**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10 - Q**





x
      QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
      the
      quarterly period ended June 30, 2005





OR





o
      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 Registrant as specified in its charter)








**Delaware**
            **59-2758596**(State
                or other jurisdiction of incorporation or
                organization)
            (I.R.S.
                EmployerIdentification No.)**354
                Eisenhower Parkway, Plaza 1, 2ndFloor****Livingston,
                New Jersey**
            **07039**(Address
                of principal executive
                offices)
            (Zip
                  Code)




Registrant's
      telephone number, including area code: **(973)
      994-3999**




Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No
o





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act) Yes x No o





Number
      of
      shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding
      as
      of August 1, 2005: 41,751,931








**PART
      1 - FINANCIAL INFORMATION**




**Item
      1. Financial Statements**




The
      following unaudited, condensed consolidated financial statements of Columbia
      Laboratories, Inc. (the “Company”) have been prepared in accordance with the
      instructions to Form 10-Q and, therefore, omit or condense certain footnotes
      and
      other information normally included in financial statements prepared in
      accordance with generally accepted accounting principles. In the opinion of
      management, all adjustments (consisting only of normal recurring accruals)
      necessary for a fair presentation of the financial information for the interim
      periods reported have been made. Results of operations for the three and six
      months ended June 30, 2005 are not necessarily indicative of the results for
      the
      year ending December 31, 2005. It is suggested that these financial statements
      be read in conjunction with the financial statements and related disclosures
      for
      the year ended December 31, 2004 included on Form 10-K filed with the SEC,
      as
      amended.





Page
          2 of
          23


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED BALANCE SHEETS




June
                    30,
                
                December
                    31,2005
                
                2004(Unaudited)ASSETSCurrent
                    assets-Cash
                    and cash equivalents
                
                
                
                
                $
                8,966,533
                
                $
                19,781,591Accounts
                      receivable, net of allowances of $75,000 and $86,114 in 2005
                      and 2004,
                      respectively
                
                
                
                
                
                4,675,858
                
                
                4,260,379Inventories
                
                
                
                
                
                2,594,732
                
                
                2,742,544Prepaid
                    expenses and other current assets
                
                
                
                
                
                444,915
                
                
                1,155,673Total
                    current assets
                
                
                
                
                
                16,682,038
                
                
                27,940,187Property
                    and equipment, net
                
                
                
                
                
                1,119,094
                
                
                1,207,041Other
                    assets
                
                
                
                
                
                120,321
                
                
                121,140TOTAL
                    ASSETS
                
                
                
                
                $
                17,921,453
                
                $
                29,268,368LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIENCY)Current
                    liabilities-Note
                    payable
                
                
                
                
                $
                —
                
                $
                10,000,000Current
                    portion of financing agreements
                
                
                
                
                
                1,105,049
                
                
                2,753,486Accounts
                    payable
                
                
                
                
                
                1,471,609
                
                
                2,772,107Accrued
                    sales returns and other accrued expenses
                
                
                
                
                
                2,975,817
                
                
                3,111,198Total
                    current liabilities
                
                
                
                
                
                5,552,475
                
                
                18,636,791Deferred
                    revenue
                
                
                
                
                
                4,350,873
                
                
                4,239,060Long-term
                    portion of financing agreements
                
                
                
                
                
                19,588,719
                
                
                18,923,440TOTAL
                    LIABILITIES
                
                
                
                
                
                29,492,067
                
                
                41,799,291Stockholders'
                    equity (deficiency)-Preferred
                    stock, $.01 par value; 1,000,000 shares authorized:Series
                      B Convertible Preferred Stock, 130 shares issued and outstanding
                      in
                      2005 and 2004
                
                
                
                
                
                1
                
                
                1Series
                      C Convertible Preferred Stock, 3,250 shares issued and
                      outstanding in
                      2005 and 2004
                
                
                
                
                
                32
                
                
                32Series
                    E Convertible Preferred Stock, 69,000 shares issued and outstanding
                    in
                    2005
                
                
                
                
                
                690
                
                
                —Common
                      stock, $.01 par value; 100,000,000 authorized 41,751,934 shares
                      issued and
                      outstanding in 2005 and 2004
                
                
                
                
                
                417,519
                
                
                417,519Capital
                    in excess of par value
                
                
                
                
                
                175,410,133
                
                
                168,587,536Accumulated
                    deficit
                
                
                
                
                
                (187,582,581
                )
                
                (181,777,838
                )Accumulated
                    other comprehensive income
                
                
                
                
                
                183,592
                
                
                241,827TOTAL
                    STOCKHOLDERS' EQUITY (DEFICIENCY)
                
                
                
                
                
                (11,570,614
                )
                
                (12,530,923
                )TOTAL
                    LIABILITIES AND STOCKHOLDERS'EQUITY
                    (DEFICIENCY)
                
                
                
                
                $
                17,921,453
                
                $
                29,268,368


See
      notes
      to condensed consolidated financial statements





Page
          3 of
          23


**** COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)







Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004NET
                  REVENUES
              
              $
              10,614,422
              
              $
              9,203,637
              
              $
              6,333,845
              
              $
              4,663,958COST
                  OF REVENUES
              
              
              4,062,440
              
              
              3,502,871
              
              
              2,245,435
              
              
              1,817,675Gross
                  profit
              
              
              6,551,982
              
              
              5,700,766
              
              
              4,088,410
              
              
              2,846,283OPERATING
                  EXPENSES:Selling
                  and distribution
              
              
              5,000,396
              
              
              9,748,148
              
              
              2,101,793
              
              
              4,875,242General
                  and administrative
              
              
              3,522,722
              
              
              3,782,737
              
              
              1,696,964
              
              
              1,854,991Research
                  and development
              
              
              2,540,822
              
              
              3,056,663
              
              
              1,248,597
              
              
              1,439,952Total
                  operating expenses
              
              
              11,063,940
              
              
              16,587,548
              
              
              5,047,354
              
              
              8,170,185Loss
                  from operations
              
              
              (4,511,958
              )
              
              (10,886,782
              )
              
              (958,944
              )
              
              (5,323,902
              )OTHER
                  INCOME (EXPENSE):Interest
                  income
              
              
              86,399
              
              
              118,976
              
              
              40,561
              
              
              59,007Interest
                  expense
              
              
              (1,365,966
              )
              
              (1,435,536
              )
              
              (625,353
              )
              
              (751,355
              )Loss
                  on sale of intangible assets
              
              
              —
              
              
              (577,917
              )
              
              —
              
              
              (577,917
              )Other,
                  net
              
              
              (13,218
              )
              
              (76,850
              )
              
              (46,300
              )
              
              (9,113
              )(1,292,785
              )
              
