Regulatory Affairs

Jean Carvais                69      Director

Irwin L. Kellner, Ph.D.     58      Director

Lila E. Nachtigall, M.D.    63      Director

Robert C.  Strauss          55      Director


        WILLIAM J. BOLOGNA has been a director of the Company since inception
and was elected Chairman of the Company's Board of Directors in January 1992.
From December 1988 to January 1992, Mr. Bologna served as Vice Chairman of the
Company's Board of Directors. In addition, since 1980, he has been Chairman of
Bologna & Hackett ("B&H"), an advertising agency specializing in pharmaceutical
products which has in the past performed services for various international
pharmaceutical companies. B&H ceased operations in May 1991. Prior to 1980, Mr.
Bologna was employed by William Douglas McAdams, Inc., a company engaged in the
marketing of pharmaceuticals, in a variety of positions, including Senior Vice
President. In 1965, Mr. Bologna received his B.S. in Pharmacy from Fordham
University. He received an MBA in Finance from Fordham University in 1971.

        NICHOLAS A. BUONICONTI has been a director of the Company since June
1991 and was elected Vice Chairman and Chief Operating Officer of the Company in
April 1992. Mr. Buoniconti, an attorney, is a member of the Massachusetts and
Florida Bar. From January 1990 to April 1992, he was a member of the law firm of
Nicholas A. Buoniconti, P.A. He held the position of President and Chief
Operating Officer of UST, a Fortune 500 company, from May 1987 to December 1989.
From 1985 to 1987, Mr. Buoniconti served as President and Chief Operating
Officer of U.S. Tobacco (which changed its name to UST), as well as serving on
the Board of Directors from 1978 to 1989. He has served as a member of the Board
of Directors of the Miami Project to Cure Paralysis, and is heavily involved in
the fund-raising efforts for the Project through the Marc Buoniconti Fund, named
for his son. Mr. Buoniconti is a former All-Pro linebacker for the Miami
Dolphins. Since 1978, he has co-hosted "Inside the NFL" on the Home Box Office
cable network. Mr. Buoniconti is also a director of American Bankers Insurance
Co. and The Sports Authority.

                                      -12-

<PAGE>

        NORMAN M. MEIER has been President, Chief Executive Officer and a
director of the Company since inception. From 1971 to 1977, Mr. Meier was Vice
President of Sales and Marketing for Key Pharmaceuticals, Inc., a company which
had been engaged in the marketing and sales of pharmaceuticals until its sale to
Schering-Plough Corporation in June 1986. From 1977 until June 1986, Mr. Meier
served as a consultant to Key Pharmaceuticals, Inc. In 1960, Mr. Meier received
his B.S. in Pharmacy from Columbia University. He received his M.S. in Pharmacy
Administration from Long Island University in 1964. Mr. Meier is also a director
of Universal Heights, Inc.

        MARGARET J. ROELL has been Vice President--Finance and Administration,
Chief Financial Officer, Treasurer and Secretary of the Company since 1991. Ms.
Roell was employed by Arthur Andersen & Co., independent public accountants,
from 1981 to 1991 and was an audit manager with Arthur Andersen & Co. from 1986
to 1991.

        DOMINIQUE DE ZIEGLER, M.D. has been Vice President--Pharmaceutical
Development of the Company since January 1996. Dr. de Ziegler has been employed
by the Company since 1992 as Director of Research Development. In addition, from
1988 through 1991, Dr. de Ziegler was an Associate Professor at the Department
of Obstetrics and Gynecology, Hospital A. Beclere in Clamart, France. In 1990,
Dr. de Ziegler became a Dipolmat of the American Board of Obstetrics and
Gynecology, Reproductive Endocrinology and Infertility. Dr. de Ziegler is a
member of the American Fertility Society, the American Society for Reproductive
Endocrinogolists, The American Endocrine Society, the Society of Gynecologic
Investigation and the Association Francaise poour l'Etude de la Menopause. Dr.
de Zeigler has also been a journal editor and an "ad hoc" reviewer for Fertility
Sterility, Human Reproduction, The Journal of In Vitro Fertilization and Embryo
Transfer, Contraception Fertilite Sexualite and Reproduction Humaine et Hormone.

        ANNICK BLONDEAU, PH. D. has been Vice President--Regulatory Affairs
since June 1996. Dr. Blondeau has been employed by the Company since 1993 as
Director of Regulatory Affairs. From 1984 through 1993, Dr. Blondeau was
responsible for all of the international filings for Debat Centre R&D Garches, a
large French pharmaceutical company. Dr. Blondeau also worked at Pfizer as Head
of the Pharmacology Department. Dr. Blondeau received her doctorate in
pharmacology and physiology from the Faculte des Sciences de Potiers France in
1971.

        JEAN CARVAIS has been a director of the Company since October 1996.
Since 1984, Dr. Carvais has been an independent consultant in the pharmaceutical
industry. Prior to that time, Dr. Carvais was President of The Research
Institute of Roger Bellon, S.A., now a division of Rhone-Poulenc Rorer. As such,
he was involved in the development of a line of anti-cancer drugs, including
Bleomycin and Adriamycin, as well as a new line of antibiotics and quinolones.
Following the acquisition of Roger Bellon, S.A., Dr. Carvais became a member of
Rhone-Poulene's central research committee which directs the company's worldwide
research and development activities. Dr. Carvais is also a director of Imclone
Systems Incorporated.

        IRWIN L. KELLNER, PH.D. has been a director of the Company since May
1988. Since March 1997, Dr. Kellner has been an independent consultant. From
1996 through February 1997, Dr. Kellner was the Chief Economist for the Chase
Manhattan's Regional Bank. From 1991 through 1996, Dr. Kellner held the same
position with Chemical and Manufacturers Hanover, Chase's predecessor
organizations. Dr. Kellner has been employed by the Bank since 1970. Dr.
Kellner, a past president of the Forecasters Club of New York and the New York
Association of Business Economists, holds membership, and has held a variety of
posts, in several professional associations, including the American Economic
Association, American Statistical Association and the National Association of
Business Economists. His other board memberships include the Children's AIDS
Network, North Shore University Hospital, the Don Monti Memorial Research
Foundation and Touro College's Barry Z. Levine School of Health Sciences.

        LILA E. NACHTIGALL, M.D. has been a director of the Company since
November 1992. Dr. Nachtigall has been employed by the New York University
School of Medicine since 1961. Dr. Nachtigall is currently a Professor of
Obstetrics and Gynecology. In addition, Dr. Nachtigall is the Clinic Coordinator
of GYN-Endocrine Clinic at Bellevue Hospital and Co-director of the
GYN-Endocrine Program and Director of Women's Wellness Division at New York
University Medical Center.

