COLUMBIA LABORATORIES INC (Form: 10-K, Received: 03/15/2004 12:53:04)

COLUMBIA LABORATORIES, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File number 1-10352

COLUMBIA LABORATORIES, INC.

(Exact name of Company as specified in its charter)


Delaware		59-2758596
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

354 Eisenhower Parkway Livingston, New Jersey		07039
(Address of principal executive offices)		(Zip Code)

Company’s telephone number, including area code: (973) 994-3999

Securities registered pursuant to Section 12(g) of the Act:


Common Stock, $.01 par value		Nasdaq National Market
(Title of each class)		(Name of exchange where registered)

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes x No ¨

The aggregate market value of Columbia Laboratories, Inc. Common Stock, $.01 par value, held by non-affiliates, computed by reference to the price at which the stock was sold as of March 1, 2004: $235,601,016.

Number of shares of Common Stock of Columbia Laboratories, Inc. issued and outstanding as of March 1, 2004: 39,751, 934.

Documents Incorporated By Reference

Portions of the Columbia Laboratories, Inc. (“Columbia” or the “Company”) Proxy Statement for the 2004 Annual Meeting of Shareholders (the “Proxy Statement”) are incorporated by reference into Part III of this Form 10-K. We expect to file our Proxy Statement with the Securities and Exchange and mail it to shareholders on or before April 12, 2004.

Index to Annual Report on Form 10-K

Year Ended December 31, 2003


		Page
Part I
Item 1	Business	3-11
Item 2	Properties	11
Item 3	Legal Proceedings	11
Item 4	Submission of Matters to a Vote of Security Holders	11-12
Part II
Item 5	Market for the Company’s Common Stock and Related Stockholder Matters	13-14
Item 6	Selected Financial Data	15
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-22
Item 7A	Quantitative and Qualitative Disclosures about Market Risks	23
Item 8	Financial Statements and Supplementary Data	23
Item 9	Changes In and Disagreements with Accountants on Accounting and Financial Disclosures	23
Item 9A	Controls and Procedures	23
Part III
Item 10	Directors and Executive Officers of the Company*	24
Item 11	Executive Compensation*	24
Item 12	Security Ownership of Certain Beneficial Owners and Management*	24
Item 13	Certain Relationships and Related Transactions*	24
Item 14	Principal Accountant Fees and Services	24
Part IV
Item 15	Exhibits, Financial Statements, Financial Statement Schedules, and Reports on Form 8-K	25-28

*	Items 11, 12, 13, 14 and portions of Item 10 are incorporated by reference to the 2004 Proxy Statement

PART I

Item 1. Business

General Description of Business

Columbia Laboratories, Inc. (the “Company”) was incorporated as a Delaware corporation in December 1986. The Company is dedicated to research and development and commercialization of women’s health care and endocrinology products, including those intended to treat infertility, endometriosis and hormonal deficiencies. The Company has developed products for vaginal delivery of hormones and other drugs and buccal delivery of hormones and peptides. The vaginal products adhere to the vaginal epithelium and the buccal products adhere to the mucosal membrane of the gum and cheek. Both forms provide sustained and controlled delivery of active drug ingredients into the bloodstream. This delivery system is particularly useful for active drug ingredients that cannot be administered orally.

All formulated products utilize the Bioadhesive Delivery System (“BDS”) consisting principally of a polymer, polycarbophil, and an active ingredient. The BDS is based upon the principle of bioadhesion, a process by which the polymer adheres to epithelial surfaces and to mucous membranes. The polymer remains attached to epithelial surfaces and/or the membranes and is discharged upon normal cell turnover, a physiological process which, depending upon the area of the body, occurs every 12 to 72 hours. This extended period of attachment permits the BDS to be utilized in products when extended duration of effectiveness is desirable or required.

The Company has focused on women’s health care because of the significant number of women whose health and hygiene needs have not been met by available products and because the Company has found vaginal delivery to be particularly effective. The Company has also found buccal delivery to be advantageous for products for both men and women. The Company intends to continue to develop products that improve the delivery of previously approved and marketed drugs that cannot be delivered orally.

The Company’s principal executive offices are located at 354 Eisenhower Parkway, Livingston, New Jersey 07039, and its telephone number is (973) 994-3999. The Company’s subsidiaries, all of which are wholly-owned, are Columbia Laboratories (Bermuda) Ltd. (“Columbia Bermuda”), Columbia Laboratories (France) SA (“Columbia France”), which is in the process of being closed, Columbia Laboratories (UK) Limited (“Columbia UK”) and Columbia Research Laboratories, Inc. (“Columbia Research”).

The Company’s website is http://www.columbialabs.com. The Company makes its SEC filings available on its website. The Company will provide electronic or paper copies of its filings free of charge upon request. Information contained on the Company’s website or any other website is not incorporated into this Annual Report and does not constitute a part of this Annual Report.

Financial Information About Segments

The Company is currently engaged solely in one business segment — the development, licensing and sale of pharmaceutical products, medical devices, and cosmetics. See footnote 10 to the consolidated financial statements for information on foreign operations.

Products

Crinone®/Prochieve® (progesterone gel). Crinone is the brand name of the Company’s progesterone gel sold by Ares Trading S.A. under a worldwide license. Prochieve is the brand name of the same progesterone gel sold by the Company in the United States under a June, 2002, sublicense from Ares Trading S.A pursuant to its

worldwide license to Crinone. The product is a sustained release, vaginally delivered, natural progesterone product. Progesterone is responsible for preparing the uterus for pregnancy and, if pregnancy occurs, maintaining it until birth, or, if pregnancy does not occur, inducing menstruation. Studies have also found prophylactic progestogen administration to be effective in reducing the incidence of preterm birth. The American College of Obstetricians and Gynecologists’ (ACOG) Committee on Obstetric Practice has issued an opinion stating that progesterone may be used as treatment to help prevent preterm birth in women with a history of delivering prematurely.

Crinone/Prochieve utilizes the Company’s patented BDS which enables the progesterone to achieve a “First Uterine Pass Effect”©. The product is available in two strengths, an 8% progesterone gel and a 4% progesterone gel. It is the first product designed to deliver progesterone directly to the uterus, thereby providing a therapeutic benefit and avoiding high blood levels of progesterone seen with orally-delivered synthetic progestins.

Crinone/Prochieve in the 8% progesterone gel is approved in the U.S. for use in progesterone supplementation or replacement as part of an Assisted Reproductive Technology (ART) treatment for infertile women with progesterone deficiency. Crinone/Prochieve in both the 8% and 4% progesterone gels are approved in the U.S. for the treatment of secondary amenorrhea (loss of menstrual period). Crinone was first marketed in the U.S. in 1997. Prochieve was first marketed in the U.S. in September, 2002.

Outside the U.S., Crinone has been approved for marketing for one or more medical indications in more than 28 countries. The medical indications include progesterone supplementation or replacement as part of an ART treatment for infertile women, the treatment of secondary amenorrhea, the prevention of hyperplasia in post-menopausal women receiving hormone replacement therapy (“HRT”), the reduction of symptoms of premenstrual syndrome (“PMS”), menstrual irregularities, dysmenorrhea and dysfunctional uterine bleeding. Prochieve is not marketed outside the U.S.

In April 2001, the Company initiated a voluntary recall of batches of Crinone that were affected by a drug application problem that could cause the consistency of the gel to change over time. Investigations confirmed that the problem with the affected batches posed no safety risk to patients and that the active ingredient of the product was still effective. In connection with the recall, the Company halted further shipments of Crinone to its distributor, Ares Trading S.A. (“Serono”), pending the Company’s revalidation of the manufacturing process. In August 2001, Serono filed a lawsuit in the Supreme Court of the State of New York (the “Action”) naming the Company as defendant. The Action set forth claims for an alleged breach of contract for failure to supply Crinone in accordance with the supply agreement between the parties. In November 2001, the Company filed counterclaims against Serono. In June 2002, the Company reached a settlement with Serono. The companies agreed to release all claims against each other. Under the terms of the settlement, Columbia sublicensed rights to market a second brand of its 8% and 4% progesterone gel products under the brand name, Prochieve, to a defined audience of obstetricians, gynecologists and primary care physicians in the U.S. Serono agreed not to market Crinone to that audience and the Company agreed not to market Prochieve to fertility specialists in the U.S.

Striant® testosterone buccal system . Striant is approved in the U.S. for hypogonadism. Hypogonadism is characterized by a deficiency or absence of endogenous testosterone production. Symptoms related to hypogonadism include diminished interest in sex, impotence, reduced lean body mass, decreased bone density, mood depression, fatigue and loss of energy. Striant is applied to gum tissue above the incisor teeth and releases testosterone for absorption across the oral mucosa as the product gradually hydrates. Striant allows for the slow release and absorption of testosterone through gum and cheek surfaces that are in contact with the product. One dose twice a day, in the morning and in the evening, maintains consistent physiologic levels of testosterone. It is estimated that hypogonadism affects between four and five million men in the United States, approximately one million of whom currently receive treatment.

Advantage-S® Bioadhesive Contraceptive Gel . Advantage-S, the Company’s female contraceptive gel utilizes the BDS with the active ingredient nonoxynol-9 and has been marketed in the U.S. by the Company since July 1998 pursuant to FDA’s ongoing review of over-the-counter drug products (including nonoxynol-9 spermicidal products). Among Advantage-S benefits is that it utilizes the Company’s BDS, which enables the nonoxynol-9 to adhere to the cervix and permits formulation of the product with the lowest dose of nonoxynol-9 of all products on the market. The product is also sold in Canada by a licensee under the brand name, Advantage-24.

Replens® Vaginal Moisturizer . Replens replenishes vaginal moisture on a sustained basis and relieves the discomfort associated with vaginal dryness. Replens was the first product utilizing the BDS. In May 2000, the Company sold the U.S. rights for Replens to Lil’ Drug Store Products, Inc. under which the Company continues to receive royalties of 10% of U.S. Replens sales. The Company has licensed and supplies Replens to other pharmaceutical companies in certain countries outside the U.S.

RepHresh® Vaginal Gel. RepHresh Vaginal Gel is a feminine hygiene product that can eliminate vaginal odor. RepHresh works by maintaining vaginal pH in the normal physiologic range of 4.5 or below. RepHresh uses the Company’s BDS and adheres to the epithelial cells of the vaginal lining for 3 days. It is available in convenient pre-filled disposable applicators. RepHresh is also sold by a licensee in Italy under the brand name Miphil.

Other Products . The Company also marketed Advanced Formula Legatrin PM®, until April 2000, for the relief of occasional pain and sleeplessness associated with minor muscle aches such as night leg cramps; Legatrin® GCM Formula ^™ , which nutritionally supports healthy joint function; Vaporizer in a Bottle®, a portable cough suppressant for the temporary relief of a cough due to the common cold; and Diasorb®, a pediatric antidiarrheal product. These products do not utilize the Bioadhesive Delivery System. In May 2000, the Company licensed these products to Lil’ Drug Store Products, Inc. Under the terms of these agreements, the Company receives license fees equal to 20% of the licensee’s net sales. These agreements each have five-year terms with provisions for renewal and contain options that allow for the acquisition of the products by the licensee. On December 29, 2000, Lil’ Drug Store purchased Vaporizer in a Bottle for $201,800. The production and sale of Diasorb was discontinued during the first half of 2003.

Sales Force . In July 2002, the Company concluded an agreement with Innovex LP, an affiliate of Quintiles Transnational Corp. Under the terms of agreement, Innovex, provided a dedicated team of 55 sales representatives on a three-year, fee-for-service basis, to commercialize the Company’s women’s healthcare products, i.e., Prochieve 8%, Prochieve 4%, Advantage-S, and RepHresh Vaginal Gel in the U.S. The sales force was recruited and trained in August and September 2002, and began in October, 2002, to call on a targeted list of approximately 8,000 obstetricians and gynecologists to encourage prescriptions and product recommendations for Prochieve 8%, Advantage-S, and RepHresh Vaginal Gel. The sales force began sales efforts for Prochieve 4% in April, 2003. In March 2003, the Company concluded a second agreement with Innovex LP, to commercialize Striant in the United States. Under the terms of the agreement, Innovex LP, provided a dedicated team of 67 additional sales representatives for a two-and-a-half year term. The new sales representatives were recruited in June 2003 and were trained on the Company’s women’s healthcare products in July 2003 and began calling on obstetricians and gynecologists. The entire sales force of 122 sales representatives and 13 managers was trained on Striant in September 2003, and added endocrinologists, urologists and certain primary healthcare doctors to their call lists. In January 2004, the Company and Innovex restructured the existing sales force. The restructured sales force is made up of nine Columbia district managers and 80 sales representatives divided evenly between Columbia and Innovex. Under the terms of this restructuring, Innovex transferred responsibility for management of the sales force to Columbia, but continues to provide half the sales representatives. Effective immediately, Columbia took responsibility for all field sales management, all sales force support and one-half of the field sales representatives. Columbia will take full responsibility for the remaining sales representatives by October 2005.

Research and Development

The Company expended $3.3 million in 2003, $5.4 million in 2002 and $7.1 million in 2001 on research and development activities. The expenditures are primarily the result of costs associated with contracting for, supervising and administering the development and clinical studies of Striant and the delivery of peptides utilizing the BDS. These studies are now coordinated from the Company’s headquarters in New Jersey. The Company cannot predict whether it will be successful in the development of the products listed below or any other products.

Striant® . On December 3, 2002, the Company announced a submission for marketing approval to the United Kingdom Medicines Control Agency for Striant. Under current regulations, approval of Striant in the U.K is anticipated in the first half of 2004. Initial regulatory approval of the U.K. application will be the basis for mutual recognition applications to be filed in the rest of Europe. In October, 2002, the Company executed a license and supply agreement for Striant with Ardana Bioscience, Ltd., Edinburgh, UK, for eighteen European countries (excluding Italy). Under the terms of the agreement, Ardana will market, distribute and sell Striant. In exchange for these rights, the Company will receive total payments of $8 million, including $4 million in signature and milestone fees received in the fourth quarter of 2002. Additional milestone payments totaling $2 million are due upon marketing approvals in major European countries included in the agreement. A performance payment of $2 million is also due upon achievement of a certain level of sales. Ardana will purchase its requirements of product from the Company during the term of the agreement. In May, 2003, the Company executed a license and supply agreement for Striant with Mipharm, S.p.A., Milan, Italy, for Italy. Under the terms of the agreement, Mipharm will market, distribute and sell Striant in Italy. In exchange for these rights, the Company will receive total payments of $1.4 million, including $350,000 in signature fees. Additional milestone payments totaling $250,000 are due upon marketing approvals in the United Kingdom and Italy. (Initial regulatory approval of the UK application will be the basis for a mutual recognition application in Italy.) Mipharm will provide additional payments to Columbia on unit sales of the product during the term of the agreement. Performance payments of $800,000 are also due upon achievement of certain levels of sales. Mipharm is Columbia’s primary manufacturing site for most of the Company’s worldwide requirements for Striant under a May 2002 non-exclusive supply agreement.

Terbutaline Vaginal Gel. In December, 2002, the Company announced a development and license agreement with Ardana Bioscience, Ltd., for the Company’s terbutaline vaginal gel product for development for the treatment of infertility, dysmenorrhea and endometriosis. The Company received a payment of $250,000 upon signing of the agreement, and will receive an additional $250,000 upon successful completion of the Phase II clinical trial, which are expected to be completed in the first half of 2004. Under the terms of the agreement, if the Phase II trial is successful, the companies will work together to progress the product through clinical trials and applications for regulatory approvals. The Company will have the right to market the product in North America and Ardana will have rights focused in Europe. The parties would share equally in proceeds from licensing and distribution of the product in the rest of the world.

Lidocaine Vaginal Gel. Lidocaine vaginal gel utilizes our BDS and is designed as a potential treatment for dysmenorrhea and gynecologic pain. We have completed the development work on this product and a critical trial in Europe. Results from this trial, which were announced on February 5, 2004, will guide the Phase III program. Trial results showed that lidocaine vaginal gel reduced the frequency of uterine contractions, as well as the intensity and frequency of uterine pain. We believe that this product will offer a new and novel approach to treating women who suffer from these painful conditions.

Testosterone Vaginal Gel. In October 2000, the Company completed a Phase I trial of its testosterone progressive hydration vaginal tablet for women. The study demonstrated that testosterone could be delivered vaginally over a period of days. Vaginal gel and vaginal tablet forms have been developed, both of which provide multiple dosing advantages. A preliminary clinical plan, with a focus on reduction in fibroids as well as general testosterone replacement is under review by our clinical advisors. We plan to move this project into a more active stage in 2004.

Peptide Delivery System. The Company has completed a program that demonstrates that the BDS can deliver therapeutic doses of the peptide, desmopressin, using the Company’s progressive hydration buccal technology for extended periods of time. Based on these positive results, the Company has initiated partnering discussions related to a desmopressin buccal tablet.

Licensing and Development Agreements

In May 1995, the Company entered into a worldwide, except for South Africa, license and supply agreement with American Home Products Corporation, now Wyeth, (“Wyeth”) for its Wyeth-Ayerst Laboratories division to market Crinone. The Company agreed to supply Crinone at a price equal to 30% of Wyeth’s net selling price. In July,

1999, Wyeth assigned the license and supply agreement to Ares Trading, S.A., (“Serono”). In June, 2002, the license and supply agreement was amended and restated and a marketing sublicense was granted to the Company permitting the Company to sell progesterone gel under a second brand name, Prochieve, to the non-infertility specialist market in the U.S. Under the marketing sublicense, the Company is obligated to pay Serono a royalty equal to 30% of its net sales to the non-infertilty specialist market. The Company is obligated to pay Serono an additional royalty of 40% of Prochieve’s net sales to the infertility specialist market. Conversely, Serono is obligated to pay the Company an additional royalty of 40% of Crinone net sales to the non-infertility specialist market in the U.S.

In March 1999, the Company entered into a license and supply agreement with Mipharm SpA (“Mipharm”) under which Mipharm will be the exclusive marketer of the Company’s women’s healthcare products in Italy, Portugal, Greece and Ireland with a right of first refusal for Spain. Mipharm currently sells two licensed products in Italy.

In October 2002, the Company and Ardana Bioscience, Ltd. entered into a license and supply agreement (described above) for Striant the Company’s testosterone product in eighteen European countries (excluding Italy).

In December 2002, the Company and Ardana Bioscience, Ltd. executed a development and license agreement (described above) for the Company’s terbutaline vaginal gel product.

In May 2003, the Company and Mipharm S.p.A. entered into a license and supply agreement (described above), under which Mipharm will market, distribute and sell Striant in Italy. Mipharm is the manufacturer for Striant under a May 2002 agreement.

Financial Agreements

On July 31, 2002, PharmaBio Development, an affiliate of Quintiles Transnational Corp. agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company’s women’s healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum ($8 million) and maximum ($12 million) amounts and because the minimum amount exceeds $4.5 million, the Company has recorded the amounts received as liabilities. The excess of the minimum ($8 million) to be paid by the Company over the $4.5 million received by the Company is being recognized as interest expense over the five-year term of the agreement, assuming an interest rate of 12.51%.

On March 5, 2003, Columbia Laboratories, Inc. and PharmaBio Development enterted into a second agreement under which PharmaBio Development, will pay $15 million to Columbia over a 15-month period commencing with the signing of the agreement. In return, PharmaBio will receive a 9% royalty on net sales of Striant in the United States up to agreed annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments commenced for the 2003 third quarter and are subject to minimum ($30 million) and maximum ($55 million) amounts. Because the minimum amount exceeds the $15 million to be received, the Company has recorded the amounts received through December 31, 2003, as liabilities. The excess of the minimum ($30 million) to be paid by the Company over the $15 million to be received by the Company is being recognized as interest expense over the seven-year term of the agreement, assuming an interest rate of 10.67%.

Patents, Trademarks and Protection of Proprietary Information

The Company purchased the patents underlying the Bioadhesive Delivery System from Bio-Mimetics, Inc. (“Bio-Mimetics”). The basic patent that covers the Bioadhesive Delivery System was issued in the United States in 1986 and by the European Patent Office in 1992. The Company has the exclusive right to the use of the Bioadhesive Delivery System subject to certain third party licenses issued by Bio-Mimetics that have been assigned to the Company and certain restrictions on the assignment of the patents. See “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.”

During 2003, there were two patents granted to the Company. The first patent was for the use of progestin therapy for maintaining amenorrhea. The second patent was for the bioadhesive progressive hydration tablet.

During 2002, there was one United States patent granted to the Company, for the use of certain polycarboxylic acid polymers for vaginal pH buffering to prevent miscarriage and premature labor associated with bacterial vaginosis.

During 2001, there were two United States patents granted to the Company. One was for bioadhesive progressive hydration tablets and for the methods of making and using the same and the second was for the use of progesterone for maintaining amenorrhea.

The Company continues to develop the core Bioadhesive Delivery System and has filed additional patent applications. Because the Company operates on a worldwide basis, the Company seeks worldwide patent protection for its technology and products. While patent applications do not ensure the ultimate issuance of a patent, and having patent protection cannot ensure that no competitors will emerge, this is a fundamental step in protecting the technologies of the Company.

The Company has filed “Replens”, “Advantage 24”, “Advantage-S”, “Advantage-LA”, “Crinone”, “Prochieve”, “RepHresh” “RepHresh Vaginal Gel”, “Striant”, “Striant SR” and “Chronodyne” as trademarks in countries throughout the world. Applications for the registration of trademarks do not ensure the ultimate registration of these marks. The Company believes marks with pending applications will be registered. In addition, there can be no assurance that such trademarks will afford the Company adequate protection or that the Company will have the financial resources to enforce its rights under such trademarks.

The Company also relies on confidentiality and nondisclosure agreements. There can be no assurance that other companies will not acquire information that the Company considers to be proprietary. Moreover, there can be no assurance that other companies will not independently develop know-how comparable, or superior, to that of the Company.

Manufacturing

Crinone®, Prochieve®, Advantage-S®, RepHresh® and Replens® are manufactured and packaged by third-party manufacturers in Europe. Striant is manufactured in Italy by Mipharm S.p.A..

Medical grade, cross-linked polycarbophil, the polymer used in the Company’s products utilizing the Bioadhesive Delivery System, is currently available from only one supplier, Noveon, Inc. (“Noveon”). The Company believes that Noveon will supply as much of the material as the Company may require because the Company’s products rank among the highest value-added uses of the polymer. There can be no assurance that Noveon will continue to supply the product. In the event that Noveon cannot or will not supply enough of the product to satisfy the Company’s needs, the Company will be required to seek alternative sources of polycarbophil. There can be no assurance that an alternative source of polycarbophil can be obtained.

All of the other raw materials used by the Company for its products utilizing the BDS are available from several sources.

Sales of Products

The Company is currently restructuring its full-time 90 person sales force and contracts with a third party to provide the Company with approximately 40 of its 80 sales representatives. The sales force calls on OB/GYN’s, endocrinologists, urologists and certain primary healthcare physicians and educates the doctors and other healthcare

professionals in their offices on the benefits of Striant, Prochieve, Advantage-S and RepHresh. The Company utilizes four employees to make calls on the Company’s trade customers on behalf of Striant and Prochieve and utilizes approximately 20 drug manufacturers’ representative firms to make calls on the Company’s trade customers on behalf of Advantage-S and RepHresh. The manufacturers’ representatives receive commissions based on sales of those two products made within their respective territories. The Company’s direct customers are drug wholesalers and chain drug stores.

