CollaGenex Pharmaceuticals Reports Record Revenues and Earnings in the Second Quarter of 2003.

Business Editors/Health/Medical Writers

NEWTOWN, Pa.--(BUSINESS WIRE)--July 22, 2003

Net Income Allocable to Common Stockholders was $0.10 per Share on Revenues of $12.7 Million

CollaGenex Pharmaceuticals, Inc. (Nasdaq:CGPI) today reported financial results for the second quarter ended June 30, 2003. Total revenues increased 16% to $12.7 million compared to $11.0 million in the second quarter of 2002. Net product sales were $11.8 million in the second quarter of 2003, a 13% increase over net product sales of $10.4 million recorded in the second quarter of 2002.

During the second quarter of 2003, net income was $1.6 million compared to a net loss of $385,000 during the second quarter of 2002. Net income allocable to common stockholders for the second quarter of 2003 was $1.2 million, or $0.10 per basic and diluted share, compared to a net loss of $794,000, or $0.07 per basic and diluted share, in the second quarter of 2002.

"We are pleased to have reported our fourth consecutive quarter of increased profitability. Our continued ability to deliver solid operating results is a testament to the ongoing market penetration by our sales force and acceptance of our dental and dermatology products," stated Brian M. Gallagher, PhD, chairman, president and chief executive officer of CollaGenex. "The introduction of the AVAR product line has significantly enhanced the standing of our representatives in the dermatologist's office and we anticipate solid growth in our dermatology sales as we move into the second half of the year."

"We continue to pursue dermatological indications for Periostat in the clinic, and I am pleased to note that a Phase 3 study evaluating Periostat in the treatment of rosacea is close to full enrollment," Dr. Gallagher continued. "We expect this trial to be completed by the end of 2003. The publication of new data on the use of Periostat in the treatment of acne and rosacea has greatly increased awareness among dermatologists of our development efforts in this field. In addition, we have identified an optimized formulation for a once-a-day version of Periostat, and we are rapidly moving ahead to carry out definitive clinical studies with this formulation ahead of schedule in the second half of 2003. We look forward to continued execution on our stated goals of investing in the future of CollaGenex while increasing our revenues and profitability."

"During the second quarter of 2003, we increased our net product sales by 13%, or $1.4 million, compared to a year ago while reducing our SG&A expense by 14%, or about $1.3 million, over the same period in the prior year," added Nancy C. Broadbent, chief financial officer of CollaGenex. "We continued to invest in our pipeline during the quarter, increasing our R&D spending by about $883,000 over the same period in the prior year, which reflects expenses related to our ongoing clinical trials of Periostat in dermatology and other indications, our once-a-day, sustained release formulation of Periostat and the development of products based on our Restoraderm platform technology."

During the second quarter of 2003, CollaGenex announced a number of additional important achievements related to marketed products and those in clinical development.

-- Periostat received final approval for marketing in two

additional countries. Periostat will be marketed in

Switzerland by Karr Dental AG and in Canada by Pharmascience

Inc.

-- Positive outcomes of a Phase 2 clinical trial of Periostat in

the treatment of moderate facial acne were reported in the

April 2003 Archives of Dermatology.

-- In rosacea, data from a Phase II study evaluating Periostat in

combination with MetroLotion demonstrated that Periostat

offers significant benefits for rosacea.

-- An independent experience trial that demonstrated favorable

results from the use of Periostat as a monotherapy in the

treatment of rosacea was published in the July/August issue of

the peer-reviewed journal Skin Med.

As previously announced, CollaGenex will hold a conference call on Tuesday, July 22, 2003, at 11:00 a.m. Eastern Daylight Time to discuss the Company's second quarter 2003 operating and financial results. Investors and other interested parties can access the conference call by dialing 800-695-6803 or via a live Internet broadcast on the Company's website at www.collagenex.com.

For those who cannot listen to the live broadcast, a replay will be available shortly after the call on the Company's website, www.collagenex.com for 90 days. A dial-in replay of the call will be available until 11:59 p.m. on August 5, 2003 by dialing 800-642-1687 and entering access code 1367663.

CollaGenex Pharmaceuticals, Inc. is a specialty pharmaceutical company currently focused on providing innovative medical therapies to the dental and dermatology markets. Currently, the Company's 115-person professional dental pharmaceutical sales force markets Periostat(R), which is indicated as an adjunct to scaling and root planing for the treatment of adult periodontitis. Periostat is the first and only pharmaceutical to treat periodontal disease by inhibiting the enzymes that destroy periodontal support tissues, and by enhancing bone protein synthesis.

The sales force also promotes Vioxx(R), a Merck & Co. drug that CollaGenex co-promotes for the treatment of acute dental pain; Denavir(R), a Novartis Group prescription anti-viral medication for the treatment of cold sores; Sirius Laboratories' AVAR(TM) product line for the topical control of acne vulgaris, rosacea and seborrheic dermatitis; and Atridox(R), Atrisorb(R) FreeFlow(TM) and Atrisorb-D FreeFlow, Atrix Laboratories Inc.'s products for the treatment of adult periodontitis.

