SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant |X|
Filed by a Party other than the Registrant | |

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

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(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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| | Fee paid previously with preliminary materials.

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| | Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement no.:

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(3) Filing Party:

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(4) Date Filed:

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COLLAGENEX PHARMACEUTICALS, INC.
301 South State Street
Newtown, PA 18940

April 8, 1998

To Our Stockholders:

You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of CollaGenex Pharmaceuticals, Inc. at 8:30 A.M., local time, on
Monday, May 11, 1998, at the Marriott Hotel, 1201 Market Street, Philadelphia,
Pennsylvania.

The Notice of Meeting and Proxy Statement on the following pages
describe the matters to be presented at the meeting.

It is important that your shares be represented at this meeting to
assure the presence of a quorum. Whether or not you plan to attend the meeting,
we hope that you will have your stock represented by signing, dating and
returning your proxy in the enclosed envelope, as soon as possible. Your stock
will be voted in accordance with the instructions you have given in your proxy.

Thank you for your continued support.

Sincerely,

Brian M. Gallagher, Ph.D.
President and
Chief Executive Officer

COLLAGENEX PHARMACEUTICALS, INC.
301 South State Street
Newtown, PA 18940

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1998

The Annual Meeting of Stockholders (the "Meeting") of COLLAGENEX
PHARMACEUTICALS, INC., a Delaware corporation (the "Company"), will be held at
the Marriott Hotel, 1201 Market Street, Philadelphia, Pennsylvania, on Monday,
May 11, 1998, at 8:30 A.M., local time, for the following purposes:

(1) To elect eight directors to serve until the next Annual Meeting of
Stockholders and until their respective successors shall have been duly
elected and qualified;

(2) To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the year ending December 31, 1998; and

(3) To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.

Holders of Common Stock of record at the close of business on March 27,
1998 are entitled to notice of and to vote at the Meeting, or any adjournment or
adjournments thereof. A complete list of such stockholders will be open to the
examination of any stockholder at the Company's principal executive offices at
301 South State Street, Newtown, PA 18940 and at the Marriott Hotel, 1201 Market
Street, Philadelphia, Pennsylvania for a period of 10 days prior to the Meeting.
The Meeting may be adjourned from time to time without notice other than by
announcement at the Meeting.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER
OF SHARES YOU MAY HOLD. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE. THE PROMPT RETURN OF PROXIES WILL ENSURE A QUORUM
AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION. EACH PROXY GRANTED MAY
BE REVOKED BY THE STOCKHOLDER APPOINTING SUCH PROXY AT ANY TIME BEFORE IT IS
VOTED. IF YOU RECEIVE MORE THAN ONE PROXY CARD BECAUSE YOUR SHARES ARE
REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH SUCH PROXY CARD SHOULD BE
SIGNED AND RETURNED TO ASSURE THAT ALL OF YOUR SHARES WILL BE VOTED.

By Order of the Board of Directors

Nancy C. Broadbent
Secretary

Newtown, Pennsylvania
April 8, 1998

The Company's 1997 Annual Report accompanies the Proxy Statement.

COLLAGENEX PHARMACEUTICALS, INC.
301 South State Street
Newtown, PA 18940

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PROXY STATEMENT
- --------------------------------------------------------------------------------

This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of CollaGenex Pharmaceuticals, Inc. (the "Company") of
proxies to be voted at the Annual Meeting of Stockholders of the Company to be
held on Monday, May 11, 1998 (the "Meeting") at the Marriott Hotel, 1201 Market
Street, Philadelphia, Pennsylvania at 8:30 A.M., local time, and at any
adjournment or adjournments thereof. Holders of record of Common Stock, $.01 par
value ("Common Stock"), as of the close of business on March 27, 1998, will be
entitled to notice of and to vote at the Meeting and any adjournment or
adjournments thereof. As of that date, there were 8,569,454 shares of Common
Stock issued and outstanding and entitled to vote. Each share of Common Stock is
entitled to one vote on any matter presented at the Meeting. The number of votes
entitled to be cast at the Meeting is 8,569,454.

If proxies in the accompanying form are properly executed and returned,
the Common Stock represented thereby will be voted in the manner specified
therein. If not otherwise specified, the Common Stock represented by the proxies
will be voted (i) FOR the election of the eight nominees named below as
directors, (ii) FOR the ratification of the appointment of KPMG Peat Marwick LLP
as independent auditors for the year ending December 31, 1998 and (iii) in the
discretion of the persons named in the enclosed form of proxy, on any other
proposals which may properly come before the Meeting or any adjournment or
adjournments thereof. Any Stockholder who has submitted a proxy may revoke it at
any time before it is voted, by written notice addressed to and received by the
Secretary of the Company, by submitting a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting. The mere presence at the
Meeting of the person appointing a proxy does not, however, revoke the
appointment.

The presence, in person or by proxy, of holders of Common Stock having a
majority of the votes entitled to be cast at the Meeting shall constitute a
quorum. The affirmative vote by the holders of a plurality of the shares of
Common Stock represented at the Meeting is required for the election of
directors, provided a quorum is present in person or by proxy. All actions
proposed herein other than the election of directors may be taken upon the
affirmative vote of Stockholders possessing a majority of the voting power
represented at the Meeting, provided a quorum is present in person or by proxy.

Abstentions are included in the shares present at the Meeting for
purposes of determining whether a quorum is present, and are counted as a vote
against for purposes of determining whether a proposal is approved. Broker
non-votes (when shares are represented at the Meeting by a proxy specifically
conferring only limited authority to vote on certain matters and no authority to
vote on other matters) are included in the determination of the number of shares
represented at the Meeting for purposes of determining whether a quorum is
present but are not counted for purposes of determining whether a proposal has
been approved and thus have no effect on the outcome.

This Proxy Statement, together with the related proxy card, is being
mailed to the Stockholders of the Company on or about April 8, 1998. The Annual
Report to Stockholders of the Company for the year ended December 31, 1997,
including financial statements (the "Annual Report"), is being mailed together
with this Proxy Statement to all Stockholders of record as of March 27, 1998. In
addition, the Company has provided brokers, dealers, banks, voting trustees and
their nominees, at the Company's expense, with additional copies of the Annual
Report so that such record holders could supply such materials to beneficial
owners as of March 27, 1998.