              (1,971,327
              )
              
              (631,092
              )
              
              (1,279,378
              )Net
                  loss
              
              
              ($5,804,743
              )
              
              ($12,858,109
              )
              $
              (1,590,036
              )
              $
              (6,603,280
              )NET
                  LOSS PER COMMON SHARE:Basic
                  and diluted
              
              $
              (0.14
              )
              $
              (0.32
              )
              $
              (0.04
              )
              $
              (0.16
              )WEIGHTED
                  AVERAGE NUMBER OFCOMMON
                  SHARES OUTSTANDING:Basic
                  and diluted
              
              
              41,751,934
              
              
              40,207,797
              
              
              41,751,934
              
              
              40,675,011





See
      notes
      to condensed consolidated financial statements




Page
          4 of
          23


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS


(Unaudited)




Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004NET
                  LOSS
              
              $
              (5,804,743
              )
              $
              (12,858,109
              )
              $
              (1,590,036
              )
              $
              (6,603,280
              )Other
                  comprehensive loss:Foreign
                  currency translation, net of tax
              
              
              (58,235
              )
              
              (16,792
              )
              
              (33,324
              )
              
              (6,263
              )Comprehensive
                  loss
              
              $
              (5,862,978
              )
              $
              (12,874,901
              )
              $
              (1,623,360
              )
              $
              (6,609,543
              )




See
      notes
      to condensed consolidated financial statements





Page
          5 of
          23


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




Six
                  Months Ended June 30,2005
              
              2004CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (5,804,743
              )
              $
              (12,858,109
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities-Depreciation
                  and amortization
              
              
              155,055
              
              
              214,628Provision
                  for doubtful accounts
              
              
              89,009
              
              
              20,000Provision
                  for returns and allowances
              
              
              2,125,048
              
              
              100,209Writedown
                  of inventories
              
              
              497,125
              
              
              290,000Interest
                  expense on financing agreements
              
              
              1,210,386
              
              
              1,057,856Loss
                  on sale of intangible assets
              
              
              —
              
              
              577,917Issuance
                  of options for sales services
              
              
              4,537
              
              
              4,886Changes
                  in assets and liabilities-(Increase)
                  decrease in:Accounts
                  receivable
              
              
              (504,488
              )
              
              1,203,270Inventories
              
              
              (349,313
              )
              
              (1,394,925
              )Prepaid
                  expenses
              
              
              710,758
              
              
              1,432,130Other
                  assets
              
              
              819
              
              
              (20,260
              )Increase
                  (decrease) in:Accounts
                  payable
              
              
              (1,300,498
              )
              
              (325,075
              )Accrued
                  sales returns and other accrued expenses
              
              
              (2,260,429
              )
              
              (1,642,243
              )Deferred
                  revenue
              
              
              111,813
              
              
              649,228Net
                  cash used in operating activities
              
              
              (5,314,921
              )
              
              (10,690,488
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Purchase
                  of property and equipment
              
              
              (67,216
              )
              
              (151,320
              )Sale
                  of intangible assets
              
              
              —
              
              
              300,000Net
                  cash provided by (used in) investing activities
              
              
              (67,216
              )
              
              148,680CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from issuance of common stock, net
              
              
              —
              
              
              6,400,000Proceeds
                  from issuance of preferred stock, net
              
              
              6,900,000
              
              
              —Exercise
                  of options and warrants
              
              
              —
              
              
              229,688Payment
                  of note payable
              
              
              (10,000,000
              )
              
              —Proceeds
                  from financing agreements
              
              
              —
              
              
              3,000,000Payments
                  pursuant to financing agreements
              
              
              (2,193,544
              )
              
              (200,106
              )Dividends
                  paid
              
              
              (81,250
              )
              
              (81,250
              )Net
                  cash provided by (used in) financing activities
              
              
              (5,374,794
              )
              
              9,348,332


(Continued)
 Page
            6 of
            23


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES




CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)




(Continued)




Six
                    Months Ended June 30,2005
                
                2004EFFECT
                    OF EXCHANGE RATE CHANGES ON CASH
                
                
                (58,127
                )
                
                (16,642
                )NET
                    INCREASE (DECREASE) IN CASHAND
                    CASH EQUIVALENTS
                
                
                (10,815,058
                )
                
                (1,210,118
                )CASH
                    AND CASH EQUIVALENTS,Beginning
                    of period
                
                
                19,781,591
                
                
                30,965,517CASH
                    AND CASH EQUIVALENTS,End
                    of period
                
                $
                8,966,533
                
                $
                29,755,399
  See
      notes
      to condensed consolidated financial statements





Page
          7 of
          23


COLUMBIA
      LABORATORIES, INC. AND SUBSIDIARIES





NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)








(1)
      SIGNIFICANT ACCOUNTING POLICIES :





The
      accounting policies followed for quarterly financial reporting are the same
      as
      those disclosed in Note (1) of the Notes to Consolidated Financial Statements
      included in the Company's Annual Report on Form 10-K filed with the SEC for
      the
      fiscal year ended December 31, 2004, as amended.





Prior-year
      financial statements have been reclassified to conform to the 2005
      presentations.





(2)
      LIQUIDITY:





As
      shown
      in the accompanying financial statements, the Company has had recurring losses
      from operations and has a stockholders' deficiency. The Company has been able
      to
      raise additional funds from equity offerings and financing arrangements and
      management believes it can continue to do so in the future. Management
      believes that certain cost reduction measures taken in 2005, together with
      increased projected revenue in 2005 and potential equity offerings, such as
      the
      one consummated on May 10, 2005 (see Note 10), and/or financing arrangements,
      will enable the Company to sustain its operations. However, there can be no
      assurance given that this will occur.





(3)
      INVENTORIES:





Inventories
      as of June 30, 2005, and December 31, 2004, consisted of the
      following:





June
                  30,
              
              December
                  31,2005
              
              2004Finished
                  goods
              
              $
              1,665,002
              
              $
              1,993,190Raw
                  materials
              
              
              929,730
              
              
              749,354$
              2,594,732
              
              $
              2,742,544


(4 )
      NOTES PAYABLE:





On
      March
      16, 1998, the Company issued to an institutional investor a $10 million
      convertible subordinated note due March 15, 2005. The note was paid in full
      on
      March 15, 2005.





