CollaGenex Pharmaceuticals Reports Record Fourth Quarter 2001 Revenues Up 75% to $10.2 Million.

Business Editors

NEWTOWN, Pa.--(BUSINESS WIRE)--Feb. 12, 2002

Loss Narrows to $(0.15) per Share;

Full year 2001 Total Revenues Increase 45% to $35.2 Million

CollaGenex Pharmaceuticals, Inc. (Nasdaq:CGPI) today announced record total revenues of $10.2 million for the fourth quarter of 2001, a 75% increase over total revenues in the fourth quarter of 2000.

Net product sales were a record $9.7 million, a 93% increase over net product sales in the fourth quarter of 2000. During the third quarter of 2001, total revenues and net product sales were $9.2 million and $8.3 million, respectively.

The net loss allocable to common stockholders for the fourth quarter of 2001 improved to $1.6 million, or $0.15 per basic and diluted share, compared to a net loss allocable to common stockholders of $2.4 million, or $0.27 per basic and diluted share, for the fourth quarter of 2000.

During the third quarter of 2001, the net loss allocable to common stockholders was $2.0 million, or $0.18 per basic and diluted share.

"During 2001, we achieved consistent quarterly increases in total revenue and significant decreases in our quarterly net loss," said Brian M. Gallagher, PhD, chairman, president and chief executive officer of CollaGenex. "Our top priority for 2002 is to achieve profitability while continuing to invest in our product pipeline and execute our business plan. We believe that the investments we made during 2001 have positioned us to achieve this important goal and other critical milestones in 2002 and beyond."

"Periostat prescriptions and sales continued to increase from the third to the fourth quarter of 2001," commented Nancy C. Broadbent, chief financial officer of CollaGenex. "We also booked $732,000 in net sales of Atridox and Atrisorb during the fourth quarter of 2001, which we only began selling in November 2001. Moreover, we were able to reduce our loss from the third to the fourth quarter of 2001 despite a slight increase in SG&A expenses associated with our launch of the Atrix dental products and the establishment of a presence in the dermatology market. As we more fully realize the sales potential of our dental and dermatology businesses, we expect significant improvements in our operating performance."

For the year ended December 31, 2001, CollaGenex recorded total revenues of $35.2 million, a 45% increase over total revenues for the year ended December 31, 2000. Total net product sales for 2001 were $31.4 million, a 53% increase over total net product sales in 2000.

Net loss allocable to common stockholders for the year ended December 31, 2001 was $9.8 million, or $0.94 per basic and diluted share, compared to a net loss allocable to common stockholders for the year ended December 31, 2000 of $10.5 million, or $1.21 per basic and diluted share.

As previously reported, total revenues for 2002 are forecasted to be $48 to $52 million, more than a 35% increase over 2001 total revenues. Periostat sales are expected to rise to between $38 and $40 million while other revenues, including sales of the Atrix dental products, should contribute between $10 and $12 million.

The company expects to report a declining loss in the first half of 2002, turn profitable in the third quarter and post a modest profit for the full year.

CollaGenex will focus on top line growth in 2002, combining the additive sales of the Atrix dental products with its successful Periostat franchise. In line with the company's strategy to improve profitability in 2002, CollaGenex will seek to enhance operating margins through targeted cost controls.

Major spending initiatives in 2002 will include the continuation of the Periostat DTC campaign, new promotional programs for the Atrix dental products, the further development of a second generation Periostat product, and the initiation of new clinical trials to further evaluate the efficacy of Periostat to treat acne vulgaris and acne rosacea.

CollaGenex Pharmaceuticals, Inc. is a specialty pharmaceutical company currently focused on providing innovative medical therapies to the dental and dermatology markets. The Company's lead product, Periostat, is the first and only pharmaceutical to treat periodontal disease by inhibiting the enzymes that destroy periodontal support tissues.

Periostat is marketed to the dental community through a professional pharmaceutical sales force composed of approximately 120 sales representatives and managers.

Currently, the Company's dental sales force is also marketing Vioxx(R), a Merck & Co. drug that CollaGenex co-promotes for the treatment of acute dental pain, and Atridox(R), Atrisorb(R) and Atrisorb-D(R), Atrix Laboratories Inc.'s products for the treatment of adult periodontitis.

Research has shown that the enzyme suppression technology underlying Periostat may also be applicable to other diseases involving destruction of the body's connective tissues, including cancer metastases (Metastat) and a broad range of inflammatory diseases.