ELECTION OF DIRECTORS
---------------------

At the Meeting, eight directors are to be elected (which number shall
constitute the entire Board of Directors of the Company) to hold office until
the next Annual Meeting of Stockholders and until their successors shall have
been elected and qualified.

It is the intention of the persons named in the enclosed form of proxy
to vote the stock represented thereby, unless otherwise specified in the proxy,
for the election as directors of the persons whose names and biographies appear
below. All of the persons whose names and biographies appear below are at
present directors of the Company. In the event any of the nominees should become
unavailable or unable to serve as a director, it is intended that votes will be
cast for a substitute nominee designated by the Board of Directors. The Board of
Directors has no reason to believe that the nominees named will be unable to
serve if elected. Each of the nominees has consented to being named in this
Proxy Statement and to serve if elected.

The current Board of Directors and nominees for election to the Board
are as follows:

Served as a Positions with
Name Age Director Since the Company
- ---- --- -------------- --------------

Helmer P.K. Agersborg, Ph.D.... 69 1992 Chairman of the
Board

Brian M. Gallagher, Ph.D....... 50 1994 President, Chief
Executive Officer
and Director

Peter R. Barnett, D.M.D........ 46 1997 Director

Robert J. Easton............... 53 1993 Director

James E. Daverman.............. 48 1995 Director

Stephen W. Ritterbush, Ph.D.... 51 1992 Director

Pieter J. Schiller............. 60 1995 Director

Terence E. Winters, Ph.D....... 55 1992 Director

The principal occupations and business experience, for at least the past
five years, of each nominee are as follows:

DR. AGERSBORG has been Chairman of the Company's Board of Directors
since March 1992 and served as its Chief Executive Officer and President until
March 1994. Dr. Agersborg also serves as President and Chief Executive Officer
of Afferon Corporation and Maret Corporation, having joined such companies in
September 1992 and September 1994, respectively. Dr. Agersborg has also served
as director of Lidak Pharmaceutical since October 1992. Each of such companies
engages in pharmaceutical development. From May 1987 until his retirement in
June 1990, Dr. Agersborg was the President of Wyeth-Ayerst Research Division of
American Home Products Corporation. Prior to that, and beginning in 1975, he was
a Vice President, and then an Executive Vice President, of Wyeth-Ayerst
Laboratories Research Division.

DR. GALLAGHER joined the Company in April 1994 as President and Chief
Executive Officer and was elected to the Board of Directors in November 1994.
From 1988 until joining the Company, Dr. Gallagher was employed by Bristol-Myers
Squibb Company ("BMS") and its predecessor, Squibb Corporation, in various
executive positions including strategic planning, worldwide product and business
development and marketing. From 1991 until joining the Company, Dr. Gallagher
was Vice President and General Manager of Squibb Diagnostics, the in vivo
imaging pharmaceutical division. Prior to that, Dr. Gallagher served for ten
years with E.I. DuPont de Nemours & Co. in a variety of pharmaceutical research,
development, marketing and business management positions.

-2-

DR. BARNETT has been a director of the Company since February 1997. He
is Senior Vice President and Chief Operating Officer of United Dental Care,
Inc., a managed dental benefits firm, where he has served in such capacity since
January 1995. From August 1994 to January 1995, Dr. Barnett was Executive
Director of Prudential DMO, and from March 1993 to August 1994, he served as an
independent consultant in the managed care field. From January 1985 to March
1993, Dr. Barnett was a Senior Vice President with Pearle Vision, Inc.

MR. EASTON has been a director of the Company since November 1993. He is
Managing Director of The Wilkerson Group, an IBM Company and a major health care
consulting firm, where he has served in such capacity since 1986. Mr. Easton is
a former President of the Biomedical Marketing Association.

MR. DAVERMAN has been a director of the Company since November 1995. He
is a managing general partner of Marquette Venture Partners ("MVP"), a venture
capital investment company which he co-founded in 1987. Mr. Daverman is
President of Marquette Management Partners, LLC, the general partner of
Marquette Venture Partners, L.P. and a general partner of MG II, L.P., the
general partner of Marquette Venture Partners II, L.P. and MVP II Affiliates
Fund, L.P. He is a member of the Board of Directors of the Technology Advisory
Group of the Technology Management Office of the University of Michigan. Mr.
Daverman is a member of the Board of Directors of Endocardial Solutions, Inc.
and numerous privately held companies.

DR. RITTERBUSH has been a director of the Company since its founding in
January 1992. He is managing general partner of Fairfax Partners/The Venture
Fund of Washington, L.P., a venture capital fund, which he co-founded in 1989.
Dr. Ritterbush serves as a director and is on the compensation committee of the
Board of Directors of Apache Medical Systems, Inc.

MR. SCHILLER has been a director of the Company since September 1995. He
joined Advanced Technology Ventures ("ATV"), a venture capital fund, in
September 1986 and is currently a general partner of various ATV funds. He is a
director of Anthra Pharmaceuticals, Inc., Endius, Inc., Afferon Corporation,
HealthShare Technology, Inc. and Novoste Corporation.

DR. WINTERS has been a director of the Company since its founding in
January 1992. He is a general partner of Columbine Venture Funds, a venture
capital fund, of which he was a founder in 1983. He also serves as a director of
Afferon Corporation, Maret Corporation and Melanotan Corporation.

All directors hold office until the next annual meeting of stockholders
and until their successors shall have been duly elected and qualified. None of
the Company's directors are related to any other director or to any executive
officer of the Company.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE
NOMINEES FOR THE BOARD OF DIRECTORS.

Committees and Meetings of the Board
- ------------------------------------

The Board of Directors has a Compensation Committee (the "Compensation
Committee"), which approves salaries and incentive compensation for executive
officers of the Company and which administers the Company's stock option plans,
and an Audit Committee, which reviews the results and scope of the audit and
other services provided by the Company's independent accountants. The
Compensation Committee currently consists of Robert J. Easton, Stephen W.
Ritterbush, Ph.D. and Terence E. Winters, Ph.D. The Compensation Committee was
established in March 1996 and held two meetings in 1997. The Audit Committee
currently consists of James E. Daverman, Stephen W. Ritterbush, Ph.D. and Pieter
J. Schiller. The Audit Committee was established in March 1996 and held one
meeting in 1997. There were four meetings of the Board of Directors during 1997.
Each incumbent director attended at least 75% of the aggregate of all meetings
of the Board of Directors held during the period in which he served as a
director and the total number of meetings held by the committee on which he
served during the period, if applicable.