(5)
      FINANCING AGREEMENTS:





In
      an
      agreement dated July 31, 2002, Quintiles Transnational Corp’s (“Quintiles”)
      strategic investment group, PharmaBio Development, Inc. (“PharmaBio”), agreed to
      pay $4.5 million, in four equal quarterly installments commencing in the third
      quarter of 2002, for the right to receive a 5% royalty on the net sales of
      the
      Company’s women’s healthcare products in the United States for five years
      beginning in the first quarter of 2003. The royalty payments are subject to
      minimum ($8 million) and maximum ($12 million) amounts. Because the minimum
      amount exceeds $4.5 million, the Company has recorded the amounts received
      as
      liabilities. The excess of the minimum ($8 million) to be paid by the Company
      over the $4.5 million received by the Company is being recognized as interest
      expense over the five-year term of the agreement, assuming an interest rate
      of
      12.51%. $172,291 and $153,136 were recorded as interest expense for the three
      months ended June 30, 2005 and June 30, 2004, respectively, and $320,168 and
      $301,013 were recorded as interest expense for the six months ended June 30,
      2005 and June 30, 2004, respectively. The Company has paid PharmaBio $2,753,758
      through June 30, 2005 under this agreement.





Page
          8 of
          23


In
      an
      agreement dated March 5, 2003, PharmaBio agreed to pay $15
      million in five quarterly installments commencing with the signing of the
      agreement. In return, Quintiles will receive a 9% royalty on net sales of
      Striant® (testosterone buccal system) in the United States up to agreed annual
      sales revenues, and a 4.5% royalty of net sales above those levels. The royalty
      term is seven years. Royalty payments commenced in the 2003 third quarter and
      are subject to minimum ($30 million) and maximum ($55 million) amounts. Because
      the minimum amount exceeds $15 million, the Company has recorded the amounts
      received as liabilities. The excess of the minimum ($30 million) to be paid
      by
      the Company over the $15 million received by the Company is being recognized
      as
      interest expense over the seven-year term of the agreement, assuming an interest
      rate of 10.67%. $453,062 and $409,380 were recorded as interest expense for
      the
      three months ended June 30, 2005 and June 30, 2004, respectively, and $890,218
      and $756,843 were recorded as interest expense for the six months ended June
      30,
      2005 and June 30, 2004, respectively. The agreement calls for a true-up payment
      to PharmaBio in an amount equal to the difference between royalties paid through
      September 30, 2006 and $13,000,000. The Company has paid PharmaBio $583,711
      through June 30, 2005 under this agreement.





Liabilities
      from financing agreements as
      of
      June 30, 2005 and December 31, 2004 consisted of the following:




June
                  30,
              
              December
                  31,2005
              
              2004July
                  31, 2002 financing agreement
              
              $
              3,190,074
              
              $
              4,932,548March
                  5, 2003 financing agreement
              
              
              17,503,694
              
              
              16,744,37820,693,768
              
              
              21,676,926Less
                  current portion
              
              
              1,105,049
              
              
              2,753,486$
              19,588,719
              
              $
              18,923,440




Page
          9 of
          23


(6)
      SEGMENT INFORMATION:





The
      Company and its subsidiaries are engaged in one line of business, the
      development, licensing and sale of pharmaceutical products, medical devices
      and
      cosmetics. The following table shows selected unaudited information by
      geographic area:




IncomeNet
              
              (Loss)
                  from
              
              IdentifiableRevenues
              
              Operations
              
              AssetsAs
                  of and for the six months ended June 30, 2005-United
                  States
              
              $
              5,161,006
              
              $
              (7,141,356
              )
              $
              9,137,513Europe
              
              
              5,453,416
              
              
              2,629,398
              
              
              8,783,940$
              10,614,422
              
              $
              (4,511,958
              )
              $
              17,921,453As
                  of and for the six months ended June 30, 2004-United
                  States
              
              $
              5,377,007
              
              $
              (11,690,534
              )Europe
              
              
              3,826,630
              
              
              803,752$
              9,203,637
              
              $
              (10,886,782
              )As
                  of and for the three months ended June 30, 2005-United
                  States
              
              $
              3,431,639
              
              $
              (2,659,739
              )Europe
              
              
              2,902,206
              
              
              1,700,795$
              6,333,845
              
              $
              (958,944
              )As
                  of and for the three months ended June 30, 2004-United
                  States
              
              $
              3,044,343
              
              $
              (5,780,786
              )Europe
              
              
              1,619,615
              
              
              456,884$
              4,663,958
              
              $
              (5,323,902
              )




Page
          10
          of 23


(7)
      LOSS PER COMMON AND COMMON EQUIVALENT SHARE:





The
      calculation of basic and diluted loss per common and common equivalent share
      is
      as follows:




Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  loss
              
              $
              (5,804,743
              )
              $
              (12,858,109
              )
              $
              (1,590,036
              )
              $
              (6,603,280
              )Less:
                  Preferred stock dividends
              
              
              (81,250
              )
              
              (81,250
              )
              
              (40,625
              )
              
              (40,625
              )Net
                    loss applicable to common stock
              
              $
              (5,885,993
              )
              $
              (12,939,359
              )
              $
              (1,630,661
              )
              $
              (6,643,905
              )Basic
                  and diluted:Weighted
                    average number of common shares outstanding
              
              
              41,751,934
              
              
              40,207,797
              
              
              41,751,934
              
              
              40,675,011Basic
                  and diluted net loss per common share
              
              $
              (0.14
              )
              $
              (0.32
              )
              $
              (0.04
              )
              $
              (0.16
              )




Basic
        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. Diluted earnings per share gives effect to dilutive options, warrants
        and other potential common stock outstanding during the periods. 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
        diluted
        loss per share as their effect is anti-dilutive.




( 8)
      LEGAL PROCEEDINGS:





Claims
      and lawsuits have been filed against the Company from time to time. Although
      the results of pending claims are always uncertain, the Company does not believe
      the results of any such actions, individually or in the aggregate, will have
      a
      material adverse effect on the Company’s financial position or results of
      operation. Additionally, the Company believes that it has adequate reserves
      or
      adequate insurance coverage in respect of these claims, but no assurance can
      be
      given as to the sufficiency of such reserves or insurance in the event of any
      unfavorable outcome resulting from these actions. It is the policy of management
      to disclose the amount or range of reasonably possible losses in excess of
      recorded amounts.