Sales

The following table sets forth the percentage of the Company’s consolidated net sales by product, for each product accounting for 5% or more of consolidated net sales in any of the three years ended December 31, 2003


	2003		2002		2001
Crinone	34	%	38	%	29	%
Prochieve	26	%	37	%	0	%
Striant	13	%	0	%	0	%
Replens	16	%	13	%	25	%
Advantage-S	1	%	2	%	11	%
Other Products, Licensing and Royalty Income	10	%	10	%	35	%

	100	%	100	%	100	%

The following table presents information about Columbia’s revenues by customer, including royalty and license revenue:


	2003		2002		2001
Ares-Serono	$	8,655,947	$	3,878,513	$	527,723
Lil’ Drug Store Products, Inc.		3,281,034		1,356,343		1,106,758
Cardinal Healthcare		3,296,865		1,624,556		—
McKesson		2,890,998		489,585		—
Amerisource Bergen		447,455		599,028		—
ANDA, Inc.		—		623,808		—
All others (none over 5%)		3,842,729		846,716		519,373

	$	22,415,028	$	9,418,549	$	2,153,854

Competition

The Company has both entered into strategic alliance agreements for the marketing of its women’s health care products and is marketing the products itself, but there can be no assurance that the Company or its partners will have the ability to compete successfully. The Company’s success is dependent in part on the marketing efforts of its strategic alliance partners, over which the Company has limited ability to influence, and its own efforts, that also rely upon its contract sales force. The markets that the Company and its strategic alliance partners operate in or intend to enter are characterized by intense competition. The Company and its partners compete against established pharmaceutical and consumer product companies which market products addressing similar needs. In addition, numerous companies are developing or, in the future, may develop enhanced delivery systems and products competitive with the Company’s present and proposed products. Some of the Company’s and its partners’ competitors possess greater financial, research and technical resources than the Company or its partners. Moreover, these companies may possess greater marketing capabilities than the Company or its partners, including the resources to implement extensive advertising campaigns.

Crinone®/Prochieve®, although a natural progesterone product, competes in markets with other progestins, both synthetic and natural, which may be delivered orally, by injections or by suppositories. Some of the more successful orally dosed products include Provera® marketed by Pfizer, Prometrium® marketed by Solvay, Prempro® and Premphase® marketed by Wyeth. Advantage-S® and RepHresh® also compete against numerous products in their respective categories of spermicidal contraceptives and feminine hygiene products. Striant® competes against other testosterone products that can be delivered by injections, transdermal patches and transdermal gels. Some of the more successful testosterone products include AndroGel® (testosterone gel) marketed by Unimed Pharmaceuticals, Inc. and Androderm® (testosterone transdermal system) marketed by Watson Pharma, Inc.

Government Regulation

The Company is subject to both the applicable regulatory provisions of the FDA in the United States and the applicable regulatory agencies in those foreign countries where its products are manufactured and/or distributed.

In the United States, manufacturers of pharmaceutical products are subject to extensive regulation by various Federal and state governmental entities relating to nearly every aspect of the development, manufacture and commercialization of such products. The FDA, which is the principal regulatory authority in the United States for such products, has the power to seize adulterated or misbranded products and unapproved new drugs, to require their recall from the market, to enjoin further manufacture or sale and to publicize certain facts concerning a product. As a result of FDA regulations, pursuant to which new pharmaceuticals are required to undergo extensive and rigorous testing, obtaining pre-market regulatory approval requires extensive time and cash expenditures. The manufacturing of the Company’s products which are either manufactured and/or sold in the United States, is subject to current Good Manufacturing Practices prescribed by the FDA. The advertising of over-the-counter drugs in the United States is subject to the review of the Federal Trade Commission (“FTC”) pursuant to the general authority of the FTC to monitor and prevent unfair or deceptive trade practices.

As in the United States, a number of foreign countries require pre-marketing approval by health regulatory authorities. Requirements for approval may differ from country to country and may involve different types of testing. There can be substantial delays in obtaining required approvals from regulatory authorities after applications are filed. Even after approvals are obtained, further delays may be encountered before the products become commercially available.

Product Liability

The Company can be exposed to product liability claims by consumers. Although the Company presently maintains product liability insurance coverage in the amount of $15 million, there can be no assurance that such insurance will be sufficient to cover all possible liabilities. In the event of a successful suit against the Company, insufficiency of insurance coverage could have a materially adverse effect on the Company.

Employees

As of March 1, 2004, the Company had 51 employees, 6 in management, 7 in production, 21 in sales and marketing, and 17 in support functions. None of the Company’s employees are represented by a labor union. The Company believes that its relationship with its employees is satisfactory.

The Company has an employment agreement with one employee, who is a stockholder of the Company. See “Executive Compensation—Employment Agreement.” The Board of Directors of the Company has adopted both a Form of Indemnification Agreement for Officers and Directors, and a Form of Executive Change of Control Severance Agreement.

Item 2. Properties

As of March 1, 2004, the Company leases the following properties:


Location	Use	Square feet	Expiration	Annual Rent
Livingston, NJ	Corporate office	12,780	July 2007	$182,000
Paris, France	Administrative office	2,100	August 2004	$ 53,000

Item 3. Legal Proceedings

Claims and lawsuits have been filed against the Company from time to time. Although the results of pending litigation are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on our financial position or results of operation. Additionally, the Company believes that it has adequate reserves or adequate insurance coverage for any unfavorable outcome resulting from these actions.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Executive Officers of the Registrant

Set forth is a list of names, ages, positions held and business experience of the persons serving as executive officers of the Company as of March 1, 2004. Officers serve at the discretion of the Board of Directors. There is no family relationship between any of the executive officers or between any of the executive officers and of Columbia’s directors and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected, except with respect to Mr. Wilkinson’s employment agreement.

James J. Apostolakis (Age 61) has been a director and Vice Chairman of the Company’s Board of Directors since January 1999 and served as President from January 2000 until April 2001. Mr. Apostolakis has been a Managing Director at Poseidon Capital Corporation, an investment banking firm, since February of 1998. Mr. Apostolakis has also served as President of Lexington Shipping & Trading Corporation, a company engaged in shipping operations, since 1973. From 1989 until 1992, Mr. Apostolakis served as a director on the Board of Directors of Grow Group, a paint and specialty chemicals company. From 1982 to 1988, he served as a director for Macmillan, Inc., a publishing and information services company. Mr. Apostolakis received an A.B. in Economics from the University of Pennsylvania in 1962 and an LL.B from Harvard University Law School in 1965.

Meg Coogan (Age 50) joined the Company as Senior Vice President, Marketing and Sales in August 2002. For the previous 10 years Ms. Coogan held various positions within the Interpublic Group of Companies most recently as

President of McCann Healthcare, a pharmaceutical advertising agency. Prior to McCann Healthcare, Ms. Coogan was General Manager of Lowe McAdams. From 1983 to 1988 she held various sales and marketing positions within Ortho-McNeil, a Johnson & Johnson company. Ms. Coogan graduated from Rutgers University.

Michael McGrane (Age 54) joined the Company as Vice President, General Counsel and Secretary in January, 2002. Prior to joining the Company, he served as Vice President, General Counsel and Secretary to The Liposome Company, Inc., a biotechnology company, from 1999 to 2001, and as Vice President, General Counsel and Secretary to Novartis Consumer Health, Inc., from 1997 to 1998. Prior to Novartis, Mr. McGrane held various positions with Sandoz Pharmaceuticals Corporation, including Associate General Counsel. Before joining Sandoz, he was Regulatory Counsel to the U.S. Food and Drug Administration. Mr. McGrane received his J.D. degree from Georgetown University and his B.A. degree from Cornell College. He is a member of the New Jersey bar.

Robert S. Mills (Age 51) joined the company as Senior Vice President, Operations, in May, 2001. Prior to joining the company, he served as Senior Vice President, Manufacturing Operations at Watson Pharmaceuticals, from 1996-2001, and as Vice President, Operations at Alpharma, Inc. from 1993-1996. Prior to Alpharma, Mr. Mills held various positions with Aventis, SA, including Director-Plant Operations. Mr. Mills holds a B.S.Degree from Grove City College.

David L. Weinberg (Age 58) has been Vice President—Finance and Administration, Chief Financial Officer and Treasurer of the Company from September 1997 to the present. From September 1997 until January 2002, he also served as Secretary and previously from the inception of the Company until June 1991, he served as Vice President—Finance and Administration, Chief Financial Officer, Treasurer and Secretary. From October 1991 until September 1997, Mr. Weinberg was employed by Transmedia Network Inc., a company specializing in consumer savings programs, where he served in various capacities including Vice President and Chief Financial Officer. From February 1981 until August 1986, Mr. Weinberg worked for Key Pharmaceuticals, Inc., a company engaged in the development, manufacturing, marketing and sales of pharmaceuticals until its sale to Schering-Plough Corporation. Mr. Weinberg served in various capacities including Vice President – Finance, Treasurer and Secretary. Mr. Weinberg received a B.B.A. in Accounting from Hofstra University in 1968.

G. Frederick Wilkinson (Age 48) has been a director of the Company since 2001 and its President and Chief Executive Officer since April 15, 2001 and Chairman of the Board since May 15, 2003. Prior to joining the Company, he served as Chief Operating Officer and Senior Vice President, Sales and Marketing of Watson Pharmaceuticals, Inc. from June 1999. Previously, Mr. Wilkinson was Vice President of Watson Pharmaceuticals, Inc. from July 1997, and Executive Vice President – Sales and Marketing of Watson Laboratories, Inc. from July 1996. Prior to his employment at Watson, Mr. Wilkinson was the President and General Manager of Creighton Pharmaceuticals, a wholly owned subsidiary of Sandoz Pharmaceuticals, Inc. from 1994 to 1996. Prior to that, he held various marketing management positions at Sandoz from 1980. Mr. Wilkinson received his M.B.A. from Capital University in 1984 and his B.S. in Pharmacy from Ohio Northern University in 1979.

Code of Ethics

The Board of Directors of the Company has adopted a Code of Ethics applicable to all Board members, executive officers and all employees.

PART II

Item 5. Market for the Company’s Common Stock and Related Stockholder Matters

The Company’s $.01 par value Common Stock (“Common Stock”) began trading on the NASDAQ National Market System under the symbol CBRX on February 13, 2004. Prior to that date it traded on the American Stock Exchange under the symbol COB. The following table sets forth the high and low sales prices of the Common Stock on the American Stock Exchange, as reported on the Composite Tape.


	High		Low
Fiscal Year Ended December 31, 2002

First Quarter	$	5.18	$	3.10
Second Quarter		6.00		4.07
Third Quarter		5.60		4.06
Fourth Quarter		4.59		2.90

Fiscal Year Ended December 31, 2003

First Quarter	$	4.20	$	2.76
Second Quarter		11.60		3.93
Third Quarter		16.15		9.80
Fourth Quarter		12.07		4.86

At March 1, 2004, there were 400 shareholders of record of the Company’s Common Stock. The Company estimates that there are approximately 9,500 beneficial owners, 1 shareholders of record of the Company’s Series B Convertible Preferred Stock (“Series B Preferred Stock”) and 12 shareholders of record of the Company’s Series C Convertible Preferred Stock (“Series C Preferred Stock”).

Effective as of February 6, 2001, the Company entered into the Amended and Restated Common Stock Purchase Agreement with Acqua Wellington to sell up to $16.5 million of the Common Stock, under the Registration Statement, the Prospectus, and the related Prospectus Supplement dated February 6, 2001 and amended on April 13, 2001. Pursuant to the Purchase Agreement, the Company may, from time to time over the term of the Purchase Agreement and at its sole discretion, issue and sell to Acqua Wellington up to $16.5 million of the Common Stock, subject to certain conditions, at a price per share based on the daily volume weighted average price of the Common Stock over a certain period of time less a discount ranging from 5% to 7%. In addition, during the period in which the Company elects to issue and sell shares of the Common Stock to Acqua Wellington, the Company may also, at its sole discretion, grant Acqua Wellington a call option at the same discount for the applicable period to purchase additional shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company and Acqua Wellington have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At March 1, 2004, $9 million may be sold under the Agreement, subject to the registration statement relating to the extension of the term of the Agreement becoming effective.

During 2003, the Company issued 2,764,612 shares of its common stock to a group of institutional investors, which resulted in the Company receiving $28,805,091 after expenses. Also in 2003, outstanding options and warrants were exercised resulting in the issuance of 1,318,190 shares of common stock and the receipt of $6,994,115 by the Company.

During 2002, the Company issued 2,691,012 shares of its common stock to several institutional investors, which resulted in the Company receiving $11,962,067 after expenses. $6,500,000 of the gross proceeds was received pursuant to the Purchase Agreement with Acqua Wellington.

During 2001, the Company issued 2,146,459 shares of its common stock, which resulted in the Company receiving $8,962,936 after expenses. $1 million of the gross proceeds were received from Acqua Wellington pursuant to the Purchase Agreement.

On March 12, 2002, the Company adopted a Stockholder Rights Plan (“Rights Plan”) designed to protect company stockholders in the event of takeover activity that would deny them the full value of their investment. The Rights Plan was not adopted in response to any specific takeover threat. In adopting the Rights Plan, the Board declared a dividend distribution of one preferred stock purchase right for each outstanding share of common stock of the Company, payable to stockholders of record at the close of business on March 22, 2002. The rights will become exercisable only in the event, with certain exceptions, a person or group of affiliated or associated persons acquires 15% or more of the Company’s voting stock, or a person or group of affiliated or associated persons commences a tender or exchange offer, which if successfully consummated, would result in such person or group owning 15% or more of the Company’s voting stock. The rights will expire on March 12, 2012. Each right, once exercisable, will entitle the holder (other than rights owned by an acquiring person or group) to buy one one-thousandth of a share of a series of the Company’s Series D Junior Participating Preferred Stock at a price of $30 per one-thousandth of a share, subject to adjustments. In addition, upon the occurrence of certain events, holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase either the Company’s preferred stock or shares in an “acquiring entity” at approximately half of market value. Further, at any time after a person or group acquires 15% or more (but less than 50%) of the Company’s outstanding voting stock, subject to certain exceptions, the Board of Directors may, at its option, exchange part or all of the rights (other than rights held by an acquiring person or group) for shares of the Company’s common stock having a fair market value on the date of such acquisition equal to the excess of (i) the fair market value of preferred stock issuable upon exercise of the rights over (ii) the exercise price of the rights. The Company generally will be entitled to redeem the rights at $0.01 per right at any time prior to the close of business on the tenth day after there has been a public announcement of the beneficial ownership by any person or group of 15% or more of the Company’s voting stock, subject to certain exceptions.

On March 12, 2001, the Company granted to James Apostolakis warrants to purchase up to an aggregate of 100,000 shares of Common Stock at an exercise price of $5.85 per share. On March 12, 2001, the Company granted to Fred Wilkinson, pursuant to an employment agreement, warrants to purchase up to an aggregate of 350,000 shares of Common Stock at an exercise price of $8.35 per share.

Between January 7, 1999 and February 1, 1999 the Company sold (i) 6,660 shares of Series C Convertible Preferred Stock, convertible into shares of the Company’s Common Stock, par value $.01 (the “Series C Convertible Preferred Stock”), and (ii) warrants to purchase up to an aggregate of 233,100 shares of Common Stock at an exercise price of $3.50 per share (the “Series C Warrants”) for an aggregate purchase price of $6,660,000. The Series C Preferred Stock may be converted into Common Shares at a conversion price equal to the lesser of (i) $3.50 and (ii) 100% of the average of the closing prices of the Common Shares as reported on the exchange upon which they are registered for the three Trading Days immediately preceding the date of conversion. The offer, sale, and delivery of the Series C Preferred Stock was made pursuant to Rule 501 of Regulation D under the Securities Act of 1933.

The Company has never paid a cash dividend on its Common Stock and does not anticipate the payment of cash dividends in the foreseeable future. The Company intends to retain any earnings for use in the development and expansion of its business.

Applicable provisions of the Delaware General Corporation Law may affect the ability of the Company to declare and pay dividends on its Common Stock as well as on its Preferred Stock. In particular, pursuant to the Delaware General Corporation Law, a company may pay dividends out of its surplus, as defined, or out of its net profits, for the fiscal year in which the dividend is declared and/or the preceding year. Surplus is defined in the Delaware General Corporation Law to be the excess of net assets of the company over capital. Capital is defined to be the aggregate par value of shares issued.

Item 6. Selected Financial Data

The following selected financial data (not covered by the auditor’s report) have been summarized from the Company’s consolidated financial statements and are qualified in their entirety by reference to, and should be read in conjunction with such consolidated financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report.


				For the Years Ended December 31,
	2003			2002			2001			2000			1999
Statement of Operations Data: (000’s except per share data)

Net sales	$	22,415		$	9,419		$	2,154		$	13,173		$	18,921
Net loss		(21,151	)		(16,850	)		(15,846	)		(2,603	)		(2,210	)
Loss per common share		(0.57	)		(0.50	)		(0.51	)		(0.09	)		(0.09	)
Weighted average number of common shares outstanding-diluted		37,440			34,392			31,243			30,235			28,853

Balance Sheet Data: (000’s)

Working capital	$	33,690		$	4,717		$	4,622		$	10,936		$	3,441
Total assets		42,480			12,766			8,560			15,519			12,988
Note payable		10,000			10,000			10,000			10,000			10,000
Long-term portion of financing agreements		15,747			1,350			—			—			—
Stockholders’ equity (deficiency)		6,087			(8,395	)		(3,421	)		3,494			(274	)

Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Forward-Looking Information

The Company and its representatives from time to time make written or verbal forward looking statements, including statements contained in this and other filings with the Securities and Exchange Commission and in the Company’s reports to stockholders, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, the Company’s expectations regarding sales, earnings or other future financial performance and liquidity, product introductions, entry into new geographic regions and general optimism about future operations or operating results. Some of these statements can be identified by the use of forward-looking terminology such as “prospects,” “outlook,” “believes,” “estimates,” “intends,” “may,” “will,” “should,” “anticipates,” “expects” or “plans,” or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategy or risks and uncertainties. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not differ materially from its expectations. Factors that could cause actual results to differ from expectations include, without limitation: (i) the successful marketing of products by the Company and its licensees; (ii) increased competitive activity from companies in the pharmaceutical industry, some of which have greater resources than the Company; (iii) social, political and economic risks to the Company’s foreign operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States; (iv) changes in the laws, regulations and policies, including changes in accounting standards, that affect, or will affect, the Company in the United States and abroad; (v) foreign currency fluctuations affecting the relative prices at which the Company and foreign competitors sell their products in the same market; (vi) failure to develop the Company’s products or delay in development of the Company’s products and (vii) the timely completion of studies and approvals by the FDA and other regulatory agencies. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Cautionary Statements in this Annual Report. Readers are advised to consult any further disclosures the Company may make on related subjects in subsequent 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission.

History of Losses.

The Company has had a history of losses in each fiscal year since its founding. For the fiscal year ended December 31, 2003, we had a net loss of $21.2 million. Our losses in 2003 were primarily the result of a lack of sales and the costs of the Company’s commercialization activities for the women’s healthcare products and Striant®, including the 135 person sales force under the fee for service agreement with Innovex. If we are unable to successfully market our products, particularly Prochieve® 8% and Striant®, and otherwise increase sales of our products, we may not have sufficient funds to continue operations unless we are able to raise additional funds from sales of securities or otherwise. We cannot assure you that any additional financing will be available to us on acceptable terms, if at all.

As of December 31, 2003, we had certain net operating loss carryforwards of approximately $92 million that may be used to reduce our future U.S. federal income tax liabilities. Our ability to use these loss carryforwards to reduce our future U.S. federal income tax liabilities could be lost if we were to experience more than a 50% change in ownership within the meaning of Section 382(g) of the Internal Revenue Code on or before December 31, 2013. If we were to lose the benefits of these loss carryforwards, our future earnings and cash resources would be materially and adversely affected.

Marketing Efforts.

We have entered into agreements with other companies for the distribution and marketing of Crinone® and some of our over-the-counter products in the U.S, and several foreign countries, and we promote Prochieve®, RepHresh®, Advantage-S®, and Striant® on our own behalf in the U.S. Our success is dependent to a great extent on costly marketing efforts by us and of our distribution and marketing partners. Our failure to successfully market our products could have a material adverse effect on our cash flow.

As previously disclosed, we entered into an agreements with Innovex to identify, hire, help train and deploy a full time, 135-person sales force to sell Prochieve®, Advantage-S® and RepHresh® to a targeted list of obstetricians and gynecologists in the United States, and to sell Striant® to a target list of urologists, endocrinologists and primary care physicians in the United States. In the first quarter of 2004 we are restructuring the sales force and reducing its size to a 90-person sales force with 80 sales representatives. We cannot assure you that our restructured sales force will be successful in promoting Striant®, Prochieve®, Advantage-S®, and RepHresh®. Also as previously disclosed, in July 2002 and March 2003, we entered into agreements with PharmaBio Development, Inc. under which we received upfront money paid in quarterly installments in exchange for royalty payments on our women’s healthcare products and Striant®, respectively. Royalty payments are owed to PharmaBio for a fixed period of time. The royalty payments are subject to minimum and maximum amounts and the minimum amounts are in excess of the amounts received by us. Our failure to successfully market our products could have a material adverse effect on our ability to pay the minimum amounts to PharmaBio.

Competition.

We and our partners operate in or intend to enter intensely competitive markets. We compete against established pharmaceutical and consumer product companies that market products addressing similar needs. In addition, numerous companies are developing, or in the future may develop, enhanced delivery systems and products that compete with our present and proposed products. Some competitors have greater financial, research and technical resources than we have. These competitors may also have greater marketing capabilities, including the resources to implement extensive advertising campaigns. It is possible that we may not have the resources to withstand these and other competitive forces. As a result, we may not gain, and may lose, market share.

Crinone®/Prochieve®, although a natural progesterone product, competes in markets with other progestins, both synthetic and natural, which may be delivered orally, by injections or by suppositories. Some of the more successful orally dosed products include Provera® marketed by Pfizer, Prometrium® marketed by Solvay Pharmaceuticals, and Prempro® and Premphase® marketed by Wyeth. Advantage-S® and RepHresh® also compete against numerous products in their respective categories of spermicidal contraceptives and feminine hygiene products. Striant® competes against other testosterone products that can be delivered by injections, transdermal patches, and transdermal gels. Some of the more successful testosterone products include AndroGel® (testosterone gel) marketed by Unimed Pharmaceuticals, Inc. and Androderm® (testosterone transdermal system) marketed by Watson Pharma, Inc.

Intellectual Property Rights

Our success and ability to compete is partially dependent on our proprietary technology. We rely primarily on a combination of U.S. patents, trademarks, copyrights, trade secret laws, third-party confidentiality and nondisclosure agreements and other methods to protect our proprietary rights. The steps we take to protect our proprietary rights, however, may not be adequate. Third parties may infringe or misappropriate our copyrights, trademarks and similar proprietary rights. Moreover, we may not be able or willing, for financial, legal or other reasons, to enforce our rights. To date, we have never been a party to a proprietary rights action.

Even though we have patents covering our Bioadhesive Delivery System, other companies may independently develop or obtain patent or similar rights to equivalent or superior technologies or processes. Additionally, although we believe that our patented technology has been independently developed and does not infringe on the patents of others, we cannot assure you that our technology does not and will not infringe on the patents of others. In the event of infringement, we may be required to modify our technology or products, obtain licenses or pay license fees. We may not be able to do so in a timely manner or upon acceptable terms and conditions. This may have a material adverse effect on our operations.

We have filed the following as trademarks in countries throughout the world: Advantage-S, Advantage-24, Advantage-LA, Crinone, Chronodyne, Prochieve, Replens, RepHresh, RepHresh Vaginal Gel, Striant, and Striant SR. These trademarks, however, may not afford us adequate protection or we may not have the financial resources to enforce our rights under these trademarks.