-3-

Compensation of Directors
- -------------------------

Helmer P.K. Agersborg is paid $36,000 per year for his services as
Chairman of the Board. Peter R. Barnett receives $1,500 per meeting for each
meeting of the Board of Directors attended. The Wilkerson Group, an IBM Company,
receives $1,500 per meeting for each meeting of the Board of Directors attended
by Mr. Easton. No other directors receive cash compensation for services on the
Board of Directors. The Company provides reimbursement to directors for
reasonable and necessary expenses incurred in connection with attendance at
meetings of the Board of Directors and other Company business.

Prior to the effective date of the Company's initial public offering
(the "IPO"), the Company granted options to certain directors as follows: (i)
Dr. Agersborg was granted options to purchase 60,625, 28,084, and 22,500 shares
of Common Stock on March 1, 1992, September 1, 1993 and March 1, 1995,
respectively, at exercise prices of $0.20, $0.20 and $0.335, respectively. Of
such options, an aggregate of 88,709 have been exercised and the remaining
options vested to the extent of 7,500 shares on March 1, 1996, 7,500 shares on
March 1, 1997 and 7,500 shares on March 1, 1998; (ii) Mr. Easton was granted
options to purchase 7,500 shares of Common Stock on each of January 1, 1994 and
October 1, 1995 at exercise prices of $0.20 and $1.20, respectively. Of such
options, 7,500 have been exercised and, of the remaining 7,500, 5,000 have
vested and 2,500 will vest on October 1, 1998; and (iii) Dr. Gallagher was
granted options to purchase 50,000 shares of Common Stock on each of October 1,
1995 and October 15, 1995 at exercise prices of $1.20 per share and $0.335 per
share, respectively. As of April 1, 1998, 25,000 of the options granted on
October 1, 1995 had vested, and 49,167 of the options granted on October 15,
1995 had vested.

On the effective date of the Company's IPO, pursuant to the Company's
1996 Non-Employee Director Stock Option Plan (the "Non-Employee Plan"), each
non-employee director of the Company, then consisting of Drs. Ritterbush and
Winters and Messrs. Easton, Daverman and Schiller, was automatically granted an
option to purchase 10,000 shares of Common Stock, at an exercise price per share
equal to $10.00. On November 22, 1996, the Board of Directors of the Company
adopted, and on May 8, 1997 the Stockholders approved, an amendment to the
Non-Employee Plan which, among other things, (i) increased the number of shares
of Common Stock underlying the automatic option grants to new non-employee
directors from 10,000 to 25,000 shares; and (ii) provided for the grant of
options to purchase an additional 15,000 shares of Common Stock, at an exercise
price per share of $9.75, to each of Drs. Ritterbush and Winters and Messrs.
Easton, Daverman and Schiller. In February 1997, Dr. Barnett was granted options
to purchase 25,000 shares of Common Stock at an exercise price of $9.00 per
share under the Non-Employee Plan upon his election to the Board. All such
options become exercisable in five equal annual installments commencing one year
after the date of grant provided that the optionee then remains a director at
the time of vesting of the installments. The right to exercise annual
installments of options under the Non-Employee Plan will be reduced
proportionately based on the optionee's actual attendance at Directors' meetings
if the optionee fails to attend at least 75% of the Directors' meetings held in
any calendar year. On February 7, 1997, Dr. Gallagher was granted options under
the Company's 1996 Stock Plan (the "1996 Stock Plan") to purchase 50,000 shares
of Common Stock, at an exercise price of $9.00 per share. Such options become
exercisable in five equal annual installments beginning February 7, 1997. The
vesting on these options may accelerate if certain conditions are met. Finally,
on April 4, 1997, Dr. Agersborg was granted options under the 1996 Stock Plan to
purchase 25,000 shares of Common Stock, at an exercise price of $12.75 per
share. Such options become exercisable in five equal annual installments
beginning on April 4, 1997.

-4-

EXECUTIVE OFFICERS
------------------

The following table identifies the current executive officers of the
Company:

Capacities in In Current
Name Age Which Served Position Since
- ---- --- ------------ --------------

Brian M. Gallagher, Ph.D... 50 President, Chief April 1994
Executive Officer and (Director since
Director November 1994)

Robert A. Ashley(1)........ 40 Vice President, September 1994
Commercial Development

Nancy C. Broadbent(2)...... 42 Chief Financial March 1996
Officer, Treasurer
and Secretary

Douglas C. Gehrig(3)....... 53 Vice President, Sales June 1997

David P. Pfeiffer(4)....... 35 Vice President, June 1997
Marketing
- ----------

(1) Mr. Ashley joined the Company in September 1994 as Vice President,
Commercial Development. From 1989 until joining the Company, he was
employed by BMS and its predecessor, Squibb Corporation, in various
positions including product development, commercial and business
development and, most recently, as Director, Business Development where
he was responsible for the worldwide product and market development of
several new drugs. From 1979 to 1989, Mr. Ashley held various positions
at Amersham International (UK) Ltd., including research, development,
manufacturing, sales and marketing positions, as well as worldwide
product development and product launch positions.

(2) Ms. Broadbent joined the Company in March 1996 as Chief Financial
Officer, Treasurer and Secretary. From October 1994 until joining the
Company, Ms. Broadbent served as Senior Vice President, Chief Financial
Officer and director of Human Genome Sciences, Inc., a biotechnology
company. From January 1993 to October 1994, she served as Vice President
and Chief Financial Officer of Cangene, Inc., a biopharmaceutical
company. From January 1992 through December 1992, Ms. Broadbent served
as an independent financial consultant. From March 1990 to December
1991, she was employed by Baring Brothers & Co., Inc., initially as
Senior Vice President and then as Executive Director, Corporate Finance.
Prior to that, Ms. Broadbent served for nine years in corporate finance
positions with Salomon Brothers, Inc. and PaineWebber Incorporated.

