SC 13D/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO

§ 240.13d-2(a)

(Amendment No. 1)

CPEX Pharmaceuticals, Inc.

(Name of Issuer)

Common Stock, par value $0.01 per share

(Title of Class of Securities)

12620N104

(CUSIP Number)

Michael Blitzer

Kingstown Capital Partners, LLC

11 East 44th Street, 7th Floor

New York, NY 10017

(212)319-1309

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

March 14, 2011

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. x (See explanatory note to this Schedule 13D)

Note:  Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits.  See § 240.13d-7 for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No.   12620N104
	1	Name of Reporting Person KINGSTOWN PARTNERS MASTER LTD.
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds WC
	5	Check box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization CAYMAN ISLANDS
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 139,214
			8	Shared Voting Power 139,214
			9	Sole Dispositive Power 139,214
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 139,214
	12	Check box if the Aggregate Amount in Row (11) Excludes Certain Shareso
	13	Percent of Class Represented by Amount in Row (11) 5.3%
	14	Type of Reporting Person CO

2

CUSIP No.   12620N104
	1	Name of Reporting Person KINGSTOWN PARTNERS II, L.P.
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds WC
	5	Check box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization DELAWARE
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 13,357
			8	Shared Voting Power 13,357
			9	Sole Dispositive Power 13,357
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 13,357
	12	Check box if the Aggregate Amount in Row (11) Excludes Certain Shareso
	13	Percent of Class Represented by Amount in Row (11) 0.5%
	14	Type of Reporting Person PN

3

CUSIP No.   12620N104
	1	Name of Reporting Person KTOWN, LP
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds WC
	5	Check box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization DELAWARE
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 6,585
			8	Shared Voting Power 6,585
			9	Sole Dispositive Power 6,585
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 6,585
	12	Check box if the Aggregate Amount in Row (11) Excludes Certain Shareso
	13	Percent of Class Represented by Amount in Row (11) 0.3%
	14	Type of Reporting Person PN

4

CUSIP No.   12620N104
	1	Name of Reporting Person KINGSTOWN CAPITAL PARTNERS, LLC
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds AF
	5	Check box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization DELAWARE
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 159,156
			8	Shared Voting Power 159,156
			9	Sole Dispositive Power 159,156
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 159,156
	12	Check box if the Aggregate Amount in Row (11) Excludes Certain Shareso
	13	Percent of Class Represented by Amount in Row (11) 6.1%
	14	Type of Reporting Person OO

5

CUSIP No. 12620N104
	1	Name of Reporting Person KINGSTOWN CAPITAL MANAGEMENT L.P.
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds AF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization DELAWARE
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 159,156
			8	Shared Voting Power 159,156
			9	Sole Dispositive Power 159,156
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 159,156
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 6.1%
	14	Type of Reporting Person PN

6

CUSIP No. 12620N104
	1	Name of Reporting Person KINGSTOWN MANAGEMENT GP LLC
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds AF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization DELAWARE
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 159,156
			8	Shared Voting Power 159,156
			9	Sole Dispositive Power 159,156
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 159,156
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 6.1%
	14	Type of Reporting Person OO

7

CUSIP No. 12620N104
	1	Name of Reporting Person MICHAEL BLITZER
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds AF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization USA
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 159,156
			8	Shared Voting Power 159,156
			9	Sole Dispositive Power 159,156
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 159,156
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 6.1%
	14	Type of Reporting Person IN

8

CUSIP No. 12620N104
	1	Name of Reporting Person GUY SHANON
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds AF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization USA
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power 159,156
			8	Shared Voting Power 159,156
			9	Sole Dispositive Power 159,156
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 159,156
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 6.1%
	14	Type of Reporting Person IN

9

CUSIP No. 12620N104
	1	Name of Reporting Person GEORGE P. BAUER
	2	Check the Appropriate Box if a Member of a Group
		(a)			x
		(b)			o
	3	SEC Use Only
	4	Source of Funds PF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization USA
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power - 0 -
			8	Shared Voting Power 164,372
			9	Sole Dispositive Power - 0 -
			10	Shared Dispositive Power 5,216
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 164,372
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 6.3%
	14	Type of Reporting Person IN

10

CUSIP No.   12620N104
	1	Name of Reporting Person CAROL B. BAUER
	2	Check the Appropriate Box if a Member of a Group
		(a)			o
		(b)			x
	3	SEC Use Only
	4	Source of Funds PF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization USA
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power - 0 -
			8	Shared Voting Power 5,216
			9	Sole Dispositive Power - 0 -
			10	Shared Dispositive Power 5,216
	11	Aggregate Amount Beneficially Owned by Each Reporting Person 5,216
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 0.2%
	14	Type of Reporting Person IN