                                      -13-

<PAGE>

        ROBERT C. STRAUSS has been a director of the Company since January 1997.
Since March 1997, Mr. Strauss has been President of IVAX Corporation. From 1987
through February 1997, Mr. Strauss was President and Chief Executive Officer of
Cordis Corporation, which was acquired by Johnson & Johnson in 1996. From 1983
through 1987, Mr. Cordis was Vice President and Chief Financial Officer of
Cordis Corporation. Mr. Strauss is also a director of American Bankers Insurance
Co.

        During 1996, Messers. Bologna and Meier, Drs. Blondeau and de Ziegler
and Ms. Roell each had one late filing of a Form 4.

        All directors hold office until the next annual meeting of stockholders
and the election and qualification of their successors. Directors receive no
compensation for serving on the Board, except for the receipt of stock options
and the reimbursement of reasonable expenses incurred in attending meetings.
Officers are elected annually by the Board of Directors and serve at the
discretion of the Board. The Board of Directors has two standing committees, the
Audit Committee and the Compensation/Stock Option Committee.


ITEM 11. EXECUTIVE COMPENSATION

        The tables, graph and descriptive information set forth below are
intended to comply with the Securities and Exchange Commission compensation
disclosure requirements applicable to, among other reports and filings, annual
reports on Form 10-Ks. This information is being furnished with respect to the
Company's Chief Executive officer ("CEO") and its three other executive
officers, other than the CEO, whose salary and bonus exceeded $100,000 for the
most recent fiscal year (collectively, the "Executive Officers").
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                     ANNUAL COMPENSATION    LONG-TERM COMPENSATION
                                     -------------------    ----------------------
                                                                  SECURITIES
                                                                  UNDERLYING
NAME AND PRINCIPAL POSITION   YEAR         SALARY                 OPTIONS (1)
---------------------------   ----        --------                -----------
<S>                           <C>         <C>                       <C>
Norman M. Meier               1996        $250,000                  150,000
 President and Chief          1995         218,000                   50,000
 Executive Officer            1994         180,000                  470,000

William J. Bologna            1996         250,000                  150,000
 Chairman of the Board        1995         218,000                   50,000
                              1994         180,000                  470,000

Nicholas A. Buoniconti        1996         200,000                      -
 Vice Chairman and            1995         167,500                   50,000
 Chief Operating Officer      1994         135,000                  910,000

Margaret J. Roell             1996         135,000                   25,000
 Vice President -             1995         120,000                   15,000
 Finance & Administration     1994         120,000                      -
 Chief Financial Officer

Dominique de Ziegler          1996         203,500                   15,000
 Vice President-              1995         203,500                   25,000
 Pharmaceutical               1994         203,500                      -
 Development
</TABLE>

                                      -14-

<PAGE>
<TABLE>
<CAPTION>

                                             OPTION GRANTS DURING 1996

                             NUMBER OF   % OF TOTAL
                            SECURITIES    OPTIONS                                GRANT
                            UNDERLYING   GRANTED TO   EXERCISE                   DATE
                              OPTIONS    EMPLOYEES     PRICE     EXPIRATION     PRESENT
NAME                          GRANTED     IN 1996      ($/SH)      DATE         VALUE(1)
----                        ----------   ----------   --------   ----------     ---------
<S>                           <C>           <C>       <C>         <C>           <C>
Norman M. Meier               150,000       21%       $ 8.06      1/8/2006      $688,935

William J. Bologna            150,000       21%        11.13      8/1/2006       902,190

Nicholas A. Buoniconti            -          -           -          -               -

Margaret J. Roell              25,000        4%        12.13     10/2/2006       136,385

Dominique de Ziegler           15,000        2%        12.13     10/2/2006        81,831
<FN>
--------------------------------
 (1)   The  estimated  grant date present  value  reflected  in the above table
       is determined using the Black-Scholes model. The material assumptions and
       adjustments incorporated in the Black-Scholes model in estimating the
       value of the options reflected in the above table include the following:
       (i) an exercise price equal to the fair market value of the underlying
       stock on the date of grant, (ii) an option term of three years, (iii) an
       interest rate of 6% that represents the interest rate on a U.S. Treasury
       security with a maturity date corresponding to that of the expected
       option term, (iv) volatility of 60% calculated using daily stock prices
       for the one-year period prior to the grant date and (v) no annualized
       dividends paid with respect to a share of Common Stock at the date of
       grant. The ultimate values of the options will depend on the future price
       of the Company's Common Stock, which cannot be forecast with reasonable
       accuracy. The actual value, if any, an optionee will realize upon
       exercise of an option will depend on the excess of the market value of
       the Company's Common Stock over the exercise price on the date the option
       is exercised.
</FN>
</TABLE>


    AGGREGATED OPTION EXERCISES DURING 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
                                                        NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                                                       UNDERLYING UNEXERCISED              IN-THE-MONEY
                                                           OPTIONS AT                       OPTIONS AT
                       SHARES ACQUIRED    VALUE          DECEMBER 31, 1996               DECEMBER 31, 1996
NAME                      ON EXERCISE    REALIZED   EXERCISABLE    UNEXERCISABLE   EXERCISABLE     UNEXERCISABLE
----                   ---------------   --------   -----------    -------------   -----------     -------------
<S>                           <C>        <C>          <C>            <C>           <C>                <C>
Norman M. Meier                 -        $  -         520,000        150,000       $5,118,900         $966,000

William J. Bologna              -           -         520,000        150,000        5,118,900          505,500

Nicholas A. Buoniconti          -           -         960,000           -           9,541,700             -

Margaret J. Roell               -           -         125,000         35,000        1,117,250          149,250

Dominique de Ziegler            -           -          65,000         30,000          544,250          170,550
</TABLE>

                                      -15-

<PAGE>

EMPLOYMENT AGREEMENTS

       In January 1996, the Company entered into five-year employment agreements
with each of William J. Bologna and Norman M. Meier, to serve as Chairman and
President of the Company, respectively. Pursuant to their respective employment
agreements, each such employee is entitled to a base salary of $250,000. In
addition, each such employee was granted options to purchase 150,000 shares of
the Company's Common Stock at an exercise price of $7.25. Pursuant to the terms
of such agreements, each employee has agreed to dedicate his services on a
substantially full-time basis and has agreed for the term of his agreement and
for two years thereafter not to compete with the Company.

       In April 1992, the Company entered into a five-year employment agreement
with Nicholas A. Buoniconti, to serve as Vice Chairman and Chief Operating
Officer of the Company. Pursuant to this agreement, Mr. Buoniconti is paid an
annual salary of $135,000. As additional compensation, Mr. Buoniconti was
granted options to purchase 250,000 and 400,000 shares of the Company's Common
Stock at exercise prices of $8.00 and $4.88 per share, respectively, which
options vest over five years. Pursuant to the terms of such agreement, Mr.
Buoniconti agreed to dedicate his services on a substantially full-time basis
and has agreed for the term of his agreement and for two years thereafter not to
compete with the Company. During 1994, in connection with Mr. Buoniconti
investing $200,000 into the Company, the exercise price of the options was
reduced to $4.375. As of July 1, 1995, Mr. Buoniconti's annual salary was
increased to $200,000.