Government Regulation

Nearly every aspect of the development, manufacture and commercialization of our pharmaceutical products is subject to time consuming and costly regulation by various governmental entities, including the Food and Drug Administration, the Drug Enforcement Administration, the Federal Trade Commission, state agencies; and regulatory agencies in those foreign countries where our products are manufactured or distributed. Some of our pharmaceutical products are in various stages of development and will require significant research and development efforts before we can sell them. These efforts include extensive clinical testing, during which the products may be found to be ineffective.

We employ various quality control measures in our efforts to ensure that our products conform to their intended specifications and standards proscribed by applicable governmental regulations. However, notwithstanding our efforts, our products or ingredients we purchase from our suppliers for inclusion in our products may contain undetected defects or non-conformities with specifications. Such defects or non-conformities could compel us to recall the affected product, make changes to or restrict distribution of the product or take other remedial actions. The occurrence of such events may harm our relations with, or result in the loss of, customers, injure our reputation, impair market acceptance of our products, harm our financial results and, in certain circumstances, expose us to product liability or other claims.

As in the United States, almost all foreign countries require pre-marketing approval by health regulatory authorities. Requirements for approval differ from country to country and involve different types of testing. There can be substantial delays in obtaining, or failures to obtain, required approvals from regulatory authorities. Even after approvals are obtained, there can be further delays encountered before the products become commercially available. These failures or delays can have material adverse effects on our business and prospects. We have made a submission for marketing approval to the United Kingdom Medicines and Healthcare Products Regulatory Agency for Striant®. Under current regulations, approval of Striant® in the U.K is anticipated in the first quarter of 2004. Initial regulatory approval of the U.K. application will be the basis for mutual recognition applications to be filed in the rest of Europe. We can give no assurance that we will be successful in obtaining regulatory approval of Striant in the U.K.

Dependence on a Principal Supplier.

Medical grade, cross-linked polycarbophil, the polymer used in our products using our Bioadhesive Delivery System, is currently available from only one supplier, Noveon, Inc. We believe that Noveon will supply as much of the material as we require because our products rank among the highest value-added uses of the polymer. In the event that Noveon cannot or will not supply enough of the product to satisfy our needs, we will be required to seek alternative sources of polycarbophil. An alternative source of polycarbophil may not be available on satisfactory terms.

Dependence on Third Party Developers and Manufacturers.

We rely on third parties to develop and manufacture our products. These third parties may not be able to satisfy our needs in the future. The failure to develop new products or delays in development of our products could have a material adverse effect on our business. This reliance on third parties could have an adverse effect on our profit margins and our ability to deliver our products on a timely and competitive basis.

Insurance Coverage and Product Liability Claims.

Due to the nature of our business, we may be exposed to product liability claims by consumers. Although we presently maintain product liability insurance coverage in the amount of $15 million, this may not be sufficient to cover

all possible liabilities. An award against us in an amount greater than our insurance coverage could have a material adverse effect on our operations. Some food and drug retailers require us to have a minimum level of product liability insurance coverage before they will purchase or accept our products for retail distribution. Our failure to satisfy insurance requirements could limit our ability to achieve broad retail distribution of our products. This could have a material adverse effect upon our business and financial condition.

Key Employees.

Our success depends in large part upon the abilities and continued service of our executive officers and other key employees, particularly G. Frederick Wilkinson, our President and Chief Executive Officer. We have entered into an employment agreement with Mr. Wilkinson, which expires in April, 2004. The Board of Directors of the Company has adopted both a Form of Indemnification Agreement for Officers and Directors, and a Form of Executive Change of Control Severance Agreement. The loss of services of these persons could have a material adverse effect on our business and prospects.

Stock Options, Warrants and Other Securities.

As of March 1, 2004, we have 39,751,934 shares of common stock outstanding, of which approximately 37,351,934 shares are freely tradable. Approximately 2,400,000 shares of our common stock are restricted securities, but may be sold pursuant to Rule 144. We also have the following securities outstanding: Series B Convertible Preferred Stock, Series C Convertible Preferred Stock, a subordinated convertible note, warrants, and options. If all of these securities are exercised or converted, an additional 8,488,113 shares of common stock will be outstanding, 8,038,113 of which have been registered under the Securities Act. When issued, these shares will be freely tradable. The exercise and conversion of these securities is likely to dilute the book value per share of our common stock. In addition, the existence of these securities may adversely affect the terms on which we can obtain additional equity financing.

We have never paid a cash dividend on our common stock and we do not anticipate paying cash dividends in the foreseeable future. We intend to retain any earnings for use in the development and expansion of our business. In addition, applicable provisions of Delaware law may affect our ability to declare and pay dividends on our common stock and our preferred stock. Accordingly, you should not expect to receive any periodic income from owning our common stock. Any economic gain on your investment will be solely from an appreciation, if any, in the price of the stock.

Anti-takeover Measures.

Columbia Laboratories, Inc. is a Delaware corporation. Anti-takeover provisions of Delaware law impose various obstacles to the ability of a third party to acquire control of our company, even if a change in control would be beneficial to our existing stockholders. In addition, our board of directors has adopted a Stockholder Rights Plan and has designated a series of preferred stock that could be used defensively if a takeover is threatened. Our incorporation under Delaware law and our Stockholder Rights Plan could impede a merger, takeover or other business combination involving our company or discourage a potential acquiror from making a tender offer for our common stock. This could reduce the market value of our common stock if investors view these factors as preventing stockholders from receiving a premium for their shares.

Market Risk from Foreign Currency Exchange Rates.

With two operating subsidiaries and third party manufacturers in Europe, economic and political developments in the European Union can have a significant impact on our business. Our Crinone®, Prochieve®, Advantage-S®, RepHresh® and Striant® products are manufactured in Europe. We are exposed to currency fluctuation related to manufacturing our products in Euros and other currencies and selling them in U.S. dollars and other currencies.

Critical Accounting Policies and Estimates

The Company has identified the policies below as critical to its business operations and the understanding of its results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 1 of the consolidated financial statements included in Item 14 of this Annual Report on Form 10-K, beginning on page F-11. Note that the preparation of this Annual Report on Form 10-K requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Revenue recognition. The Company’s revenue recognition is significant because revenue is a key component of the Company’s results of operations. In addition, revenue recognition determines the timing of certain expenses, such as commissions and royalties. Revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause operating results to vary significantly from quarter to quarter. Revenues from the sale of products are recorded at the time goods are shipped to customers. Provisions for returns, rebates and other allowances are estimated based on a percentage of sales and are recorded in the same period the related sales are recognized. Royalties and additional monies owed to the Company based on the strategic alliance partners sales are recorded as revenue as sales are made by the strategic alliance partners. License fees are recognized in net sales over the term of the license.

Impairment of intangible assets. The Company periodically evaluates its intangible assets for potential impairment indicators. Judgments regarding the existence of impairment indicators are based on legal factors, market condition and operational performance. Future events could cause the Company to conclude that impairment factors exist and that certain intangible assets are impaired. Any resulting impairment loss could have a material adverse impact on results of operations.

Accounting For PharmaBio Agreements. In July 2002 and March 2003, the Company entered into agreements with PharmaBio Development, Inc. under which the Company received upfront money paid in quarterly installments in exchange for royalty payments on certain of the Company’s products to be paid to PharmaBio for a fixed period of time. The royalty payments are subject to minimum and maximum amounts and because the minimum amounts are in excess of the amount to be received by the Company, the Company has recorded the money received as liabilities. The excess of the minimum to be paid by the Company over the amount received by the Company is being recorded as interest expense over the terms of the agreements.

Liquidity and Capital Resources

Cash and cash equivalents increased from approximately $5,018,000 at December 31, 2002 to approximately $30,966,000 at December 31, 2003. During 2003, the Company received approximately $28,805,000, net of expenses, from the sale of 2,764,612 shares of its common stock, $14,250,000 from the proceeds of the PharmaBio agreements and approximately $6,994,000 from the exercise of options and warrants. During 2003, the Company used approximately $22,476,000 of cash for operating activities, approximately $609,000 for payments to PharmaBio, approximately $587,000 to pay off a note payable, approximately $178,000 for dividends and approximately $358,000 for fixed asset additions. The effect of exchange rate changes increased cash by approximately $107,000.

shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company issued and sold $6.5 million and $1.0 million of its Common Stock to Acqua Wellington in 2002 and 2001, respectively. The Company and Acqua Wellington have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At March 1, 2004, $9 million may be sold under the Agreement subject to the registration statement relating to the extension of the term of the Agreement becoming effective.

For the fiscal year ended December 31, 2003, the Company had a net loss of $21.2 million, which was primarily the result of a lack of sales and the costs of the Company’s commercialization activities which did not result in anticipated sales. In 2003, the major sources of cash were approximately $28.8 million from the sale of the Company’s common stock to investors, the receipt of approximately $14.2 million from PharmaBio Development and approximately $7.0 million received as the result of the exercise of options and warrants.

In January 1999, the Company raised approximately $6.4 million, net of expenses, from the issuance and sale of Series C Convertible Preferred Stock. (“Preferred Stock”). The Preferred Stock, sold to twenty-four accredited investors, has a stated value of $1,000 per share. The Preferred Stock is convertible into common stock at the lower of: (i) $3.50 per common share, and (ii) 100% of the average of the closing prices during the three trading days immediately preceding the conversion notice. If conversion is based on the $3.50 conversion price, conversion may take place after the underlying common stock is registered. If conversion is based on the alternative calculation, conversion cannot take place for fifteen months. The Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day of the quarter.

In connection with the 1989 purchase of the assets of Bio-Mimetics, Inc., which assets consisted of the patents underlying the Company’s Bioadhesive Delivery System, other patent applications and related technology, the Company pays Bio-Mimetics, Inc. a royalty equal to two percent of the net sales of products based on the Bioadhesive Delivery System, to an aggregate of $7.5 million. The Company is required to prepay a portion of the remaining royalty obligation, in cash or stock at the option of the Company, if certain conditions are met. Through December 31, 2003, the Company has paid approximately $ 2,600,000 in royalty payments.

As of December 31, 2003, the Company has outstanding exercisable options and warrants that, if exercised, would result in approximately $ 48.4 million of additional capital. However, there can be no assurance that such options or warrants will be exercised.

Significant expenditures anticipated by the Company in the near future are concentrated on equipment. The Company anticipates it will spend approximately $500,000 on equipment in 2004.

As of December 31, 2003, the Company had available net operating loss carryforwards of approximately $92 million to offset its potential future U.S. taxable income.

In accordance with Statement of Financial Accounting Standards No. 109, as of December 31, 2003 and 2002, other assets in the accompanying consolidated balance sheet include deferred tax assets of approximately $32 million and $23 million, respectively, (comprised primarily of a net operating loss carryforward) for which a valuation allowance has been recorded since the realizability of the deferred tax assets are not determinable.

Results of Operations

Net sales increased by approximately 138% in 2003 to approximately $22.4 million as compared to $9.4 million in 2002 and $2.2 million in 2001. Sales of Crinone accounted for approximately $7.7 million in 2003 as compared to approximately $3.6 million in 2002 and approximately $528,000 in 2001. In April 2001, the Company requested its licensee Serono to voluntarily recall a number of batches of Crinone. The Company resumed sales of Crinone to Serono in May 2002. In the 2002 third quarter, the Company began selling Prochieve 8% and in the 2003 first quarter began selling Prochieve 4%. Sales of the Prochieve line of products accounted for approximately $5.8 million in 2003 and approximately $3.5 million in 2002. Sales of the product Replens were approximately $3.6 million in 2003 as compared to $1.2 million and $0.6 million in 2002 and 2001, respectively. In the 2003 third quarter, the Company began selling Striant and 2003 sales approximated $2.9 million.

Gross profit as a percentage of sales increased in 2003 to 56% as compared to 44% in 2002 and a negative 23% in 2001. The 56% gross profit percentage resulted from the introduction of Striant and the increase in Crinone and Prochieve sales. The 44% gross profit percentage in 2002 was the result of the reintroduction of Crinone sales and the launch of Prochieve 8%. Cost of goods sold for Prochieve includes a 30% royalty on net sales. The negative 23% gross profit percentage in 2001 resulted from the reduced sales caused by the Crinone recall and the inability to reduce fixed manufacturing costs.

Selling and distribution expenses were approximately $22.6 million, $6.1 million and $1.1 million in 2003, 2002 and 2001, respectively. Selling and distribution expenses increased by approximately 273% in 2003 compared to 2002 and by 474% in 2002 compared to 2001. The commencement of commercialization efforts by the Company in September 2002 accounted for the increase in both 2003 and 2002. Included in the 2003 expenses were sales force costs of approximately $11,531,000, product marketing expenses of approximately $7,759,000 and salary costs of approximately $1,404,000. Expenses in 2002 included approximately $2,412,000 in sales force costs, approximately $1,614,000 in product marketing expenses and approximately $390,000 in salary costs.

General and administrative expenses increased approximately $1.3 million or 24% to approximately $6.4 million in 2003 from approximately $5.1 million in 2002. The increase resulted from higher insurance costs ($554,000), the hiring of additional administrative personnel ($297,000) and the increase in the cost of non-legal consultants ($261,000). General and administrative expenses increased approximately $881,000 or 21% to approximately $5.1 million in 2002 from approximately $4.3 million in 2001. The increase resulted from higher legal fees ($368,000), higher insurance costs ($112,000), and the hiring of additional administrative personnel ($413,000).

Research and development expenses decreased in 2003 to $3.3 million from $5.4 million in 2002 and $7.1 million in 2001. The completion in 2002 of many of the Striant related studies which had begun in 2000 and 2001 was the primary reason for the decrease in 2003 and 2002.

Litigation settlement expense of $3,960,000 in 2002 represents the amount the Company agreed to pay Ares Trading S.A. to settle the litigation that followed the recall of Crinone in April 2001.

Product recall costs in 2001 in the amount of $1,500,000 represented an estimate of the Company’s direct out-of-pocket costs related to the voluntary recall of Crinone. In 2002, the remaining unused accrual amounting to $449,000 was reversed.

Corporate restructuring expense in 2001, of $1,000,000, represents the costs of closing the Paris office. These costs included employee severance payments and other costs

Interest expense amounted to approximately $1,846,000, $853,000 and $755,000 in 2003, 2002 and 2001, respectively. The 2003 increase in interest expense included $1,085,000 as a result of amortizing as interest expense over the term of the agreements, the difference between the minimum amounts to be paid to PharmaBio Development and the amounts received. Interest expense related to the Company’s convertible subordinated note payable, totaled approximately $713,000 in 2003, 2002 and 2001.

As a result, the net loss for 2003 was $21,151,019 or $0.57 per share as compared to a net loss of $16,849,789 or $0.50 per share in 2002 and a net loss of $15,845,627 or $0.51 per share in 2001.

Impact of Inflation

Sales revenues, manufacturing costs, selling and distribution expenses, general and administrative expenses and research and development costs tend to reflect the general inflationary trends.

Item 7A. Quantitative and Qualitative Disclosures About Market Risks

The Company does not believe that it has material exposure to market rate risk. The Company has only a fixed rate debt obligation that comes due in 2005. The Company may, however, require additional financing to fund future obligations and no assurance can be given that the terms of future sources of financing will not expose the Company to material market risk.

Item 8. Financial Statements and Supplementary Data

The financial statements and supplementary data required by this item are set forth at the pages indicated in Item 15(a) below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9 A. Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Company’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of December 31, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s chief executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934. Based upon that evaluation, the chief executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective.

During the fiscal quarter ended December 31, 2003, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls.

PART III

Item 10. Directors and Executive Officers of the Company

The information concerning directors and all audit committee financial experts required by Item 10 is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders. The information concerning compliance with Section 16(a) of the Exchange Act is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders. The information concerning executive officers required by Item 10 is contained in the discussion entitled Executive Officers of the Registrant in Part I hereof.

Item 11. Executive Compensation

The information required by Item 11 is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 is incorporated by reference to Columbia’s Proxy Statement for its 2004 Annual Meeting of Shareholders.

PART IV

Item 15. Exhibits, Financial Statements and Financial Statement Schedules, and Reports on Form 8-K

(a)(1)(2) Financial Statements and Financial Statement Schedules

Indexes to financial statements and financial statement schedules appear on F-1 and F-26, respectively.

(b) Reports on Form 8-K

On November 12, 2003, the Company filed a Form 8-K in which it had attached a copy of two Company press releases dated November 12, 2003 the first titled “Columbia Laboratories Reports 2003 Third Quarter Financial Results” and the second titled “Columbia Laboratories Initiates U.S. Study in Pregnant Women at Risk of Preterm Labor”

On December 1, 2003, The Company filed a Form 8-K in which it announced that it had executed a standstill agreement with a shareholder, Perry Corp.

(c) Exhibits



3.1	—	Restated Certificate of Incorporation of the Company, as amended ^1/

3.2	—	Amended and Restated By-laws of Company ^10/

4.1	—	Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock of the Company, dated as of January 7, 1999 ^10/

4.2	—	Securities Purchase Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto ^10/

4.3	—	Securities Purchase Agreement, dated as of January 19, 1999, among the Company, David M. Knott and Knott Partners, L.P. ^10/

4.4	—	Securities Purchase Agreement, dated as of February 1, 1999, between the Company and Windsor Partners, L.P. ^10/

4.5	—	Registration Rights Agreement, dated as of January 7, 1999, between the Company and each of the purchasers named on the signature pages thereto ^10/

4.6	—	Form of Warrant to Purchase Common Stock ^10/

4.7	—	Warrant to Purchase Common Stock granted to James J. Apostolakis on September 23, 1999

10.1	—	Employment Agreement dated as of January 1, 1996, between the Company and Norman M. Meier ^6/*

10.2	—	Employment Agreement dated as of January 1, 1996, between the Company and William J. Bologna ^6/*

10.3	—	1988 Stock Option Plan, as amended, of the Company ^4/

10.4	—	1996 Long-term Performance Plan, as amended, of the Company ^7/

10.5	—	License and Supply Agreement between Warner-Lambert Company and the Company dated December 5, 1991 ^3/

10.6	—	Asset Purchase, License and Option Agreement, dated November 22, 1989 ^1/

10.7	—	Employment Agreement dated as of April 15, 1997, between the Company and Nicholas A. Buoniconti ^8/*

10.8	—	License and Supply Agreement for Crinone between Columbia Laboratories, Inc. (Bermuda) Ltd. and American Home Products dated as of May 21, 1995 ^5/

10.9	—	Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Norman M. Meier ^8/*

10.10	—	Addendum to Employment Agreement dated as of September 1, 1997, between the Company and William J. Bologna ^8/*



10.11	—	Addendum to Employment Agreement dated as of September 1, 1997, between the Company and Nicholas A. Buoniconti ^8/*

10.12	—	Convertible Note Purchase Agreement, 7 ¹ / 8 % Convertible Subordinated Note due March 15, 2005 and Registration Rights Agreement all dated as of March 16, 1998 between the Company and SBC Warburg Dillon Read Inc. ^9/

10.13	—	Termination Agreement dated as of April 1, 1998 between the Company and the Warner-Lambert Company ^9/

10.14	—	Addendum to Employment Agreement dated as of October 8, 1998, between the Company and Nicholas A. Buoniconti. ^10/*

10.15	—	Agreement dated as of December 14, 1998, by and among Columbia Laboratories, Inc., William J. Bologna, Norman M. Meier, James J. Apostolakis, David Ray, Bernard Marden, Anthony R. Campbell, David M. Knott and Knott Partners, L.P. ^10/

10.16A	—	License and Supply Agreement by an between the Company and MiPharm SpA dated March 5, 1999 ^11/

10.16B	—	License and Supply Agreement for Crinone between Columbia Laboratories (Bermuda) Limited and Ares Trading S.A. dated as of May 20, 1999 ^12/

10.17	—	Addendum to Employment Agreement dated as of January 1, 2000 between the Company and Norman M. Meier ^12/*

10.18	—	Addendum to Employment Agreement dated as of January 1, 2000 between the Company and William J. Bologna ^12/*

10.19	—	Employment Agreement dated as of January 1, 2000 between the Company and James J. Apostolakis ^12/*

10.20	—	Employment Agreement dated December 30, 1999 between the Company and Dominique de Ziegler ^12/*

10.21	—	Settlement Agreement and Release dated as of March 16, 2000 between Columbia Laboratories (Bermuda) Ltd. and Lake Consumer Products, Inc. ^12/

10.22	—	Replens Purchase and License Agreement dated April 18, 2000, between the Company and Lil’ Drug Store Products, Inc. ^13/

10.23	—	License Agreement dated April 18, 2000, between the Company and Lil’ Drug Store Products, Inc. ^13/

10.24	—	Distribution Agreement dated April 18, 2000, between the Company and Lil’ Drug Store Products, Inc. ^13/

10.25	—	Stock Purchase Agreement, dated January 31, 2001, between the Company and Ridgeway Investment Limited ^14/

10.26	—	Amended and Restated Common Stock Purchase Agreement by and between the Company and Acqua Wellington North American Equities Fund, Ltd., effective as of February 6, 2001. ^15/

10.27	—	Employment Agreement dated March 16, 2001 between the Company and G. Frederick Wilkinson ^16/*

10.28	—	Stock Purchase Agreement, dated May 10, 2001, between the Company and Ridgeway Investment Limited ^17/

10.29	—	Stock Purchase Agreement, dated July 23, 2001, between the Company and Ridgeway Investment Limited ^18/

10.30	—	Rights Agreement dated as of March 13, 2002, by and between Columbia Laboratories, Inc. and First Union National Bank, as Rights Agent ^19/

10.31†	—	Semi-Exclusive Supply Agreement dated May 7, 2002 between the Company and Mipharm S.p.A. ^20/

10.32†	—	Amended and Restated Licence and Supply Agreement dated June 4, 2002 between the Company and Ares Trading S.A. ^20/

10.33†	—	Marketing License Agreement dated June 4, 2002 between the Company and Ares Trading S.A. and Serono, Inc. ^20/

10.34†	—	Master Services Agreement dated July 31, 2002 between the Company and Innovex LP ^20/

10.35†	—	Stock Purchase Agreement dated July 31, 2002 By and Between Columbia Laboratories, Inc. and PharmaBio Development Inc. ^20/



10.36†	—	Investment and Royalty Agreement dated July 31, 2002 between the Company and PharmaBio Development Inc. ^20/

10.37†	—	License and Supply Agreement dated October 16, 2002 between the Company and Ardana Bioscience Limited ^21/

10.38†	—	Development and License Agreement dated December 26, 2002 between the Company and Ardana Bioscience Limited ^21/

10.39	—	Amendment No. 1 to the Amended and Restated Common Stock Purchase Agreement by and between the Company and Acqua Wellington North American Equities Fund, Ltd., effective as of January 31, 2003 ^21/

10.40†	—	Investment and Royalty Agreement dated March 5, 2003 between the Company and PharmaBio Development Inc. ^21/

10.41†	—	Sales Force Work Order #8872 pursuant to the Master Services Agreement having an Effective Date of July 31, 2002, between the Company and Innovex LP ^21/

10.42	—	Separation and Consulting Agreement dated April 15, 2003 between the Company and William J. Bologna ^22/

10.43†	—	License and Supply Agreement Dated May 27, 2003 between the Company and Mipharm S.p.A. ^23/

10.44	—	Standstill Agreement dated December 1, 2003 between the Company and Perry Corp. ^24/

10.45†	—	Amended and Restated Sales Force Work Order #8795 And Termination of Work Order #8872 pursuant to the Master Services Agreement having an effective date of January 26, 2004 between the Company and Innovex ^25/

10.46	—	Form of Indemnification Agreement for Officers and Directors ^25/

10.47	—	Form of Executive Change of Control Severance Agreement ^25/

14	—	Code of Ethics of the Company ^25/

21	—	Subsidiaries of the Company ^25/

31.1	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company ^25/

32.2	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company ^25/

32.1	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^25/

32.2	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ^25/

*	Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to item 601 of Regulation S-K.

