COLLAGEN CORP. ANNOUNCES FOURTH QUARTER AND YEAR-END RESULTS -- Company reports 86% increase in EPS and 38% increase in Operating Earnings for the year.

PALO ALTO, Calif.--(BUSINESS WIRE)--Aug. 16, 1995--Collagen Corporation today reported its fourth quarter and fiscal year-end results which included revenues of $72.6 million, operating income of $11.9 million and net income of $8.8 million, or $0.93 per share, for the fiscal year ended June 30, 1995, compared with revenues of $65.6 million, operating income of $8.6 million and net income of $4.9 million, or $0.50 per share, in fiscal 1994. This represents an 11 percent increase in revenues, a 38 percent increase in operating income, and an 86 percent increase in earnings per share compared with fiscal 1994. Return on sales increased from 8 percent in fiscal 1994 to 12 percent in fiscal 1995 and return on stockholders' equity increased from 10 percent in fiscal 1994 to 18 percent in fiscal 1995.

Gross margin as a percentage of sales improved during fiscal 1995 to 74 percent from 71 percent during fiscal 1994. Selling, general and administrative ("SG&A") expenses increased to 45 percent of sales in fiscal 1995, from 44 percent in fiscal 1994, while research and development ("R&D") expenses as a percentage of sales declined to 14 percent from 15 percent in fiscal 1994.

For the fourth quarter ended June 30, 1995, Collagen reported revenues of $20.2 million, operating income of $3.2 million and net income of $2.7 million, or $0.29 per share, compared with revenues of $18.7 million, operating income of $2.7 million and net income of $1.6 million, or $0.17 per share, during the prior year period. This represents an 8 percent increase in revenues, a 19 percent increase in operating income, and a 71 percent increase in earnings per share compared with the prior year period.

Worldwide revenues from the Company's dermatology and plastic surgery products increased 20 percent to $14.9 million during the fiscal 1995 fourth quarter, compared with $12.4 million in the prior year period. Revenues for the fourth quarter were positively impacted by approximately $500,000 of favorable foreign exchange rate movements, compared with the prior year period. Unit sales increased approximately 22 percent on a worldwide basis compared with the prior year fourth quarter. Worldwide revenues from the sales of these products totaled $51.5 million for fiscal 1995, compared with $43.5 million in fiscal 1994, which represents an 18 percent increase in revenues for fiscal 1995.

"This past year we saw a gratifying revitalization in the revenue growth of our dermatology and plastic surgery products business. For fiscal 1996, we expect to build on this success with the addition of sales people and the introduction of novel sales and marketing programs on a worldwide basis. We also plan to expand our offerings in this market franchise with the launch of the Trilucent(TM) breast implant, which is manufactured by our affiliate, LipoMatrix, Incorporated, of Neuchatel, Switzerland. We are quite encouraged with the reception that the Trilucent(TM) implant has received during the initial phases of its launch in the United Kingdom and we look forward to the roll-out of this product throughout the major markets of Europe over the next twelve months," stated Gary S. Petersmeyer, president and chief operating officer. "As part of our strategy to develop closer relationships with our physician customers, Collagen International recently formed a joint venture in Spain, Collagen Iberica, S.A., with our long-time distributor Quimigranel, S.A., to further our local presence in that country. We now have direct control of our sales efforts for our collagen implant products in 11 of our top 12 countries, including the U.S."

Contigen(R) Bard collagen implant ("Contigen implant") revenues were $4.4 million for the fiscal 1995 fourth quarter, consisting of shipments to Collagen Corporation's marketing partner, C.R. Bard, Inc. ("Bard"), as well as income based on sales by Bard to physician customers in that quarter. This compares with $4.6 million in revenues during the same prior year period. Total Contigen implant revenues during fiscal 1995 were $16.5 million, compared with $16.7 million in fiscal 1994.

Combined fourth quarter revenues from sales of Collagraft(R) bone graft matrix ("Collagraft implant") and Collagraft(R) bone graft matrix strip ("Collagraft strip") were $820,000, compared with revenues of $1.1 million in the prior-year fourth quarter. Collagraft implant and Collagraft strip revenues totaled $3.0 million for fiscal 1995, compared with $2.7 million in fiscal 1994.