       In July 1995, the Company entered into a three-year employment agreement
with Dominique de Ziegler, to serve as director of research development.
Pursuant to this agreement, Dr. de Ziegler is paid an annual salary of $203,500.
As additional compensation, Dr. de Ziegler was granted options to purchase
25,000 shares of the Company's Common Stock at an exercise prices of $7.25 per
share. Pursuant to the terms of such agreement, Dr. de Ziegler agreed to
dedicate his services on a substantially full-time basis and has agreed for the
term of his agreement and for two years thereafter not to compete with the
Company.

       The exercise price of all of the options granted pursuant to the
aforementioned employment agreements are based on the closing price of the
Company's Common Stock on the American Stock Exchange on the day prior to grant.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       As of February 28, 1997, directors and named executive officers,
individually and as a group, beneficially owned Common Stock as follows:

             NAME OF                        SHARES, NATURE OF INTEREST
        BENEFICIAL OWNER             AND PERCENTAGE OF EQUITY SECURITIES(1)
        ----------------             --------------------------------------

Norman M. Meier(3)                            1,345,800            4.7%
William J. Bologna(2)                         2,428,632            8.5%
Nicholas A. Buoniconti(3)                     1,040,000            3.6%
Margaret J. Roell(3)                            125,200             *
Dominique de Ziegler(3)                          65,000             *
Annick Blondeau(3)                               32,500             *
Jean Carvais                                       -                *
Irwin L. Kellner(3)                             101,500             *
Lila E. Nachtigall(3)                            32,000             *
Robert C. Strauss                                 1,000             *
Officers and directors as a group (10 people) 5,171,632           17.0%

*       Represents less than 1 percent.

                                      -16-

<PAGE>

(1)     Includes shares issuable upon exercise of both options and warrants
        which are currently exercisable or which may be acquired within 60 days
        and shares issuable upon conversion of the Series A and Series B
        Preferred Stock (12.36 for the Series A Preferred Stock and 20.57 for
        the Series B Preferred Stock).

(2)     Includes 20,570 shares issuable upon conversion of 1,000 shares of
        Series B Preferred Stock. Includes 520,000 shares issuable upon exercise
        of options, which are currently exercisable or which may be acquired
        within 60 days. Includes 198,062 shares beneficially owned by Mr.
        Bologna's spouse.

(3)     Includes shares issuable upon exercise of options, which are currently
        exercisable or which may be acquired within 60 days, to purchase 670,000
        shares with respect to Mr. Meier, 960,000 shares with respect to Mr.
        Buoniconti, 125,000 shares with respect to Ms. Roell, 65,000 shares with
        respect to Dr. de Ziegler, 32,500 shares with respect to Dr. Blondeau,
        62,000 shares with respect to Dr. Kellner and 32,000 shares with respect
        to Dr. Nachtigall.

        As of February 28, 1997, the following table sets forth information
regarding the number and percentage of Common Stock held by all persons who are
known by the Company to beneficially own or exercise voting or dispositive
control over 5% or more of the Company's outstanding Common Stock:

                             NUMBER OF SHARES
    NAME AND ADDRESS        BENEFICIALLY OWNED      PERCENT OF CLASS
    ----------------        ------------------      ----------------

Strome Susskind Investment
  Management, L.P. (1)
100 Wilshire Blvd.
Santa Monica,  CA                2,694,185               9.6%

 (1)  Based on information included on Schedule 13G dated February 13, 1997.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        During 1993, the Company loaned Messrs. Meier and Bologna, $80,000 and
$110,350, respectively. The notes, which bear interest at 10% per annum and are
unsecured but with full recourse, were due on or before December 7, 1996. The
due dates of these notes have subsequently been extended through December 7,
1999.

                                      -17-

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K

FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

        Indexes to financial statements and financial statement schedules appear
on F-1 and S-1, respectively.

EXHIBITS

 3.1    --     Restated Certificate of Incorporation of the Company, as
               amended2/
 3.2    --     By-laws of Company1/
10.1    --     Employment Agreement dated as of January 1, 1996, between the
               Company and Norman M. Meier8/
10.2    --     Employment Agreement dated as of January 1, 1996, between the
               Company  and William J. Bologna8/
10.3    --     1988 Stock Option Plan, as amended, of the Company6/
10.4    --     1996 Long-term Performance Plan9/
10.5    --     License and Supply Agreement between Warner-Lambert Company and
               the Company dated December 5, 19914/
10.6    --     Asset Purchase, License and Option Agreement, dated November 22,
               19892/
10.7    --     Employment Agreement dated as of April 15, 1992, between the
               Company and Nicholas A. Buoniconti5/
10.8    --     License and Supply Agreement for Crinone between Columbia
               Laboratories, Inc. (Bermuda) Ltd. and American Home Products
               dated as of May 21, 19957/
21      --     Subsidiaries of the Company
23      --     Consent of Independent Certified Public Accountants


1/             Incorporated by reference to the Registrant's Registration
               Statement on Form S-1 (File No. 33-22062-A) declared effective on
               July 28, 1988.

2/             Incorporated by reference to the Registrant's Registration
               Statement on Form S-1 (File No. 33-31962) declared effective on
               May 14, 1990.

3/             Incorporated by reference to the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1990.

4/             Incorporated by reference to the Registrant's Current Report on
               Form 8-K, filed on January 2, 1992.

5/             Incorporated by reference to the Registrant's Registration
               Statement on Form S-1 (File No. 33-35723) declared effective on
               May 28, 1992.

6/             Incorporated by reference to the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1993.

7/             Incorporated by reference to the Registrant's Registration
               Statement on Form S-1 (File No. 33-60123) declared effective
               August 28, 1995.

8/             Incorporated by reference to the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1995.

9/             Incorporated by reference to the Registrant's Proxy Statement
               dated August 26, 1996.

                                      -18-

<PAGE>

REPORTS ON FORM 8-K

        On February 12, 1997, the Company filed a Form 8-K stating that it had
received notification from the U.S. Food and Drug Administration approving the
Company's Treatment Protocol under its IND for the use of Crinone in assisted
fertility procedures.

                                      -19-

<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES
                  --------------------------------------------


                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------


                                                                           PAGE
                                                                           ----


Report of Independent Certified Public Accountants                         F-2


Consolidated Balance Sheets
  As of December 31, 1996 and 1995                                         F-3


Consolidated Statements of Operations
  for the Three Years Ended December 31, 1996                              F-5


Consolidated Statements of Stockholders' Equity
  for the Three Years Ended December 31, 1996                              F-6


Consolidated Statements of Cash Flows
  for the Three Years Ended December 31, 1996                              F-8


Notes to Consolidated Financial Statements                                 F-11

                                      F-1

<PAGE>

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders
   of Columbia Laboratories, Inc.:


We have audited the accompanying consolidated balance sheets of Columbia
Laboratories, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Columbia Laboratories, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.