¹ ^/	Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-31962) declared effective on May 14, 1990.

² ^/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1990.

³ ^/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed on January 2, 1992.

⁴ ^/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1993.

⁵ ^/	Incorporated by reference to the Registrant’s Registration Statement on Form S-1 (File No. 33-60123) declared effective August 28, 1995.

⁶ ^/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995.

⁷ ^/	Incorporated by reference to the Registrant’s Proxy Statement dated May 10, 2000.

⁸ ^/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1997.

⁹ ^/	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.

^10/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998.

^11/	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.

^12/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1999

^13/	Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.

^14/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated January 31, 2001.

^15/	Incorporated by reference to the Registrant’s Registration Statement on Form S-3 (File No. 333-38230) declared effective May 7, 2001.

^16/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 16, 2001.

^17/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated May 10, 2001.

^18/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated July 23, 2001.

^19/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated March 12, 2002.

^20/	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q dated August 14, 2002.

^21/	Incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002

^22/	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q dated May 14, 2003.

^23/	Incorporated by reference to the registrant’s Quarterly Report on Form 10-Q dated August 14, 2003.

^24/	Incorporated by reference to the Registrant’s Current Report on Form 8-K, dated December 1, 2003.

^25/	Filed herewith.

†	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	COLUMBIA LABORATORIES, INC.

Date: March 8, 2004	By:	/s/ David L. Weinberg
		David L. Weinberg, Vice President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.



/s/ Fred Wilkinson Fred Wilkinson	Chairman of the Board of Directors and President and Chief Executive Officer	March 8, 2004

/s/ James J. Apostolakis James J. Apostolakis	Vice Chairman of the Board of Directors	March 4, 2004

/s/ David L. Weinberg David L. Weinberg	Vice President-Finance, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	March 8, 2004

/s/ Jean Carvais Jean Carvais	Director	March 5, 2004

/s/ Max Link Max Link	Director	March 3, 2004

/s/ Denis M. O’Donnell Denis M. O’Donnell	Director	March 10, 2004

/s/ Selwyn P. Oskowitz Selwyn P. Oskowitz	Director	March 10, 2004

/s/ Robert C. Strauss Robert C. Strauss	Director	March 8, 2004

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS


		Page
Report of Independent Certified Public Accountants		F-2

Consolidated Balance Sheets as of December 31, 2003 and 2002		F-3

Consolidated Statements of Operations for the Three Years Ended December 31, 2003		F-5

Consolidated Statements of Comprehensive Operations for the Three Years Ended December 31, 2003		F-6

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Three Years Ended December 31, 2003		F-7

Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2003		F-9

Notes to Consolidated Financial Statements		F-11

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders

of Columbia Laboratories, Inc.:

We have audited the accompanying consolidated balance sheets of Columbia Laboratories, Inc. (a Delaware corporation) and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, comprehensive operations, stockholders’ equity (deficiency) and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Columbia Laboratories, Inc. and Subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

GOLDSTEIN GOLUB KESSLER LLP

New York, New York

February 13, 2004

F-2

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2003 AND 2002

ASSETS


	2003			2002
CURRENT ASSETS:
Cash and cash equivalents, of which $30,273,715 is interest-bearing as of December 31, 2003	$	30,965,517		$	5,018,365
Accounts receivable, net of allowance for doubtful accounts of $120,000 and $30,000 in 2003 and 2002, respectively		4,780,921			2,198,181
Inventories		2,469,224			2,325,210
Prepaid expenses and other current assets		2,240,920			825,833
Loans receivable, related party		—			211,122

Total current assets		40,456,582			10,578,711

PROPERTY AND EQUIPMENT:
Machinery and equipment		2,151,482			2,268,502
Computer software		445,385			401,356
Office equipment and furniture and fixtures		770,702			535,359

		3,367,569			3,205,217
Less - accumulated depreciation and amortization		(2,405,574	)		(2,332,782	)

		961,995			872,435

INTANGIBLE ASSETS, net		920,418			1,163,341

OTHER ASSETS		140,654			151,820

TOTAL ASSETS	$	42,479,649		$	12,766,307

(Continued)

F-3

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2003 AND 2002

(Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)


	2003			2002
CURRENT LIABILITIES:
Note payable - short-term	$	—		$	586,667
Current portion of financing agreements		1,228,865			900,000
Accounts payable		2,806,236			3,489,118
Accrued expenses		2,731,692			885,606

Total current liabilities		6,766,793			5,861,391

NOTE PAYABLE - long-term		10,000,000			10,000,000
DEFERRED REVENUE		3,879,618			3,949,859
LONG-TERM PORTION OF FINANCING AGREEMENTS		15,746,695			1,350,000

TOTAL LIABILITIES		36,393,106			21,161,250


COMMITMENTS AND CONTINGENCIES (Note 7)

STOCKHOLDERS’ EQUITY (DEFICIENCY):
Preferred stock, $.01 par value; 1,000,000 shares authorized:
Series B Convertible Preferred Stock, 130 and 1,130 shares issued and outstanding in 2003 and 2002, respectively (liquidation preference of $13,000 at December 31, 2003)		1			11
Series C Convertible Preferred Stock, 3,250 and 3,750 shares issued and outstanding in 2003 and 2002, respectively (liquidation preference of $3,250,000 at December 31, 2003)		32			38
Common stock, $.01 par value; 100,000,000 shares authorized; 39,679,381 and 35,453,722 shares issued and outstanding in 2003 and 2002, respectively		396,794			354,537
Capital in excess of par value		162,146,561			126,664,805
Accumulated deficit		(156,648,214	)		(135,497,195	)
Accumulated other comprehensive income (loss)		191,369			82,861

Total stockholders’ equity (deficiency)		6,086,543			(8,394,943	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)	$	42,479,649		$	12,766,307

The accompanying notes to consolidated financial statements

are an integral part of these statements.

F-4

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003


	2003			2002			2001
NET SALES	$	22,415,028		$	9,418,549		$	2,153,854

COST OF GOODS SOLD		9,782,784			5,228,519			2,658,690

Gross profit		12,632,244			4,190,030			(504,836	)

OPERATING EXPENSES:
Selling and distribution		22,570,177			6,053,732			1,054,472
General and administrative		6,376,274			5,135,121			4,254,143
Reseach and development		3,267,966			5,350,156			7,132,720
Litigation settlement expense		—			3,960,000			—
Product recall costs		—			(449,489	)		1,500,000
Corporate restructuring expenses		—			—			1,000,000

Total operating expenses		32,214,417			20,049,520			14,941,335

Loss from operations		(19,582,173	)		(15,859,490	)		(15,446,171	)

OTHER INCOME (EXPENSE):
Interest income		134,387			51,844			246,937
Interest expense		(1,846,281	)		(852,864	)		(755,398	)
Other, net		143,048			(189,279	)		109,005

		(1,568,846	)		(990,299	)		(399,456	)

Net loss	$	(21,151,019	)	$	(16,849,789	)	$	(15,845,627	)

LOSS PER COMMON SHARE - BASIC AND DILUTED	$	0.57		$	0.50			0.51

WEIGHED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
BASIC AND DILUTED		37,440,270			34,392,060			31,243,307

The accompanying notes to consolidated financial statements

are an integral part of these statements.

F-5

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003


	2003			2002			2001
NET LOSS	$	(21,151,019	)	$	(16,849,789	)	$	(15,845,627	)

Other comprehensive income:
Foreign curency translation, net of tax		108,508			101,459			18,054

Comprehensive loss	$	(21,042,511	)	$	(16,748,330	)	$	(15,827,573	)

The accompanying notes to consolidated financial statements

are an integral part of these statements.

F-6

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE THREE YEARS ENDED DECEMBER 31, 2003


	Series A Convertible Preferred Stock				Series B Convertible Preferred Stock					Series C Convertible Preferred Stock					Common Stock			Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
	Number of Shares		Amount		Number of Shares		Amount			Number of Shares		Amount			Number of Shares	Amount		Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance, January 1, 2001	33		$	—	1,630		$	16		4,050		$	41		30,494,924	$	304,949	$	105,991,194		$	(102,801,779	)	$	(544	)	$	3,493,877
Issuance of common stock	—			—	—			—		—			—		2,146,459		21,465		8,962,936			—			—			8,984,401
Options exercised															7,500		75		41,175			—			—			41,250
Warrants exercised	—			—	—			—		—			—		8,557		85		12,165			—			—			12,250
Dividends on preferred stock	—			—	—			—		—			—		—		—		(201,663	)		—			—			(201,663	)
Fair market value of options granted to non-employees	—			—	—			—		—			—		—		—		112,387			—			—			112,387
Translation adjustment	—			—	—			—		—			—		—		—		—			—			(18,054	)		(18,054	)
Conversion of preferred stock	(33	)		—	—			—		(300	)		(3	)	94,985		950		(947	)		—			—			—
Net loss	—			—	—			—		—			—		—		—		—			(15,845,627	)		—			(15,845,627	)

Balance, December 31, 2001	—			—	1,630			16		3,750			38		32,752,425		327,524		114,917,247			(118,647,406	)		(18,598	)		(3,421,179	)
Issuance of common stock	—			—	—			—		0			—		2,691,012		26,910		11,935,156			—						11,962,066
Dividends on preferred stock	—			—	—			—		—			—		—		—		(187,500	)		—			—			(187,500	)
Translation adjustment	—			—	—			—		—			—		—		—		—			—			101,459			101,459
Conversion of preferred stock	—			—	(500	)		(5	)	—			—		10,285		103		(98	)		—			—			—
Net loss	—			—	—			—		—			—		—		—		—			(16,849,789	)		—			(16,849,789	)

Balance, December 31, 2002	—		$	—	1,130		$	11		3,750		$	38		35,453,722	$	354,537	$	126,664,805		$	(135,497,195	)	$	82,861		$	(8,394,943	)

(Continued)

F-7

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)

FOR THE THREE YEARS ENDED DECEMBER 31, 2003

(Continued)


	Series A Convertible Preferred Stock			Series B Convertible Preferred Stock					Series C Convertible Preferred Stock					Common Stock					Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		Total
	Number of Shares	Amount		Number of Shares		Amount			Number of Shares		Amount			Number of Shares		Amount			Capital in Excess of Par Value			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		Total
Balance, December 31, 2002	—	$	—	1,130		$	11		3,750		$	38		35,453,722		$	354,537		$	126,664,805		$	(135,497,195	)	$	82,861	$	(8,394,943	)
Issuance of common stock	—		—	—			—		—			—		2,764,612			27,646			28,777,445			—			—		28,805,091
Options exercised	—		—	—			—		—			—		1,260,268			12,603			6,781,574			—			—		6,794,177
Warrants exercised	—		—	—			—		—			—		57,922			579			199,359			—			—		199,938
Fair market value of options granted to non-employees	—		—	—			—		—			—		—			—			96,152			—			—		96,152
Dividends on preferred stock	—		—	—			—		—			—		—			—			(178,125	)		—			—		(178,125	)
Translation adjustment	—		—	—			—		—			—		—			—			—			—			108,508		108,508
Conversion of preferred stock	—		—	(1,000	)		(10	)	(500	)		(6	)	163,427			1,634			(1,619	)		—			—		(1	)
Payment of related party loan	—		—	—			—		—			—		(20,570	)		(205	)		(193,030	)		—			—		(193,235	)
Net loss	—		—	—			—		—			—		—			—			—			(21,151,019	)		—		(21,151,019	)

Balance, December 31, 2003	—	$	—	130		$	1		3,250		$	32		39,679,381		$	396,794		$	162,146,561		$	(156,648,214	)	$	191,369	$	6,086,543

The accompanying notes to consolidated financial statements are an integral part of these statements.

F-8

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003


	2003			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,151,019	)	$	(16,849,789	)	$	(15,845,627	)
Adjustments to reconcile net loss to net cash used in operating activities -
Depreciation and amortization		513,109			579,412			688,198
Provision for doubtful accounts		133,509			(1,191	)		17,000
Provision for returns and allowances		406,000			310,183			368,273
Write-down of inventories		461,648			453,797			166,905
Loss on disposal of fixed assets		—			6,384			27,961
Gain on sale of assets		—			—			—
Interest expense on financing agreements		1,085,073			—			—
Issuance of warrants and options for consulting services		96,152			—			112,387

Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable		(3,122,249	)		(1,695,525	)		2,105,880
Inventories		(605,662	)		(1,786,554	)		(179,620	)
Prepaid expenses		(1,415,087	)		(287,571	)		220,341
Other assets		29,053			(16,032	)		195,141

Increase (decrease) in:
Accounts payable		(682,882	)		2,858,650			(165,040	)
Accrued expenses		1,846,086			(465,129	)		220,889
Deferred revenue		(70,241	)		3,949,859			(100,000	)

Net cash used in operating activities		(22,476,510	)		(12,943,506	)		(12,167,312	)

(Continued)

F-9

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003

(Continued)


	2003			2002			2001
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	$	(357,993	)	$	(808,104	)	$	(188,602	)

Net cash used in investing activities		(357,993	)		(808,104	)		(188,602	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		28,805,091			11,962,067			8,984,401
Issuance of note payable		—			3,960,000			—
Payment of note payable		(586,667	)		(3,373,333	)		—
Proceeds from exercise of options and warrants		6,994,115			—			53,500
Proceeds from financing agreements		14,250,000			2,250,000			—
Payments pursuant to financing agreements		(609,513	)		—			—
Dividends paid		(178,125	)		(187,500	)		(201,663	)

Net cash provided by financing activities		48,674,901			14,611,234			8,836,238

EFFECT OF EXCHANGE RATE CHANGES ON CASH		106,754			97,905			(14,195	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		25,947,152			957,529			(3,533,871	)

CASH AND CASH EQUIVALENTS,
Beginning of year		5,018,365			4,060,836			7,594,707

CASH AND CASH EQUIVALENTS,
End of year	$	30,965,517		$	5,018,365		$	4,060,836

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	761,208		$	807,595		$	712,500

Taxes paid	$	24,800		$	93,900		$	58,300

NON-CASH INVESTING AND FINANCING ACTIVITIES
Related party loan repaid with common stock	$	193,235		$	—		$	—

The accompanying notes to consolidated financial statements

are an integral part of these statements

F-10

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :

Organization-

Columbia Laboratories, Inc. (the “Company”) was incorporated as a Delaware corporation in December 1986. The Company is dedicated to research and development of women’s healthcare and endocrinology products, including those intended to treat infertility, endometriosis and hormonal deficiencies. The Company is also developing a buccal delivery system for peptides. The Company’s products primarily utilize its patented Bioadhesive Delivery System technology.

Principles of Consolidation-

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Accounting Estimates-

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency-

The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at current exchange rates and revenue and expense items are translated at average rates of exchange prevailing during the period. Resulting translation adjustments are accumulated as a separate component of stockholders’ equity.

Accounts Receivable-

Accounts receivable are reported at their outstanding unpaid principal balances reduced by allowances for doubtful accounts and potential returns. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible.

Inventories-

Inventories are stated at the lower of cost (first-in, first-out) or market. Components of inventory cost include materials, labor and manufacturing overhead. Inventories consist of the following:


	December 31,
	2003		2002
Finished goods	$	1,096,785	$	1,564,136
Raw materials		1,372,439		761,074

	$	2,469,224	$	2,325,210

Shipping costs are included in selling and distribution expenses.

F-11

Property and Equipment-

Property and equipment is stated at cost less accumulated depreciation. Leasehold improvements are amortized over the life of the respective leases. Depreciation is computed on the straight-line basis over the estimated useful lives of the respective assets, as follows:


		Years
Software		3
Machinery and equipment		5
Furniture and fixtures		5

Costs of major additions and improvements are capitalized and expenditures for maintenance and repairs that do not extend the term of the assets are expensed. Upon sale or disposition of property and equipment, the cost and related accumulated depreciation are eliminated from the accounts and any resultant gain or loss is credited or charged to operations.

Concentration of Credit Risk-

The Company sells its products to customers worldwide. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Management believes that the Company is not subject to any significant concentrations of credit risk.

Intangible Assets-

Intangible assets consist of the following:


	December 31,
	2003			2002
Patents	$	2,600,000		$	2,600,000
Trademarks		1,566,000			1,566,000
Licensing rights		100,000			100,000

		4,266,000			4,266,000
Less accumulated amortization		(3,345,582	)		(3,102,659	)

	$	920,418		$	1,163,341

Patents are being amortized on a straight-line basis over their remaining lives (through 2003). Trademarks are being amortized on a straight-line basis over ten years to fifteen years. Licensing rights are being amortized over a period of five years.

On March 16, 2000, the Company acquired the U.S. rights for the product Advantage-S. The cost of the acquisition was $1,225,000 (in cash and Company common stock) which is being amortized over a 15-year period.

Aggregate amortization expense for the year ended December 31, 2003 was $242,923.

Future estimated amortization expense is as follows:


2004	$	83,334
2005		81,667
2006		81,667
2007		81,667
2008		81,667

F-12

Long-lived Assets-

Following the acquisition of any long-lived assets, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of the long-lived asset may warrant revision or that the remaining balance of the long-lived asset may not be recoverable. When factors indicate that a long-lived asset may be impaired, the Company uses an estimate of the underlying product’s future cash flows, including amounts to be received over the remaining life of the long-lived asset from license fees, royalty income, and related deferred revenue, in measuring whether the long-lived asset is recoverable. Unrecoverable amounts are charged to operations.

Accrued Expenses-

Accrued expenses consist of the following:


	2003		2002
Royalties	$	564,582	$	205,696
Contract sales force		900,000		—
Marketing costs		399,618		—
Professional fees		196,666		108,629
Interest		207,812		210,273
Salaries		175,370		101,039
Other		287,644		259,969

	$	2,731,692	$	885,606

Income Taxes-

The reconciliation of the effective income tax rate to the federal statutory rate is as follows:


	2003		2002		2001
Federal income tax rate	(34.0	)%	(34.0	)%	(34.0	)%
Increase in valuation allowance	34.0		34.0		34.0

Effective income tax rate	0.0	%	0.0	%	0.0	%

As of December 31, 2003, the Company has U.S. tax net operating loss carryforwards of approximately $92 million which expire through 2023. The Company also has unused tax credits of approximately $1,439,000 which expire at various dates through 2023. Utilization of net operating loss carryforwards may be limited in any year due to limitations in the Internal Revenue Code. As of December 31, 2003 and 2002, other assets in the accompanying consolidated balance sheets include deferred tax assets of approximately $32 million and $23 million, respectively (comprised primarily of a net operating loss carryforward), for which a 100% valuation allowance has been recorded since the realizability of the deferred tax assets is not determinable.

Revenue Recognition-

Revenues from the sale of products are recorded at the time title passes from the Company to the customer which is at the time goods are shipped. Provisions for returns, rebates and other allowances are estimated based on a percentage of sales and are recorded in the same period the related sales are recognized. Royalties and additional monies owed to the Company based on the Company’s strategic alliance partners’ sales are included in net sales as sales are recorded by the strategic alliance partners.

F-13

License Fees-

License revenue consists of up-front, milestone and similar payments under license agreements and is recognized when earned under the terms of the applicable agreements. Milestone payments represent payments for the occurrence of contract-specified events and coincide with the achievement of a substantive element in a multi-element arrangement (see Note 2). License revenue, including milestone payments, is deferred and recognized in net sales over the estimated product life cycle or the length of relevant patents, whichever is shorter.

Advertising Expense-

All costs associated with advertising and promoting products are expensed in the year incurred. Advertising and promotion expense was approximately $6,800,000 in 2003, $1,317,000 in 2002 and $55,000 in 2001.

Research and Development Costs-

Company-sponsored research and development costs related to future products are expensed as incurred.

Loss per Share-

Basic loss per share is computed by dividing the net loss plus preferred dividends by the weighted-average number of shares of common stock outstanding during the period. Shares to be issued upon the exercise of the outstanding options and warrants or the conversion of the preferred stock are not included in the computation of diluted loss per share as their effect is antidilutive. Outstanding options and warrants excluded from the calculation amounted to 6,944,911, 7,704,618 and 7,140,118 at December 31, 2003, 2002 and 2001, respectively.

Statements of Cash Flows-

For purposes of the statements of cash flows, the Company considers all investments purchased with an original maturity of three months or less to be cash equivalents.

F-14

Stock-based Compensation-

The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the stock option plans and warrants issued to employees. Had compensation cost been determined based on the fair value at the grant dates for those awards consistent with the method of Statement of Financial Accounting Standard No. 123, the Company’s net loss per share would have been increased to the pro forma amounts indicated below.


	2003			2002			2001
Net loss, as reported	$	(21,151,019	)	$	(16,849,789	)	$	(15,845,627	)
Deduct: Total stock-based employee compensation expense determined under-fair-value based methods for all awards		(2,048,636	)		(2,522,790	)		(3,655,328	)

Pro forma net loss	$	(23,199,655	)	$	(19,372,579	)	$	(19,500,955	)

Loss per share: As reported	$	(0.57	)	$	(0.50	)	$	(0.51	)

Pro forma	$	(0.62	)	$	(0.57	)	$	(0.63	)

The estimated grant date present value reflected in the above table is determined using the Black-Scholes model. The material assumptions and adjustments incorporated in the Black-Scholes model in estimating the value of the options reflected in the above table include the following: (i) an exercise price equal to the fair market value of the underlying stock on the dates of grant, (ii) an option term of five years in 2003 and three years in 2002 and 2001, (iii) a risk-free rate of 4.25% in 2003 and 5.0% in 2002 and 2001 that represents the interest rate on a U.S. Treasury security with a maturity date corresponding to that of the option term, (iv) volatility of 59.2% for 2003, 57.8% for 2002 and 86.4% for 2001 and (v) no annualized dividends paid with respect to a share of Common Stock at the date of grant. The ultimate values of the options will depend on the future price of the Company’s Common Stock, which cannot be forecast with reasonable accuracy. The actual value, if any, an optionee will realize upon exercise of an option will depend on the excess of the market value of the Company’s Common Stock over the exercise price on the date the option is exercised.

The weighted-average fair value of options and warrants granted to employees during 2003, 2002 and 2001 was $3.33, $1.81 and $3.66, respectively.

Product Recall Costs-

Product recall costs represent the direct out-of-pocket costs related to the recall of the product Crinone that took place in April 2001. In 2002, the unused portion of the accrual was reversed.

Corporate Restructuring Expense-

During the second quarter of 2001, the Company’s management decided to close the France office. The Company recorded a restructuring charge for the anticipated costs associated with closing the office consisting of employee severance payments and other costs.

Recent Accounting Pronouncements-

The Company does not believe that any recently issued, but not yet effective, accounting standards will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

F-15

Reclassification of Prior-year Amounts-

Prior-year financial statements have been reclassified to conform to the 2003 presentation.