CollaGenex is developing a series of novel, proprietary compounds known as IMPACS (Inhibitors of Multiple Proteases and Cytokines) to address these applications. The Company intends to pursue further research and development of these technologies primarily through partnerships with third parties.

To receive additional information on the Company, please visit our Web site at www.collagenex.com, which is not a part of this press release.

Periostat(R), Metastat(R) and IMPACS(R) are trademarks of CollaGenex Pharmaceuticals, Inc.

VIOXX(R)is a trademark of Merck & Co., Inc.

Atridox, Atrisorb and Atrisorb-D are trademarks of Atrix Laboratories, Inc.

                        Summary Financial Data
          (In thousands, except share and per share amounts)


                            Three Months Ended December 31,
                            ------------------------------
                                 2001            2000
                                 ----            ----
Statement of Operations
 Data
Revenues:
  Product sales           $      9,657    $      5,015
  Contract revenues                574             720
  License revenues                  16             135
                          ------------    ------------
                                10,247           5,870
Operating Expenses:
  Cost of product sales          1,669             956
  Research and
   development                     922             755
  Selling, general and
   administrative                8,915           6,230
                          ------------    ------------
    Total operating
     expenses                   11,506           7,941
Other Income (Expense):
  Interest income                   43             111
  Interest expense                 (10)             (3)
  Other income                    --                12
                          ------------    ------------
Net loss                        (1,226)         (1,951)
  Preferred stock
   dividend                        420             411
                          ------------    ------------
Net loss allocable to
 common stockholders      $     (1,646)   $     (2,362)
                          ============    ============

Basic and diluted net
 loss per share
 allocable to common
 stockholders
                          $      (0.15)   $      (0.27)
                          ============    ============

Shares used in
 computing basic and
 diluted net loss per
 share allocable to
 common stockholders

                            10,999,573       8,775,029





                              Year Ended December 31,
                              ----------------------
                                2001            2000
                                ----            ----
Statement of Operations
 Data
Revenues:
  Product sales           $     31,358    $     20,501
  Contract revenues              3,386           3,240
  License revenues                 488             530
                          ------------    ------------
                                35,232          24,271
Operating Expenses:
  Cost of product sales          5,825           4,070
  Research and
   development                   3,764           3,128
  Selling, general and
   administrative               34,010          25,746
                          ------------    ------------
    Total operating
     expenses                   43,599          32,944
Other Income (Expense):
  Interest income                  232             613
  Interest expense                 (17)            (15)
  Other income                       8               9
                          ------------    ------------
Loss before cumulative
 effect of change in
 accounting principle           (8,144)         (8,066)

Cumulative effect of
 change in accounting
 principle
                                  --              (764)
                          ------------    ------------

Net loss                  $     (8,144)   $     (8,830)

Preferred stock
 dividend                        1,680           1,689
                          ------------    ------------

Net loss allocable to
 common stockholders            (9,824)        (10,519)
                          ============    ============

Basic and diluted net
 loss per share
 allocable to common
 stockholders before
 cumulative effect of
 change in accounting
 principle:

                          $      (0.94)   $      (1.12)

Cumulative effect of
 change in accounting
 principle
                                  --             (0.09)
                          ------------    ------------
Basic and diluted net
 loss per share
 allocable to common
 stockholders
                          $      (0.94)   $      (1.21)
                          ============    ============

Shares used in
 computing basic and
 diluted net loss per
 share allocable to
 common stockholders
                            10,413,663       8,711,668



Balance Sheet Data:            Dec. 31,        Dec. 31,
-------------------            --------        --------
                                 2001            2000
                               --------        --------

Cash, cash equivalents
 and short-term
 investments                   $ 6,171         $ 5,448
Total assets                    14,698          10,431
Total stockholders'
 equity                          7,126           5,264

This news release contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended. Investors are cautioned that forward-looking statements involve risks and uncertainties, which may affect the Company's business and prospects.

The Company's business of selling, marketing and developing pharmaceutical products is subject to a number of significant risks, including risks relating to the implementation of the Company's sales and marketing plans for Periostat; risks inherent in research and development activities; risks associated with conducting business in a highly regulated environment and uncertainty relating to clinical trials of products under development, all as discussed in the Company's periodic filings with the US Securities and Exchange Commission.