Page
          11
          of 23


(9)
      STOCK-BASED COMPENSATION:





The
      Company has elected to apply Accounting Principles Board Opinion No. 25,
      Accounting for Stock Issued to Employees, and related interpretations in
      accounting for its stock options and has adopted the disclosure-only provisions
      of Statement of Financial Accounting Standards ("SFAS") No. 123, Accounting
      for
      Stock-Based Compensation. If the Company had elected to recognize compensation
      cost based on the fair value of the options granted at the grant date as
      prescribed by SFAS No. 123, the Company's net loss and net loss per common
      share
      for the six and three month periods ended June 30, 2005 and 2004 would have
      been
      as follows:




Six
                  Months Ended
              
              Three
                  Months EndedJune
                  30,
              
              June
                  30,2005
              
              2004
              
              2005
              
              2004Net
                  loss, as reported
              
              $
              (5,804,743
              )
              $
              (12,858,109
              )
              $
              (1,590,036
              )
              $
              (6,603,280
              )Add:
                    Value of options charged  to operations, net of
                    tax
              
              
              4,537
              
              
              4,886
              
              
              4,537
              
              
              4,886Deduct
                      : Total stock-based compensation expense determined under fair
                      value based method for all awards, net of
                      tax
              
              
              (780,244
              )
              
              (972,474
              )
              
              (263,951
              )
              
              (520,180
              )Pro
                  forma net loss
              
              $
              (6,580,450
              )
              $
              (13,825,697
              )
              $
              (1,849,450
              )
              $
              (7,118,574
              )Loss
                  per share - basic and dilutedAs
                  reported
              
              $
              (0.14
              )
              $
              (0.32
              )
              $
              (0.04
              )
              $
              (0.16
              )Pro
                  forma
              
              $
              (0.16
              )
              $
              (0.35
              )
              $
              (0.05
              )
              $
              (0.18
              )





(10)
      CAPITAL TRANSACTION:





On
      May
      10, 2005, the Company raised $6.9 million from the issuance and sale of 69,000
      shares of Series E Convertible Preferred Stock ("Series E Preferred Stock")
      in a
      transaction exempt from the registration requirements of the Securities Act
      of
      1933, as amended (the “Securities Act”). The Series E Preferred Stock has a
      stated value of $100 per share. Each share of the Series E Preferred Stock
      may
      be converted by the holder into 50 shares of common stock, subject to
      adjustment, and will automatically be converted into common stock at that rate
      upon the date that the average of the daily market prices of the Company’s
      common stock for the 20 consecutive trading days preceding such date exceeds
      $6.00 per share. The Series E Preferred Stock pays no dividends and contains
      voting rights equal to the number of shares of common stock into which each
      share of Series E Preferred Stock is convertible. Upon liquidation of the
      Company, the holders of the Series E Preferred Stock are entitled to $100 per
      share.





(11)
      RECENT ACCOUNTING PRONOUNCEMENTS:







In
      December 2004, the Financial
      Accounting Standards Board (“FASB”) issued SFAS No. 123R (Revised 2004),
      Share-Based Payment ("SFAS No. 123R"), which requires that the compensation
      cost
      relating to share-based payment transactions be recognized in financial
      statements based on alternative fair value models. The share-based compensation
      cost will be measured based on the fair value of the equity or liability
      instruments issued. The Company currently discloses pro forma compensation
      expense quarterly and annually by calculating the stock option grants' fair
      value using the Black-Scholes model and disclosing the impact on net loss and
      net loss per share in a Note to the Condensed Consolidated Financial Statements.
      See Note 9. Upon adoption, pro forma disclosure will no longer be an
      alternative. SFAS No. 123R also requires the benefits of tax deductions in
      excess of recognized compensation cost to be reported as a financing cash flow
      rather than as an operating cash flow as required under current literature.
      This
      requirement will reduce net operating cash flows and increase net financing
      cash
      flows in periods after adoption. The Company has not completed its evaluation
      of
      SFAS No. 123R and therefore has not determined the impact that adopting SFAS
      No.
      123R will have on its results of operations. The Company will begin to apply
      SFAS No. 123R using the most appropriate fair value model as of the interim
      reporting period ending March 31, 2006.




Page
          12
          of 23


In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
      SFAS No. 154 requires retrospective application of prior periods' financial
      statements for changes in accounting principle, unless it is impracticable
      to
      determine either the period-specific effects or the cumulative effect of the
      change. Also, SFAS No. 154 requires that retrospective application of a change
      in accounting principle be limited to the direct effects of the change. SFAS
      No.
      154 is effective for accounting changes and corrections of errors made in fiscal
      years beginning after December 15, 2005.




The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards would have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.




Page
          13
          of 23


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




**Overview**




The
      following Management’s Discussion and Analysis of Financial Condition and
      Results of Operations (“MD&A”) is intended to help the reader understand the
      Company’s financial condition and results of operations. MD&A is provided as
      a supplement to, and should be read in conjunction with, our financial
      statements and the accompanying notes (“Notes”).




We
      are in
      the business of developing, manufacturing and selling pharmaceutical, medical
      device, and cosmetic products that address various healthcare conditions. Most
      of our products and developmental product candidates address women’s healthcare.
      We have also developed Striant ® ,
      a
      buccal system for the treatment of hypogonadism in men, and a desmopressin
      buccal product for the treatment of nocturnal enuresis in children.




All
      of
      our products and product candidates utilize our patented, proprietary
      Bioadhesive Delivery System (“BDS”), which consists principally of a polymer
      (polycarbophil) and an active ingredient. The BDS is based upon the principle
      of
      bioadhesion, a process by which the polymer adheres to epithelial surfaces
      or
      mucosa. The polymer remains attached to epithelial surfaces or mucosa and is
      discharged upon normal cell turnover, a physiological process that, depending
      upon the area of the body, occurs every 12 to 72 hours, or longer. This extended
      period of attachment permits the BDS to be utilized in products when extended
      duration of effectiveness is desirable or required.




Over
      the
      last few years we have laid a foundation for the Company’s long-term growth by
      establishing marketing partnerships and forging alliances with strategic
      partners to create a base business of products that these partners market and
      that provide us with good margins and growth potential. In addition, in
      September 2002, we developed our own commercial organization to commercialize
      our women’s healthcare products in the United States. We more than doubled the
      size of that sales organization in the summer of 2003 upon approval of
      Striant ® by
      the
      Food and Drug Administration. Subsequently, in both January 2004 and February
      2005, we restructured our sales and marketing organizations and downsized them
      to reduce costs. We have advanced several clinical research initiatives designed
      to realize additional potential from currently marketed Prochieve ® products
      by developing new indications, while also bringing new products through the
      clinic. Our focus in fiscal 2005 is building on this foundation and executing
      well in key areas, including the successful implementation of our selling
      strategy of targeting our sales force on current prescribers of our products.




**Results
      of Operations - Six Months Ended June 30, 2005 versus Six Months Ended June
      30,
      2004**





Net
      revenues increased 15% in the six months ended June 30, 2005 to $10.6 million
      as
      compared to $9.2 million in the six months ended June 30, 2004. Net revenues
      in
      the six-month period ended June 30, 2005 reflect a provision for product returns
      amounting to $2.1 million. During the period, the Company re-evaluated its
      estimate for product returns to take into consideration additional factors
      related to inventory and return practices of its primary trade customers. We
      receive revenues both from selling our products to licensees, which we refer
      to
      as our “partnered products”, and selling our products that we promote through
      our own sales force to wholesalers and other distributors, which we refer to
      as
      our “promoted products.”