ARTHUR ANDERSEN LLP

Miami, Florida,
   February 7, 1997.


<PAGE>


                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1996 AND 1995


                                     ASSETS
                                     ------




                                                           1996         1995
                                                       ----------    ----------
CURRENT ASSETS:
  Cash and cash equivalents, of which $3,049,036 is
     interest bearing as of December 31, 1996          $3,561,794    $1,628,952

  Accounts receivable, net of allowance
    for doubtful accounts of $97,275
    and $105,437 in 1996 and 1995, respectively         1,261,478     1,266,964
  Inventories                                             943,143       953,913
  Prepaid expenses                                        151,400       213,723
                                                       ----------    ----------
    Total current assets                                5,917,815     4,063,552
                                                       ----------    ----------

PROPERTY AND EQUIPMENT:
  Leasehold improvements                                  172,524        74,303
  Machinery and equipment                               2,166,289     1,571,246
  Furniture and fixtures                                  170,881       131,670
                                                       ----------    ----------
                                                        2,509,694     1,777,219
  Less-Accumulated depreciation
    and amortization                                    1,276,056       855,126
                                                       ----------    ----------
                                                        1,233,638       922,093
                                                       ----------    ----------

INTANGIBLE ASSETS, net                                  1,341,757     1,563,817

OTHER ASSETS                                            1,486,887     1,137,208
                                                       ----------    ----------
                                                       $9,980,097    $7,686,670
                                                       ==========    ==========

                                   (Continued)

                                      F-3

<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1996 AND 1995

                                   (Continued)

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

                                                           1996            1995
                                                       ------------    ------------
<S>                                                    <C>             <C>
CURRENT LIABILITIES:
  Current portion of long-term debt                    $       --      $    156,751
  Accounts payable                                        2,891,502       3,423,339
  Accrued expenses                                          892,456         956,647
  Deferred revenue                                        1,093,524       1,081,522
  Estimated liability for returns and allowances            320,484         413,899
                                                       ------------    ------------
      Total current liabilities                           5,197,966       6,032,158
                                                       ------------    ------------


OTHER LONG-TERM LIABILITIES                                 108,693          98,079

COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value; 1,000,000 shares
   authorized;
     Series A Convertible Preferred Stock, 1,323
     shares issued and outstanding in 1996 and
     1995, respectively (liquidation preference of
     $132,300 at December 31, 1996)                              13              13
     Series B Convertible Preferred Stock, 1,630 and
     1,750 shares issued and outstanding in 1996 and
     1995, respectively (liquidation preference of
     $163,000 at December 31, 1996)                              16              18
  Common stock, $.01 par value; 40,000,000
    shares authorized; 28,071,596 and 25,982,373
    shares issued and outstanding in 1996 and 1995,
    respectively                                            280,716         259,824
  Capital in excess of par value                         89,254,885      73,067,014
  Accumulated deficit                                   (84,891,812)    (71,812,828)
  Cumulative translation adjustment                          29,620          42,392
                                                       ------------    ------------
    Total stockholders' equity                            4,673,438       1,556,433
                                                       ------------    ------------
                                                       $  9,980,097    $  7,686,670
                                                       ============    ============
</TABLE>

           The accompanying notes to consolidated financial statements
                  are an integral part of these balance sheets.

                                       F-4

<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996


                                   1996           1995            1994
                               ------------    -----------    ------------
NET SALES                      $  5,646,031    $ 9,904,633    $  8,769,064

COST OF GOODS SOLD                3,517,163      5,430,458       5,539,424
                               ------------    -----------    ------------
    Gross profit                  2,128,868      4,474,175       3,229,640
                               ------------    -----------    ------------

OPERATING EXPENSES:
  Selling and distribution        3,012,089      2,897,312       2,036,353
  General and administrative      3,493,621      2,870,416       2,799,863
  Research and development       10,942,065      7,812,488       8,976,047
                               ------------    -----------    ------------
    Total operating expenses     17,447,775     13,580,216      13,812,263
                               ------------    -----------    ------------

    Loss from operations        (15,318,907)    (9,106,041)    (10,582,623)
                               ------------    -----------    ------------

OTHER INCOME (EXPENSE):
  License fees                    2,018,205      8,054,883         174,741
  Interest income                   359,224        135,799          61,030
  Interest expense                  (22,041)      (178,592)     (2,479,610)
  Other, net                       (115,465)       134,479        (167,427)
                               ------------    -----------    ------------
                                  2,239,923      8,146,569      (2,411,266)
                               ------------    -----------    ------------

    Net loss                   $(13,078,984)   $  (959,472)   $(12,993,889)
                               ============    ===========    ============

NET LOSS PER COMMON SHARE      $      (0.47)   $     (0.04)   $      (0.58)
                               ============    ===========    ============

WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING      27,615,000     25,487,000      22,530,000
                               ============    ===========    ============

           The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-5

<PAGE>
<TABLE>
<CAPTION>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996


                                Series A        Series B
                              Convertible      Convertible
                            Preferred Stock  Preferred Stock      Common Stock
                            ---------------- ---------------  -------------------
                            Number            Number            Number            Capital in               Cumulative
                              of                 of               of               Excess of  Accumulated  Translation
                            Shares   Amount   Shares  Amount    Shares    Amount   Par Value    Deficit     Adjustment     Total
                            ------  --------  ------  ------  ---------- -------- ----------- ------------ -----------  -----------
<S>                          <C>      <C>      <C>     <C>    <C>        <C>      <C>         <C>            <C>        <C>
BALANCE, January 1, 1994     1,915    $ 19     7,750   $  77  22,155,906 $221,559 $58,926,490 $(57,859,467)  $186,210   $ 1,474,888
Issuance of common stock      -         -         -       -      126,061    1,261     525,739         -          -          527,000
Options exercised             -         -         -       -       20,000      200      28,600         -          -           28,800
Warrants exercised            -         -         -       -    1,060,000   10,600   3,714,400         -          -        3,725,000
Conversion of debt            -         -         -       -      293,710    2,937   1,025,048         -          -        1,027,985
Conversion of preferred       (400)     (4)   (5,750)    (57)    123,220    1,232     (1,171)         -          -             -
stock
Accumulated dividends on
  preferred stock             -         -         -       -         -        -       (12,599)         -          -         (12,599)
Translation adjustment        -         -         -       -         -        -           -            -        30,437       30,437
Net loss                      -         -         -       -         -        -           -     (12,993,889)      -     (12,993,889)
                           -------  --------- ------  ------  ---------- -------- ----------- ------------  ---------  -----------
BALANCE,  December 31,       1,515      15     2,000      20  23,778,897  237,789  64,206,507  (70,853,356)   216,647   (6,192,378)
1994
Issuance of common stock      -         -         -       -      112,611    1,127     639,519         -          -         640,646
Options exercised             -         -         -       -      161,000    1,610     757,828         -          -         759,438
Warrants exercised            -         -         -       -      227,118    2,271   1,152,110         -          -       1,154,381
Conversion of debt            -         -         -       -    1,695,232   16,952   6,322,457         -          -       6,339,409
Conversion of preferred       (192)     (2)     (250)     (2)      7,515       75         (71)        -          -            -
stock
Accumulated dividends on
  preferred stock             -         -         -       -         -        -        (11,336)        -          -         (11,336)
Translation adjustment        -         -         -       -         -        -           -            -      (174,255)    (174,255)
Net loss                      -         -         -       -         -        -           -        (959,472)      -        (959,472)
                           -------  --------- ------  ------  ----------  ------- ----------- ------------  ---------  -----------
BALANCE, December 31, 1995   1,323      13     1,750      18  25,982,373  259,824  73,067,014  (71,812,828)    42,392    1,556,433
</TABLE>
                                   (Continued)