(3) Mr. Gehrig joined the Company in June 1997 as Vice President, Sales.
From September 1991 until joining the Company, he was employed by the
Musculoskeletal Transplant Foundation, most recently as Vice President,
Hospital Sales. From January 1990 until September 1991, Mr. Gehrig was
Director of Sales for the Consumer Product Division of Warner Lambert.
Prior to that, he served for 19 years in various sales, marketing and
sales management positions with Johnson & Johnson.

(4) Mr. Pfeiffer joined the Company in June 1997 as Vice President,
Marketing. From September 1995 until June 1997, Mr. Pfeiffer served as
Director of Marketing, Health Management Services, for SmithKline
Beecham. From May 1994 to September 1995, Mr. Pfeiffer served as
Director, Disease Management Services of Stuart Disease Management
Services. From October 1991 to May 1994 he was employed in various
product management positions with Zeneca Pharmaceuticals Group. From
July 1988 to October 1991, Mr. Pfeiffer held various marketing and
product management positions with the Lederle Laboratories Division of
American Cyanamid.

-5-

None of the Company's executive officers is related to any other
executive officer or to any director of the Company. Executive officers of the
Company are elected annually by the Board of Directors and serve until their
successors are duly elected and qualified.

Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and stockholders who
beneficially own more than 10% of any class of equity securities of the Company
registered pursuant to Section 12 of the Exchange Act to file initial reports of
ownership and reports of changes in ownership with respect to the Company's
equity securities with the Securities and Exchange Commission (the "SEC"). All
reporting persons are required by SEC regulation to furnish the Company with
copies of all reports that such reporting persons file with the SEC pursuant to
Section 16(a).

Based solely on the Company's review of the copies of such forms
received by the Company and upon written representations of the Company's
reporting persons received by the Company, Douglas C. Gehrig, Vice President,
Sales, and David P. Pfeiffer, Vice President, Marketing, did not report on a
timely basis certain transactions. In particular, Mr. Gehrig failed to timely
report on a Form 3 his election on June 16, 1997 as Vice President, Sales. Mr.
Gehrig filed such Form 3 with the Securities and Exchange Commission on August
11, 1997. Mr. Pfeiffer failed to timely report on a Form 3 his election on June
9, 1997 as Vice President, Marketing. Mr. Pfeiffer filed such Form 3 with the
Securities and Exchange Commission on August 11, 1997.

-6-

EXECUTIVE COMPENSATION
----------------------

Summary of Compensation in Fiscal 1997, 1996 and 1995
- -----------------------------------------------------

The following Summary Compensation Table sets forth information
concerning compensation for services in all capacities awarded to, earned by or
paid to each person who served as the Company's Chief Executive Officer at any
time during 1997 and each other executive officer of the Company whose aggregate
cash compensation exceeded $100,000 at the end of 1997 (collectively, the "Named
Executives") during the years ended December 31, 1995, 1996 and 1997.

SUMMARY COMPENSATION TABLE(1)
- --------------------------------------------------------------------------------
Long-Term
Compensation
Annual Compensation Awards
------------------- ----------
Securities
Underlying
Name and Principal Position Year Salary Bonus Options
($) ($) (#)
(a) (b) (c) (d) (g)
- -------------------------------------- ---- ------- ------ ----------

Brian M. Gallagher, Ph.D(2) ......... 1997 250,000 42,536 50,000
President and Chief Executive 1996 225,000 50,000 0
Officer 1995 225,000 50,000 100,000

Robert A. Ashley .................... 1997 157,500 36,125 25,000
Vice President, Commercial 1996 139,961 30,000 0
Development 1995 120,000 10,000 37,500

Nancy C. Broadbent(3) ............... 1997 173,250 36,380 25,000
Chief Financial Officer, 1996 137,500 30,000 60,000
Treasurer and Secretary 1995 -- -- --

- ----------

(1) The costs of certain benefits are not included because they did not
exceed, in the case of each Named Executive, the lesser of $50,000 or
10% of the total annual salary and bonus reported in the above table.

(2) In November 1994, Dr. Gallagher purchased 125,000 shares of the
Company's restricted Common Stock at $0.335 per share. Such shares are
subject to vesting and the Company's repurchase right and right of first
refusal. Of such shares, 25,000 vested immediately, an additional 83,332
shares vested as of April 1, 1998 and the remaining 16,668 shares will
vest in equal monthly portions over the next eight months. Pursuant to
the Company's repurchase right, the Company may repurchase any of Dr.
Gallagher's unvested shares, at a purchase price of $0.335 per share, at
the time of termination of his service. Pursuant to the Company's right
of first refusal, the Company may buy back Dr. Gallagher's vested shares
at $0.335 per share, if Dr. Gallagher is terminated for cause, and at
the current market value per share, if he is terminated for any other
reason. At December 31, 1997, Dr. Gallagher held 102,083 shares of
restricted Common Stock with a year-end value of $1,241,840 based on the
value of the Common Stock as of such date ($12.50 per share), less the
purchase price per share paid for such shares ($0.335 per share).

(3) Ms. Broadbent joined the Company in March 1996 as Chief Financial
Officer, Treasurer and Secretary.

-7-

Option Grants in 1997
- ---------------------

The following table sets forth information concerning individual grants
of stock options made pursuant to the Company's 1996 Stock Plan during 1997 to
each of the Named Executives. The Company has never granted any stock
appreciation rights.

OPTION GRANTS IN LAST FISCAL YEAR(1)
- -------------------------------------------------------------------------------------------------------------
Individual Grants
- ------------------------------------------------------------------------------------
Potential Realizable
Value at
Assumed Annual Rates
Number of Percent of of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise for Option
Options Employees in or Base Term (4)
Granted Fiscal Price Expiration -------------------
Name (#)(2) Year(3) ($/Sh) Date 5%($) 10%($)
(a) (b) (c) (d) (e) (f) (g)
- ------------------------------ ------ ------------- ------- ---------- ------- --------

Brian M. Gallagher, Ph.D ..... 50,000 15.4% $ 9.00 2/6/07 283,003 717,184

Robert A. Ashley ............. 25,000 7.7% $ 9.00 2/6/07 141,501 358,592

Nancy C. Broadbent ........... 25,000 7.7% $ 9.00 2/6/07 141,501 358,592

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

(1) Mr. Gehrig was granted options to purchase 60,000 shares of the
Company's Common Stock in July 1997 at an exercise price of $10.625 per
share. Mr. Pfeiffer was granted options to purchase 60,000 shares of the
Company's Common Stock in July 1997 at an exercise price of $10.625 per
share.