Partnered
      products are:


·
            Crinone®sold to Ares Trading S.A. (“Serono”) on a worldwide
                basis;


·
            Striant®sold to our non-U.S. marketing partners;


·
            Replens®Vaginal Moisturizer sold to Lil’ Drug Store Products, Inc. (“Lil’ Drug
                Store”) non-U.S.;


·
            RepHresh®Vaginal Gel and Advantage-S®Bioadhesive Contraceptive Gel sold to Lil’ Drug Store on a worldwide
                basis; and


·
            Royalty
                and licensing revenues.





Promoted
      products are:


·
            Prochieve®8%, Prochieve 4% and Striant in the
                U.S.;


·
            Crinone®prescriptions in the U.S. from our OB/GYN audience, for which Serono
                pays
                us a 40% supplemental royalty; and


·
            Replens®Vaginal Moisturizer, RepHresh®Vaginal Gel, and Advantage-S®Bioadhesive Contraceptive Gel, for which Lil’ Drug Store pays us promotion
                fees to present to OB/GYNs.





Page
          14
          of 23


Revenues
      from promoted products increased 63% to $3.1 million in the six months ended
      June 30, 2005 as compared to $1.9 million in the six months ended June 30,
      2004,
      primarily as a result of an increase in sales of the Prochieve ® line of
      products to trade customers to meet prescription demand.





Revenues
      from partnered products increased 3% to $7.5 million in the six months ended
      June 30, 2005 as compared to $7.3 million in the six months ended June 30,
      2004.





Gross
      profit as a percentage of revenues was 62% in both the six months ended June
      30,
      2005 and the six months ended June 30, 2004.





Selling
      and distribution expenses decreased 49% to $5.0 million in the six months ended
      June 30, 2005, as compared to $9.7 million in the six
      months ended June 30, 2004. Selling and distribution expenses include payroll,
      employee benefits, equity compensation and other personnel-related costs
      associated with sales and marketing personnel, and advertising, promotions,
      tradeshows, seminars, and other marketing-related programs. The Company
      restructured its sales force in February 2005, reducing the number of
      salespeople, which is reflected in the 2005 reduction in expense. Included
      in
      the 2005 expenses were sales force costs of approximately $2.9 million, product
      marketing expenses of approximately $768,000 and non-sales force salary costs
      of
      approximately $467,000. Expenses in 2004 included approximately $5.9 million
      in
      sales force costs, approximately $1.9 million in product marketing expenses
      and
      approximately $788,000 in non-sales force salary costs.





General
      and administrative costs include payroll, employee benefits, equity compensation
      and other personnel-related costs associated with the finance, legal, regulatory
      affairs, information technology, facilities, certain human resources and other
      administrative personnel, as well as legal costs and other administrative fees.
      General and administrative expenses decreased 7% to $3.5 million in the six
      months ended June 30, 2005 as compared to $3.8 million in the six months ended
      June 30, 2004. The reduction in 2005 expenses is primarily the result in a
      decrease in insurance premiums ($495,000) offset by an increase in salaries
      ($220,000).





Research
      and development expenses include payroll, employee benefits, equity compensation
      and other personnel-related costs associated with product development, as well
      as the cost of conducting and administering clinical studies and the cost of
      regulatory filings for our products. Research and development expenses decreased
      17% to $2.5 million in the six months ended June 30, 2005 as compared to $3.1
      million in the six months ended June 30, 2004. The decrease is primarily related
      to a reduction in the costs associated with obtaining regulatory approvals
      for
      Striant ® in
      Europe ($396,000) and costs associated with completing Striant ® Phase
      III follow-up studies ($82,000).





In
      June
      2004, the Company recorded a loss of approximately $578,000 when it sold its
      intangible assets associated with its over-the-counter products to Lil’ Drug
      Store.




As
      a
      result, the net loss for the six months ended June 30, 2005 was $5.8 million
      or
      $(.14) per common share as compared to the net loss for the six months ended
      June 30, 2004 of $12.9 million or $(.32) per common share.




**Results
      of Operations - Three Months Ended June 30, 2005 versus Three Months Ended
      June
      30, 2004**





Net
      revenues increased 36% in the three months ended June 30, 2005 to $6.3 million
      as compared to $4.7 million in the three months ended June 30, 2004.  Net
      revenues in the second quarter of 2005 reflect a provision for product returns
      amounting to $1.6 million. During the quarter, the Company re-evaluated its
      estimate for product returns to take into consideration additional factors
      related to inventory and return practices of its primary trade customers. We
      receive revenues both from our partnered products and our promoted products,
      which are described above under “ Results
      of Operations - Six Months Ended June 30, 2005 versus Six Months Ended June
      30,
      2004.”




Page
          15
          of 23


Revenues
      from promoted products increased 63% to $1.7 million in the three months ended
      June 30, 2005 as compared to $1.1 million in the three months ended June 30,
      2004, primarily as a result of an increase in sales of the Prochieve ® line of
      products to trade customers.





Revenues
      from partnered products increased 28% to $4.6 million in the three months ended
      June 30, 2005 as compared to $3.6 million in the three months ended June 30,
      2004, primarily as a result of an increase in the sale of RepHresh ® and
      Crinone ® to our
      marketing partners.





Gross
      profit as a percentage of revenues was 65% in the three months ended June 30,
      2005 and 61% in the three months ended June 30, 2004. The
      increase in gross profit percentage in 2005 as compared to 2004 resulted from
      an
      increase in overall production and a change in product mix in 2005. Cost of
      revenues for Prochieve ® includes
      a 30% royalty on net sales paid to Serono.





Selling
      and distribution expenses decreased 57% to $2.1 million in the three months
      ended June 30, 2005, as compared to $4.9 million in the
      three months ended June 30, 2004.. The Company restructured its sales force
      in
      February 2005, reducing the number of salespeople, which is reflected in the
      2005 reduction in expense. Included in the 2005 expenses were sales force costs
      of approximately $1.2 million, product marketing expenses of approximately
      $286,000 and non-sales force salary costs of approximately $195,000. Expenses
      in
      2004 included approximately $3.1 million in sales force costs, approximately
      $971,000 in product marketing expenses and approximately $389,000 in non-sales
      force salary costs.





General
      and administrative expenses decreased 9% to $1.7 million in the three months
      ended June 30, 2005 as compared to $1.9 million in the three months ended June
      30, 2004. The reduction in 2005 expenses is primarily the result in a decrease
      in insurance premiums ($245,000).