                                      F-6

<PAGE>
<TABLE>
<CAPTION>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                                   (Continued)


                                        Series A           Series B
                                      Convertible        Convertible
                                    Preferred Stock    Preferred Stock          Common Stock
                                    ---------------    ---------------    ----------------------
                                    Number             Number               Number
                                      of                 of                   of
                                    Shares   Amount    Shares   Amount      Shares        Amount
                                    ------   ------    ------   ------    ----------  ----------
<S>                                 <C>     <C>        <C>      <C>       <C>         <C>
BALANCE,  January 1, 1996           1,323   $   13     1,750    $  18     25,982,373  $  259,824
Issuance of common stock             --       --        --       --        1,358,000      13,580
Options exercised                    --       --        --       --          253,374       2,534
Warrants exercised                   --       --        --       --          475,382       4,754
Conversion of preferred
 stock                               --       --        (120)      (2)         2,467          24
Accumulated dividends on
 preferred stock                     --       --        --       --             --          --
Translation adjustment               --       --        --       --             --          --
Net loss                             --       --        --       --             --          --
                                   ------   ------     -----    -----     ----------  ----------
BALANCE, December 31, 1996          1,323   $   13     1,630    $  16     28,071,596     280,716
                                   ======   ======     =====    =====     ==========  ==========
</TABLE>

<TABLE>
<CAPTION>

                             (RESTUBBED FROM ABOVE)


                                Capital in                    Cumulative
                                 Excess of    Accumulated     Translation
                                 Par Value      Deficit       Adjustment       Total
                               -----------    ------------    -----------   -----------
<S>                            <C>            <C>               <C>         <C>
BALANCE,  January 1, 1996      $73,067,014    $(71,812,828)     $ 42,392    $  1,556,433
Issuance of common stock        12,220,519            --            --        12,234,099
Options exercised                1,651,872            --            --         1,654,406
Warrants exercised               2,326,116            --            --         2,330,870
Conversion of preferred
 stock                                 (22)           --            --              --
Accumulated dividends on
 preferred stock                   (10,614)           --            --           (10,614)
Translation adjustment                --              --         (12,772)        (12,772)
Net loss                              --       (13,078,984)         --       (13,078,984)
                               -----------    ------------    -----------    ------------
BALANCE, December 31, 1996     $89,254,885    $(84,891,812)   $    29,620    $  4,673,438
                               ===========    ============    ===========    ============
</TABLE>

          The accompanying notes to consolidated financial statements
                    are an integral part of these statements.

                                       F-7

<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996


                                                       1996           1995          1994
                                                   ------------    ---------    ------------
<S>                                                <C>             <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                           $(13,078,984)   $(959,472)   $(12,993,889)

Adjustments to reconcile net loss to net
 cash used in operating activities-
   Depreciation and amortization                        848,469      520,066         440,496
   Provision for (recovery of) doubtful accounts         (8,162)       7,067          (3,030)
   Provision for (recovery of) returns and              (82,718)      37,445         168,215
    allowances
   Write-down of inventories                             77,380      251,043         888,277
   Interest expense                                        --        (19,035)      1,738,635

Changes in assets and liabilities-
 (Increase) decrease in:
    Accounts receivable                                (228,558)    (429,570)         43,773
    Inventories                                         (66,610)     (87,713)        868,688
    Prepaid expenses                                    (38,383)     (54,454)         78,365
    Other assets                                       (304,561)     (74,615)         20,548

  Increase (decrease) in:
    Accounts payable                                   (491,797)     239,589       1,171,080
    Accrued expenses                                     57,650      215,748        (616,010)
    Deferred revenue                                     (8,902)    (157,410)       (387,993)
    Estimated liability for returns and
      allowances                                        (10,697)     (10,621)        (92,287)
                                                   ------------    ---------    ------------
      Net cash used in operating activities         (13,335,873)    (521,932)     (8,675,132)
                                                   ------------    ---------    ------------
</TABLE>

                                   (Continued)

                                      F-8

<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                                   (Continued)

                                                       1996          1995          1994
                                                   -----------    ----------    -----------
<S>                                                <C>            <C>           <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment               $  (750,763)   $ (309,091)   $ (275,210)

                                                   -----------    ----------    -----------



CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of notes payable and long-term debt      (156,751)      (91,954)       (37,527)
  Proceeds from issuance of common stock            12,234,099        78,146        500,000
  Proceeds from exercise of options and warrants     3,985,276     1,913,819      3,753,800
                                                   -----------    ----------    -----------
    Net cash provided by financing activities       16,062,626     1,900,011      4,216,273

EFFECT OF EXCHANGE RATE CHANGES ON CASH                (43,148)     (129,785)       142,989
                                                   -----------    ----------    -----------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                   1,932,842       939,203     (4,591,080)

CASH AND CASH EQUIVALENTS,
  beginning of year                                  1,628,952       689,749      5,280,829
                                                   -----------    ----------    -----------

CASH AND CASH EQUIVALENTS,
  end of year                                      $ 3,561,794    $1,628,952    $   689,749

                                                   ===========    ==========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION
  Interest paid                                    $    24,124    $  107,132    $   573,338
                                                   ===========    ==========    ===========
</TABLE>

                                   (Continued)

                                      F-9

<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996

                                   (Continued)


SUPPLEMENTAL SCHEDULE OF NONCASH
 OPERATING AND FINANCING ACTIVITIES:

    During 1995 and 1994, the Company repaid $6,339,409 and $1,027,985,
respectively, of long-term debt and accrued interest through the issuance of
1,695,232 and 293,710 shares, respectively, of Common Stock.

    During 1994, the Company issued 5,008 shares of Common Stock, in payment of
consulting fees, which totaled $27,000. During 1995, the Company issued 95,000
shares of Common Stock in payment of legal fees aggregating $562,500.

