CollaGenex Pharmaceuticals Reports Financial Results for the Fourth Quarter and Full Year 2007

Business Wire, March 12, 2008

Total Revenues were $63.6 Million in 2007, including $52.5 Million of Oracea Net Sales

Signs Merger Agreement with Galderma Pharma S.A.

NEWTOWN, Pa. -- CollaGenex Pharmaceuticals, Inc. (NASDAQ:CGPI) today reported financial results for the fourth quarter and year ended December 31, 2007.

Net revenues were $17.0 million in the fourth quarter of 2007 compared to net revenues of $13.2 million in the fourth quarter of 2006. Net sales of Oracea(R) were $15.2 million in the fourth quarter of 2007 compared to $9.7 million in the fourth quarter of 2006. During the fourth quarter of 2007, total deductions from gross sales for estimated product returns, trade cash discounts, government, managed care and patient rebates and wholesale distribution fees were approximately 17.4% of gross sales compared to 9.5% of gross sales during the fourth quarter of 2006, primarily reflecting higher discounts to managed care organizations for expanded Tier II coverage of Oracea Wholesaler inventories were within the Company's target range of three to five weeks of sales. Cost of product sales for the fourth quarter of 2007 were reduced by a $1.7 million refund received from Nycomed during the quarter, which represents the initial Pandel license fee paid to Nycomed.

Research and development (R&D) expenses in the fourth quarter of 2007 declined slightly to $4.7 million compared to $4.8 million in the fourth quarter of 2006. Selling, general and administrative (S,G&A) expenses were $11.6 million in the fourth quarter of 2007 and 2006.

Net income allocable to common stockholders for the fourth quarter of 2007 was $0.4 million, or $0.02 per basic and diluted share, compared to a net loss allocable to common stockholders of $5.3 million, or $0.28 per basic and diluted share, in the fourth quarter of 2006. Total weighted average diluted shares outstanding were 21,731,425 in the fourth quarter of 2007 compared to 19,212,381 in the fourth quarter of 2006.

Colin W. Stewart, president and chief executive officer of CollaGenex, stated, "In 2007, we grew Oracea into the most prescribed oral systemic treatment for rosacea. In addition, we advanced the product's long-term potential by securing Tier II access on managed care formularies for more than 100 million lives and strengthened Oracea's patent estate with the issuance of two key patents. At the same time, we refocused our product development pipeline on Col-118, which has the potential to be the first effective treatment of erythema, and becocalcidiol, a novel vitamin-D analogue for the treatment of psoriasis."

Mr. Stewart continued, "In early 2008, we released important clinical data from our Oracea Phase IV clinical development program that showed the same efficacy and a significantly better side effect profile for Oracea compared to 100 mg of doxycycline. We expect these results will further expand the prescriber base for Oracea. We also recently initiated a Phase II dose-finding study of becocalcidiol, which we expect to be completed in the fourth quarter of 2008."

Nancy C. Broadbent, chief financial officer of CollaGenex, commented, "We were pleased that our financial results for 2007 were better than our previously announced financial guidance, primarily reflecting Oracea's strengthening growth. We completed the year with a strong balance sheet that included approximately $64.2 million in cash, cash equivalents and short-term investments."

For the year ended December 31, 2007, net revenues were $63.6 million compared to $26.4 million for the year ended December 31, 2006. Net revenues from the sale of dermatology products were nearly 92% of total net revenues in 2007 compared to 70% in 2006, reflecting the Company's transition from a dental pharmaceutical company to a company focused on developing and marketing prescription pharmaceutical products for the dermatology market.

R&D expenses for the full year 2007 increased by 35.7% to $20.9 million compared to $15.4 million for the full year 2006. This increase reflects the Company's continued investment in its dermatology pipeline. S,G&A expenses for the full year 2007 increased by 15.5% to $47.3 million compared to $40.9 million in the full year 2006. This increase was primarily a result of the full year of selling and marketing expense for Oracea, which was launched to the dermatology community in July of 2006.

Net loss allocable to common stockholders for the year ended December 31, 2007 was $10.9 million, or $0.51 per basic and diluted share, compared to a net loss allocable to common stockholders for the year ended December 31, 2006 of $35.4 million, or $1.98 per basic and diluted share.

Merger Agreement with Galderma Pharma

On February 26, 2008, CollaGenex announced that it had entered into a definitive merger agreement with an affiliate of Galderma Pharma S.A., pursuant to which Galderma's U.S. holding company, Galderma Laboratories, Inc., will acquire all of the outstanding shares of CollaGenex at a price of $16.60 per share in cash, representing approximately $420 million for the equity of CollaGenex. The acquisition will be effected by a cash tender offer for all the outstanding shares of CollaGenex common stock, followed by a merger in which the holders of any remaining outstanding shares of CollaGenex common stock will receive the same cash price per share paid in the tender offer. The tender offer commenced March 10, 2008 and is expected to close before the end of the second quarter of 2008. The tender offer is conditioned upon the tender of a majority of the outstanding shares of CollaGenex common stock and is also subject to regulatory clearances and other customary closing conditions. Due to the potential acquisition by Galderma, the Company will not be providing 2008 financial guidance.