(2) STRATEGIC ALLIANCE AGREEMENTS:

In May 1995, the Company entered into a worldwide license and supply agreement, except for South Africa, with American Home Products Corporation (“AHP”) under which the Wyeth-Ayerst Laboratories division of AHP marketed Crinone. The Company supplied Crinone to AHP at a price equal to 30% of AHP’s net selling price. On July 2, 1999, AHP assigned the license and supply agreement to Ares-Serono, a Swiss pharmaceutical company. The Company supplies Crinone to Ares Trading S.A. (“Serono”) under the same terms as in the agreement with AHP. In June 2002, as part of the settlement of litigation between the two companies, the Company acquired the right to market a second brand of its 8% and 4% progesterone gel products under the trade name “Prochieve ^™ ” to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. Under this agreement the Company is required to pay a 30% royalty to Serono based on net sales of the products. The Company paid approximately $1,526,898 and $985,000 to Serono in accordance with this agreement for the years 2003 and 2002, respectively.

In March 1999, the Company entered into a license and supply agreement with Mipharm SpA under which Mipharm SpA will be the exclusive marketer of the Company’s previously unlicensed women’s healthcare products in Italy, Portugal, Greece and Ireland with a right of first refusal for Spain. Under the terms of the agreement, the Company has received $540,000, net of expenses, and expects to receive future milestone payments as products are made available by the Company.

Effective May 5, 2000, the Company sold various tangible and intangible assets related to the U.S. rights for Replens, to Lil’ Drug Store Products Inc. for a total of $4.5 million cash. Additionally, the purchaser agreed to buy up to $500,000 of Replens inventory from the Company and to pay future royalties of up to $2 million equal to 10% of future U.S. sales of Replens. Additionally, effective May 5, 2000, the Company licensed its Legatrin PM, Legatrin GCM, Vaporizer in a Bottle and Diasorb brands to the same purchaser mentioned above. Legatrin GCM and Diasorb are no longer sold by Lil’Drug Store Products, Inc. Under the terms of this agreement, the Company receives license fees equal to 20% of the licensee’s net sales of Legatrin PM. This agreement has a five-year term with provisions for renewal and contains options that allow the licensee to acquire these brands from the Company. On December 29, 2000, Lil’ Drug Store Products, Inc. acquired the Vaporizer in a Bottle brand for $201,800.

On July 31, 2002, the Company and Quintiles Transnational Corp. (“Quintiles”) entered into an agreement to commercialize the Company’s portfolio of women’s healthcare products in the United States. Under the terms of this agreement, Quintiles’ commercialization unit, Innovex, will provide a dedicated team of 55 sales representatives on a three-year, fee-for-service basis, to commercialize the Company’s women’s healthcare products. On March 5, 2003, Columbia Laboratories, Inc. and Quintiles Transnational Corp. announced an agreement to commercialize Columbia’s Striant ^™ testosterone buccal bioadhesive product in the United States. Under the terms of the agreement, Quintiles’ commercialization unit, Innovex, will provide a dedicated team of approximately 75 sales representatives for two-and-a-half years. In January 2004, the Company and Innovex restructured the sales force dedicated to exclusively promoting the Company’s women’s healthcare products and Striant ^™ . The restructured sales force would be made up of nine Columbia district managers as well as 80 sales representatives divided evenly between Columbia and Innovex. Under the terms of this restructuring, Innovex will accelerate the transfer of responsibility for management of the sales force to Columbia, but would continue to provide half the sales representatives. Effective immediately, Columbia would take responsibility for all field sales management, all sales force support and will hire one-half of the field sales representatives. Columbia will take full responsibility for the remaining Sales Representatives by October 2005. The restructuring of the Innovex agreement will have no effect on the product royalty agreements between Columbia and Quintiles’ subsidiary, PharmaBio Development, Inc.

On October 16, 2002, the Company and Ardana Bioscience, Ltd. (“Ardana”) entered into a license and supply agreement for the Company’s Striant ^™ testosterone buccal mucoadhesive product in 18 European countries (excluding Italy). Under the terms of the agreement, Ardana will market, distribute and sell Striant ^™ . In exchange for the license, the Company will receive total payments of $8 million, including $4 million in signature and

F-16

milestone fees received in the fourth quarter of 2002. Initial regulatory approval of the U.K. application will be the basis for mutual recognition applications to be filed in the rest of Europe. Additional milestone payments totaling $2 million are due upon marketing approvals in major European countries included in the agreement. A performance payment of $2 million is also due upon achievement of a certain level of sales. Ardana will purchase its requirements of product from the Company during the term of the agreement. The agreement shall continue for a period of the later of 10 years from the first commercial sale of the finished product by Ardana or the date of expiration or lapse of the last to expire or lapse Company’s patent rights in the territory, determined on a country by country basis. The Company will recognize the license revenue on this agreement over a 10-year period and accordingly has recognized revenue of $401,681 in 2003 and $50,141 in 2002 in the accompanying consolidated statements of operations. The remaining $3,548,178 is shown as deferred revenue in the accompanying consolidated balance sheets.

In May 2003, the Company and Mipharm S.p.A. entered into an agreement, under which Mipharm will market, distribute and sell Striant ^™ in Italy. In exchange for these rights, Columbia will receive payments of $1.4 million, including the immediate reimbursement of $350,000 in development costs. A mutual recognition application for marketing in Italy will be filed based on initial regulatory approval of the pending application in the United Kingdom. Mipharm will provide additional performance payments upon achievement of certain levels of sales in Italy, and Columbia will receive a percentage markup on the cost of goods for each unit sold. Mipharm is Columbia’s manufacturer for Striant ^™ under a May 2002 agreement. The Company will recognize revenue on this agreement over a 132-month period and accordingly has recognized revenue of $18,560 in 2003 in the accompanying consolidated statements of operations. The remaining $331,440 is shown as deferred revenue in the accompanying consolidated balance sheets.

The Company has also entered into strategic alliance agreements with various pharmaceutical companies for the foreign marketing and distribution of Replens, RepHresh and Advantage-S.

(3) PRODUCT RECALL:

On April 5, 2001, the Company announced that it had requested its licensee, Serono, to voluntarily recall a number of batches of Crinone, a progesterone vaginal gel used in the treatment of infertile women. The recall was initiated due to an application problem of the gel in the recalled batches. The Company estimated that the direct out-of-pocket costs related to the recall would cost approximately $1.5 million, which was recorded in the first quarter of 2001. The Company’s original estimate of the expenses necessary to complete the product recall exceeded the actual expense by approximately $449,000. This amount is shown as a reduction in 2002 operating expenses in the consolidated statements of operations.

(4) NOTES PAYABLE:

Notes payable consist of the following:


	December 31,
	2003		2002
7.125% convertible subordinated note payable—due March 2005	$	10,000,000	$	10,000,000
9.00% note payable - payable in monthly installments		—		586,667

		10,000,000		10,586,667
Less: current portion		—		(586,667	)

	$	10,000,000	$	10,000,000

F-17

On March 16, 1998, the Company issued to an institutional investor a $10 million convertible subordinated note due March 15, 2005. The note is subordinate to other senior securities of the Company and bears interest at 7.125% which is payable semiannually on March 15 and September 15. The note is convertible into 662,032 shares of Common Stock at a price equal to $15.105 per share.

As part of the settlement with Serono in June 2002, the Company issued to Serono a promissory note payable in the original amount of $3,960,000 with interest on the unpaid balance at the fixed rate of 9.00% per annum. Principal and interest were paid in equal monthly installments of $220,000 of principal plus accrued interest. Pursuant to the note, the Company was obligated to pay down the note by an amount equal to one-third of the proceeds from the sale by the Company of its equity securities. The Company paid $1,833,333 (one-third of the $5,500,000 raised by the Company through the sale of its Common Stock in July 2002). The payment was applied in reverse order of payments due. The note was paid in full in March 2003.

The carrying amount of the Company’s note payable approximates fair value using the Company’s estimated incremental borrowing rate.

(5) FINANCING AGREEMENTS :

In an agreement dated July 31, 2002, Quintiles’ strategic investment group, PharmaBio Development, agreed to pay $4.5 million, to be paid in four equal quarterly installments commencing third quarter 2002 for the right to receive a 5% royalty on the net sales of the Company’s women’s healthcare products in the United States for five years beginning in the first quarter of 2003. The royalty payments are subject to minimum ($8 million) and maximum ($12 million) amounts and because the minimum amount exceeds $4.5 million, the Company has recorded the amounts received as liabilities. The excess of the minimum ($8 million) to be paid by the Company over the $4.5 million received by the Company is being recognized as interest expense over the five-year term of the agreement, assuming an interest rate of 12.51%. $498,369 was recorded as interest expense for the year ended December 31, 2003. The agreement calls for a catch-up payment, if by February 28, 2005, the Company has not made $2,750,000 in royalty payments to PharmaBio. The Company paid PharmaBio $350,351 in 2003.

In an agreement dated March 5, 2003, Quintiles’ strategic investment group, PharmaBio Development, agreed to pay $15 million, to be paid in five quarterly installments commencing with the signing of this agreement. In return, Quintiles will receive a 9% royalty on net sales of Striant in the United States up to agreed annual sales revenues, and a 4.5% royalty of net sales above those levels. The royalty term is seven years. Royalty payments commenced for the 2003 third quarter and are subject to minimum ($30 million) and maximum ($55 million) amounts. Because the minimum amount exceeds the $15 million to be received, the Company has recorded the amounts received through December 31, 2003, as liabilities. The excess of the minimum ($30 million) to be paid by the Company over the $15 million to be received by the Company is being recognized as interest expense over the seven-year term of the agreement, assuming an interest rate of 10.67%. $586,704 was recorded as interest expense for the year ended December 31, 2003. The Company has received $12.0 million through December 31, 2003. The agreement calls for a catch-up payment, if by June 30, 2006, the Company has not made $13,000,000 in royalty payments to PharmaBio. The Company paid PharmaBio $259,162 in 2003.

F-18

Liabilities from financing agreements consist of the following:


	December 31,
	2003		2002
July 31, 2002 financing agreement	$	4,648,018	$	2,250,000
March 5, 2003 financing agreement		12,327,542		—

		16,975,560		2,250,000
Less: current portion		1,228,865		900,000

	$	15,746,695	$	1,350,000

(6) STOCKHOLDERS’ EQUITY (DEFICIENCY):

Preferred Stock-

In August 1991, the Company completed a private placement of 150,000 shares of Series B Convertible Preferred Stock (“Series B Preferred Stock”). Each share of Series B Preferred Stock is convertible into 20.57 shares of Common Stock.

Upon liquidation of the Company, the holders of the Series B Preferred Stock are entitled to $100 per share. The Series B Preferred Stock will be automatically converted into Common Stock upon the occurrence of certain events. Holders of the Series B Preferred Stock are entitled to one vote for each share of Common Stock into which the preferred stock is convertible.

In April 2002, 500 shares of the Series B Preferred Stock were converted into 10,285 shares of the Common Stock. In June 2003, 1,000 shares of the Series B Preferred Stock were converted into 20,570 shares of the Common Stock.

In January 1999, the Company raised approximately $6.4 million, net of expenses from the issuance and sale of Series C Convertible Preferred Stock (“Series C Preferred Stock”). The Series C Preferred Stock, sold to 24 accredited investors, has a stated value of $1,000 per share. The Series C Preferred Stock is convertible into common stock at the lower of: (i) $3.50 per common share or (ii) 100% of the average of the closing prices during the three trading days immediately preceding the conversion notice. The Series C Preferred Stock pays a 5% dividend, payable quarterly in arrears on the last day of the quarter. In 2003, 500 shares of the Series C Preferred Stock were converted into 142,857 shares of the Common Stock.

On March 12, 2002, the Company adopted a Stockholder Rights Plan (“Rights Plan”) designed to protect company stockholders in the event of takeover activity that would deny them the full value of their investment. The Rights Plan was not adopted in response to any specific takeover threat. In adopting the Rights Plan, the Board declared a dividend distribution of one preferred stock purchase right for each outstanding share of Common Stock of the Company, payable to stockholders of record at the close of business on March 22, 2002. The rights will become exercisable only in the event, with certain exceptions, a person or group of affiliated or associated persons acquires 15% or more of the Company’s voting stock, or a person or group of affiliated or associated persons commences a tender or exchange offer, which if successfully consummated, would result in such person or group owning 15% or more of the Company’s voting stock. The rights will expire on March 12, 2012. Each right, once exercisable, will entitle the holder (other than rights owned by an acquiring person or group) to buy one one-thousandth of a share of a series of the Company’s Series D Junior Participating Preferred Stock at a price of $30 per one-thousandth of a share, subject to adjustments. In addition, upon the occurrence of certain events, holders of the rights (other than rights owned by an acquiring person or group) would be entitled to purchase either the Company’s preferred stock or shares in an “acquiring entity” at approximately half of market value. Further, at any time after a person or group acquires 15% or more (but less than 50%) of the Company’s outstanding voting stock, subject to certain exceptions, the Board of Directors may, at its option, exchange part or all of the rights (other than rights held by an acquiring person or group)

F-19

for shares of the Company’s common stock having a fair market value on the date of such acquisition equal to the excess of (i) the fair market value of preferred stock issuable upon exercise of the rights over (ii) the exercise price of the rights. The Company generally will be entitled to redeem the rights at $0.01 per right at any time prior to the close of business on the tenth day after there has been a public announcement of the beneficial ownership by any person or group of 15% or more of the Company’s voting stock, subject to certain exceptions. These rights are deemed to have no value and accordingly have not been recorded in the accompanying financial statements.

Common Stock-

Effective as of February 6, 2001, the Company entered into the Amended and Restated Common Stock Purchase Agreement with an institutional investor to sell up to $16.5 million of the Common Stock, under the Registration Statement, the Prospectus and the related Prospectus Supplement dated February 6, 2001 and amended on April 13, 2001. Pursuant to the Purchase Agreement, the Company may, from time to time over the two-year term of the Purchase Agreement and at its sole discretion, issue and sell to the institutional investor up to $16.5 million of the Common Stock, subject to certain conditions, at a price per share based on the daily volume weighted-average price of the Common Stock over a certain period of time less a discount ranging from 5% to 7%. In addition, during the period in which the Company elects to issue and sell shares of the Common Stock to the institutional investor, the Company may also, at its sole discretion, grant the institutional investor a call option at the same discount for the applicable period to purchase additional shares of the Common Stock up to the applicable amount being sold by the Company in such period, subject to the overall limit of $16.5 million described above. The Company and the institutional investor have agreed to extend the term of the Agreement until February 6, 2005. All other terms remain the same. At December 31, 2003, $9 million may be sold under the Agreement subject to the filing of a registration relating to the amendment becoming effective.

During 2001, the Company issued 2,146,459 shares of its common stock, which resulted in the Company receiving $8,962,936 after expenses. $1 million of the gross proceeds were received pursuant to the Amended and Restated Common Stock Purchase Agreement described above.

Warrants-

As of December 31, 2003, the Company had warrants outstanding for the purchase of 921,475 shares of Common Stock. Information on outstanding warrants is as follows:


Exercise Price
$3.50		132,475
4.81		200,000
5.85		100,000
7.06		386
7.50		75,000
8.35		350,000

		857,861

During 2001, a warrant to purchase 350,000 shares of Common Stock at an exercise price of $8.35 was issued pursuant to an employment agreement with the Company’s new President and Chief Executive Officer. A warrant to purchase 100,000 shares of Common Stock at an exercise price of $5.85 per share was issued to an officer and director of the Company. As of December 31, 2003, 682,861 warrants were exercisable.

F-20

Stock Option Plans-

All employees, officers, directors and consultants of the Company or any subsidiary were eligible to participate in the Columbia Laboratories, Inc. 1988 Stock Option Plan, as amended (the “Plan”). Under the Plan, a total of 5,000,000 shares of Common Stock were authorized for issuance upon exercise of the options. As of October 1996, no further options were granted pursuant to this Plan.

In October 1996, the Company adopted the 1996 Long-term Performance Plan (“Performance Plan”) which provides for the grant of stock options, stock appreciation rights and restricted stock to certain designated employees of the Company, non-employee directors of the Company and certain other persons performing significant services for the Company as designated by the Compensation/Stock Option Committee of the Board of Directors. Pursuant to the Performance Plan, an aggregate of 6,000,000 shares of Common Stock have been reserved for issuance.

A summary of the status of the Company’s two stock option plans as of December 31, 2003, 2002 and 2001 and changes during the years ending on those dates is presented below:


	2003				2002				2001
	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	6,783,143		$	8.23	6,218,643		$	8.69	5,550,143		$	9.06
Granted	667,175			6.04	692,500			4.18	761,000			5.94
Exercised	(1,260,268	)		5.39	—			—	(7,500	)		5.50
Forfeited	(103,000	)		8.47	(128,000	)		8.67	(85,000	)		8.99

Outstanding at end of year	6,087,050			8.57	6,783,143			8.23	6,218,643			8.69

Options exercisable at year end	4,628,000				5,566,943				5,420,043

The following table summarizes information about stock options outstanding at December 31, 2003:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at December 31, 2003	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Number Exercisable at December 31, 2003	Weighted- Average Exercise Price
$2.97 - $4.00	704,050	8.09	$	3.32	173,750	$	3.36
$4.06 - $7.90	2,489,000	5.32		5.47	1,700,750		5.38
$8.06 - $12.13	1,707,000	4.22		10.77	1,613,500		10.76
$12.25 - $18.63	1,187,000	3.41		15.04	1,140,000		15.12

$2.97 - $18.63	6,087,050	4.96		8.57	4,628,000		9.58

F-21

(7) LOSS PER COMMON AND POTENTIAL COMMON SHARE:

The calculation of basic and diluted loss per common and potential common share is as follows:


	2003			2002			2001
Net loss	$	(21,151,019	)	$	(16,849,789	)	$	(15,845,627	)
Less: Preferred stock dividends		(178,125	)		(187,500	)		(201,663	)

Net loss applicable to common stock	$	(21,329,144	)	$	(17,037,289	)	$	(16,047,290	)

Basic and diluted
Weighted-average number of common shares outstanding		37,440,270			34,392,060			31,243,307

Basic and diluted net loss per common share	$	(0.57	)	$	(0.50	)	$	(0.51	)

(8) COMMITMENTS AND CONTINGENCIES:

Cash and cash equivalents-

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company believes that there is no credit risk with respect to these accounts.

Leases-

The Company leases office space, apartments and office equipment under noncancelable operating leases. Lease expense for each of the three years ended December 31, 2003, 2002 and 2001 totaled $392,222, $323,977 and $450,550, respectively. Future minimum lease payments as of December 31, 2003 are as follows:


2004		278,782
2005		212,128
2006		201,097
2007		125,216

Royalties-

In 1989, the Company purchased the assets of Bio-Mimetics, Inc. which consisted of the patents underlying the Company’s Bioadhesive Delivery System, other patent applications and related technology, for $2,600,000, in the form of 9% convertible debentures which were converted into 500,000 shares of Common Stock during 1991, and $100,000 in cash. In addition, Bio-Mimetics, Inc. receives a royalty equal to 2% of the net sales of products based on the Bioadhesive Delivery System up to an aggregate amount of $7,500,000. In addition, beginning in March 1995, the Company agreed to prepay a portion of the remaining royalty obligation if certain conditions are met. The Company may not assign the patents underlying the Bioadhesive Delivery System without the prior written consent of Bio-Mimetics, Inc. until the aggregate royalties have been paid.

F-22

In June 2002, as part of the settlement of litigation between Serono and the Company, the Company acquired the right to market a second brand of its 8% and 4% progesterone gel products under the trade name “Prochieve ^™ ” to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. Under this agreement the Company is required to pay a 30% royalty to Serono based on net sales of the products.

Geographic Area of Operations-

Included in the Company’s Consolidated Balance sheet at December 31, 2003 are the net assets of the Company’s subsidiaries located in Bermuda, France and the United Kingdom that total approximately $9.6 million.

Employment Agreements-

In March 2001, the Company entered into a three-year employment agreement with an individual to serve as President and Chief Executive Officer of the Company. Pursuant to his employment agreement, the employee is entitled to a base salary of $450,000 per year plus a minimum 10% bonus. Additionally, the employee was granted options to purchase 500,000 shares of the Company’s Common Stock at an exercise price of $5.85 per share and a warrant to purchase 350,000 shares of the Company’s Common Stock at an exercise price of $8.35 per share. The options and warrants vest ratably over a four-year period.

During 1993, the Company’s stockholders approved an Incentive Compensation Plan covering all employees pursuant to which an aggregate of 5% of pretax earnings of the Company for any year will be awarded to designated employees of the Company. No provision was required in 2002 and 2001. In November 2002, the Incentive Compensation Plan was terminated by the Board of Directors.

Legal Proceedings-

In August 2001, Ares Trading S.A. (“Serono”) filed a lawsuit in the Supreme Court of the State of New York (the “Action”) naming the Company as defendant. The Action set forth claims for an alleged breach of contract for failure to supply Crinone® in accordance with the supply agreement between the parties. In November 2001, the Company filed counterclaims against Serono. In June 2002, the Company reached a settlement with Serono. The companies agreed to release all claims against each other in Serono’s suit against the Company and the Company’s counterclaims against Serono. Under the terms of the settlement, Columbia has rights to market a second brand of its 8% and 4% progesterone gel products under the trade name “Prochieve ^™ ” to a defined audience of obstetricians, gynecologists and primary care physicians in the United States. As part of the settlement, Columbia gave Ares a note for $3.96 million, which was paid in full in March 2003 to cover out of pocket costs resulting from the recall. This amount is shown as litigation settlement expense in Operating Expenses of the Consolidated Statements of Operations.

Other claims and lawsuits have been filed against the Company. Although the results of pending litigation are always uncertain, the Company does not believe the results of any such actions, individually or in the aggregate, will have a material adverse effect on our financial position or results of operation. Additionally, the Company believes that it has adequate reserves or adequate insurance coverage for any unfavorable outcome resulting from these actions.

(9) RELATED PARTY TRANSACTIONS :

During 1993, the Company loaned an individual, who was an officer, director and stockholder of the Company, an aggregate of $110,350. These notes, bearing interest at 10% per annum and due on or before December 7, 1997, were subsequently extended through December 7, 1999. On June 30, 2003, the notes and accrued interest totaling $216,637 were paid in full by transferring, to the Company, Columbia stock valued at $193,235 and $23,402 in cash.