11

CUSIP No.   12620N104
	1	Name of Reporting Person BRADLEY P. BAUER
	2	Check the Appropriate Box if a Member of a Group
		(a)			o
		(b)			x
	3	SEC Use Only
	4	Source of Funds PF
	5	Check Box if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)  o
	6	Citizenship or Place of Organization USA
Number of Shares Beneficially Owned by Each Reporting Person With			7	Sole Voting Power - 0 -
			8	Shared Voting Power - 0 -
			9	Sole Dispositive Power - 0 -
			10	Shared Dispositive Power - 0 -
	11	Aggregate Amount Beneficially Owned by Each Reporting Person - 0 -
	12	Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares o
	13	Percent of Class Represented by Amount in Row (11) 0%
	14	Type of Reporting Person IN

12

CUSIP No.   12620N104

EXPLANATORY NOTE

This Amendment No. 1 to Schedule 13D (this “Amendment No. 1”) is being filed with respect to the beneficial ownership of common stock, par value $0.01 per share (the “Common Stock”), of CPEX Pharmaceuticals, Inc. (the “Issuer” or the “Company”).  This Amendment No. 1 supplements Items 4 and 7 of the Schedule 13D originally filed on February 24, 2011.

Item 4.Purpose of Transaction.

On March 14, 2011, Kingstown Capital Partners, LLC was listed as a rights issue backstop participant in a proposal delivered by Mangrove Partners to the board of directors of the Issuer (the “Board”), an updated version of which was delivered to the Board on March 16, 2011 (as updated, the “Term Sheet”).  A copy of the Term Sheet from Mangrove Partners is attached hereto as Exhibit 99.1 and is incorporated herein by reference.  The description herein of the Term Sheet is qualified in its entirety by reference to the Term Sheet.

All of the shares of Common Stock reported herein as being beneficially owned by the Reporting Persons were acquired for investment purposes.  No Reporting Person and, to the best of the Reporting Persons’ knowledge, none of the persons listed on Schedule A, who are not also Reporting Persons, has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon completion of any of the actions discussed herein, including in any Exhibits hereto.  The Reporting Persons intend to review their investment in the Issuer on a continuing basis.  Depending on various factors including, without limitation, the Issuer’s financial position and investment strategy, the price levels of the Shares, conditions in the securities markets and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment in the Issuer as they deem appropriate including, without limitation, communications with management and the Board of the Issuer regarding, among other things, the strategic direction and capital allocation of the Issuer, engaging in discussions with third parties, including other stockholders of the Issuer, about the Issuer and the Reporting Persons’ investment, making proposals to the Issuer concerning changes to the capitalization, ownership structure, board structure (including seeking board representation) or operations of the Issuer, purchasing additional Shares, selling some or all of their Shares, engaging in short selling of or any hedging or similar transaction with respect to the Shares, or changing their intention with respect to any and all matters referred to in Item 4; provided that the Reporting Persons expressly disclaim any intention of engaging in a control transaction or a contested election of directors of the Issuer’s Board.

Item 7.Material to be Filed as Exhibits.

99.1Term Sheet, dated March 16, 2011

13

CUSIP No.  12620N104

SIGNATURES

After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Date: March 17, 2011	KINGSTOWN CAPITAL MANAGEMENT L.P.
	By:	Kingstown Management GP LLC
		its general partner
	By:	/s/ Michael Blitzer
		Michael Blitzer Managing Member
	KINGSTOWN MANAGEMENT GP LLC
	By:	/s/ Michael Blitzer
		Michael Blitzer Managing Member
	KINGSTOWN CAPITAL PARTNERS, LLC
	By:	/s/ Michael Blitzer
		Michael Blitzer Managing Member
	KINGSTOWN PARTNERS MASTER LTD.
	By:	/s/ Michael Blitzer
		Michael Blitzer Director
	KINGSTOWN PARTNERS II, L.P.
	By:	Kingstown Capital Partners LLC
		its general partner
	By:	/s/ Michael Blitzer
		Michael Blitzer Managing Member

14

KTOWN, LP
By:	Kingstown Capital Partners, LLC
	its general partner
By:	/s/ Michael Blitzer
	Michael Blitzer Managing Member
/s/ Michael Blitzer
MICHAEL BLITZER
/s/ Guy Shanon
GUY SHANON
/s/ George P. Bauer
GEORGE P. BAUER
/s/ Carol B. Bauer
CAROL B. BAUER
/s/ Bradley P. Bauer
BRADLEY P. BAUER

15

CUSIP No.  12620N104

SCHEDULE A

Directors and Officers of Kingstown Partners Master Ltd.

