1012270--3/16/2006--COLLAGENEX_PHARMACEUTICALS

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{product, candidate, development}

{property, intellectual, protect}

{product, liability, claim}

{regulation, government, change}

{regulation, change, law}

{stock, price, operating}

{acquisition, growth, future}

{product, market, service}

We are depending heavily on the success of our most advanced product candidate, Oracea, for the treatment of rosacea, which is still under regulatory review. If we are unable to obtain approval for and commercialize Oracea, or experience significant delays in doing so, our business will be materially harmed. We cannot rely on regulatory protections to prevent the approval of generic equivalents of our products. If we are not able to obtain and enforce patent protection for Oracea or our other discoveries, our ability to commercialize our product candidates successfully will be harmed and we may not be able to operate our business profitably. We cannot assure you that our pursuit of business in the dermatology market will be successful. If we are not able to obtain required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired. If we lose our sole supplier of doxycycline or our manufacturer of Oracea, our sales of Oracea, if any, will be interrupted, halted or less profitable. If the federal regulatory status of Alcortin or Novacort changes, we may be unable to continue to market one or both of these products. Our products could be subject to restrictions or withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements. Both before and after approval or clearance, we, our vendors and suppliers, and our products and product candidates are subject to extensive regulatory requirements. Failure to comply with these requirements could subject us to administrative and judicial sanctions. We cannot predict with certainty the effect on our business of the decline in revenues generated by the dental business following the commercial launch of generic versions of Periostat and the termination of our dental sales force. We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs and commercialization efforts. We cannot assure you that our clinical trials will be completed in a timely manner or will meet agreed upon end-points. If we infringe or are alleged to infringe intellectual property rights of third parties, it will adversely affect our business. We depend upon third party researchers and providers of clinical services to perform as contractually required if we are to be successful in bringing new products to market. We depend upon certain key relationships to generate much of the technology required to maintain our competitive position in the marketplace. If our products cause injuries, we may incur significant expense and liability. Changes in stock option accounting rules may have a significant adverse affect on our operating results. Our stock price is highly volatile and, therefore, the value of your investment may fluctuate significantly.

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1012270--3/16/2006--COLLAGENEX_PHARMACEUTICALS_INC