F-23

(10) SEGMENT INFORMATION :

The Company and its subsidiaries are engaged in one line of business, the development, licensing and sale of pharmaceutical products. The following table shows selected information by geographic area:


	Net Sales		Loss from Operations			Identifiable Assets
As of and for the year ended December 31, 2003-
United States	$	13,573,723	$	(20,156,126	)	$	32,921,720
Europe		8,841,305		573,953			9,557,929

	$	22,415,028	$	(19,582,173	)	$	42,479,649

As of and for the year ended December 31, 2002-
United States	$	6,458,323	$	(8,190,386	)	$	5,301,288
Europe		2,960,226		(7,669,104	)		7,465,019

	$	9,418,549	$	(15,859,490	)	$	12,766,307

As of and for the year ended December 31, 2001-
United States	$	1,019,187	$	(8,748,062	)	$	5,809,982
Europe		1,134,667		(6,698,109	)		2,750,042

	$	2,153,854	$	(15,446,171	)	$	8,560,024

The following table presents information about Columbia’s revenues by customer, including royalty and license revenue:


	2003		2002		2001
Ares-Serono	$	8,655,947	$	3,878,513	$	527,723
Lil’ Drug Store Products, Inc.		3,281,034		1,356,343		1,106,758
Cardinal Healthcare		3,296,865		1,624,556		—
McKesson		2,890,998		489,585		—
Amerisource Bergen		447,455		599,028		—
ANDA, Inc.		—		623,808		—
All others (none over 5%)		3,842,729		846,716		519,373

	$	22,415,028	$	9,418,549	$	2,153,854

F-24

(11) QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

The following table summarizes selected quarterly data for the years ended December 31, 2003 and 2002:


	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
2003

Net sales	$	3,605,546		$	4,919,800		$	8,763,957		$	5,125,725		$	22,415,028
Gross profit		1,928,198			2,782,433			5,740,598			2,181,015			12,632,244
Loss from operations		(4,393,335	)		(4,007,791	)		(3,830,193	)		(7,350,854	)		(19,582,173	)
Net loss		(4,704,070	)		(4,366,608	)		(4,254,547	)		(7,825,794	)		(21,151,019	)
Basic and diluted loss per common share		(0.13	)		(0.12	)		(0.11	)		(0.20	)		(0.57	)

2002

Net sales	$	576,811		$	2,455,149		$	4,040,534		$	2,346,055		$	9,418,549
Gross profit		(374,470	)		1,553,401			2,124,162			886,937			4,190,030
Loss from operations		(3,163,815	)		(4,597,202	)		(1,632,507	)		(6,465,966	)		(15,859,490	)
Net loss		(3,380,942	)		(4,855,498	)		(1,879,189	)		(6,734,160	)		(16,849,789	)
Basic and diluted loss per common share		(0.10	)		(0.14	)		(0.05	)		(0.19	)		(0.50	)

F-25

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENT SCHEDULE


		Page
Report of Independent Certified Public Accountants		F-27

Schedule II-Valuation and Qualifying Accounts and Reserves		F-28

F-26

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders

of Columbia Laboratories, Inc.:

We have audited in accordance with auditing standards generally accepted in the United States of America, the financial statements of Columbia Laboratories, Inc. and Subsidiaries for each of the three years in the period ended December 31, 2003 included in this Form 10-K and have issued our report thereon dated February 13, 2004. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Schedule II is the responsibility of the Company’s management and is presented for purposes of complying with the Securities and Exchange Commission’s rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

GOLDSTEIN GOLUB KESSLER LLP

New York, New York

February 13, 2004

F-27

COLUMBIA LABORATORIES, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003


Description	Balance at beginning of period		Charged to (credited to) costs and expenses			Deductions		Balance at end of period
YEAR ENDED DECEMBER 31, 2003:
Allowance for doubtful accounts	$	30,000	$	133,509		$	43,509	$	120,000

YEAR ENDED DECEMBER 31, 2002:
Allowance for doubtful accounts	$	40,000	$	(1,191	)	$	8,809	$	30,000

YEAR ENDED DECEMBER 31, 2001:
Allowance for doubtful accounts	$	23,000	$	17,000		$	—	$	40,000

F-28

EXHIBIT INDEX


Exhibit Numbers

10.45	—	Amended and Restated Sales Force Work Order #8795 And Termination of Work Order #8872 pursuant to the Master Services Agreement having an effective date of January 26, 2004 between the Company and Innovex

10.46	—	Form of Indemnification Agreement for Officers and Directors

10.47	—	Form of Executive Change of Control Severance Agreement

14	—	Code of Ethics of the Company

21	—	Subsidiaries of the Company

31.1	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of the Company

31.2	—	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of the Company

32.1	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	—	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 10.45

AMENDED AND RESTATED SALES FORCE WORK ORDER # 8795 AND

TERMINATION OF WORK ORDER #8872

EFFECTIVE DATE: January 26, 2004

This Amended and Restated Sales Force Work Order is entered into between Columbia Laboratories, Inc., (“Columbia”) and Innovex Inc. (“Innovex”), pursuant to the Master Services Agreement, having an effective date of July 31, 2002, between Columbia and Innovex’s predecessor, Innovex LP, and is subject to all the terms and conditions set forth therein, except as may be otherwise expressly provided herein. Sales Force Work Order #8872 is hereby terminated and no longer in effect.

A.	BRIEF DESCRIPTION OF SALES FORCE PROJECT:

Sales Force

A full time sales force will be assigned to selling Prochieve® 8% Progesterone Gel (“Prochieve 8%”), Prochieve® 4% Progesterone Gel (“Prochieve 4%”), RepHresh® Vaginal Gel (“RepHresh”), and Advantage-S® Bioadhesive Contraceptive Gel (“Advantage-S”) to a target list of obstetricians, gynecologists, and primary care physicians, and selling Striant ^™ Testosterone Buccal System (“Striant”) to a target list of endocrinologists, urologists, and primary care physicians. Columbia’s and Innovex’s objective is to maximize the quality of the calls and to work the total office to support the full Columbia product line.

The parties acknowledge and agree that the grant of rights to Innovex hereunder is non-exclusive and nothing herein shall limit or restrict Columbia’s right to market or promote the Products itself or through a third party, in Columbia’s sole discretion.

B.	PROJECT TEAMS:


Columbia Contact Person:		Meg Coogan
		Senior Vice President, Marketing and Sales
address:		354 Eisenhower Parkway
		Livingston, NJ 07039
phone:		973-994-3999
fax:		973-994-3001

Innovex Contact Person:		Tony Yost
		President
address:		10 Waterview Blvd.
		Parsippany, NJ 07054
phone:		973-257-4500
fax:		973-257-4617

[***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Routine correspondence relevant to the operation of the sales force should be sent to the above-named contact persons. All notices or similar communications in regard to the terms of this Amended and Restated Sales Force Work Order are to be sent to the parties named in Section 16 of the Master Services Agreement.

C.	PROJECT TERM AND KEY DATES:


Project Start Date		July 31, 2002
Last Innovex Sales Representative Field Day		October 31, 2005
Project End Date		October 31, 2005

“Project Term” shall mean the period of time beginning on the Project Start Date and ending on the Project End Date.

D.	DEFINITIONS

“Day Worked” shall mean a day during which an Innovex Sales Representative Details or Presents to Prescribers, or attends scheduled Columbia training and/or specifically designated home study. A “Day Worked” by an Innovex District Manager shall mean a day during which the Innovex District Manager performs duties and responsibilities described in this Amended and Restated Sales Force Work Order. A “Day Worked” by an Innovex Field Coordinator shall mean a day during which the Innovex Field Coordinator performs duties and responsibilities described in this Amended and Restated Sales Force Work Order. Days Worked shall not include days on leave, holidays, sick days, or vacations.

“Detail” shall mean an interactive face-to-face contact by an Innovex Sales Representative with a Prescriber, during which a promotional message involving Prochieve 8%, Prochieve 4%, or Striant is given in accordance with the Promotional Program. When used as “Detail,” “Details,” “Detailing” or “Detailed,” it shall mean to engage in a Detail as defined herein.

“Innovex District Manager” shall mean an Innovex employee who is a district manager and who, among other things, manages and supervises Innovex Sales Representatives.

“Innovex Field Coordinator” shall mean an Innovex employee who, among other things, manages and supervises Innovex Sales Representatives with respect to personnel matters.

“Innovex National Field Coordinator” shall mean the Innovex employee who, among other things, manages and supervises the Innovex Field Coordinators.

“Innovex Sales Force” shall mean the Innovex Sales Representatives, Innovex Field Coordinators and the Innovex National Field Coordinator, individually and as a group, that have been assigned by Innovex to deliver Details and Presentations of Products in accordance with the terms of this Amended and Restated Sales Force Work Order.

[***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

“Innovex Sales Representative” shall mean an Innovex employee who has been trained and equipped to Detail and Present to Prescribers.

“Off-limits Prescriber” shall mean one of the Prescribers specifically identified by Columbia within an Innovex Sales Representative’s Territory that the Innovex Sales Representative is prohibited from contacting.

“Prescriber” shall mean physicians and other health care professionals legally authorized to write prescriptions for pharmaceutical products.

10.

“Presentation” shall mean an interactive face-to-face contact by an Innovex Sales Representative with a Prescriber or the Prescriber’s staff, during which a promotional message involving RepHresh or Advantage-S is given in accordance with the Promotional Program. When used as “Present,” “Presents,” “Presenting” or “Presented,” it shall mean to engage in a Presentation as defined herein.

11.

“Product” shall mean, individually and collectively, Prochieve 4%, Prochieve 8%, Advantage-S, RepHresh and Striant.

12.

“Promotional Material” shall mean the Product labeling and package inserts, sales aids, Detailing materials, Presentation materials, and other promotional support items provided by Columbia to Innovex for use in promotion of a Product.

13.

“Promotional Program” shall mean the marketing plan, strategy and promotional message for each Product, as provided by Columbia, which will include use of the Promotional Material.

14.

“Referral Message” shall mean the promotional message, as provided by Columbia, that any patient who has not become pregnant after three (3) cycles of treatment using clomiphene citrate together with Prochieve 8% should seek care of an assisted reproductive technology specialist for further treatment.

15.

“Target Prescriber” shall mean one of the specifically identified Prescribers within an Innovex Sales Representative’s Territory to be Detailed and Presented to by the Innovex Sales Representative.

16.

“Territory” shall mean the United States and Puerto Rico. In connection with an individual Sales Representative, the Territory shall be the geographic area assigned to the individual Sales Representative.

E.	INNOVEX RIGHTS, RESPONSIBILITIES AND OBLIGATIONS

Innovex Continuing Sales Force . As of the Effective Date of this Amended and Restated Sales Force Work Order, Innovex will provide the Innovex Sales Force

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composed of Innovex District Managers and Innovex Sales Representatives (the “Innovex Continuing Sales Force”) assigned to Work Orders #8795 and #8872 on the date immediately preceding the Effective Date. The Innovex Continuing Sales Force will perform the obligations of Innovex pursuant to this Amended and Restated Sales Force Work Order until the establishment of the Columbia Re-Aligned Sales Force in accordance with paragraph E(2) of this Amended and Restated Sales Force Work Order.

Columbia Re-Aligned Sales Force . Within thirty days of the Effective Date of this Amended and Restated Sales Force Work Order, Columbia, within its sole discretion but on the basis of analyses and recommendations of [***] , will determine the number and placement of districts and Territories for a nationwide sales force of Columbia district managers, Columbia sales representatives and Innovex Sales Representatives (the “Columbia Re-Aligned Sales Force”) and the Steering Committee will agree on a date within such thirty day period to terminate those members of the Innovex Continuing Sales Force that will not be part of the Columbia Re-Aligned Sales Force and institute the Columbia Re-Aligned Sales Force (the “Re-Alignment Date”). Columbia may, in its sole discretion and with no payment or other obligation to Innovex whatsoever (notwithstanding any other provision of this Amended and Restated Sales Force Work Order), hire directly any Innovex District Manager in the Innovex Continuing Sales Force to be a Columbia district manager in the Columbia Re-Aligned Sales Force. Innovex will provide to Columbia pursuant to this Amended and Restated Sales Force Work Order Innovex Sales Representatives equal in number to one-half the number of sales Territories established by Columbia on the Re-Alignment Date (the “Innovex Sales Representative Threshold”). The Innovex Sales Force which will constitute part of the Re-Aligned Sales Force may be recruited from within or without the Innovex Continuing Sales Force and will be selected in accordance with the provisions of paragraph E(3), below. Columbia will hire directly sales representatives for one-half the number of sales Territories established by Columbia on the Re-Alignment Date. Columbia will provide appropriate sales and marketing oversight of the Innovex Sales Force, including the provision of a Columbia national sales director and district managers. Beginning on the Re-Alignment Date, Columbia shall be entitled, in its sole discretion, to select, appoint and hire all district managers. Innovex will provide Innovex Field Coordinators and an Innovex National Field Coordinator for the Innovex Sales Force. Columbia may request that Innovex provide additional Innovex Sales Representatives for the Columbia Re-Aligned Sales Force by submitting a written request in substantially the form attached hereto as Exhibit 1, (“Additional Innovex Sales Representative Request Form”). If after the Re-Alignment Date Columbia in its sole discretion reduces the number of Territories to be covered by the Columbia Re-Aligned Sales Force below the number of Territories on the Re-Alignment Date, such reduction shall be allocated equally between the Innovex Sales Representatives and Columbia sales representatives. If after the Re-Alignment Date Columbia in its sole discretion increases the number of Territories to be covered by the Columbia Re-Aligned Sales Force from the number of Territories on the Re-Alignment Date, such increase may be made solely by Columbia hiring new sales representatives directly,

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with no obligation of Columbia to increase the number of Innovex Sales Representatives; provided, however, that (i) any increase in Territories made within the first three months after the Re-Alignment Date shall be allocated equally between the Innovex Sales Representatives and Columbia sales representatives and the Innovex Sales Representative Threshold shall be increased by the number of Innovex Sales Representative so added; or (ii) if the number of Innovex Sales Representatives at the time of such increase is less than the Innovex Sales Representative Threshold, then the increase shall be allocated equally between the Innovex Sales Representatives and Columbia sales representatives until such time as the number of Innovex Sales Representatives equals the Innovex Sales Representative Threshold. As the total number of district managers changes for the Columbia Re-Aligned Sales Force, Innovex Field Coordinators will also be added or removed in order to maintain a ratio Innovex Field Coordinators to district managers of no greater than 1:4 unless determined otherwise by the Steering Committee.

Recruitment .

Innovex shall be responsible for recruitment and re-recruitment (replacement) of the Innovex Sales Representatives and Innovex Field Coordinators in accordance with the Innovex Sales Force Qualifications described below, subject to Columbia’s approval of each Innovex Sales Representative and Innovex Field Coordinator. Innovex shall be responsible for the cost of recruitment, background checks and drug screens. Columbia shall approve or disapprove qualified candidates within five (5) business days after each qualified candidate is submitted to Columbia for final selection. A “qualified candidate” must meet the Innovex Sales Force Qualifications set forth in paragraph E(4) of this Amended and Restated Sales Force Work Order and, in the reasonable judgment of Columbia, be capable of Detailing and Presenting the Products to Prescribers and their staffs in an effective manner.

At Columbia’s request, Innovex will provide recruiting services to Columbia with regard to Columbia’s recruitment of its own, directly employed, field sales force. The scope and pricing of such services shall be determined by the Steering Committee.

Innovex Sales Force Qualifications . Innovex will exercise best efforts to recruit from a diverse candidate base. A qualified candidate for Innovex Sales Representative shall meet the following minimum qualifications: four-year college degree (B.A., B.S. or equivalent); minimum two years outside sales experience, preferably within pharmaceuticals and women’s health, endocrinology or urology. At least 50% of Innovex Sales Representative candidates shall have a minimum of one year of pharmaceutical sales experience.

Position Descriptions and Duties . Innovex shall evaluate the performance of the Innovex Sales Representatives, Innovex Field Coordinators, and the Innovex National Field Coordinator in accordance with the responsibilities and duties identified below,

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giving at least 60% weight in the evaluation of Innovex Sales Representatives to the ability to generate sales within the assigned Territory. All Innovex Sales Force employees shall demonstrate the following: work ethic and integrity; planning, organizing and territory management skills; strong interpersonal skills; excellent communication skills; critical thinking and analysis; problem solving; decisiveness; sound judgment; Columbia-focused selling skills; basic computer skills; ability to listen and learn.

In addition, the responsibilities of the Innovex Sales Representatives, Innovex Field Coordinators and the Innovex National Field Coordinator shall include the following:

Innovex Sales Representatives

•

Generate sales within the assigned Territory

•

Work a full 8 hours each field selling day

•

Achieve 90% or better on all product knowledge tests

•

Spend [***] of their Detailing time on Striant and [***] of their Detailing time on Prochieve 8% and Prochieve 4%

•

Make an average of [***] Details per day, calculated on a weekly basis, on the Target Prescribers within the Innovex Sales Representative’s call list for all products

•

Make an average of [***] pharmacy calls per day, calculated on a weekly basis, on the pharmacy target list within the Innovex Sales Representative’s Territory

•

Make an average of [***] calls per month on the [***] Striant Target Prescribers within the Innovex Sales Representative’s call list

•

Make an average of [***] calls per month on the [***] Prochieve 8% Target Prescribers within the Innovex Sales Representative’s call list

•

Make an average of [***] calls per month on the [***] Prochieve 4% Target Prescribers within the Innovex Sales Representative’s call list

•

Make one call per month on the remaining Target Prescribers within the Innovex Sales Representative’s call list up to the required call frequency

•

Make a full office staff Presentation (including OTC Products) on every call

•

Make laptop call note entries throughout each day (8:00 A.M—5:00 P.M.)

•

Synchronize his/her laptop a minimum of 1 time per day

•

Accurately document what takes place on every call, as well as specific plans for the next call. Maintain and update current and prospective Target Prescriber profiles. (Call notes must be a succession of documentation, highlighting objectives, accomplishments, issues, objections and success planning.)

•

Check e-mail twice per day

•

Check voice mail three times per day

•

Avoid all contact whatsoever with Off-limits Prescribers

•

Keep current with market knowledge and competitive products

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•

Avoid any comparison or reference to Crinone ^® (progesterone gel) products marketed by Serono, Inc.

•

Maintain a professional image for Columbia and Columbia Products

•

Participate in all training and sales meetings

•

Plan and organize Territory to meet sales and call Target Prescribers

•

Make sales presentations (Details and Presentations) – individual, one-on-one, in-services

•

Deliver the Referral Message with each Detail of Prochieve 8%

•

Comply with the Prescription Drug Marketing Act and other applicable laws

•

Make complete, accurate and timely submission of all time-keeping, call activity and expense reports

•

Meet all specified timelines for submitting weekly reports, expense reports, and all other project specific reports

•

Comply with Promotional Program, and proper use of Promotional Materials

•

Participate or coordinate “Lunch & Learns,” dinner programs, weekend events, as appropriate

•

Have appropriate interaction with co-promotional partners or counterparts

Innovex Field Coordinators

•

Assist with recruitment of Innovex Sales Representatives and Columbia Sales Representatives

•

Handle initial 120 day and annual performance reviews, personnel issues, discipline and termination of Innovex Sales Representatives

•

Review and approve expense reports; monitor compliance with expense policies

•

Assess and monitor field activity and work schedules; monitor and manage field reporting; implement performance or disciplinary plans.

•

Communicate with Columbia district managers on a regular and timely basis

•

Assist with the planning and delivery of training, and periodic sales meetings

•

Monitor time-keeping and attendance

•

Monitors compliance with the Prescription Drug Marketing Act, other applicable laws and sample accountability procedures as applicable

Innovex National Field Coordinator

•

Manage and supervise Innovex Field Coordinators

•

Monitor compliance with Innovex Sales Representative re-recruitment process, including maintaining recruit profile integrity and ensuring Columbia review of recruits

•

Track call activity

•

Ensure appropriate billing (both estimates and actuals)

•

Draft, compile and deliver monthly reports

•

Serve as Columbia’s main point of contact

•

Ensure appropriate follow-up on personnel and performance related issues

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Innovex Sales Force Compensation; Benefits . Innovex shall administer the compensation plan for the Innovex Sales Force with a combination of salary and variable incentive (bonus). The Steering Committee shall establish a target average salary and salary matrix, which recognizes greater experience and training, and preferred selection criteria. The terms and conditions of a variable incentive compensation plan for the Innovex Sales Force (“Incentive Plan”) shall be determined by Columbia, including eligibility criteria and performance targets. The plan may also include incentive awards such as trips and prizes. Innovex shall administer the Incentive Plan and pay the incentive compensation and awards in accordance with the Incentive Plan. Innovex Sales Force employees shall be eligible to receive an auto allowance, and shall be entitled to participate in the Innovex employee benefit plans for health and dental care, 401K, in accordance with Innovex eligibility criteria.

Training and Periodic Sales Meetings . Innovex shall facilitate the participation of the Innovex Sales Force in Columbia’s training of the Innovex Sales Force, backfill training of replacement Innovex Field Coordinators and Innovex Sales Representatives and all follow-up training, including periodic sales meetings. Columbia may request Innovex’s participation in the delivery of training and Innovex will provide such services on a time and materials basis as the parties may agree. In all cases, Innovex may have other appropriate personnel monitor and observe Columbia training (solely for purposes relating to the marketing of Products hereunder) at Innovex’s sole cost and expense. Innovex may have Innovex Sales Force members participate in the Innovex Leadership Development Program at Innovex’s sole cost and expense.

Promotional Activities . Columbia shall be responsible for managing and monitoring the promotional activities of the Innovex Sales Force. The Innovex Sales Force shall engage in promotional activities in strict adherence to the Promotional Program and using only the Promotional Materials provided by Columbia. Innovex Sales Representatives shall not be permitted to develop, create or use any other promotional material or literature in connection with the promotion of the Products. The Innovex Sales Representatives will be required to immediately cease the use of any Promotional Materials when instructed to do so by Columbia. Columbia shall monitor that Promotional Materials are not changed, (including, without limitation, by underlining or otherwise highlighting any text or graphics or adding any notes thereto) by the Innovex Sales Representatives. Innovex Sales Representatives shall be required to limit their statements and claims regarding Product, including as to efficacy and safety, to those which are consistent with the Product labels, package inserts and Promotional Materials. The Innovex Sales Representatives shall not be permitted to add, delete or modify claims of the efficacy or safety in the promotion of the Products, nor shall the Innovex Sales Representatives be permitted to make any untrue or misleading statements or comments about the Products or any Columbia competitors or competitor products. Innovex Sales Representatives shall be prohibited from (i) contacting Off-limits Prescribers and (ii) making comparisons or references to Crinone® products.

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Project Reports . Innovex shall provide Columbia a monthly Project Report in respect of the activities of the Innovex Sales Force, which shall include: (i) headcount, reported nationally, by district and Territory; vacancy rates, turnover, personnel transfers to Columbia, status of recruitment/hiring update; (ii) project status, milestones, and progress toward achieving objectives; (iii) call averages by district and nationally, (iv) financial accountability, tracking expenses against budget; and (v) call reporting on a Territory-by-Territory basis, including reach and frequency, calls during the period on [***] Striant physicians, [***] Prochieve 8% physicians, [***] Prochieve 4% physicians, pharmacies; office calls vs. physician calls; and times of call note entries.

10.

Reporting by Innovex Sales Representatives . Innovex Sales Representatives shall be required to report all field activities and expenditures to district managers and Innovex Field Coordinators in a manner that is timely, accurate and honest, and in accordance with policies and procedures for the applicable reporting systems. Columbia district managers and Innovex Field Coordinators shall routinely reinforce the importance of compliance with the reporting guidelines and policies (e.g. sample accountability, call reporting, promotional budget expenditures, travel expenses). Newly hired Innovex Sales Representatives shall receive training on the reporting systems, guidelines and policies during the initial sales training program.

11.

SFA and Call Reporting . Innovex shall provide a sales force automation tool, including automated call reporting functions. Innovex shall equip the Innovex Sales Force with computer hardware and software, and shall bear the cost of database and system administration, licenses, access to data/replication lines, help desk support, and training of the Innovex Sales Force in proper use of the computers and software.

12.

Management and Discipline of the Innovex Sales Force . Columbia shall be responsible for managing the sales and marketing activities of the Innovex Sales Force. Innovex, in light of its human resources responsibilities, shall have sole authority to remove employees from the Innovex Sales Force. The Steering Committee may establish minimum sales criteria for an Innovex Sales Representative to continue employment on the Innovex Sales Force. In conformance with Innovex policy, Innovex shall provide appropriate employee counseling and discipline, up to and including termination, on its own initiative and upon the reasonable request of Columbia, to Innovex Sales Force members who violate employment rules and who are otherwise under performing their job responsibilities. Innovex will promptly follow-up on any reports made by Columbia of Innovex Sales Force member non-compliance and will apply such counseling or discipline as may be warranted in Innovex’s judgment consistent with Innovex’s prior employment practices and the reasonable requests of Columbia.

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13.

