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Collagen Corp. Acquires 80% Interest in Cohesion Corp.; Cohesion to develop products for tissue adhesive and anti-adhesion markets, estimated at $1.4 billion in annual sales.

PALO ALTO, Calif.--(BUSINESS WIRE)--May 29, 1996--Collagen Corp., a leader in biomaterials technology, today announced that it has increased its ownership position in Cohesion Corp. from approximately 40 percent to 80 percent.

This affiliate will be managed within the new Collagen Technologies Division. Cohesion, formerly named Otogen, was founded in 1993 by Collagen Corp. and Cohesion's Chairman, Dr. Rodney Perkins.

Cohesion, which is based in Palo Alto, is a privately held company that is developing novel biomaterials with superior performance characteristics in the areas of tissue adhesives, hemostats, biosealants and adhesion prevention. Cohesion anticipates that its lead product will begin clinical evaluation within nine to 12 months, pending successful completion of pre-clinical activities.

Collagen believes that the markets potentially being addressed by Cohesion in biological tissue adhesives may total more than $400 million in annual sales, with the principal current markets being Japan and Western Europe. At present, Cohesion believes there are no biological adhesives approved for sale in the United States, but several are under investigation.

Cohesion's approach may offer advantages in performance, price and ease of application, as well as administration via laparoscopy. Cohesion also has an active program in developing products for use as adhesion barriers. The market for these anti-adhesion products is also potentially large, estimated by some analysts to be as high as $1 billion.

Cohesion believes that a variety of synthetic and biological approaches are currently being investigated to reach this potential market.

"We are delighted to increase our participation in Cohesion Corporation to help the company accelerate the development of its outstanding new surgical products.

"This infusion by Collagen Corporation of technology, money and talent indicates that we believe in the technology under development and that we expect important new surgical products to emerge from this company," said Howard D. Palefsky, chairman and chief executive officer of Collagen Corp.

"Cohesion Corporation is pleased to have these additional financial and technical resources. We believe they will allow us to accelerate the development of our tissue adhesive, biosealant and anti-adhesive products and more rapidly enter the large, relatively untapped U.S. market for these products," said Perkins.

In conjunction with this transaction, several Collagen employees have joined Cohesion to provide the company with leadership, general management and an additional base of expertise in research and development, clinical and regulatory affairs and process engineering.

The former Collagen employees are led by Frank A. DeLustro, Ph.D., formerly senior vice president, Scientific Affairs of Collagen Corp., who has been named president and chief executive officer and a board member of Cohesion Corp.

In addition, Ross Erickson, formerly vice president of Regulatory Affairs and Quality Assurance at Collagen Corp. has joined Cohesion as vice president of Regulatory, Clinical Affairs and Quality Assurance.

At Cohesion, the former Collagen employees have joined David Sierra, who was appointed vice president of Research and Development, and a member of the Cohesion board. Perkins, who continues as chairman, is a founder and director of Collagen Corp.

In addition, it is anticipated that Dr. John Daniels, also a founder and director of Collagen Corp., will be elected to Cohesion's board at its next meeting, joining Perkins, DeLustro, Sierra and Palefsky.

At Collagen, Carol Harner, Ph.D., formerly group head, Product Development, has been appointed vice president of Scientific Affairs in the company's Collagen Technologies Division. She will lead the company's continued research and development efforts focused on enhancing the use of collagen as a biomaterial and conducting additional research into new biomaterials.

As a result of this transaction, Collagen will be investing a total of approximately $6.6 million, which includes the purchase of equity from existing stockholders, new funding and the repayment to Collagen by Cohesion of past loans.

Collagen will take a charge of approximately $3.0 million for purchased in-process research and development in the quarter ending June 30, 1996. Collagen also has agreed to provide up to $5 million of additional capital in the form of convertible debt.

Palefsky added, "Our investment in Cohesion is the latest example of the strategy of the Collagen Technologies Division of Collagen Corporation. Here we have large markets and proprietary technologies that are based on collagen (our core technology), and we have put in place the resources needed to develop a line of products based on these technologies.

"This model of establishing and developing majority-owned affiliate organizations utilizing Collagen's technology and other resources is consistent with our stated goal of building businesses based on our science. We have over a decade of experience in executing this business model and we are very excited about the prospects for Cohesion."

Collagen Corp. is a technology-based company that develops, manufactures and markets biomedical devices for the treatment of defective, diseased, traumatized or aging human tissues. Cohesion Corp. is developing novel tissue adhesives and biosealants for use in surgical applications.

Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements, the accuracy of which is necessarily subject to risks and uncertainties. Collagen's actual activities may differ significantly from those discussed in the forward-looking statements.

Actual activities may be affected by, among other things, the size of the markets, product development, regulatory approvals, product introduction, future results of operations, strategic decisions by management or the Board of Directors, as well as those factors set forth under the heading "Factors That May Affect Future Results of Operations" in Collagen's Form 10-Q for the quarter ended March 31, 1996.

CONTACT: Collagen Corp.

David Foster, 415/856-0200

or

Edelman Public Relations

Jon Greer, 415/433-5381
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Publication:Business Wire
Date:May 29, 1996
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