Research
      and development expenses decreased 13% to $1.2 million in the three months
      ended
      June 30, 2005 as compared to $1.4 million in the three months ended June 30,
      2004. The decrease is primarily related to a reduction in the costs associated
      with obtaining regulatory approvals for Striant ® in
      Europe ($308,000) and costs associated with completing Striant Phase III
      follow-up studies ($240,000), offset by an increase in the Company’s on-going
      Phase III trial for Prochieve® 8% in preventing pre-term delivery in pregnant
      women who are at high risk ($233,000).





In
      June
      2004, the Company recorded a loss of approximately $578,000 when it sold its
      intangible assets associated with its over-the-counter products to Lil’ Drug
      Store.




As
      a
      result, the net loss for the three months ended June 30, 2005 was $1.6 million
      or $(.04) per common share as compared to the net loss for the three months
      ended June 30, 2004 of $6.6 million or $(.16) per common share.





**Liquidity
      and Capital Resources**





Cash
      and
      cash equivalents decreased from $19,781,591 at December 31, 2004 to $8,966,533
      at June 30, 2005. During the six months ended June 30, 2005 the Company received
      $6,900,000 from the sale of 69,000 shares of Series E Preferred Stock. The
      Company used $5,314,921, for operations, paid off its $10,000,000 convertible
      subordinated note, paid $2,193,544, which included a $1,891,944 true-up payment
      to PharmaBio, spent $67,216 on property and equipment and paid a $81,250
      dividend to holders of its Series C preferred stock. The effect of exchange
      rate
      changes reduced cash by $58,127.





On
      May
      10, 2005 ,
      the
      Company raised $6.9 million from the issuance and sale of 69,000 shares of
      Series E Preferred Stock in a transaction exempt from the registration
      requirements of the Securities Act (see Note 10). The Series E Preferred Stock
      has a stated value of $100 per share. Each share of the Series E Preferred
      Stock
      may be converted by the holder into 50 shares of common stock, subject to
      adjustment, and will automatically be converted into common stock at that rate
      upon the date that the average of the daily market prices of the Company’s
      common stock for the 20 consecutive trading days preceding such date exceeds
      $6.00 per share. The Series E Preferred Stock pays no dividend and contains
      voting rights equal to the number of shares of common stock into which each
      share of Series E Preferred Stock is convertible. Upon liquidation of the
      Company, the holders of the Series E Preferred Stock are entitled to $100 per
      share. The Company believes that certain cost reduction measures taken in 2005,
      together with increased projected revenue in 2005 and potential equity
      offerings, such as the one consummated on May 10, 2005, and/or financing
      arrangements, will enable the Company to sustain its operations. However, there
      can be no assurance given that this will occur. The Company believes that it
      has
      sufficient cash to meet its operating plan for 2005.





Page
          16
          of 23


T he
      Company has an effective registration statement that we filed with the
      Securities and Exchange Commission (the “SEC”) using a shelf registration
      process. Under the shelf registration process, we may offer from time to time
      shares of our common stock up to an aggregate amount of $75,000,000. To date
      the
      Company has sold approximately $56,400,000 in common stock under the
      registration statement. We cannot be certain that additional funding will be
      available on acceptable terms, or at all. To the extent that we raise additional
      funds by issuing equity securities, our stockholders may experience significant
      dilution. Any debt financing, if available, may involve restrictive covenants
      that impact our ability to conduct our business. If we are unable to raise
      additional capital when required or on acceptable terms, we may have to
      significantly delay, scale back or discontinue the marketing of one or more
      of
      our products and the development and/or commercialization
      of one or more of our product candidates.





In
      connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which
      assets consisted of the patents underlying the Company’s BDS, 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 BDS,
      up
      to an aggregate of $7.5 million or until the last of the relevant patents
      expire. The Company is required to prepay 25% of the remaining maximum royalty
      obligation, in cash or stock at the option of the Company, within 30 days of
      March 2 of any year in which the closing price on that date of the Company’s
      common stock on any national securities exchange is $20 or more. Through June
      30, 2005, the Company has paid approximately $3.2 million in royalty
      payments.


As
      of
      June 30, 2005, the Company has outstanding exercisable options and warrants
      that, if exercised, would result in approximately $49.0 million of additional
      capital and would cause the total number of shares outstanding to increase.
      However, there can be no assurance that any such
      options or warrants will be exercised.





Significant
      expenditures anticipated by the Company in the near future are concentrated
      on
      research and development related to new products. In addition, the Company
      anticipates it will spend approximately $200,000 on property and equipment
      in
      2005.





As
      of
      June 30, 2005, the Company had available net operating loss carryforwards of
      approximately $120 million to offset its future U.S. taxable income. There
      can
      be no assurance that the Company will have sufficient income to utilize the
      net
      operating loss carryforwards or that the net operating loss carryforwards will
      be available at that time.





In
      accordance with SFAS No. 109, as of June 30, 2005 and December 31, 2004, other
      assets in the accompanying consolidated balance sheets include deferred tax
      assets of approximately $43 and $41 million, respectively (comprised primarily
      of a net operating loss carryforward), for which a full valuation allowance
      has
      been recorded since the realizability of the deferred tax assets are not
      determinable.





**Recent
      Accounting Pronouncements**




In
      December 2004, the FASB issued SFAS No. 123R, which requires that the
      compensation cost relating to share-based payment transactions be recognized
      in
      financial statements based on alternative fair value models. The share-based
      compensation cost will be measured based on the fair value of the equity or
      liability instruments issued. The Company currently discloses pro forma
      compensation expense quarterly and annually by calculating the stock option
      grants' fair value using the Black-Scholes model and disclosing the impact
      on
      net loss and net loss per share in a Note to the Consolidated Financial
      Statements. Upon adoption, pro forma disclosure will no longer be an
      alternative. SFAS No. 123R also requires the benefits of tax deductions in
      excess of recognized compensation cost to be reported as a financing cash flow
      rather than as an operating cash flow as required under current literature.
      This
      requirement will reduce net operating cash flows and increase net financing
      cash
      flows in periods after adoption. The Company has not completed its evaluation
      of
      SFAS No. 123R and therefore has not determined the impact that adopting SFAS
      No.
      123R will have on its results of operations. The Company will begin to apply
      SFAS No. 123R using the most appropriate fair value model as of the interim
      reporting period
      ending March 31, 2006.




In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
      SFAS No. 154 requires retrospective application of prior periods' financial
      statements for changes in accounting principle, unless it is impracticable
      to
      determine either the period-specific effects or the cumulative effect of the
      change. Also, SFAS No. 154 requires that retrospective application of a change
      in accounting principle be limited to the direct effects of the change. SFAS
      No.
      154 is effective for accounting changes and corrections of errors made in fiscal
      years beginning after December 15, 2005.