Name and Position	Principal Occupation	Principal Business Address	Citizenship
Michael Blitzer Director	Managing Member, Kingstown Management GP LLC	11 East 44th Street, 7th Floor, New York, New York 10017	United States
Guy Shanon Director	Managing Member, Kingstown Management GP LLC	11 East 44th Street, 7th Floor, New York, New York 10017	United States
Warren Keens Director	Director of Close Brothers (Cayman) Limited and Managing Director of Close Fund Services	Harbour Place, 4th Floor 103 South Church Street Grand Cayman, Cayman Islands	United Kingdom

16

EX-99.1

Exhibit 99.1

Proposed Funding Term Sheet, March 16, 2011

CPEX Dividend Recapitalization via Rights Issue for new Notes

Summary of Proposed Transaction	Dividend recapitalization of $28.00 per share to be funded by new notes, existing cash on CPEX Balance Sheet, and options proceeds
Amount of Notes	$85,256,000 (approximately)
New Debt Funding	Funding via tradable rights issue to existing shareholders to subscribe for new debt and shares
Funding Date	July 1, 2011 targeted
Rights issue backstop participants	Kingstown Capital $28,000,000 Nantahala Capital Management $15,500,000 Weiss Asset Management $10,400,000 Mangrove Partners $7,099,658 KVO Capital Management, LLC $5,500,000
Interest Rate on Notes	LIBOR + 14%
LIBOR Floor	1%
LIBOR Definition	90-Day LIBOR
Maturity	December 31, 2024
Interest Payments	Quarterly in arrears
Rights Description	1 right issued for each Share/Option/Restricted Share. 35 rights plus $780 can be exchanged for a 1 new note and 20 new 12-year warrants struck at $0.01 each and immediately exercisable. Warrants to be registered and rights to be freely tradable
Par Value of Notes	$1,000
Share consideration	Shares that do not participate in the tax-free exchange option will receive a $28.00 special dividend
Backstop Fees	2% cash fee plus 3,750,000 new European style 10-year warrants struck at $0.01 each and exercisable only at expiration. Warrants to be registered
Prepayment Penalty	None
Change of Control Put	None
Debt / legal service account	6-months of interest based on quarterly ending debt balance
Royalty Stream Placement	Royalty Stream to be placed into Special Purpose Vehicle (SPV) whereby 100% of SPV equity owned by CPEX
Security	Senior secured obligation of SPV and CPEX Pharmaceuticals including CPEX guaranty
Limitation on Indebtedness	No additional debt allowed at SPV. Basket for $2.5 million unsecured or pari passu debt at CPEX Corporate

Quarterly Cash Flow Sweep Mechanism	100% excess cash flow at SPV to repay debt. Cash flow shall be paid as follows:
	1.	First, revenue shall be added to the debt service reserve to create starting SPV cash balance
	2.	From starting SPV cash balance interest due to note holders shall be paid
	3.	From remaining cash after payment of interest, debt service reserve shall be replenished
	4.	From cash after debt service reserve replenishment, cash taxes for CPEX (the consolidated filer) shall be paid. Checks to be issued directly to U.S. Treasury and state(s), as appropriate
	5.	From remaining cash after payment of cash taxes, funds to reimburse prior quarter G&A at CPEX shall be released in an amount not to exceed $1.25 million per quarter
	6.	From remaining cash after reimbursement of G&A, prior quarter capex is reimbursed, not to exceed the available amount in the capex basket
	7.	All remaining cash after capex reimbursement to be applied to principal of then outstanding notes through a lottery system
SPV Change of Control	Automatic change of control with equity conveyance to trustee/lenders in event that SPV is unable to fully replenish debt service account or in event that CPEX files for bankruptcy
SPV Dissolution	SPV to be dissolved when all note principal repaid
Legal expenses for royalty	CPEX to pay all legal expenses as part of G&A. Responsibility for legal expenses to transfer to SPV in event SPV change of control occurs
Management Options and Restricted Shares	Rights to be issued to options and restricted shareholders. Restricted shares and options to receive special dividend net of options strike price. Cashless exercise allowed for pro rata participation in new securities
Board Representation	Board expanded to 8 members with 2 new shareholder representatives TBD by vote of note holders in consultation with existing Board
Public Reporting	CPEX shall include a full accounting of cash flow sweeps with quarterly financials

Capex basket	Starting capex basket of $250,000 to increase quarterly by the amount by which incurred capex is below $50,000 and to decline by the amount by which prior quarter capex exceeds $50,000
Related Party Transactions	CPEX to covenant not to engage in any related party transactions without the express approval of a majority of shares voted at a special or annual meeting of stockholders
Tax refunds	Any tax refunds received shall be paid into SPV and shall become part of quarterly starting cash balance in quarter tax refund received
Change of Control	A change of control shall not have taken place as a result of this transaction per preliminary legal review
Minimum backstop allowance	In the event that more than 25% of the rights are subscribed for, investor demand will be prorated such that the backstop parties purchase 75% of the new securities. Shares and rights not accepted due to proration will receive $28.00 in cash
Tax-free exchange option	To the extent allowable, an alternative will be given to shareholders to make a tax free exchange of rights plus shares for new notes, new shares, new warrants, and a pro rata share of excess cash (to be confirmed)

This is an indicative term sheet only. It is not a binding proposal or offer or agreement. No party shall have any obligation to proceed with a transaction unless and until definitive transaction documents have been agreed and signed by the parties.