Business Cards; Detail Bags . Innovex shall supply the Innovex Sales Force with business cards, the content of which shall be subject to approval by Columbia, such approval not to be unreasonably withheld. Innovex shall supply the Innovex Sales Force with Detail bags. Columbia shall provide Innovex with camera ready artwork of Columbia’s logo or other content Columbia wishes to include on the business cards.

14.

Innovex Sales Force Performance. If the average number of combined prescriptions for Prochieve 4%, Prochieve 8% and Striant in September, 2004, for the Innovex Sales Representatives based upon monthly IMS data is less than [***] , the parties will meet on or before October 31, 2004, to discuss corrective measures or termination of this Amended and Restated Sales Force Work Order. The parties shall consider all relevant factors, including, but not limited to, the analogous performance of the Columbia sales representatives, overall sales of the Products, entry of competitors (generic or branded), etc.

F.	COLUMBIA RIGHTS, RESPONSIBILITIES AND OBLIGATIONS

Promotional Program and Promotional Materials . Columbia shall be responsible for providing a Promotional Program and Promotional Materials that (i) will not involve the counseling or promotion of a business arrangement that violates federal or state law; (ii) will be in compliance with the PhRMA Code on Interactions with Healthcare Professionals; and (iii) shall not require or encourage the Innovex Sales Representatives to offer, pay, solicit or receive any remuneration from or to Prescribers to induce referrals or to purchase Product.

Training and Periodic Sales Meetings .

Columbia shall be responsible for the following:

•

Programming, materials and facilities for initial Innovex Sales Force training. The initial training agenda shall include time designated for Innovex training regarding personnel management, compensation and benefits and field administration.

•

Programming, materials and facilities for periodic sales meetings or product launch meetings as designated by Columbia.

Any reasonable, documented and approved expenses incurred by Innovex in conjunction with the Innovex Sales Force training shall be a Pass-Through Expense to Columbia.

Sales Data . Columbia shall be solely responsible for obtaining historic and ongoing sales data regarding the Products. Columbia shall be solely responsible for paying any applicable per representative fee required by any third party. Upon execution of this Amended and Restated Sales Force Work Order, Innovex will provide Columbia with the historic data used to size and structure the Innovex Sales Force. Columbia shall provide Innovex with on going monthly IMS Xponent Data at the territory level for all sales representatives, Innovex and Columbia.

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Innovex Sales Force Travel Expenses . Columbia shall be responsible for all reasonable Innovex Sales Force travel, lodging and meal expenses, when necessary, documented, and actually incurred by the Innovex Sales Force.

No Recruitment . Through the Project End Date and for one year thereafter, neither party shall attempt to actively recruit or solicit any personnel of the other party without the prior written consent of such party; except as otherwise provided herein and provided that, notwithstanding the foregoing, a party shall be permitted to engage in general recruitment through advertisements or recruiting through head-hunters so long as Innovex employees and personnel or Columbia employees and personnel, as the case may be, are not specifically targeted.

Ancillary Services . Columbia may, upon 60 days prior notice to Innovex, assume direct responsibility for call reporting, sample accountability and reporting, and computers and support services related to the Innovex Sales Force.

G.	FEES AND PASS-THROUGH EXPENSES

Daily Fees . As of the Effective Date of this Amended and Restated Sales Force Work Order, Columbia shall pay Innovex a Daily Fee for each Day Worked by an Innovex Sales Representative of [***] , and each Day Worked by an Innovex District Manager of [***] . As of the Re-Alignment Date, Columbia shall pay Innovex a Daily Fee for each Day Worked during the Project Term by each Innovex Sales Representative, each Innovex Field Coordinator, and the Innovex National Field Coordinator respectively as follows: [***] . In order to adjust for Innovex’s unamortized expenses incurred, the parties agree to renegotiate the Sales Representative Daily Fee when and if the number of Innovex Sales Representatives becomes [***] above or below the Innovex Sales Representative Threshold.

The estimated Days Worked per year for each Innovex Sales Representative and Innovex Field Coordinator is [***] days. The Daily Fees may be increased only with the prior written approval of Columbia; provided, however, that Innovex shall have no obligation to raise Innovex Sales Force salaries without Columbia’s agreement to raise the amount of such Daily Fees.

Salary Adjustments . The parties hereto hereby acknowledge and agree that the Daily Fees set forth above are based upon an assumed average annual salary per Innovex Sales Representative of [***] . To the extent the Innovex Sales Representatives average salary is above or below [***] (annualized) in any calendar month (or part thereof), Columbia shall pay to, or receive a credit from, Innovex in an amount equal to (i) the amount by which the average salary compensation earned by the Innovex Sales Representatives is greater or less than that amount, plus (ii) an amount equal to [***] of such amount for Innovex’s employer costs (payroll taxes, benefits).

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Recruiting Fee . For each Sales Force Member recruited by Innovex for backfill, Columbia shall pay Innovex a recruiting fee of [***] , up to a maximum of [***] . After this backfill maximum fee is reached, further backfill recruiting shall be at Innovex’s sole cost and expense. Notwithstanding anything else herein to the contrary, the [***] fee shall always be due where the backfill is necessitated by Columbia’s hiring of a member of the Innovex Sales Force or for any recruiting to fill a newly established Territory and the fee in such cases shall not be subject to, or counted against, the maximum fee set forth herein.

Take-On Fee .

Individual Innovex Sales Force Members . Innovex may charge Columbia a fee for each Innovex Sales Force member that becomes employed by Columbia or an affiliate during the Project Term (or six months thereafter if Columbia does not exercise its rollover rights with respect to such member under paragraph G(2)(b) of this Amended and Restated Sales Force Work Order), provided however, that Columbia may only hire an Innovex Sales Force member during such period upon providing Innovex 15 days notice of Columbia’s desire to so hire and, in the case of Innovex Sales Representatives only upon Innovex express consent. For each such hire, Columbia shall pay Innovex a one-time fee consisting of the following: [***] before October 31, 2004, and [***] thereafter, respectively, of the employee’s Innovex annual salary, as in effect immediately prior to such employee’s hiring by Columbia. These amounts shall be included in Innovex’s regular invoicing.

(i)

Use of Take-on Fees . Innovex, in its sole discretion, may make the fees paid by Columbia under paragraph G(2)(a) of this Amended and Restated Sales Force Work Order available for the Innovex Sales Force retention initiatives as may be warranted and prudent during the Project Term. The Steering Committee may make recommendations to Innovex on such expenditures.

Innovex Sales Force Rollover . Columbia may hire directly any member of the Innovex Sales Force contemporaneously with the Project End Date by providing Innovex 90 days notice and without any payment to Innovex, whatsoever.

Pass-Through Expenses . Attachment A to this Amended and Restated Sales Force Work Order sets forth certain expenses which are “Pass Through Expenses.” Columbia shall reimburse Innovex for any such Pass Through Expenses in accordance with the terms and conditions of this Amended and Restated Sales Force Work Order.

Incentive Plan Administration . Columbia shall pay Innovex an amount equal to (i) the amount of all non-salary compensation earned by Innovex Sales Force members in accordance with the terms of the Incentive Plan or the amount of other compensation

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otherwise requested by Columbia to be paid to the Innovex Sales Force; and (ii) an amount equal to [***] of such non-salary compensation for Innovex’s employer costs (payroll taxes, benefits).

SFA Fees . For Innovex’s provision of SFA services as set forth in paragraph E(11) of this Amended and Restated Sales Force Work Order, Columbia shall pay a monthly service fee in the amount of [***] per Innovex Sales Representative, Innovex Field Coordinator, and the Innovex National Field Coordinator on staff during such month through the Project End Date. Columbia shall also pay Innovex [***] per month for each Columbia sales representative, Columbia district manager and other employee of Columbia using the SFA system during such month. Provided, however, that the parties agree to renegotiate the monthly fee of [***] , when and if the number of monthly users (i) is reduced to fewer than 60, or (ii) increased to more than 135.

Payment Schedule . Innovex shall send Columbia an itemized list of estimated costs for each month ten (10) days in advance, including all incentive compensation and related employer costs, a list of the estimated billable Innovex Sales Force personnel and the estimated total number of Days Worked multiplied by the respective Daily Fee rate and all estimated Daily Fees, Take-on Fees and Pass-Through Expenses on a Territory-by-Territory basis, and a district by district basis. Columbia shall pay the estimated monthly charge on the first day of the month by wire transfer to the account designated by Innovex. At the end of each calendar month Innovex shall provide Columbia with an itemized list of the actual billable Innovex Sales Force personnel and the actual total number of Days Worked multiplied by the respective Daily Fee rate and all Daily Fees, Take-on Fees and Pass-Through Expenses on a Territory-by-Territory basis, and a district-by-district basis. Innovex shall add any underpayment to, and deduct any overpayment from, the next estimate sent to Columbia, with a final true-up payment to be made with respect to the last month of the Project Term 30 days after the Project End Date. The format of the Innovex estimates and invoices should conform in all respects, except invoices shall also contain full details of all expenses reported by Innovex employees other than Innovex Sales Representatives. The parties shall use good faith efforts to reconcile any disputed amount as soon as practicable. One half of any amount in dispute for more than 30 days shall be credited against the next estimate (provided the amount in dispute was paid by Columbia based on a previous estimate) sent to Columbia and remain as a credit until the dispute is resolved.

Fourth Quarter 2003 Rates . On or before January 31, 2004, Innovex shall credit Columbia with an amount equal to [***] of the aggregate amount of Daily Fees in Innovex invoices for services rendered from October 1, 2003 through December 31, 2003, for Work Orders #8795 and #8872, which shall be no less than [***] .

June 2004 Performance Bonus . If the average number of combined prescriptions for Prochieve 4%, Prochieve 8% and Striant in June 2004 for the Innovex Sales Representatives based upon monthly IMS data is [***] or greater, Columbia will make a payment to Innovex on or before August 15, 2004, in an amount equal to [***] .

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10.

Changes in Scope; Additional Services . All prices and costs contained in this Amended and Restated Sales Force Work Order are subject to revision as agreed by Columbia and Innovex to reflect changes in the scope of services being provided by Innovex. Additional services will be provided at Innovex’s normal and customary rates.

11.

Expense Allocation Chart . The financial responsibility of Innovex and Columbia for expenses and costs of Innovex Sales Force operation shall be allocated in accordance with the terms of this Work Order, which are summarized for illustrative purposes in the “Innovex Sales Force Expense Allocation” chart (Attachment A). On or before February 27, 2004, Innovex shall make an accounting for, and credit to, Columbia all phone, postage, supplies, miscellaneous charges, and auto costs in the Territories that were paid by Columbia under Work Orders #8795 and #8872 if, and to the extent, such costs and expenses exceed [***] and such expenses were not otherwise approved by Columbia.

H.	ADDITIONAL TERMS

Steering Committee . Columbia shall make all decisions with respect to the strategy for the marketing and promotion of the Products. However, other issues may arise under the terms of this Amended and Restated Sales Force Work Order or between the parties while operating under this Amended and Restated Sales Force Work Order which are appropriate for consultation between the parties to ensure maximum productivity of the Innovex Sales Force, including, but not limited to, the establishment of work rules or the response to greater than expected Innovex Sales Force turnover or lower than expected Innovex Sales Force performance, and other changing market conditions. The parties shall, therefore, establish a Steering Committee, chaired by Columbia and consisting of up to three (3) members from each party. The chairperson’s duties shall include site selection, logistics, agenda and facilitation; provided however, that an Innovex Committee member may submit agenda items to the Chair and such items shall be included in the next regular meeting of the Steering Committee. The initial Innovex members are Tony Yost, Daryl Gaugler, and Ed Heimers, and the initial Columbia members are Fred Wilkinson (chair), Meg Coogan, and Bill Reggio. A member of the Committee may be removed and replaced at any time, with or without cause, and replaced by the party that appointed such member. The Committee shall meet at least monthly, or otherwise at the call of the chairperson to review, coordinate, and discuss issues regarding the Project. In addition, the Committee shall review and attempt to resolve issues pertaining to this Amended and Restated Sales Force Work Order. The members of the Committee will use reasonable efforts to reach consensus on all decisions. For decisions concerning the day-to-day operations of the Re-Aligned Sales Force (such as discretionary spending for promotional expense monies, incentive compensation payments, revision of Sales Force responsibilities), for which the Steering Committee cannot reach consensus, the chair shall cast the deciding vote. Notwithstanding anything else to the contrary, the Steering Committee shall have no authority to alter the basic economic terms of this Amended and Restated Work Order, including the pricing terms, the number of members of the Innovex Sales Force, and the Project End Date.

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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

In Witness Whereof, Columbia and Innovex have each caused this Amended and Restated Sales Force Work Order #8795 to be duly executed on their behalf by their authorized representatives and made effective as of Effective Date of Work Order appearing above.

Accepted and Agreed to by:


C OLUMBIA L ABORATORIES , I NC .		I NNOVEX , I NC .

/S/ Fred Wilkinson		/S/ Anthony J Yost
By:	Fred Wilkinson	By:	Anthony J Yost
Title:	President & CEO	Title:	President
Date:	January 26, 2004	Date:	January 26, 2004

[***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Attachment A to Sales Force Work Order

SALES FORCE EXPENSE ALLOCATION

Project # 8795


Category	Innovex Direct Expenses	PassThrough Expenses	Columbia Direct Expenses

Salary, including payroll taxes, for Innovex Sales Representatives, Innovex Field Coordinators and the Innovex National Field Coordinator. Incentive compensation for Innovex Field Coordinators, compensation for the Innovex National Field Coordinator.	X

Incentive compensation (bonus) for Innovex Sales Representatives, plus [***]		X

Benefits package, including (401k), medical, dental, Rx, vacation, holidays	X

Auto Costs in Territory, including monthly allowance, mileage reimbursement, parking and tolls.	X

Basic Business Expenses in Territory, including phone, paper supplies, postage and voice mail.	X

Business Cards & Detail Bags for Innovex Sales Force members	X

Call Reporting; SFA	X

Computers for Innovex Sales Representatives, including software, helpdesk support, data/replication lines	X

Computers for FCs, NFC, including software, helpdesk support, data/replication lines	X

Infrastructure support (operations, HR, finance, legal)	X

Liability Insurance: employment, workers comp, E & O, CGL, auto	X

Recruitment and re-recruitment, includes drug screens, background and motor vehicle checks	X

Meetings: Columbia national, regional and district meetings; product launches		X

Access Money, Lunch and Learn and Speaker Programs		X

Promotional Program and Promotional Materials (sales aids)			X

Promotional marketing expenses, including sales data			X

Training program, materials and facilities; initial and follow-up			X

Travel Expenses (air, hotel, meals, T&E) for Innovex Sales Representatives, Innovex Field Coordinators, and the Innovex National Field Coordinator * Interviewing * Territory travel for field management purposes		X

[***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT 1 to Amended and Restated Sales Force Work Order

ADDITIONAL INNOVEX SALES REPRESENTATIVE REQUEST FORM

This Request for Additional Innovex Sales Representative is issued pursuant to the Master Sales Services Agreement between Columbia and Innovex LP, dated as of July 31, 2002, and Amended and Restated Sales Force Work Order #8795, dated as of January 16, 2004.


PART 1		To be completed by Columbia Attach any relevant, helpful information
NUMBER OF SALES REPS. REQUESTED

TERRITORY LOCATION(S)

REQUESTED START DATE

AUTHORIZED COLUMBIA REPRESENTATIVE SUBMITTING REQUEST		Signature: Name: Title: Date: Phone: Fax:

PART 2		To Be Completed by Innovex *Innovex shall respond within ten (10) business days after receipt of the Additional Innovex Sales Representatives Request.*

This Additional Innovex Sales Representative Request Form was Received by Innovex on the following date:		Request is Accepted, and Recruitment shall begin immediately: (sign and date) Contact Person: Phone:

		Request is Not Accepted (identify above information which must be clarified or changed before Request may be accepted by Innovex): (sign and date) Contact Person: Phone:

[***] A CONFIDENTIAL PORTION OF THE MATERIAL HAS BEEN OMITTED AND FILED

SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Exhibit 10.46

INDEMNIFICATION AGREEMENT

This Agreement is made and entered into this day of , 2004 (“Agreement”) by and between Columbia Laboratories, Inc., a Delaware corporation (“Corporation”) and (“Indemnitee”).

WHEREAS the Board of Directors (the “Board”) has determined that the best interests of the Corporation require that persons serving as directors of, and in other capacities for, the Corporation receive better protection from the risk of claims and actions against them arising out of their service to and activities on behalf of such corporations; and

WHEREAS, this Agreement is a supplement to and in furtherance of Article VI of the amended and restated by-laws of the Corporation, any rights granted by the Certification of Incorporation of the Corporation and any resolutions adopted pursuant thereto and shall not be deemed to be a substitute therefore nor to diminish or abrogate any rights of the Indemnitee thereunder; and

WHEREAS, Indemnitee is willing to serve, continue to serve and take on additional service for or on behalf of the Corporation on the condition that Indemnitee be indemnified according to the terms of this Agreement;

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Corporation and Indemnitee do hereby covenant and agree as follows:

Section 1. Definitions .

For purposes of this Agreement:

(a) “Change in Control” shall be deemed to have occurred if (a) there shall have consummated (i) any consolidation or merger of Company in which Company is not the continuing or surviving entity or pursuant to which shares of Company’s common stock would be converted to cash, securities or other property, other than a merger of Company in which the holders of Company’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving entity immediately after the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the company; or (b) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as that term is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as amended (the “Exchange Act”)) shall become a beneficial owner (within the meaning of Rule 13d-2 under the Exchange Act) of 40% or more of Company’s outstanding common stock; or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Company’s stockholders, of each new director was approved by a vote of at least 50% of the directors eligible to vote who were directors at the beginning of the period.

(b) “Disinterested Director” means a director of the Corporation who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(d) “Expenses” mean all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements and expenses of the type customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

(e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Corporation or Indemnitee in any other matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Corporation or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(f) “Proceeding” means an action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee pursuant to Section 11 of this Agreement to enforce Indemnitee’s rights under this Agreement.

Section 2. Services by Indemnitee .

Indemnitee agrees to serve as an officer or director of the corporation, and, at its request, as a director, officer, employee, agent or fiduciary of certain other corporations and entities. Indemnitee may at any time and for any reason resign from any such position (subject to any other contractual obligation or any obligation imposed by operation of law).

Section 3. Indemnification - General .

The Corporation shall indemnify, and advance Expenses to, Indemnitee as provided in this Agreement to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may thereafter from time to time permit. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement.

Section 4. Proceeding Other Than Proceedings by or in the Right of the Corporation .

Indemnitee shall be entitled to the rights of indemnification provided in this Section if, by reason of Indemnitee’s employment or service as an officer or director, Indemnitee is, or is threatened to be made, a party to any threatened, pending or completed Proceeding, other than a

Proceeding brought by or in the right of the Corporation to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement, actually and reasonable incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal Proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful.

Section 5. Proceedings by or in the Right of the Corporation .

Indemnitee shall be entitled to the rights of indemnification provided in this Section if, by reason of his Corporate Status, Indemnitee is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Corporation to procure a judgment in its favor. Pursuant to this Section, Indemnitee shall be indemnified against Expenses, judgments, penalties, fines and amounts paid in settlement, actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation. Notwithstanding the foregoing, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in any such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Corporation if applicable law prohibits such indemnification unless the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that indemnification against Expenses may nevertheless be made by the Corporation.

Section 6. Indemnification for Expenses of a Party Who is Wholly or Partly Successful .

Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s employment or service as an officer or director, a party to and is successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Corporation shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each successfully resolved claim, issue or matter. For the purposes of this Section and without limiting the foregoing, the termination of any claim, issue or matter in any such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 7. Indemnification for Expenses of a Witness .

Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of Indemnitee’s employment or service as an officer or director, a witness in any Proceeding, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

Section 8. Advancement of Expenses .

The Corporation shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within thirty (30) days after the receipt by the Corporation of a statement or statement from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses.

Section 9. Procedure for Determination of Entitlement to Indemnification .

(a) To obtain indemnification under this Agreement in connection with any Proceeding, and for the duration thereof, Indemnitee shall submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Corporation shall, promptly upon receipt of any such request for indemnification, advise the board in writing that Indemnitee has requested indemnification.

(b) Upon written request by Indemnitee for indemnification pursuant to Section 9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in such case: (i) if a Change in Control shall have occurred, by Independent Counsel (unless Indemnitee shall request that such determination be made by the Board or the stockholders in the manner provided for in clauses (ii) or (iii) or this Section 9(b)) in written opinion to the Board, a copy of which shall be delivered to Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the Board by a majority vote of a quorum consisting of Disinterested Directors, or (B) if a quorum of the Board consisting of Disinterested Directors is not obtainable, or even if such quorum is obtainable, if such quorum of Disinterested Directors so directs, either (x) by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee, or (y) by the stockholders of the Corporation, as determined by such quorum of Disinterested Directors, or a quorum of the Board, as the case may be; or (iii) as provided in Section 10(b) of this Agreement. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within thirty (30) days after such determination. Indemnitee shall cooperate with the persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such persons or entity upon request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the persons or entity making such determination shall be borne by the Corporation (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Corporation hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

(c) If required, Independent Counsel shall be selected as follows: (i) if a Change of Control shall not have occurred, Independent Counsel shall be selected by the Board by a majority vote of a quorum consisting of Disinterested Directors and the Corporation shall give written notice to Indemnitee advising Indemnitee of the identity of Independent Counsel so selected; or (ii) if a Change of Control shall have occurred, Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board, in which event (i) shall apply), and Indemnitee shall give written notice to the Corporation advising it of the identity of Independent Counsel so selected. In either event, Indemnitee or the Corporation, as the case may be, may, within seven (7) days after such written notice of selection shall have been given, deliver to the Corporation or to Indemnitee, as the case may be, a written objection to such selection. Such objection may be asserted only on the ground that Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is made, Independent Counsel so selected may not serve as Independent Counsel unless and until a court has determined that such objection is without merit. If, within twenty (20) days after submission by Indemnitee of a written request for indemnification pursuant to Section 9(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Corporation or Indemnitee may petition the Court of Chancery of the State of Delaware, or any court in the State of New Jersey in which such petition would be cognizable, for resolution of any objection which shall have been made by the Corporation or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by such court or by such other person as such court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 9(b) hereof. The Corporation shall pay any and all reasonable fees and expenses incurred by such Independent Counsel in connection with its actions pursuant to this Agreement, and the Corporation shall pay all reasonable fees and expenses incident to the procedures of this Section 9(c) regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement date of any judicial proceeding pursuant to Section 11(a)(iii) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

Section 10. Presumptions and Effects of Certain Proceedings .

(a) If a Change in Control shall have occurred, in making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Corporation shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption.

(b) The person or entity empowered or selected under Section 8 of this Agreement shall make the determination of whether Indemnitee is entitled to indemnification as soon as practicable after receipt by the Corporation of the request therefore.

(c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

Section 11. Remedies of Indemnitee .

(a) In the event that (i) a determination is made pursuant to Section 9 or 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) the determination of entitlement to indemnification is made by Independent Counsel pursuant to Section 9 of this Agreement and such determination shall not have been made and delivered in a written opinion within ninety (90) days after receipt by the Corporation of the request for indemnification, (iv) or (iv) payment of indemnification is not made within thirty (30) days after such determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Sections 9 or 10 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware or the State of New Jersey, of Indemnitee’s entitlement to such indemnification or advancement of Expenses. Indemnitee shall commence such proceeding seeking an adjudication or an award within one hundred eighty (180) days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a).