Page
          17
          of 23


The
      Company does not believe that any other recently issued, but not yet effective,
      accounting standards would have a material effect on the Company’s consolidated
      financial position, results of operations or cash flows.





**Critical
      Accounting Policies and Estimates**





The **** Company
      has identified the policies below as critical to its business operations and
      the
      understanding of its **** results
      of operations. For a detailed discussion on the application of these and other
      accounting policies, see Note 1 of the consolidated financial statements
      included in Item 14 of the Annual Report for the year ended December 31, 2004
      on
      Form 10-K, beginning on page F-11. Note that the preparation of this Quarterly
      Report on Form 10-Q requires the Company to make estimates and assumptions
      that
      affect the reported amount of assets and liabilities, 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. There can be
      no
      assurance that actual results will not differ from those estimates.





*Revenue
      Recognition.* The
      Company’s revenue recognition is significant because revenue is a key component
      of our results of operations. In addition, revenue recognition determines the
      timing of certain expenses, such as commissions and royalties. Revenue results
      are difficult to predict, and any shortfall in revenue or delay in recognizing
      revenue could cause operating results to vary significantly from quarter to
      quarter. Revenues
      from the sale of products are recorded at the time goods are shipped to
      customers. Provisions for returns, rebates and other allowances are estimated
      based on a percentage of sales, using such factors as historical trends,
      distributor inventory levels and product prescription data, and are recorded
      in
      the same period the related sales are recognized. Royalties
      and additional monies owed to the Company based on the strategic alliance
      partners’ sales are recorded as revenue as those sales are made by the strategic
      alliance partners. License fees are recognized in net sales over the term of
      the
      license.





*Accounting
      for PharmaBio Agreements.* In
      July
      2002 and March 2003, the Company entered into agreements with PharmaBio under
      which the Company received upfront money paid in quarterly installments in
      exchange for royalty payments on certain of the Company’s products to be paid to
      PharmaBio for a fixed period of time. The
      royalty payments are subject to minimum and maximum amounts. Because the minimum
      amounts exceed the amount received by the Company, the Company has recorded
      the
      monies received as liabilities. The excess of the minimum to be paid by the
      Company over the amount received by the Company is being recorded as interest
      expense over the terms of the agreements.





**Forward-Looking
      Information**





The
      Company and its representatives from time to time make written or verbal
      forward-looking statements, including statements contained in this and other
      filings with the SEC and in the Company’s reports to stockholders, which are
      made pursuant to the safe harbor provisions of the Private Securities Litigation
      Reform Act of 1995. Such statements include, without limitation, the Company’s
      expectations regarding sales, earnings or other future financial performance
      and
      liquidity, product introductions, entry into new geographic regions and general
      views about future operations or operating results. Some
      of
      these statements can be identified by the use of forward-looking terminology
      such as "prospects," "outlook," "believes," "estimates," "intends," "may,"
      "will," "should," "anticipates," "expects" or "plans," or the negative or other
      variation of these or similar words, or by discussion of trends and conditions,
      strategy or risks and uncertainties. Although
      the Company believes that its expectations are based on reasonable assumptions
      within the bounds of its knowledge of its business and operations, there can
      be
      no assurance that actual results will not differ materially from its
      expectations. Factors
      that might cause future results to differ include, but are not limited to,
      the
      following: the successful marketing of Striant ® ,
      Prochieve ® 8% and
      Prochieve ® 4% in
      the U.S.; the timing and size of orders for out-licensed products from our
      marketing partners; the timely receipt of national marketing authorizations
      and
      individual licenses for Striant in European countries; the timely payment of
      milestone payments by our marketing and product development partners; the timely
      and successful development of products; the timely and successful completion
      of
      clinical studies, including the Prochieve ® 8% study
      in the prevention of preterm birth and the lidocaine vaginal gel studies;
      success in obtaining acceptance and approval of new products and indications
      for
      current products by the FDA and international regulatory agencies, including
      acceptance and approval of an indication for preventing preterm delivery for
      Prochieve 8% from the FDA; the impact of competitive products and pricing;
      competitive economic and regulatory factors in the pharmaceutical and health
      care industry; general economic conditions; and other risks and uncertainties
      that may be detailed, from time to time, in the Company’s reports filed with the
      SEC . All
      subsequent written and oral forward-looking statements attributable to the
      Company or persons acting on behalf of the Company are expressly qualified
      in
      their entirety by the Cautionary Statements in this Quarterly Report. Readers
      are advised to consult any further disclosures the Company may make on related
      subjects in subsequent Form 10-Q, 8-K, and 10-K reports to the SEC.




Page
          18
          of 23


**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk**





The
      Company does not believe that it has material exposure to market rate risk.
      The
      Company may, however, require additional financing to fund future obligations
      and no assurance can be given that the terms of future sources of financing
      will
      not expose the Company to material market risk.




**Item
      4. Controls and Procedures**





The
      Company maintains disclosure controls and procedures that are designed to ensure
      that information required to be disclosed in the Company's filings with the
      SEC
      is recorded, processed, summarized and reported within the periods specified
      in
      the rules and forms of the SEC. Such information is accumulated and communicated
      to the Company's management, including its Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosure. The Company's management, including the Chief Executive Officer
      and
      the Chief Financial Officer, recognizes that any set of controls and procedures,
      no matter how well designed and operated, can provide only reasonable assurance
      of achieving the desired control objectives.





As
      of
      June 30, 2005, the end of the period covered by this report, the Company carried
      out an evaluation, under the supervision and with the participation of the
      Company's management, including the Company's Chief Executive Officer and the
      Company's Chief Financial Officer, of the effectiveness of the design and
      operation of the Company's disclosure controls and procedures. Based on such
      evaluation and the changes in business processes discussed in the following
      paragraph, the Company's Chief Executive Officer and Chief Financial Officer
      concluded that the Company's disclosure controls and procedures were
      effective .





**Changes
      in Internal Control Over Financial Reporting**





During
      the quarter ended June 30, 2005, the Company implemented changes in business
      processes relating to oversight in the review of financial reporting and to
      the
      segregation of duties in the accounting department. The Company expects these
      changes are reasonably likely to materially improve the Company’s internal
      control over financial reporting. Except
      for those changes there were no significant changes in the Company’s internal
      controls over financial reporting that occurred during the quarter ended June
      30, 2005, that have materially affected, or are reasonably likely to materially
      affect, the Company’s internal control over financial reporting.