During fiscal 1995, Collagen Corporation sold an aggregate of 245,000 shares of Target Therapeutics, Inc. ("Target") common stock as part of its on-going program to generate cash for investments in current or new affiliates, corporate development programs, and other purposes. Collagen Corporation sold 75,000 shares of Target stock during the fiscal fourth quarter, contributing to a pre-tax gain on investments for the quarter of $2.0 million. As of June 30, 1995 Collagen Corporation owned approximately 2 million shares of Target stock, or about 29 percent of the outstanding shares of such company. Collagen's investment in Target has proven to be a very valuable asset and, over time, one that has increased in value despite the reduction in the Company's ownership position.

"We are delighted with the performance of our Target asset, and we expect to increase our activity in corporate and affiliate development by: expanding our presence in our cosmetic medical franchise; extending the uses of our collagen technology to other medical specialties and, enhancing our biomaterials technology," commented Howard D. Palefsky, chairman and chief executive officer.

Further increasing stockholder value, Collagen Corporation repurchased 300,000 shares of its common stock during the fiscal fourth quarter and a total of 562,500 shares during fiscal 1995. Collagen Corporation has repurchased a total of 1.5 million shares of its common stock, or 14 percent of outstanding shares, at an average acquisition price of approximately $22.00 per share, since the inception of the stock repurchase program in February 1993. As of June 30, 1995, the Company had authorization to repurchase an additional 300,000 shares of its common stock in the open market.

Collagen Corporation is a technology-based company that develops, manufactures and markets biomedical devices for the treatment of defective, diseased, traumatized or aging human tissues. -0-

                      COLLAGEN CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
                          (Unaudited)
                        (In thousands)

                                                June 30,
                                      1995(a)                1994(a)

ASSETS
 Current assets:
  Cash, cash equivalents and
  short-term investments            $   9,384              $  12,736
 Accounts receivable, net              13,402                 12,241
 Inventories                            5,056                  3,861
 Other current assets                   5,568                  3,305
    Total current assets               33,410                 32,143

 Property and equipment, net           16,506                 17,108
 Intangible assets                      2,727                  2,243
 Investments & other assets,
  principally Target
  Therapeutics, Inc.                   24,263                 23,011

                                    $  76,906              $  74,505

LIABILITIES AND STOCKHOLDERS'
 EQUITY
 Current liabilities:
  Accounts payable                  $   2,250              $   1,420
  Accrued liabilities                  10,862                 10,245
  Income taxes payable                  5,902                  4,251
    Total current liabilities          19,014                 15,916

 Long-term liabilities
  Deferred income taxes                 8,478                  8,240
  Other long-term liabilities           1,494                  1,267
    Total long-term liabilities         9,972                  9,507

 Stockholders' equity:
  Common stock                         63,961                 61,276
  Retained earnings                    16,669                  9,234
  Treasury stock                      (32,710)               (21,428)
    Total stockholders' equity         47,920                 49,082

                                    $  76,906              $  74,505

(a) NOTE: Amounts derived from audited financial statements at dates
indicated.

                     COLLAGEN CORPORATION
             CONSOLIDATED STATEMENTS OF INCOME
                        (Unaudited)
         (In thousands, except per share amounts)

                              Quarter Ended      Years Ended
                                 June 30,          June 30,
                              1995     1994     1995(a)  1994(a)
Revenues:
  Product sales            $20,226   $18,726   $71,560  $64,552
  Other                       --        --       1,000    1,000
                            20,226    18,726    72,560   65,552

Costs and expenses:
  Cost of sales              4,917     5,968    18,584   18,940
  Research & development     2,672     2,377     9,943    9,366
  Selling, general &
    administrative           9,405     7,666    32,179   28,639
                            16,994    16,011    60,706   56,945

Income from operations       3,232     2,715    11,854    8,607

Other income (expense):
  Gain on investments, net   1,766      --       5,110      --
  Equity in losses of
     affiliates, net          (364)     (115)   (1,160)    (269)
  Interest income              134       107       487      510
  Interest expense              (8)     --         (91)     --

Income before income taxes   4,760     2,707    16,200    8,848
Provision for income taxes   2,060     1,076     7,440    3,928

Net income                 $ 2,700   $ 1,631   $ 8,760  $ 4,920

Net income per share       $   .29   $   .17   $   .93  $   .50

Shares used in
  calculating per share
  information                9,250     9,667     9,460    9,896

    (a) NOTE:  Amounts derived from audited financial statements for
the periods indicated.

CONTACT: Collagen Corporation

David Foster, 415/865-0200

or

Edelman Public Relations

Jon Greer, 415/433-5381