(2) Such options were granted pursuant to and in accordance with the
Company's 1996 Stock Plan. The 1996 Stock Plan was adopted by the Board
of Directors and approved by the Stockholders of the Company on March
22, 1996 and March 29, 1996, respectively. A total of 750,000 shares of
Common Stock currently are reserved for issuance upon exercise of
options and/or stock purchase rights granted under the 1996 Stock Plan.
Those eligible to receive stock option grants under the 1996 Stock Plan
include employees, non-employee directors and consultants. The 1996
Stock Plan is administered by the Compensation Committee, which is
comprised solely of outside directors. Subject to the provisions of the
1996 Stock Plan, the administrator of the 1996 Stock Plan has the
discretion to determine the optionees and/or grantees, the type of
options to be granted (incentive stock options ("ISOs") or non-qualified
stock options ("NQSOs")), the vesting provisions, the terms of the
grants and such other related provisions as are consistent with the 1996
Stock Plan. The exercise price of an ISO may not be less than the fair
market value per share of the Common Stock on the date of grant or, in
the case of an optionee who beneficially owns 10% or more of the
outstanding capital stock of the Company, not less than 110% of the fair
market value per share on the date of grant. The exercise price of a
NQSO may be less than 85% of the fair market value per share of the
Common Stock on the date of grant or, in the case of an optionee who
beneficially owns 10% or more of the outstanding capital stock of the
Company, not less than 110% of the fair market value per share on the
date of grant. The purchase price of shares issued pursuant to stock
purchase rights may not be less than 50% of the fair market value of
such shares as of the offer date of such rights. The options terminate
not more than ten years from the date of grant, subject to earlier
termination on the optionee's death, disability or termination of
employment with the Company, but provide that the term of any options
granted to a holder of more than 10% of the outstanding shares of
capital stock may be

-8-

no longer than five years. Options are not assignable or otherwise
transferable except by will or the laws of descent and distribution. In
the event of a merger or consolidation of the Company with or into
another corporation or the sale of all or substantially all of the
Company's assets in which the successor corporation does not assume
outstanding options or issue equivalent options, the Board of Directors
is required to provide accelerated vesting of outstanding options. The
1996 Stock Plan terminates on March 21, 2006.

(3) Based on an aggregate of 323,750 options granted to employees in 1997,
including options granted to Named Executives.

(4) Based on a grant date fair market value of $9.00 per share.

Aggregated Option Exercises in 1997
and Year End Option Values
- -----------------------------------

The following table sets forth information concerning each exercise of
options during 1997 by each of the Named Executives and the year end value of
unexercised in-the-money options.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Shares Year-End Year-End
Acquired on Value (#) ($) (1)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ------------------------------ ---------- --------- --------------------- ------------------

Brian M. Gallagher, Ph.D ..... -- $ -- 71,667/78,333 $ 850,205/$498,046

Robert A. Ashley ............. -- -- 28,125/53,125 $ 325,922/$413,422

Nancy C. Broadbent ........... 24,000 273,000 0/61,000 $ 0/$465,500

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

(1) Based on a year end fair market value of the underlying securities equal
to $12.50, less the exercise price payable for such shares.

-9-

Employment Contracts, Termination of Employment and
Change-in-Control Arrangements
- ---------------------------------------------------

The Company has executed indemnification agreements with each of its
executive officers and directors pursuant to which the Company has agreed to
indemnify such parties to the full extent permitted by law, subject to certain
exceptions, if such party becomes subject to an action because such party is a
director, officer, employee, agent or fiduciary of the Company. In general, the
Company's employees are covered by confidentiality agreements.

In addition, each of Dr. Gallagher, Ms. Broadbent and Mr. Ashley have
agreed that during the term of his or her employment and for a period of two
years thereafter, such person will not directly or indirectly provide services
to or for any business engaged in research regarding the development,
manufacture, testing, marketing or sale of collagenase inhibiting drugs for
application in periodontal disease or any other application which, during the
period of such person's employment with the Company, is either marketed or in
advanced clinical development by the Company.

Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------

The Compensation Committee consists of, and during 1997 consisted of,
Robert J. Easton, Stephen W. Ritterbush, Ph.D. and Terence E. Winters, Ph.D.
There are no, and during 1997 there were no, Compensation Committee Interlocks.

As of April 1, 1998, each of Fairfax Partners/The Venture Fund of
Washington, L.P., with which Dr. Ritterbush is affiliated and Columbine Venture
Fund II, L.P., with which Dr. Winters is affiliated, held 446,517 and 969,328
shares, respectively, of the Company's Common Stock which were previously issued
upon conversion of certain shares of the Company's Series A, Series B or Series
C Redeemable Preferred Stock previously held by such entities. Such shares of
Common Stock are entitled to certain registration rights and certain rights to
participate in certain future offerings undertaken by the Company.

In September 1995, the Company and the then holders of the Company's
Series A, Series B and Series C Redeemable Preferred Stock entered into a
Registration Rights Agreement (the "Rights Agreement") pursuant to which the
Company has granted certain registration rights to such Stockholders. Pursuant
to the Rights Agreement, at any time beginning six months after June 20, 1996,
the effective date of the Company's IPO, the holders of at least a majority of
the Common Stock issued upon the conversion of the Series A, Series B and Series
C Redeemable Preferred Stock (the "Registrable Securities") have the right,
subject to certain restrictions set forth in the Rights Agreement, to require
that the Company register the Registrable Securities requested by such holders
at the Company's expense (on no more than two occasions) on either a Form S-1,
Form S-2 or Form S-3 Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act"). The Company is not, however, required to
register any Registrable Securities unless such shares represent at least 10% of
the Company's outstanding shares of Common Stock, or, if less than 10%, if the
anticipated aggregate offering price exceeds $1,000,000.

The holders of Registrable Securities also have the right to an
unlimited number of registrations on Form S-3 under the Securities Act. The
Company is not, however, required to effect such a registration unless the
requesting holders reasonably anticipate having an aggregate disposition price
of at least $500,000.