Page
          19
          of 23


**PART
      II - OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings**





Claims
      and lawsuits have been filed against the Company from time to time. Although
      the results of pending claims are always uncertain, the Company does not believe
      the results of any such actions, individually or in the aggregate, will have
      a
      material adverse effect on the Company’s financial position or results of
      operation. Additionally, the Company believes that it has adequate reserves
      or
      adequate insurance coverage in respect of these claims, but no assurance can
      be
      given as to the sufficiency of such reserves or insurance in the event of for
      any unfavorable outcome resulting from these actions.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





On
      May
      10, 2005 ,
      the
      Company raised $6.9 million from the issuance and sale of 69,000 shares of
      Series E Preferred Stock in a transaction exempt from the registration
      requirements of the Securities Act. The Series E Preferred Stock has a stated
      value of $100 per share. Each share of the Series E Preferred Stock may be
      converted by the holder into 50 shares of common stock, subject to adjustment,
      and will automatically be converted into common stock at that rate upon the
      date
      that the average of the daily market prices of the Company’s common stock for
      the 20 consecutive trading days preceding such date exceeds $6.00 per share.
      The
      Series E Preferred Stock pays no dividend and contains voting rights equal
      to
      the number of shares of common stock into which each share of Series E Preferred
      Stock is convertible. Upon liquidation of the Company, the holders of the Series
      E Preferred Stock are entitled to $100 per share. The cash raised will be used
      as general working capital.




**Item
      3.**  **Defaults
      upon Senior Securities**




None.




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





The
      Company held its Annual Meeting of shareholders on May 12, 2004. At the Annual
      Meeting:





1.
      Six
      nominees for director were elected for a one-year term by a vote of shares
      as
      follows:





Edward
      Blechschmidt received 39,775,653 votes for his election (99.5% of shares voted;
      95.3% of shares outstanding) and 204,457 votes were withheld (0.5% of shares
      voted; 0.5% of outstanding shares).





Stephen
      Kasnet received 39,630,800 votes for his election (99.1% of shares voted; 94.9%
      of shares outstanding) and 349,310 votes were withheld (0.9% of shares voted;
      0.8% of outstanding shares).





Denis
      M.
      O’Donnell received 39,734,393 votes for his election (99.4% of shares voted;
      95.2% of shares outstanding) and 245,717 votes were withheld (0.6% of shares
      voted; 0.6% of outstanding shares).





Selwyn
      P.
      Oskowitz received 39,778,303 votes for his election (99.5% of shares voted;
      95.3% of shares outstanding) and 201,807 votes were withheld (0.5% of shares
      voted; 0.5% of outstanding shares).





Robert
      C.
      Strauss received 39,772,303 votes for his election (99.5% of shares voted;
      95.3%
      of shares outstanding) and 207,807 votes were withheld (0.5% of shares voted;
      0.5% of outstanding shares).





Page
          20
          of 23


G.
      Frederick Wilkinson received 37,354,247 votes for his election (93.4% of shares
      voted; 89.5% of shares outstanding) and 2,625,863 votes were withheld (6.6%
      of
      shares voted; 6.3% of outstanding shares).





2.
      The
      designation of Goldstein Golub Kessler LLP to audit the books and records of
      the
      Company for the year ending December 31, 2005 was ratified by a vote of 99.5%
      of
      shares voted (or 95.3% of outstanding shares).






For
            Against
            Abstain39,784,639
            91,762
            103,709




**Item
      5.**  **Other
      Information**





None.





**Item
      6.**  **Exhibits**





A.
            Exhibits





4.1
            --
            Certificate
                of Designations of Series E Convertible Preferred Stock, filed May
                10,
                2005, with the Delaware Secretary of State.2


10.1
            --
            Description
                of the registrant’s compensation and reimbursement practices for its
                non-employee directors1


10.56
            --
            Preferred
                Stock Purchase Agreement, Dated as of May 10, 2005, among Columbia
                Laboratories, Inc., Perry Partners, L.P, and Perry Partners International,
                Inc.2


10.57
              --
              Columbia
                  Laboratories, Inc. Incentive Plan3
 10.58
              --
              2005 base salaries and incentive bonus targets
                for
                Registrant’s executive officers.3
 31(i).1
              --
              Rule 13a-14(a)/15d-14(a) Certification of Chief
                Executive
                Officer of the Company.4


31(i).2
            --
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the
                Company.4


32.1
            --
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.4


32.2
            --
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.4


99.1
              --
              Schedule
                  Identifying Series E Convertible Preferred Stock Purchase Agreements
                  Omitted2


1
            --
            Incorporated
                by reference to the Registrant’s Current Report on Form 8-K, dated April
                11, 2005


2
            --
            Incorporated
                by reference to the Registrant’s Current Report on Form 8-K, dated May 10,
                2005


3
              --
              Incorporated
                  by reference to the Registrant’s Current Report on Form 8-K, dated May 17,
                  2005
 4
              --
              Filed herewith




Page
          21
          of 23


**SIGNATURES**








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





**COLUMBIA
              LABORATORIES, INC.**DATE:
                August 2, 2004
            By:
            /s/ DAVID
              L. WEINBERGDAVID
                L. WEINBERG, Vice President-
              Finance
                and Chief Financial Officer






Page
          22
          of 23


**Exhibit
      Index**




4.1
            --
            Certificate
                of Designations of Series E Convertible Preferred Stock, filed May
                10,
                2005, with the Delaware Secretary of State.2


10.1
            --
            Description
                of the registrant’s compensation and reimbursement practices for its
                non-employee directors1


10.56
            --
            Preferred
                Stock Purchase Agreement, Dated as of May 10, 2005, among Columbia
                Laboratories, Inc., Perry Partners, L.P, and Perry Partners International,
                Inc.2


10.57
              --
              Columbia
                  Laboratories, Inc. Incentive Plan3
 10.58
              --
              2005 base salaries and incentive bonus targets
                for
                Registrant’s executive officers.3
 31(i).1
              --
              Rule 13a-14(a)/15d-14(a) Certification of Chief
                Executive
                Officer of the Company.4


31(i).2
            --
            Rule
                13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the
                Company.4


32.1
            --
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.4


32.2
            --
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 of
                the \Sarbanes-Oxley Act of 2002.4


99.1
              --
              Schedule
                  Identifying Series E Convertible Preferred Stock Purchase Agreements
                  Omitted2


1
            --
            Incorporated
                by reference to the Registrant’s Current Report on Form 8-K, dated April
                11, 2005


2
            --
            Incorporated
                by reference to the Registrant’s Current Report on Form 8-K, dated May 10,
                2005


3
              --
              Incorporated
                  by reference to the Registrant’ s Current Report on Form 8-K, dated May
                  17, 2005
 4
              --
              Filed herewith






Page
        23
        of 23