(b) In the event that a determination shall have been made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section shall be conducted in all respects as a de novo trial and Indemnitee shall not be prejudiced by any reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding commenced pursuant to this Section the Corporation shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made or deemed to have been made pursuant to Section 9 or 10 of this Agreement that Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to this Section, absent (i) a misstatement by Indemnitee or Indemnitee’s representative of a material fact, or an omission of any material fact necessary to make Indemnitee’s or Indemnitee’s representative’s statement not materially misleading, in connection with the request for indemnification, or (ii) prohibition of such indemnification under applicable law.

(d) The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Corporation is bound by all the provisions of this Agreement.

(e) In the event that Indemnitee, pursuant to this Section, seeks a judicial adjudication of Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Corporation and shall be indemnified by the Corporation against, any and all expenses (of the kinds described in the definition of Expenses) actually and reasonably incurred by Indemnitee in such judicial adjudication, but only if Indemnitee prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated.

Section 12. Non-Exclusivity; Survival of Rights; Insurance Subrogation .

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation or by-laws of the Corporation, any agreement, a vote of stockholders or resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to any Indemnitee with respect to any action taken or omitted by such Indemnitee in Indemnitee’s employment or service as an officer or director prior to such amendment, alteration or repeal.

(b) To the extent that the corporation maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Corporation, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies.

(c) In the event of any payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights.

(d) The Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

Section 13. Duration of Agreement .

This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a director, officer, employee, agent or fiduciary of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Corporation; (b) the final termination of all pending Proceedings in respect of which Indemnitee

is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement. This Agreement shall be binding upon the Corporation and its successors and assigns and shall inure to the benefit of Indemnitee and Indemnitee’s heirs.

Section 14. Severability .

If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

Section 15. Exception to Right of Indemnification or Advancement of Expenses .

Except as provided in Section 11(e), Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding, or any claim therein, brought or made by Indemnitee against the Corporation. For the purposes of this Section 15, a Proceeding in the right of the Corporation shall not be deemed to constitute a Proceeding brought or made by the Corporation.

Section 16. Identical Counterparts .

This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 17. Headings .

The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

Section 18. Modification and Waiver .

No supplement, modification or amendment to this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

Section 19. Notice by Indemnitee .

Indemnitee agrees promptly to notify the Corporation in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder.


	COLUMBIA LABORATORIES, INC.

	By:
, Indemnitee		Name:
		Title:

I, [name], [title], certify that the Board of Directors has authorized the Corporation to enter into this Agreement by a resolution unanimously passed at its [date] meeting.



Name:
Title:

Exhibit 10.47

EXECUTIVE CHANGE OF CONTROL SEVERANCE AGREEMENT

THIS EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENT dated as of , 2004 (as the same may be amended, restated, supplemented or otherwise modified from time to time hereafter, this “Agreement”), is entered into between Columbia Laboratories, Inc., a Delaware corporation having its corporate offices at 354 Eisenhower Parkway, Livingston, New Jersey (“Columbia” or the “Company”), and (“Executive”).

WITNESSETH :

WHEREAS, the Company desires to create a greater incentive for Executive to remain in the employ of the Company, particularly in the event of any possible change or threatened change in control of the Company; and

NOW THEREFORE, in partial consideration of Executive’s past and future services to the Company and the mutual covenants contained herein, the parties hereby agree as follows:

Termination Following A Change in Control

(a) Qualifying Termination . Executive shall be entitled to the compensation and benefits listed in Paragraph 1(b), in addition to compensation and benefits to which Executive would otherwise be entitled as of the date of termination, if Executive’s employment with the Company is terminated either (i) by the Company for any reason other than for Cause or (ii) by Executive for Good Reason, in each case within 90 days before a Change in Control or within one year following the occurrence of any Change in Control or successive Change of Control that occurs and Executive properly executes, and does not revoke or attempt to revoke, a valid and reasonable release of claims against the Company, its affiliates and their employees and agents.

(b)

Compensation and Benefits .

(i) Lump Sum Payment . Within ten business days after a Qualified Event (or the last day of any period during which any release may be revoked by Executive), the Company shall make a lump sum cash payment to Executive, subject to any mandatory tax withholding, equal to one times Executive’s Base Salary and Bonus for the year prior to the Change in Control plus a lump sum payment equal to the value of the Fringe Benefits provided to Executive for the year prior to the Change in Control.

(ii) Excise Tax Gross-Up Payment . In the event it shall be determined that any payment or distribution of any type to or for the benefit of the Executive directly or indirectly by the Company, any affiliate of the Company, any person who acquires ownership or effective control of the company or ownership of a substantial portion of the company’s assets (within the meaning of Section 280G of the Internal

Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder) or any affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.

Definitions .

(a) Bonus . “Bonus” shall mean the greater of (i) the bonus, if any, paid to Executive in the year prior to the Qualifying Termination, (ii) the bonus, if any, paid to Executive in the year prior to the Change in Control, or (iii) the Executive’s target bonus at the time of the Change in Control.

(b) Base Salary . “Base Salary” shall mean the greater of (i) the annual rate of base salary in effect for Executive at the time of the Qualifying Termination or (ii) the annual rate of base salary in effect for Executive at the time of the Change in Control.

(c) Cause . “Cause” shall mean termination based on (i) gross negligence, recklessness or malfeasance in the performance of Executive’s duties; (ii) Executive committing any criminal act; (iii) Executive committing any act of fraud or other material misconduct resulting or intending to result directly or indirectly in gain or personal enrichment at the expense of Company; (iv) Executive willfully engaging in any conduct relating to the business of Company that could reasonably be expected to have a materially detrimental effect on the business or financial condition of the Company; (v) misconduct which materially discredits or damages Company, or violates Company’s policies or procedures, after Company has notified Executive of the actions Company deems to constitute non-compliance; (vi) Executive materially breaches Executive’s obligations relating to confidential information, non-solicitation and non-competition.

(d) Change In Control . “Change in Control” shall have occurred if (a) there shall have consummated (i) any consolidation or merger of Company in which Company is not the continuing or surviving entity or pursuant to which shares of Company’s common stock would be converted to cash, securities or other property, other than a merger of Company in which the holders of Company’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving entity immediately after the merger, or (ii) any sale, lease, exchange or transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the company; or (b) the stockholders of the Company approve a plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as that term is used in Sections 13(d) and 14(d)(z) of the Securities and Exchange Act, as amended (the “Exchange Act”)) shall become a beneficial owner (within the meaning of Rule 13d-2 under the

Exchange Act) of 40% or more of Company’s outstanding common stock; or (d) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by Company’s stockholders, of each new director was approved by a vote of at least 50% of the directors eligible to vote who were directors at the beginning of the period.

(e) Good Reason . “Good Reason” means (i) a material reduction in Executive’s level of duties or responsibilities or the nature of Executive’s functions; (ii) a reduction in Executive’s Base Salary; or (ii) Company has, without Executive’s consent, relocated Executive’s office more than 100 miles from its location at the commencement of this Agreement.

3. Applicable Laws and Consent to Jurisdiction . The validity, construction, interpretation, and enforceability of this Agreement shall be determined and governed by the laws of the State of New Jersey without giving effect to the principles of conflicts of law. For the purpose of litigating any dispute that arises under this Agreement, the parties hereby consent to exclusive jurisdiction of, and agree that such litigation shall be conducted in, any state or federal court located in the State of New Jersey.

7. Severability . The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

8. Miscellaneous; Waiver . Executive further agrees that this Agreement sets forth the entire Agreement between the Company and Executive with respect to the subject matter herein, supersedes any and all prior agreements between the Company and Executive with respect to the subject matter herein, and shall not be amended or added to except in writing signed by the Company and Executive. Executive understands that Executive may not assign Executive’s duties and obligations under this Agreement to any other party and that the Company may, at any time and without further action by or the consent of Executive, assign this Agreement to any of its affiliated companies.

9. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same agreement.

10. Successors and Assigns . This Agreement shall be binding on the successors and heirs of Executive and shall inure to the benefit of the successors and assigns of the Company.

11. Notices . Any notice required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered or if sent by registered or certified mail, postage prepaid, with return receipt requested, addressed: (a) in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower Parkway, Livingston, New Jersey, attn.: General Counsel, and (b) in the case of Executive, to Executive’s last known address as reflected in the Company’s records, or to such other address as Executive shall designate by written notice to the Company. Any notice given hereunder shall be deemed given at the time of receipt thereof by the person to whom such notice is given.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

Exhibit 14

COLUMBIA LABORATORIES, INC.

Code of Business Conduct and Ethics

Introduction

This Code of Business Conduct and Ethics (“Code”) has been adopted by our Board of Directors and summarizes the standards that must guide our actions. While covering a wide range of business practices and procedures, these standards cannot and do not cover every issue that may arise, or every situation where ethical decisions must be made, but rather set forth key guiding principles that represent Company policies and establish conditions for employment at the Company.

We must strive to foster a culture of honesty and accountability. Our commitment to the highest level of ethical conduct must be reflected in all of the Company’s business activities including, but not limited to, relationships with employees, customers, suppliers, competitors, the government and the public, including our shareholders. All of our employees, officers, directors, and consultants must conduct themselves according to the language and spirit of this Code and seek to avoid even the appearance of improper behavior.

Even well-intentioned actions that violate the law or this Code may result in negative consequences for the Company and for the individuals involved. For our employees, officers, directors, and consultants, such consequences may result in corrective and/or disciplinary action that may include termination of such person’s relationship with the Company.

Our Company’s most valuable asset is our reputation for integrity, professionalism and fairness. We should all recognize that our actions are the foundation of our reputation and adhering to this Code and applicable law is imperative.

Compliance with Laws, Rules and Regulations

We are strongly committed to conducting our business affairs with honesty and integrity and in full compliance with all applicable laws, rules and regulations. No employee, officer, director, or consultant of the Company shall commit an illegal or unethical act, or instruct others to do so, for any reason.

If you believe that any practice or action raises questions as to compliance with this Code or applicable law, rule or regulation you must report such question or concern, anonymously if you wish, to the Company via the toll-free numbers provided in Section 10. The Company also periodically holds certain information and training sessions to promote compliance with the laws, rules and regulations that affect our business.

Any violation of applicable laws, rules and regulations, including any conflict of interest that rises to such a level, will be dealt with swiftly by the Company and promptly disclosed to the applicable law enforcement authorities.

Trading on Inside Information

Using non-public information to trade in securities, or providing a family member, friend or any other person with a “tip”, is illegal. All non-public information should be considered inside information and should never be used for personal gain. You should contact the Company’s General Counsel with any questions about your ability to buy or sell Columbia securities, including the exercise of stock options.

Protection of Confidential Proprietary Information

Confidential proprietary information generated and gathered in our business is a valuable Company asset. Protecting this information plays a vital role in our continued growth and ability to compete, and all proprietary information should be maintained in strict confidence, except when disclosure is authorized by the Company or required by law.

Proprietary information includes all non-public information that might be useful to competitors or that could be harmful to the Company or its customers if disclosed. Intellectual property, including but not limited to, trade secrets, patents, trademarks and copyrights, as well as business, research and new product plans, objectives and strategies, clinical and preclinical data, records, databases, salary and benefits data, employee medical information, customer, employee and supplier lists and any unpublished financial or pricing information, must also be protected.

In addition, we frequently receive information which is proprietary to our business affiliates under confidentiality agreements and other agreements. This information must also be protected from disclosure and may not be used except for its intended purpose.

Unauthorized use or distribution of proprietary information violates Company policy, including the nondisclosure agreement employees have signed with the Company, and could be illegal. Such use or distribution could result in negative consequences for both the Company and the individuals involved, including potential legal and disciplinary actions.

Your obligation to protect the proprietary and confidential information of the Company and its affiliates continues even after your relationship with the Company terminates, and you must return all proprietary information in your possession upon leaving the Company.

Similarly, employees, officers, directors, and consultants may not use proprietary information that they are in possession of as a result of any other relationship they may have with another organization in connection with their carrying out their responsibilities to the Company.

Conflicts of Interest

Our employees, officers, directors, and consultants have an obligation to act in the best interest of the Company. All employees, officers, directors, and consultants should endeavor to avoid situations that present a potential or actual conflict between their interest and the interest of the Company. Conflicts of interest are prohibited as a matter of Company policy, unless they have been approved by the Company.

A “conflict of interest” occurs when a person’s private interest, real or perceived, interferes in any way, or even appears to interfere, with the interest of the Company, including any subsidiaries and affiliates. A conflict of interest can arise when an employee, officer, director, or consultant takes an action or has an interest that may make it difficult for him or her to perform his or her work objectively and effectively. Conflicts of interest may also arise when an employee, officer, director, or consultant (or his or her family members) receives improper personal benefits as a result of the employee’s, officer’s, director’s, or consultant’s relationship to the Company.

Although it would not be possible to describe every situation in which a conflict of interest may arise, the following are examples of situations that may constitute a conflict of interest:

•

Working, in any capacity, for another individual or entity while employed by the Company.

•

Accepting valuable gifts or receiving personal discounts or other benefits as a result of your position in the Company from a vendor, competitor, customer or supplier.

•

Competing with the Company for the purchase or sale of property, services or other interests.

•

Having an interest in a transaction involving the Company, a customer or supplier or lender (not including routine, small investments in publicly traded companies).

•

Receiving a loan or guarantee of an obligation as a result of your position with the Company.

•

Directing Company business to a supplier owned or managed by, or which employs, a relative or friend.

Situations involving a conflict of interest may not always be obvious or easy to resolve. You should report actions that may involve a conflict of interest directly to the Company’s General Counsel, or via the toll-free numbers established for that purpose.

In order to avoid conflicts of interests, employees, officers, directors, and consultants must disclose to the Company’s General Counsel any material transaction or relationship that reasonably could be expected to give rise to such a conflict, and the General Counsel shall notify the Chairman of the Audit Committee of any such disclosure. Conflicts of interests involving the Company’s General Counsel shall be disclosed to the Chairman of the Audit Committee.

Employees, officers, directors, and consultants who knowingly fail to disclose conflicts of interest are subject to disciplinary action, including termination of their relationship with the Company.

Protection and Proper Use of Company Assets

Protecting Company assets against loss, theft or other misuse is the responsibility of every employee, officer and director. Any such loss, misuse or suspected theft should be reported to the Company’s General Counsel. The sole purpose of the Company’s equipment and supplies is the conduct of our business. They may only be used for legitimate Company business purposes.

Corporate Opportunities

Employees, officers, directors, and consultants are prohibited from taking for themselves business opportunities that arise through the use of Company property, information or position. No employee, officer, director, or consultant may use Company property, information or position for personal gain, and no employee, officer, director, or consultant may compete with the Company. Competing with the Company may involve engaging in the same line of business as the Company, or any situation where the employee, officer, director, or consultant takes away from the Company opportunities for sales or purchases of products, services or interests.

Fair Dealing

Each employee, officer, director, or consultant of the Company should endeavor to deal fairly with customers, suppliers, competitors, the public and one another at all times and in accordance with ethical business practices. No one should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair dealing practice. No payment in any form shall be made directly or indirectly to or for anyone for the purpose of obtaining or retaining business or obtaining any other favorable action. The Company and the employee, officer, director, or consultant involved may be subject to disciplinary action as well as potential civil or criminal liability for violation of this policy.

Occasional business gifts to and entertainment of non-government employees in connection with business discussions or the development of business relationships are generally deemed appropriate in the conduct of Company business. However, these gifts should be given infrequently and their value should be modest. Gifts or entertainment in any form that would likely result in a feeling or expectation of personal obligation should not be extended or accepted.

Practices that are acceptable in commercial business environments may be against the law or the policies governing federal, state or local government employees or consultants (including the employees of public universities and medical centers). Therefore, no gifts or business entertainment of any kind may be given to any government employee or consultant without the prior approval of the Company’s General Counsel.

The Foreign Corrupt Practices Act (“FCPA”) prohibits giving anything of value directly or indirectly to any “foreign official” for the purpose of obtaining or retaining business. When in doubt as to whether a contemplated payment or gift may violate the FCPA, contact the Company’s General Counsel.

In addition, federal regulations may restrict (or at least require the reporting of) gifts and compensation to investigators engaged in clinical research. As a result, all gifts and compensation to clinical investigators (other than the clinical grant to the study itself) must be approved in writing in advance by the Company’s General Counsel.

Quality of Public Disclosures

The Company has a responsibility to communicate effectively with security holders so that they are provided with full and accurate information, in all material respects, about the Company’s financial condition and results of operations. Our reports and documents filed with or submitted to the Securities and Exchange Commission and our other public communications shall include full, fair, accurate, timely and understandable disclosure, and the Company has established a Disclosure Committee consisting of members of senior management to assist in monitoring such disclosures.

It is the Company’s policy to comply with all applicable laws, rules and regulations related to the disclosures the Company makes to the SEC and to ensure that such disclosures are made fairly, accurately and timely. The Company will disclose in its annual report filed with the SEC that it has adopted a code of ethics for all of its directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company will make a copy of this Code available to the public by filing a copy as an exhibit to its annual report filed with the SEC.

10.

Compliance with this Code, Laws, Rules and Regulations and Reporting of any Suspected Illegal or Unethical Behavior

All employees, officers, directors, and consultants are expected to comply with all of the provisions of this Code and all applicable laws, rules and regulations and it is the personal responsibility of each employee, officer, director, and consultant to adhere to the standards and restrictions imposed by this Code and those laws, rules and regulations. The Code will be strictly enforced throughout the Company and violations will be dealt with immediately, including subjecting persons to corrective and/or disciplinary action including termination of their relationship with the Company. Violations of the Code that involve illegal or potentially illegal behavior will be reported to the appropriate authorities.

Situations that may involve a violation of ethics, laws or this Code may not always be clear and may require difficult judgment. All individuals subject to this Code must report any concerns or questions about violations or suspected violations of laws, rules, regulations or this Code, including, but not limited to accounting, internal accounting controls or auditing matters, to the Company’s General Counsel, toll-free, at 866-566-5636, extension 7906, or at 973-994-3999, extension 7906. Any concerns about violations or suspected violations of any laws, rules, regulations or this Code, including, but not limited to accounting, internal accounting controls or auditing matters, involving the Company’s General Counsel or members of the Legal Department should be reported to the Chairman of the Audit Committee, toll free, at 866-784-1718. A failure to observe this requirement is a violation of this Code. Reporting of violations or suspected violations may be done anonymously. Any report should provide enough information about the incident or situation to allow the Company to conduct a proper investigation or inquiry. The Company will endeavor to keep all such reports confidential, including maintaining in anonymity the identity of the individual making the report, whenever practicable. The Company’s General Counsel shall maintain a record of all reports made and will notify the Chairman of the Audit Committee of any violation or suspected violation of any laws, rules, regulations or this Code.

All employees, officers, directors, and consultants must report any violation or suspected violations promptly and the Company will promptly and thoroughly investigate all reports made. The Company will not tolerate any kind of retaliation for reports or complaints regarding misconduct that were made in good faith. Open communication of issues and concerns by all individuals subject to this Code without fear of retribution or retaliation is vital to the successful implementation of this Code. You are required to cooperate in internal investigations of misconduct and unethical behavior.

The Company recognizes the need for this Code to be applied equally to everyone it covers. The General Counsel of the Company will have primary authority and responsibility for the enforcement of this Code, subject to the supervision of the Audit Committee, and the Company will devote the necessary resources to enable the Company’s General Counsel to establish such procedures as may be reasonably necessary to create a culture of accountability and facilitate compliance with the Code. Questions concerning this Code should be directed to the Company’s General Counsel.

11.

Waivers and Amendments

Any waivers of the provisions in this Code for senior financial officers, executive officers, or directors may only be granted by the Board of Directors and will be promptly disclosed to the Company’s shareholders, along with the reasons for the waiver. Such disclosure shall be made in the Company’s public filings, not later than the next periodic report. Any waivers of this Code for other individuals subject to this Code may only be granted by the Company’s General Counsel. Amendments to this Code must be approved by the Board of Directors.

In addition, any amendment or waiver of this Code that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or person performing similar functions, and that has been made known to an executive officer of the Company, shall be disclosed in a Form 8-K filed by the Company, or posted on the Company’s Internet website, within five business days of such amendment or waiver. The disclosure shall include a brief description of the nature of the amendment or waiver, and in the case of a waiver, the name of the person to whom the waiver was granted and the date of the waiver. Such disclosure will be required with respect to any material departure from a provision of this Code, or the failure by the Company to take action within a reasonable period of time regarding a material departure from a provision of this Code. No disclosure in a Form 8-K or by posting on the Company’s Internet website, however, will be required for technical, administrative or other non-substantive amendments of this Code. If the Company discloses amendments or waivers to this Code by means of a posting on the Company’s Internet website, then the Company shall previously have disclosed, in its most recent annual report filed with the SEC, the Company’s Internet website address and the fact that it intends to disclose such amendments and waivers on the Company’s Internet website.

12.

Equal Opportunity, Non-Discrimination and Fair Employment

The Company’s policies for recruitment, advancement and retention of employees forbid discrimination on the basis of any criteria prohibited by law, including but not limited to race, religion, sex and age. Our policies are designed to ensure that employees are treated, and treat each other, fairly and with respect and dignity. In keeping with this objective, conduct involving discrimination or harassment of others will not be tolerated. All employees are required to comply with the Company’s policy on equal opportunity, non-discrimination and fair employment, copies of which are included in the Employee Handbook distributed to all employees.

13.

Political Contributions and Activities

No political contributions shall be made by or on behalf of the Company without the prior approval of the Board. This policy applies solely to the use of Company assets and is not intended to discourage or prevent individual employees, officers, directors, and consultants from making political contributions or engaging in political activities on their own behalf. No one may be reimbursed directly or indirectly by the Company for personal political contributions.

14.

Environment, Health and Safety

The Company is committed to conducting its business in compliance with all applicable environmental and workplace health and safety laws and regulations. The Company strives to provide a safe and healthy work environment for our employees and to avoid adverse impact and injury to the environment and communities in which we conduct our business. Achieving this goal is the responsibility of all employees, officers, directors, and consultants.

CODE OF BUSINESS CONDUCT AND ETHICS

ACKNOWLEDGEMENT

I acknowledge that I have read the Company’s Code of Business Conduct and Ethics, that I understand its contents and that I agree to abide by its terms. I accept that this acknowledgement forms part of the terms of my employment by the Company and that I will also be bound by any further policies and procedures issued from time to time for the purposes of ensuring compliance with applicable statutory or regulatory provisions and the maintenance of the Company’s reputation and integrity. I also understand that any violation of the Code of Business Conduct and Ethics and related policies and procedures may subject me to discipline, including dismissal, as well as other penalties.


Signature:
Name:
Date:

EXHIBIT 21

SUBSIDIARIES OF THE COMPANY

Columbia Laboratories (Bermuda) Ltd.

Columbia Laboratories (France) SA

Columbia Laboratories (UK) Limited

Columbia Research Laboratories, Inc.

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Fred Wilkinson, Chief Executive Officer of the Company, certify that:

1. I have reviewed this annual report on Form 10-K of Columbia Laboratories, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 10, 2004

/ S / Fred Wilkinson

Fred Wilkinson

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

I, David L. Weinberg, Chief Financial Officer of the Company, certify that:

1. I have reviewed this annual report on Form 10-K of Columbia Laboratories, Inc.;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors:

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: March 10, 2004

/ S / David L. Weinberg

David L. Weinberg

Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Columbia Laboratories, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Wilkinson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Fred Wilkinson

Fred Wilkinson

Chief Executive Officer

March 10, 2004

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Columbia Laboratories, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David L. Weinberg, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ David L. Weinberg

David L. Weinberg

Chief Financial Officer

March 10, 2004