Also pursuant to the Rights Agreement, if, at any time during the
seven-year period commencing on the effective date of the Company's IPO, the
Company proposes to register any of its Common Stock under the Securities Act
for sale to the public, the holders of the Registrable Securities have unlimited
piggyback registration rights at the Company's expense, subject to certain
restrictions set forth in the Rights Agreement.

Also in September 1995, the Company granted to the then holders of
Series A, Series B and Series C Redeemable Preferred Stock certain rights to
participate in certain future offerings undertaken by the Company. Such rights
to participate require that, with certain exceptions including, but not limited
to, an underwritten public offering, any time the Company proposes to issue,
sell or exchange, or reserve therefor, any securities, the Company must first
offer to sell to each of the pre-conversion holders of Series A, Series B and
Series C Redeemable

-10-

Preferred Stock their respective pro rata share of such securities at a price
and on terms identical to the price and terms of the securities proposed to be
issued, sold or exchanged in the applicable offering.

Performance Graph
- -----------------

The following graph compares the cumulative total stockholder return on
the Company's Common Stock with the cumulative total return on the Nasdaq
Composite Index and the Nasdaq Pharmaceutical Index (capitalization weighted)
for the period beginning on the date on which the Securities and Exchange
Commission declared effective the Company's Form 8-A Registration Statement
pursuant to Section 12 of the Exchange Act and ending on the last day of the
Company's last completed fiscal year.

COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)(3)
----------------------------------------------

Among the Company, the Nasdaq Composite Index and the
Nasdaq Pharmaceutical Index
(Capitalization Weighted)

Base Period December June December
Company/Index Name June 1996 1996 1997 1997
- ---------------------------- ----------- -------- -------- --------
CGPI........................ $100 $ 89.04 $ 131.51 $ 136.99
NASDAQ...................... 100 110.46 123.67 135.61
NASDAQ PHAR................. 100 98.41 101.11 101.87

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

(1) Graph assumes $100 invested on June 20, 1996 in the Company's Common
Stock, the Nasdaq Composite Index and the Nasdaq Pharmaceutical Index
(capitalization weighted).

(2) Total return assumes reinvestment of dividends.

(3) Year ended December 31.

-11-

Compensation Committee Report on Executive Compensation
- -------------------------------------------------------

The Compensation Committee has furnished the following report:

The Compensation Committee is composed of three non-employee directors.
The Compensation Committee recommends, and the Board approves, all matters
relating to executive compensation, including setting and administering policies
governing executive salaries, bonuses (if any) and stock option awards (if any).
The Compensation Committee meets twice annually to set performance objectives
for the Chief Executive Officer ("CEO") and to determine the annual compensation
of the CEO and other senior executives of the Company. The CEO is not present
during the discussion of his compensation.

EXECUTIVE COMPENSATION POLICY

The goal of the Company's executive compensation policy is to ensure
that an appropriate relationship exists between executive compensation and the
creation of stockholder value, while at the same time attracting and retaining
qualified senior management. Since its inception in 1992, the Company has
operated as a "virtual" pharmaceutical company with a small number of highly
experienced senior executives determining and executing the Company's strategy
while contracting out pharmaceutical development activities to clinical research
and other third party organizations. In order to attract highly experienced
executives, the Company's compensation packages for senior executives are highly
competitive with those paid to executives of other emerging pharmaceutical
companies.

COMPENSATION MIX

The Company's executive compensation packages generally include three
components: base salary, a discretionary annual cash bonus and stock options.

BASE SALARY

The Compensation Committee seeks to establish base salaries for each
position and level of responsibility which are competitive with those of
executive officers at other emerging pharmaceutical companies.

DISCRETIONARY CASH BONUS

The Compensation Committee believes that discretionary cash bonuses are
important to motivate and reward executive officers. However, cash bonuses are
not guaranteed. Annual cash bonuses are awarded to executives based on their
achievements against a stated list of objectives developed at the beginning of
each year by senior management and the Compensation Committee. Such objectives
are reviewed and approved by the Board of Directors.

STOCK OPTIONS

Stock option grants under the Company's stock option plans are designed
to align the long term interests of the Company's executives with those of its
stockholders by rewarding executives for increasing stockholder value. All
executive officers are awarded option grants upon joining the Company which are
competitive with those at comparable emerging pharmaceutical companies. In
addition, the Compensation Committee may award additional stock option grants
annually. When granting stock options, the Compensation Committee considers the
recommendation of the CEO and the relative performance and contributions of each
officer compared to that of other officers within the Company with similar
levels of responsibility.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

In establishing Dr. Gallagher's compensation package, the Compensation
Committee seeks to maintain a level of total current compensation that is
competitive with that paid to CEOs of other comparable emerging pharmaceutical
companies. In addition, in order to align Dr. Gallagher's interests with the
interests of the

-12-

Company's stockholders, the Compensation Committee attempts to make a
substantial portion of the value of his total compensation dependent on the
appreciation of the Company's stock price.

Dr. Gallagher's performance is evaluated annually by the Compensation
Committee against a stated list of short, medium and long term objectives
developed by the Compensation Committee at the beginning of each year and
approved by the Board. Based on his achievements relating to these objectives,
the Compensation Committee recommended, and the board approved, a bonus to Dr.
Gallagher of $50,000 for 1997, which is paid in 1998, and an increase in base
salary from $250,000 to $262,500 effective January 1, 1998.

Section 162(m) of the Internal Revenue Code disallows the deductibility
by the Company of any compensation over $1 million paid to the CEO or any of the
other four most highly compensated executives, unless certain criteria are
satisfied. The Company's CEO and the other named executives have not received
annual compensation over $1 million, and the Company has not determined what
measures, if any, it should take to comply with Section 162.

Compensation Committee Members:

Robert J. Easton
Stephen W. Ritterbush, Ph.D.
Terence E. Winters, Ph.D.

-13-

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------

There are, as of February 15, 1998, approximately 86 holders of record
and 1,700 beneficial holders of the Company's Common Stock. The following table
sets forth certain information, as of February 15, 1998, with respect to
holdings of the Company's Common Stock by (i) each person known by the Company
to be the beneficial owner of more than 5% of the total number of shares of
Common Stock outstanding as of such date, (ii) each of the Company's directors
(which includes all nominees) and Named Executives, and (iii) all directors and
officers as a group.

