<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-Q
/X/           Quarterly report pursuant to Section 13 or 15(d) of the
              Securities Exchange Act of 1934.

For the quarter period ended September 30, 1995

                                       OR

/ /           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:  0-10640

                              COLLAGEN CORPORATION

             (Exact name of Registrant as specified in its charter)

       DELAWARE                                         94-2300486
State of Incorporation                      I.R.S. Employer Identification No.

                 2500 Faber Place, Palo Alto, California  94303
                           Telephone:  (415) 856-0200

Indicate by check mark whether the Registrant (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
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes    X    No
                                       ---     ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

As of October 31, 1995, Registrant had outstanding 8,972,496 shares of common
stock, exclusive of 1,550,000 shares held by the Registrant as treasury stock.


<PAGE>   2
                              COLLAGEN CORPORATION

                                     INDEX

<TABLE>
<CAPTION>
PART I.        Financial Information                              Page No.
                                                                  --------
<S>                                                                 <C>
Condensed Consolidated Balance Sheets -
September 30, 1995 and June 30, 1995...............................      3

Condensed Consolidated Statements of Operations -
Three months ended September 30, 1995 and 1994.....................      4

Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1995 and 1994.....................      5

Notes to Condensed Consolidated Financial Statements...............   6-11

Management's Discussion and Analysis of Financial
Condition and Results of Operations................................  12-20


PART II.       Other Information

Other Information..................................................  21-22

Signatures.........................................................     23

</TABLE>


                                       2
<PAGE>   3

                         PART I. FINANCIAL INFORMATION
                              COLLAGEN CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                       September 30,      June 30,
                                                                           1995             1995
                                                                       -------------     ---------

<S>                                                                      <C>             <C>
ASSETS
    Current assets:
       Cash, cash equivalents and short-term investments                 $ 21,153        $  9,384
       Accounts receivable, net                                             9,876          13,402
       Inventories, net                                                     6,377           5,056
       Other current assets                                                 5,303           5,568
                                                                         --------        --------
              Total current assets                                         42,709          33,410

    Property and equipment, net                                            16,717          16,506
    Intangible assets and goodwill, net                                    11,719           2,727
    Investment in Target Therapeutics, Inc.                                15,088          17,570
    Other investments & assets, net                                         5,862           6,693
                                                                         --------        --------
                                                                         $ 92,095        $ 76,906
                                                                         ========        ========



LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                                                  $  3,034        $  2,250
       Accrued purchase consideration to LipoMatrix, Incorporated          20,990              --
       Other accrued liabilities                                            9,579          10,862
       Income taxes payable                                                 8,570           5,902
                                                                         --------        --------
              Total current liabilities                                    42,173          19,014

    Long-term liabilities:
       Deferred income taxes                                                8,478           8,478
       Other long-term liabilities                                          2,892           1,494

    Stockholders' equity:
       Preferred stock, $.01 par value, authorized
          5,000,000 shares; none issued and outstanding                        --              --
       Common stock, $.01 par value, authorized 28,950,000 shares;
          issued:  10,522,496 shares at September 30, 1995
              (10,519,632 shares at June 30, 1995)
          outstanding:  8,972,496 shares at September 30, 1995
              (9,019,632 shares at June 30, 1995)                             106             106
       Additional paid-in capital                                          63,894          63,855
       Retained earnings                                                    8,722          17,273
       Cumulative translation adjustment                                     (656)           (604)
       Treasury stock, 1,550,000 shares at September 30, 1995
          (1,500,000 shares at June 30, 1995)                             (33,514)        (32,710)
                                                                         --------        --------
              Total stockholders' equity                                   38,552          47,920
                                                                         --------        --------
                                                                         $ 92,095        $ 76,906
                                                                         ========        ========
</TABLE>

                            See accompanying notes.

                                       3

<PAGE>   4
                              COLLAGEN CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                September 30,
                                                                           ------------------------
                                                                             1995            1994
                                                                           --------        --------

<S>                                                                        <C>             <C>

Revenues:
      Product sales                                                        $ 14,940        $ 15,432
      Other                                                                   2,000           1,000
                                                                           --------        --------
                                                                             16,940          16,432
                                                                           --------        --------

Costs and expenses:
      Cost of sales                                                           3,997           4,406
      Selling, general & administrative                                       8,302           7,224
      Research & development                                                  2,579           2,534
      Acquired In-process research and development                           14,800            --
                                                                           --------        --------
                                                                             29,678          14,164
                                                                           --------        --------

Income (loss) from operations                                               (12,738)          2,268

Other income (expense):
      Net gain on investments, principally Target Therapeutics, Inc.         10,466            --
      Equity in losses of affiliates, net                                      (508)           (129)
      Interest income                                                           154             130
      Interest expense                                                          (12)            (15)
                                                                           --------        --------
Income (loss) before income taxes                                            (2,638)          2,254

Provision for income taxes                                                    5,913             947
                                                                           --------        --------
Net income (loss)                                                          $ (8,551)       $  1,307
                                                                           ========        ========
Net income (loss) per share                                                $   (.95)       $    .14
                                                                           ========        ========
Shares used in calculating per share information                              8,992           9,631
                                                                           ========        ========
</TABLE>

                             See accompanying notes

                                       4



<PAGE>   5
                              COLLAGEN CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents
                                  (Unaudited)
                                 (In thousands)