          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-10

<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    ORGANIZATION-

Columbia Laboratories, Inc. (the "Company") was incorporated as a Delaware
corporation in December 1986. The Company's objective is to develop unique
pharmaceutical products that treat female specific diseases and conditions
including menopause, fertility, contraception, sexually transmitted diseases,
premenstrual syndrome and dysmenorrhea. Columbia's products primarily utilize
the Company's patented bioadhesive delivery technology.

    PRINCIPLES OF CONSOLIDATION-

The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated in consolidation.

    ACCOUNTING ESTIMATES-

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

    FOREIGN CURRENCY-

The assets and liabilities of the Company's foreign subsidiaries are translated
into U.S. dollars at current exchange rates and revenue and expense items are
translated at average rates of exchange prevailing during the period. Resulting
translation adjustments are accumulated as a separate component of stockholders'
equity.

    INVENTORIES-

Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventory cost include materials, labor and manufacturing
overhead. Inventories consist of the following:

                                              DECEMBER 31,
                                        -----------------------
                                          1996           1995
                                        --------       --------
Finished goods                          $448,770       $831,794
Raw materials                            494,373        122,119
                                        --------       --------
                                        $943,143       $953,913
                                        ========       ========

    PROPERTY AND EQUIPMENT-

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line basis over the estimated useful
lives of the respective assets, as follows:

                                                      YEARS
                                                      -----

                     Machinery and equipment          5 - 10
                     Furniture and fixtures                5


                                      F-11

<PAGE>

Costs of major additions and improvements are capitalized and expenditures for
maintenance and repairs which do not extend the life of the assets are expensed.
Upon sale or disposition of property and equipment, the cost and related
accumulated depreciation are eliminated from the accounts and any resultant gain
or loss is credited or charged to income.

Deposits on manufacturing equipment totaling approximately $1.1 million and $1
million as of December 31, 1996 and 1995, respectively, are included in other
assets in the accompanying consolidated balance sheets.

    INTANGIBLE ASSETS-

Intangible assets consist of the following:
                                                     DECEMBER 31,
                                           ---------------------------------
                                               1996                 1995
                                           ------------         ------------
       Patents                             $  2,600,000         $  2,600,000
       Trademarks                               341,000              341,000
                                           ------------         ------------
                                              2,941,000            2,941,000
       Less accumulated amortization         (1,599,243)          (1,377,183)
                                            ----------          ------------
                                           $  1,341,757         $  1,563,817
                                           ============         ============

Patents are being amortized on a straight-line basis over their remaining lives
(through 2003). Trademarks are being amortized on a straight-line basis over ten
years.

    LONG-LIVED ASSETS-

Following the acquisition of any long-lived assets, the Company continually
evaluates whether later events and circumstances have occurred that indicate the
remaining estimated useful life of the long-lived asset may warrant revision or
that the remaining balance of the long-lived asset may not be recoverable. When
factors indicate that a long-lived asset may be impaired, the Company uses an
estimate of the underlying product's undiscounted net income, including amounts
to be received over the remaining life of the long-lived asset from license
fees, royalty income, and related deferred revenues, in measuring whether the
long-lived asset is recoverable. Unrecoverable amounts are charged to
operations.

    INCOME TAXES-

As of December 31, 1996, the Company has U.S. tax net operating loss
carryforwards of approximately $48 million which expire through 2011. The
Company also has unused tax credits of approximately $782,000 which expire at
various dates through 2005. Utilization of net operating loss carryforwards may
be limited in any year due to limitations in the Internal Revenue Code.

As of December 31, 1996 and 1995, other assets in the accompanying consolidated
balance sheets include deferred tax assets of approximately $17 million and $14
million, respectively, (comprised primarily of a net operating loss
carryforward) which have been fully reserved for as their ultimate realizability
is not assured.

    REVENUE RECOGNITION-

Sales are recorded as products are shipped and services are rendered. Royalties
and additional monies owed to the Company based on the strategic alliance
partners selling prices are recorded as revenue as sales are made by the
strategic alliance partners.

    LICENSE FEES-

License fees, net of related expenses, are recognized as other income when the
Company has no further obligations with respect to the payments and thus the
earnings process is complete.

                                      F-12

<PAGE>

    RESEARCH AND DEVELOPMENT COSTS-

Company sponsored research and development costs related to future products are
expensed as incurred. Costs related to research and development contracts are
charged to cost of sales upon recognition of the related revenue.

    LOSS PER SHARE-

Loss per share is computed by dividing the net loss plus preferred dividends by
the weighted average number of shares of common stock outstanding during the
period. Shares to be issued upon the exercise of the outstanding options and
warrants or the conversion of the preferred stock are not included in the
computation of loss per share as their effect is antidilutive.

    STATEMENTS OF CASH FLOWS-

For purposes of the statements of cash flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.

    STOCK-BASED COMPENSATION-

In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". Under the provisions of SFAS No. 123, companies can
either measure the compensation cost of equity instruments issued under employee
compensation plans using a fair value based method, or can continue to recognize
compensation cost using the intrinsic value method under the provisions of
Accounting Principles Board Opinion ("APB") No. 25. However, if the provisions
of APB No. 25 are continued, pro forma disclosure of net income or loss and
earnings or loss per share must be presented in the financial statements as if
the fair value method had been applied. For the three years ended December 31,
1996, the Company recognized compensation costs under the provisions of APB No.
25, and for the years ended December 31, 1996 and 1995, the Company has provided
the expanded disclosure required by SFAS No. 123 (see Note 3).


(2) STRATEGIC ALLIANCE AGREEMENTS:

In May 1995, the Company entered into a worldwide, except for South Africa,
license and supply agreement with American Home Products ("AHP") under which the
Wyeth-Ayerst division of AHP will market Crinone. Under the terms of the
agreement, during 1995 the Company received $8 million in milestone payments. An
additional $2 million in milestone payments was received during 1996. The
Company expects to receive additional milestone payments and a percentage of
AHP's sales of Crinone.

The Company has also entered into strategic alliance agreements for the
marketing and distribution of Replens and Advantage 24 with various
pharmaceutical companies. Pursuant to these agreements, the Company has received
advance payments, of which $1,093,524 and $1,081,522, respectively, are
reflected as deferred revenue in the accompanying December 31, 1996 and 1995
consolidated balance sheets. These advance payments will be recognized as
products are shipped to the applicable strategic alliance partners or as sales
are made by the strategic alliance partners.

                                      F-13

<PAGE>

(3) STOCKHOLDERS' EQUITY:

     PREFERRED STOCK-

In November 1989, the Company completed a private placement of 151,000 shares of
Series A Convertible Preferred Stock ("Series A Preferred Stock"). The Series A
Preferred Stock pays cumulative dividends at a rate of 8% per annum payable
quarterly and each share is convertible into 12.36 shares of Common Stock. As of
December 31, 1996 and 1995, dividends of $108,693 and $98,079, respectively,
have been earned but have not been declared and are included in other long-term
liabilities in the accompanying consolidated balance sheets.