Amount and Nature of Percent
Name and Address of Beneficial Owner(1) Beneficial Ownership(1) of Class(2)
- --------------------------------------- ----------------------- -----------
(i) Certain Beneficial Owners:

Columbine Venture Fund II, L.P.
6155 N. Scottsdale Road, Suite 100
Scottsdale, Arizona 85250 ................. 969,328 11.3%

Marquette Venture Partners II, L.P.
and MVP II Affiliates Fund, L.P.
520 Lake Cook Road, Suite 450
Deerfield, Illinois 60015 ................. 916,313(3) 10.7

Zesiger Capital Group LLC
320 Park Avenue, 30th Floor
New York, New York 10022 .................. 652,700 7.6

Delphi Ventures III, L.P. and
Delphi Investments III, L.P.
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, California 94025 .............. 625,000(4) 7.3

Fairfax Partners/The Venture Fund
of Washington, L.P.
1568 Spring Hill Road, Suite 200
McLean, Virginia 22102 .................... 446,517 5.2

(ii) Directors (which includes all
nominees) and Named Executives:

Brian M. Gallagher, Ph.D .................. 325,000(5) 3.7

Robert A. Ashley .......................... 96,975(6) 1.1

Nancy C. Broadbent ........................ 87,000(7) 1.0

Helmer P.K. Agersborg, Ph.D ............... 121,209(8) 1.4

Peter R. Barnett, D.M.D ................... 7,000(9) *

James E. Daverman ......................... 921,313(10) 10.7

Robert J. Easton .......................... 23,689(11) *

Stephen W. Ritterbush, Ph.D ............... 451,517(12) 5.3

Pieter J. Schiller ........................ 395,299(13) 4.6

Terence E. Winters, Ph.D .................. 974,328(14) 11.4

(iii) All Directors and officers as a
group (12 persons) ................. 3,467,330(15) 38.4

- ----------

-14-

* Less than 1%

(1) Except as set forth in the footnotes to this table and subject to
applicable community property law, the persons named in the table have
sole voting and investment power with respect to all shares.

(2) Applicable percentage of ownership for each holder is based on 8,567,579
shares of Common Stock outstanding on February 15, 1998, plus any Common
Stock equivalents and presently exercisable stock options or warrants
held by each such holder, and options or warrants held by each such
holder which will become exercisable within 60 days after February 15,
1998.

(3) Includes 890,860 shares and 25,453 shares owned by Marquette Venture
Partners II, L.P. and MVP II Affiliates Fund, L.P., respectively.

(4) Includes 613,946 shares and 11,054 shares owned by Delphi Ventures III,
L.P. and Delphi Investments III, L.P., respectively.

(5) Of such shares, 125,000 are subject to certain rights of first refusal
held by the Company, of which 20,834 also are subject to repurchase by
the Company as of February 15, 1998. See "EXECUTIVE COMPENSATION --
Summary of Compensation in fiscal 1997, 1996 and 1995". Includes 200,000
shares of Common Stock underlying options which are or may be
exercisable as of February 15, 1998 or 60 days after such date.

(6) Includes 78,125 shares of Common Stock underlying options which are or
may be exercisable as of February 15, 1998 or 60 days after such date.

(7) Includes 62,000 shares of Common Stock underlying options which are or
may be exercisable as of February 15, 1998 or 60 days after such date.
Also includes 1,000 shares held as custodian to minor child.

(8) Includes 32,500 shares of Common Stock underlying options which are
exercisable as of February 15, 1998 or 60 days after such date.

(9) Includes 5,000 shares of Common Stock underlying options which are
exercisable as of February 15, 1998 or 60 days after such date.

(10) James E. Daverman is President of Marquette Management Partners, LLC,
the general partner of Marquette Venture Partners, L.P. and a general
partner of MG II, L.P., the general partner of Marquette Venture
Partners II, L.P. and MVP II Affiliates Fund, L.P. and, as such, has the
power to vote or direct the vote of and to dispose of or direct the
disposition of the shares owned by Marquette Venture Partners II, L.P.
and MVP II Affiliates Fund, L.P. Mr. Daverman expressly disclaims
beneficial ownership of such shares, except as to his proportionate
interest in Marquette Venture Partners II, L.P. and MVP II Affiliates
Fund, L.P. Includes 5,000 shares of Common Stock underlying options
which are exercisable as of February 15, 1998 or 60 days after such
date.

(11) Includes 10,000 shares of Common Stock underlying options which are
exercisable as of February 15, 1998 or 60 days after such date. Also
includes 2,000 shares held as custodian to minor child.

(12) Stephen W. Ritterbush, Ph.D. is a general partner of Fairfax Partners/
The Venture Fund of Washington, L.P. and, as such, has the power to vote
or direct the vote of and to dispose of or direct the disposition of the
shares owned by Fairfax Partners/The Venture Fund of Washington, L.P.
Dr. Ritterbush expressly disclaims beneficial ownership of such shares,
except as to his proportionate interest in Fairfax Partners/The Venture
Fund of Washington, L.P. Includes 5,000 shares of Common Stock
underlying options which are exercisable as of February 15, 1998 or 60
days after such date.

(13) Pieter J. Schiller is a general partner of Advanced Technology Ventures
III, L.P. and, as such, has the power to vote or direct the vote of and
to dispose of or direct the disposition of the shares owned by

-16

Advanced Technology Ventures III, L.P. Mr. Schiller expressly disclaims
beneficial ownership of such shares, except as to his proportionate
interest in Advanced Technology Ventures III, L.P. Includes 5,000 shares
of Common Stock underlying options which are exercisable as of February
15, 1998 or 60 days after such date.

(14) Terence E. Winters, Ph.D. is a general partner of Columbine Venture Fund
II, L.P. and, as such, has the power to vote or direct the vote of and
to dispose of or direct the disposition of the shares owned by Columbine
Venture Fund II, L.P. Dr. Winters expressly disclaims beneficial
ownership of such shares, except as to his proportionate interest in
Columbine Venture Fund II, L.P. Includes 5,000 shares of Common Stock
underlying options which are exercisable as of February 15, 1998 or 60
days after such date.

(15) See Notes 5 through 14. Also includes an aggregate of 64,000 shares of
Common Stock underlying options granted to Douglas C. Gehrig and David
P. Pfeiffer which are exercisable as of February 15, 1998 or 60 days
after such date.