Research has shown that certain unique properties of the tetracyclines discovered during the development of Periostat may be applicable to other diseases involving inflammation and/or destruction of the body's connective tissues, including acne, rosacea, meibomianitis and cancer metastasis, among others. CollaGenex is further evaluating Periostat, as well as the new IMPACS(R) compounds, to assess whether they are safe and effective in these applications. In addition, CollaGenex has licensed the Restoraderm(TM) technology, a unique, proprietary dermal drug delivery system, in order to develop a range of topical dermatological products with enhanced pharmacologic and cosmetic properties.

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

Periostat(R), IMPACS(R) and Metastat(R) are registered trademarks, and Restoraderm(TM) is a trademark, of CollaGenex Pharmaceuticals, Inc.

All other trade names, trademarks or service marks are the property of their respective owners and are not the property of CollaGenex Pharmaceuticals, Inc. or any of our subsidiaries.

Pandel(R) is a trademark of Taisho Pharmaceuticals .

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

Denavir(R) is a registered trademark of Novartis Consumer Health, Inc.

AVAR(TM) is a trademark of Sirius Laboratories, Inc.

Atridox(R) and Atrisorb(R) are registered trademarks, and FreeFlow(TM) is a trademark, of Atrix Laboratories, Inc.

(Financial Tables Follow)

                        Summary Financial Data
                              (Unaudited)
                 (In thousands, except share amounts)

                                           Three Months Ended June 30,
                                           ---------------------------
                                                2003          2002
                                             ----------    ----------

Consolidated Statement of Operations:
Revenues:
    Net Product sales                           $11,750       $10,377
    Contract revenues                               503           555
    License revenues                                433            35
                                             ----------    ----------
        Total revenues                           12,686        10,967

Operating Expenses:
    Cost of product sales                         1,738         1,598
    Research and development                      1,654           771
    SG&A, Other                                   7,718         8,998
                                             ----------    ----------
        Total operating expenses                 11,110        11,367

Other Income (Expense):
    Interest income                                  25            15
    Interest expense                                  -            (1)
    Other income (expense)                           (4)            1
                                             ----------    ----------
Net income (loss)                                 1,597          (385)
    Preferred stock dividend                        400           409
                                             ----------    ----------
Net income (loss) allocable to common
 stockholders                                   $ 1,197        $ (794)
                                             ==========    ==========

Net income (loss) per basic share allocable
 to common stockholders                          $ 0.10       $ (0.07)

Weighted average shares used in computing
 net income (loss) per basic share
 allocable to common stockholders            11,427,420    11,163,585
                                             ==========    ==========

Net income (loss) per diluted share
 allocable to common stockholders                $ 0.10       $ (0.07)
                                             ==========    ==========

Weighted average shares used in computing
 net income (loss) per diluted share
 allocable to common stockholders            12,369,971    11,163,585
                                             ==========    ==========



                                             Six Months Ended June 30,
                                             -------------------------
                                                2003          2002
                                             ----------    ----------

Consolidated Statement of Operations:
Revenues:
    Net Product sales                           $23,120       $20,258
    Contract revenues                             1,053         1,347
    License revenues                                670           122
                                             ----------    ----------
        Total revenues                           24,843        21,727

Operating Expenses:
    Cost of product sales                         3,652         3,178
    Research and development                      2,621         1,580
    SG&A, Other                                  15,540        17,946
    SG&A, Stock Compensation Charge                 251             -
                                             ----------    ----------
        Total operating expenses                 22,064        22,704

Other Income (Expense):
    Interest income                                  56            37
    Interest expense                                  -            (2)
    Other expense                                   (10)            -
                                             ----------    ----------
Net income (loss)                                 2,825          (942)
                                             ----------    ----------
    Preferred stock dividend                        800           829
                                             ----------    ----------
Net income (loss) allocable to common
 stockholders                                   $ 2,025      $ (1,771)
                                             ==========    ==========

Net income (loss) per basic share allocable
 to common stockholders                          $ 0.18       $ (0.16)

Weighted average shares used in computing
 net income (loss) per basic share allocable
 to common stockholders                      11,410,914    11,122,041
                                             ==========    ==========

Net income (loss) per diluted share
 allocable to common stockholders                $ 0.17       $ (0.16)
                                             ==========    ==========

Weighted average shares used in computing
 net income (loss) per diluted share
 allocable to common stockholders            12,252,893    11,122,041
                                             ==========    ==========



Consolidated Selected                         June 30,      Dec. 31,
 Balance Sheet Data:                            2003          2002
---------------------                        ----------    ----------


Cash, cash equivalents and short-term
 investments                                    $11,455       $10,112
Total current assets                             16,880        15,299
Total assets                                     18,994        17,634

Total current liabilities                         6,518         8,721
Long-term liabilities                               342           561
                                             ----------    ----------
    Total liabilities                             6,860         9,282

Total stockholders' equity                       12,134         8,352

This press 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(R) and other products that the Company markets, the outcome and consequences of the patent litigation against West-ward and Mutual and the outcome of litigation initiated by Mutual, risks that the FDA will approve generic products, such as West-ward's or Mutual's products, that will compete with and limit the market for Periostat, risks inherent in research and development activities, risks associated with conducting business in a highly regulated environment and uncertainty relating to clinical trails of products under development, all as discussed in the Company's periodic filings with the U.S. Securities and Exchange Commission.