In August 1991, the Company completed a private placement of 150,000 shares of
Series B Convertible Preferred Stock ("Series B Preferred Stock"). Each share of
Series B Preferred Stock is convertible into 20.57 shares of Common Stock.

Upon liquidation of the Company, the holders of the Series A and Series B
Preferred Stock are entitled to $100 per share. In addition, the holders of
Series A Preferred Stock are entitled to accumulated unpaid dividends. The
Series A Preferred Stock shares are redeemable for cash, at the option of the
Company, at specified redemption prices. The Series B Preferred Stock will be
automatically converted into Common Stock upon the occurrence of certain events.
Holders of the Series A and Series B Preferred Stock are entitled to one vote
for each share of Common Stock into which the preferred stock is convertible.

     WARRANTS-

As of December 31, 1996, the Company had warrants outstanding for the purchase
of 270,400 shares of Common Stock. Information on outstanding warrants is as
follows:

                      EXERCISE
                       PRICE
                      --------
                       $ 4.38                 150,000
                         4.88                  35,000
                         5.25                   3,500
                         5.63                   7,000
                         5.88                   7,000
                        10.78                  67,900
                                              -------
                                              270,400
                                              =======

All of the warrants, except 15,000 of the $4.88 warrants, were exercisable on
December 31, 1996.

     STOCK OPTION PLAN-

All employees, officers, directors and consultants of the Company or any
subsidiary were eligible to participate in the Columbia Laboratories, Inc. 1988
Stock Option Plan, as amended (the "Plan"). Under the Plan, a total of 5,000,000
shares of Common Stock were authorized for issuance upon exercise of the
options. As of October 1996, no further options will be granted pursuant to this
Plan.

In October 1996, the Company adopted the 1996 Long-term Performance Plan
("Performance Plan") which provides for the grant of stock options, stock
appreciation rights and restricted stock to certain designated employees of the
Company, non-employee directors of the Company and certain other persons
performing significant services for the Company as designated by the
Compensation/Stock Option Committee of the Board of Directors. Pursuant to the
Performance Plan, an aggregate of 3,000,000 shares of Common Stock have been
reserved for issuance.

A summary of the status of the Company's two stock option plans as of December
31, 1996 and 1995, and changes during the years ending on those dates is
presented below:

                                      F-14

<PAGE>
<TABLE>
<CAPTION>

                                                     1996                          1995
                                             ----------------------       ---------------------
                                                           WEIGHTED                    WEIGHTED
                                                           AVERAGE                     AVERAGE
                                                           EXERCISE                    EXERCISE
                                               SHARE         PRICE          SHARES       PRICE
                                             ---------     --------       ---------    --------
<S>                                          <C>            <C>           <C>           <C>
Outstanding at beginning of year             3,176,646      $ 5.37        3,276,320     $ 5.67
Granted                                        699,000       10.41          321,500       7.25
Exercised                                     (253,374)       6.53         (161,000)      4.72
Forfeited                                      (31,000)       6.80         (260,174)     11.92
                                             ---------                    ---------
Outstanding at end of year                   3,591,272        6.25        3,176,646       5.37
                                             =========                    =========

Options exercisable at year end              2,808,772                    2,713,809
                                             =========                    =========
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>

  RANGE OF              NUMBER            REMAINING      AVERAGE             NUMBER           AVERAGE
  EXERCISE            OUTSTANDING        CONTRACTUAL     EXERCISE         EXERCISABLE         EXERCISE
   PRICES        AT DECEMBER 31, 1996        LIFE         PRICE       AT DECEMBER 31, 1996      PRICE
-------------    --------------------    -----------     --------     --------------------    --------
<S>                   <C>                    <C>          <C>               <C>                <C>
    $1.44                 1,000              1.94         $ 1.44                1,000          $ 1.44
    $4.38             1,850,000              7.74           4.38            1,850,000            4.38
$ 4.88-$ 7.25           882,748              7.04           6.10              784,248            6.18
$ 8.00-$12.13           750,000              8.73          10.06              116,000            8.64
$12.25-$16.03           107,524              6.04          13.33               57,524           14.27
                      ---------                                             ---------
$ 1.44-$16.03         3,591,272              7.72           6.26            2,808,772            5.26
                      =========                                             =========
</TABLE>

The Company applies APB Opinion 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation cost been determined based on the fair value at
the grant dates for those awards consistent with the method of FASB Statement
123, the Company's net loss and loss per share would have been increased to the
pro forma amounts indicated below:

                                            1996             1995
                                        ------------       ---------
Net loss            As reported         $(13,078,984)      $  (959,472)
                    Proforma             (16,648,154)       (2,284,148)
                                        ============       ===========

Loss per share      As reported         $      (0.47)      $     (0.04)
                    Proforma                    (.60)             (.09)
                                        ============       ===========

The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value of
the options reflected in the above table include the following: (i) an exercise
price equal to the fair market value of the underlying stock on the dates of
grant, (ii) an option term of three years, (iii) an interest rate of 6% that
represents the interest rate on a U.S. Treasury security with a maturity date
corresponding to that of the option term, (iv) volatility of 60% calculated
using daily stock prices for the one-year period prior to the grant date and (v)
no annualized dividends paid with respect to a share of Common Stock at the date
of grant. The ultimate values of the options will depend on the future price of
the Company's Common Stock, which cannot be forecast with reasonable accuracy.
The actual value, if any, an optionee will realize upon exercise of an option
will depend on the excess of the market value of the Company's Common Stock over
the exercise price on the date the option is exercised.

                                      F-15

<PAGE>

(4) COMMITMENTS AND CONTINGENCIES:

     LEASES-

The Company leases office space, apartments and office equipment under
noncancelable operating leases. Lease expense for each of the three years ended
December 31, 1996, 1995 and 1994 totaled $736,372, $365,995 and $461,489,
respectively. Future minimum lease payments as of December 31, 1996 are as
follows:

                     1997                $  715,059
                     1998                   523,665
                     1999                   141,857
                     2000                    87,072
                     2001                    53,802
                     Thereafter              19,852
                                         ----------
                                         $1,541,307
                                         ==========
     ROYALTIES-

In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which consisted
of the patents underlying the Company's Bioadhesive Delivery System, other
patent applications and related technology, for $2,600,000, in the form of 9%
convertible debentures which were converted into 500,000 shares of Common Stock
during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc. receives a
royalty equal to two percent of the net sales of products based on the
Bioadhesive Delivery System to an aggregate amount of $7,500,000. In addition,
beginning in March 1995, the Company agreed to prepay a portion of the remaining
royalty obligation if certain conditions are met. The Company may not assign the
patents underlying the Bioadhesive Delivery System without the prior written
consent of Bio-Mimetics, Inc. until the aggregate royalties have been paid.

In May 1989, the Company signed an exclusive agreement to license the U.S. and
Canadian marketing rights for Diasorb(/registered/), a unique pediatric
antidiarrheal product formerly marketed by Schering-Plough Corporation. Under
the terms of the agreement, the Company is obligated to pay a royalty equal to
5% of the net sales of Diasorb.