-16-

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

As of April 1, 1998, each of Advanced Technology Ventures III, L.P.,
with which Mr. Schiller is affiliated, and Marquette Venture Partners II, L.P.
and MVP II Affiliates Fund, L.P., with which Mr. Daverman is affiliated, held
390,299, 890,860 and 25,453 shares, respectively, of the Company's Common Stock
which were previously issued upon conversion of certain shares of the Company's
Series A, Series B or Series C Redeemable Preferred Stock previously held by
such entities. Such shares of Common Stock are entitled to certain registration
rights and certain rights to participate in certain future offerings undertaken
by the Company.

For information with respect to Drs. Ritterbush and Winters, each a
member of the Compensation Committee, see "EXECUTIVE COMPENSATION --
Compensation Committee Interlocks and Insider Participation."

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
---------------------------------------------------

The Board of Directors of the Company intends, subject to Stockholder
approval, to retain KPMG Peat Marwick LLP as independent auditors of the Company
for the year ending December 31, 1998. KPMG Peat Marwick LLP also served as
independent auditors of the Company for 1997. Neither the firm nor any of its
members has any direct or indirect financial interest in or any connection with
the Company in any capacity other than as auditors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 1998.

-17-

One or more representatives of KPMG Peat Marwick LLP is expected to
attend the Meeting and have an opportunity to make a statement and/or respond to
appropriate questions from stockholders.

On January 19, 1996, the Company selected KPMG Peat Marwick LLP to act
as independent accountants for the Company and informed the prior auditors, the
Company's independent accountants since January 1994, of its decision. The prior
auditors conducted the Company's audit for the period from January 10, 1992
(inception) to December 31, 1993. In connection with such audit, there were no
disagreements with the prior auditors on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures. The
prior auditors' report on the Company's financial statements for the period from
January 10, 1992 (inception) to December 31, 1993 contained no adverse opinion
or disclaimer of opinion and was not modified or qualified as to uncertainty,
audit scope, or accounting principles. The decision to change accountants was
approved by the Board of Directors of the Company.

STOCKHOLDERS' PROPOSALS
-----------------------

Stockholders who wish to submit proposals for inclusion in the Company's
proxy statement and form of proxy relating to the 1999 Annual Meeting of
Stockholders must advise the Secretary of the Company of such proposals in
writing by December 7, 1998.

OTHER MATTERS
-------------

The Board of Directors is not aware of any matter to be presented for
action at the Meeting other than the matters referred to above and does not
intend to bring any other matters before the Meeting. However, if other matters
should come before the Meeting, it is intended that holders of the proxies will
vote thereon in their discretion.

GENERAL
-------

The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company, whose notice of meeting is attached to this Proxy
Statement, and the entire cost of such solicitation will be borne by the
Company.

In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors, officers and other
employees of the Company who will not be specially compensated for these
services. The Company will also request that brokers, nominees, custodians and
other fiduciaries forward soliciting materials to the beneficial owners of
shares held of record by such brokers, nominees, custodians and other
fiduciaries. The Company will reimburse such persons for their reasonable
expenses in connection therewith.

Certain information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received from the individual directors and officers.

COLLAGENEX PHARMACEUTICALS, INC. WILL FURNISH, WITHOUT CHARGE, A COPY OF
ITS REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO BUT NOT INCLUDING EXHIBITS, TO EACH
OF ITS STOCKHOLDERS OF RECORD ON MARCH 27, 1998, AND TO EACH BENEFICIAL
STOCKHOLDER ON THAT DATE UPON WRITTEN REQUEST MADE TO MS. NANCY C. BROADBENT,
SECRETARY, COLLAGENEX PHARMACEUTICALS, INC., 301 SOUTH STATE STREET, NEWTOWN,
PENNSYLVANIA 18940. A REASONABLE FEE WILL BE CHARGED FOR COPIES OF REQUESTED
EXHIBITS.

-18-

PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE
IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE
APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.

By Order of the Board of Directors

Nancy C. Broadbent,
Secretary

Newtown, Pennsylvania
April 8, 1998

-19-

COLLAGENEX PHARMACEUTICALS, INC.

PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR THE ANNUAL MEETING OF STOCKHOLDERS

The undersigned hereby constitutes and appoints Brian M. Gallagher,
Ph.D. and Nancy C. Broadbent, and each of them, his or her true and lawful agent
and proxy with full power of substitution in each, to represent and to vote on
behalf of the undersigned all of the shares of CollaGenex Pharmaceuticals, Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at the Marriott Hotel, 1201 Market
Street, Philadelphia, Pennsylvania at 8:30 A.M., local time, on Monday, May 11,
1998, and at any adjournment or adjournments thereof, upon the following
proposals more fully described in the Notice of Annual Meeting of Stockholders
and Proxy Statement for the Meeting (receipt of which is hereby acknowledged).

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.

(continued and to be signed on reverse side)

Please Detach and Mail In the Envelope Provided

A | X | Please mark your
votes as in this
example.

1. ELECTION OF FOR WITHHELD Nominees:
DIRECTORS. | | | | Helmer P.K. Agersborg, Ph.D.
Peter R. Barnett, D.M.D
Brian M. Gallagher, Ph.D.
Robert J. Easton
VOTE FOR all the nominees listed at right; James E. Daverman
except vote withheld from the following Stephen W. Ritterbush, Ph.D.
nominee(s) (if any). Pieter J. Schiller
Terence E. Winters, Ph.D.

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

2. APPROVAL OF PROPOSAL TO RATIFY FOR AGAINST ABSTAIN
THE APPOINTMENT OF KPMG PEAT MARWICK | | | | | |
LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY
FOR THE YEAR ENDING DECEMBER 31, 1998.

3. In his or her discretion, the proxy is authorized to vote upon other matters
as may properly come before the Meeting.

I will I will not
| | | |
attend the Meeting.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.

Signature of Stockholder Signature of Stockholder Dated:
--------- -------- --------
IF HELD JOINTLY

Note: This proxy must be signed exactly as the name appears hereon. When
shares are held by joint tenants, both should sign. If the signer is a
corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If the signer is a partnership, please sign
in partnership name by authorized person.