     EMPLOYMENT AGREEMENTS-

The Company has employment agreements with certain employees, some of whom are
also stockholders of the Company. The remaining terms of the employment
agreements range from one to four years. Future base compensation to be paid
under these agreements as of December 31, 1996 are as follows:

                     1997                  $  761,833
                     1998                     601,750
                     1999                     500,000
                     2000                     500,000
                                           ----------
                                           $2,363,583
                                           ==========

During 1993, the Company's stockholders approved an Incentive Compensation Plan
covering all employees pursuant to which an aggregate of 5% of pretax earnings
of the Company for any year will be awarded to designated employees of the
Company. As a result of the Company's net losses, no amounts have been awarded
to date.

     LEGAL PROCEEDINGS-

Various claims and complaints have been filed or are pending against the Company
with respect to various matters. In the opinion of management and counsel, all
such matters are adequately reserved for or covered by insurance or, if not so
covered, are without any or have little merit or involve such amounts that if
disposed of unfavorably would not have a material adverse effect on the Company.

                                      F-16

<PAGE>

(5) OTHER RELATED-PARTY TRANSACTION:

During 1993, the Company loaned two individuals who are officers, directors and
stockholders of the Company an aggregate of $190,350. These notes, which bear
interest at 10% per annum, were due on or before December 7, 1996. The notes and
the related accrued interest, aggregating $230,354 as of December 31, 1995, are
included in accounts receivable in the accompanying 1995 consolidated balance
sheet. The due dates of these notes have subsequently been extended through
December 7, 1999. Accordingly, as of December 31, 1996, the aggregate balance of
$249,289 is included in other assets in the accompanying 1996 consolidated
balance sheet.


(6) SEGMENT INFORMATION:

The Company and its subsidiaries are engaged in one line of business, the
development and sale of pharmaceutical products and cosmetics. One customer
accounted for approximately 21% and 27% of 1995 and 1994 consolidated net sales,
respectively. Another customer accounted for approximately 18%, 16% and 14%,
respectively, of 1996, 1995 and 1994 consolidated net sales. A third customer
accounted for approximately 13%, 5% and 6% of 1996, 1995 and 1994 consolidated
net sales, respectively. The following table shows selected information by
geographic area:

                                       NET          LOSS FROM     IDENTIFIABLE
                                      SALES        OPERATIONS        ASSETS
                                    ----------    ------------    ------------
As of and for the year
 ended December 31, 1996-
 United States                      $4,434,410    $ (5,560,059)    $5,370,215
 Europe                              1,211,621      (9,758,848)     4,609,882
                                    ----------    ------------     -----------
                                    $5,646,031    $(15,318,907)    $9,980,097
                                    ==========    ============     ==========

As of and for the year
 ended December 31, 1995-
 United States                      $8,321,578    $ (2,451,702)    $2,989,278
 Europe                              1,583,055      (6,654,339)     4,697,392
                                    ----------    ------------     -----------
                                    $9,904,633    $ (9,106,041)    $7,686,670
                                    ==========    ============     ==========

As of and for the year
 ended December 31, 1994-

 United States                      $7,681,985   $ (2,798,773)     $3,153,159
 Europe                              1,087,079     (7,783,850)      3,654,405
                                    ----------   -------------     ----------
                                    $8,769,064   $(10,582,623)     $6,807,564
                                    ==========   ============      ==========

                                      F-17

<PAGE>

                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES


                      INDEX TO FINANCIAL STATEMENT SCHEDULE


                                                                     PAGE
                                                                     ----



Report of Independent Certified Public Accountants                    S-2


Schedule II-Valuation and Qualifying Accounts and Reserves            S-3




<PAGE>

                      REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders
 of Columbia Laboratories, Inc.:


We have audited in accordance with generally accepted auditing standards, the
financial statements of Columbia Laboratories, Inc. and subsidiaries included in
this Form 10-K and have issued our report thereon dated February 7, 1997. Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule II is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.





ARTHUR ANDERSEN LLP

Miami, Florida,
  February 7, 1997.


<PAGE>
<TABLE>
<CAPTION>
                  COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                   FOR THE THREE YEARS ENDED DECEMBER 31, 1996


                                                     CHARGED TO
                                       BALANCE AT   (CREDITED TO)                   BALANCE
                                       BEGINNING      COSTS AND                     AT END
                DESCRIPTION            OF PERIOD       EXPENSES     DEDUCTIONS     OF PERIOD
                -----------            ---------       --------     ----------     ---------
<S>                                    <C>             <C>            <C>           <C>
YEAR ENDED DECEMBER 31, 1996:
  Allowance for doubtful accounts       $105,437       $(8,162)       $  --         $ 97,275
                                        ========       =======        =======       ========



YEAR ENDED DECEMBER 31, 1995:
  Allowance for doubtful accounts       $ 98,370       $ 7,067        $  --         $105,437
                                        ========       =======        =======       =======



YEAR ENDED DECEMBER 31, 1994:
  Allowance for doubtful accounts       $110,015       $(3,030)       $(8,615)      $ 98,370
                                        ========       =======        =======       ========
</TABLE>

<PAGE>

                                   SIGNATURES


        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                          COLUMBIA LABORATORIES, INC.

Date: MARCH 20, 1997                      By:/s/ MARGARET J. ROELL
                                             ---------------------
                                             Margaret J. Roell, Vice President


        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.

/s/ NORMAN M. MEIER          President, Chief Executive         March 25, 1997
-------------------
Norman M. Meier              Officer, Director
                             (Principal Executive Officer)

/s/ WILLIAM J. BOLOGNA       Chairman of the Board of           March 21, 1997
-------------------------    Directors
William J. Bologna

/s/ NICHOLAS A. BUONICONTI   Vice Chairman of the Board         March 25, 1997
--------------------------   of Directors
Nicholas A. Buoniconti

/s/ MARGARET J. ROELL        Vice President-Finance and         March 20, 1997
--------------------         Administration, Chief Financial
Margaret J. Roell            Officer, Treasurer and
                             Secretary (Principal Financial
                             and Accounting Officer)


/s/ JEAN CARVAIS             Director                           March 22, 1997
----------------
Jean Carvais

/s/ IRWIN L. KELLNER         Director                           March 21, 1997
--------------------
Irwin L. Kellner

/s/ LILA E. NACHTIGALL       Director                           March 24, 1997
----------------------
Lila E. Nachtigall

/s/ ROBERT C. STRAUSS        Director                           March 25, 1997
---------------------
Robert C. Strauss

<PAGE>

                               INDEX TO EXHIBITS

EXHIBIT
NUMBER    DESCRIPTION
------    -----------

  21      --             Subsidiaries of the Company
  23      --             Consent of Independent Certified Public Accountants
  27      --             Financial Data Schedule