<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                 September 30,
                                                                            ------------------------
                                                                              1995            1994
                                                                            ---------       --------
<S>                                                                         <C>             <C>
Cash flows from operating activities:
   Net income (loss)                                                        $ (8,551)       $ 1,307
   Adjustments to reconcile net income (loss) to net cash provided by
     operating activities:
       Acquired in-process research and development                           14,800             --
       Depreciation and amortization                                           1,210            887
       Gain on investments, net                                              (10,466)            --
       Other adjustments related to changes in
         assets and liabilities                                                4,227             10
                                                                            --------        -------
     Net cash provided by operating activities                                 1,220          2,204
                                                                            --------        -------

Cash flows from investing activities:
   Net proceeds from sale of stock of Target Therapeutics, Inc.               14,336             --
   Proceeds from sales and maturities of short-term investments                1,144          2,357
   Purchase of short-term investments                                           (101)            --
   Increase in intangible and other assets                                      (163)          (354)
   Expenditures for investments in and loans to affiliates                    (1,775)        (2,179)
   Expenditures for property and equipment                                      (592)          (570)
   Acquisition of LipoMatrix, Incorporated, net of cash balances             (22,608)            --
   Accrued purchase consideration and other costs of
     acquisition of LipoMatrix                                                22,729             --
                                                                            --------        -------
     Net cash provided by (used in) investing activities                      12,970           (746)
                                                                            --------        -------

Cash flows from financing activities:
   Repurchase of common stock                                                   (804)        (1,805)
   Net proceeds from issuance of common stock                                     39            654
   Dividends paid                                                               (676)          (943)
   Proceeds from bank borrowings by LipoMatrix, Incorporated                      70             --
                                                                            --------        -------
     Net cash used in financing activities                                    (1,371)        (2,094)
                                                                            --------        -------

Net increase (decrease) in cash and cash equivalents                          12,819           (636)
Cash and cash equivalents at beginning of period                               6,155          5,369
                                                                            --------        -------

Cash and cash equivalents at end of period                                  $ 18,974        $ 4,733
                                                                            ========        =======
</TABLE>





                            See accompanying notes.

                                       5
<PAGE>   6



                              COLLAGEN CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.   Summary of Significant Accounting Policies

     Basis of Presentation

     The condensed consolidated financial statements include the accounts of
     Collagen Corporation ("the Company"), a Delaware corporation, and its
     wholly-owned and majority-owned subsidiaries.  The financial statements
     include the accounts of LipoMatrix, Incorporated ("LipoMatrix"), of
     Neuchatel, Switzerland subsequent to August 22, 1995 when the Company
     entered into a stock purchase agreement with certain of the stockholders
     of LipoMatrix to purchase approximately 50% of the outstanding securities
     of LipoMatrix on a fully diluted basis.  At the same time, the Company has
     also entered into discussions with certain of LipoMatrix's management and
     employees to purchase the remaining 10% of the outstanding securities on a
     fully diluted basis.  This purchase will increase the Company's ownership
     interest in LipoMatrix from approximately 40% to approximately 100% of the
     outstanding securities on a fully diluted basis.  Previously,  LipoMatrix
     was accounted for under the equity method of accounting.  All significant
     intercompany accounts and transactions have been eliminated.  Investments
     in unconsolidated subsidiaries, and other investments in which the Company
     has a 20% to 50% interest or otherwise has the ability to exercise
     significant influence, are accounted for under the equity method.  (See
     Note 4.)

     The condensed consolidated balance sheet as of September 30, 1995, the
     condensed consolidated statements of operations for the three months ended
     September 30, 1995 and 1994, and the condensed consolidated statements of
     cash flows for the three months ended September 30, 1995 and 1994, have
     been prepared by the Company, without audit.  In the opinion of
     management, all adjustments (which include only normal recurring
     adjustments) necessary to present fairly the financial position, results
     of operations and cash flows at September 30, 1995 and for all periods
     presented have been made.  Interim results are not necessarily indicative
     of results for a full fiscal year.  The condensed consolidated balance
     sheet as of June 30, 1995 has been derived from the audited consolidated
     financial statements at that date.

     Certain information and footnote disclosures normally included in
     financial statements prepared in accordance with generally accepted
     accounting principles have been condensed or omitted.  These condensed
     consolidated financial statements should be read in conjunction with the
     audited consolidated financial statements and

                                       6
<PAGE>   7
     notes thereto for the year ended June 30, 1995 included in the Company's
     1995 Annual Report to Stockholders.

     Cash, Cash Equivalents and Short-term Investments

     The Company considers all highly liquid investments with a maturity from
     date of purchase of three months or less to be cash equivalents.
     Short-term investments consist principally of bankers acceptances,
     commercial paper and master notes and have maturities greater than ninety
     days, but not exceeding one year.

     The Company's investment securities are classified as available-for-sale
     and their carrying value approximates fair value because of the short
     maturity of these investments.  The Company determines the appropriate
     classification of investment securities at the time of purchase and
     reevaluates such designation as of each balance sheet date.  Effective
     July 1, 1994, the Company adopted Statement of Financial Accounting
     Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in
     Debt and Equity Securities".  Material unrealized gains and losses will be
     recorded, net of tax, in a separate component of stockholders' equity.
     Both realized and unrealized gains and losses were immaterial for the
     three months ended September 30, 1995 and 1994.

     Intangible assets and goodwill

     The cost of identified intangible assets (customer lists, purchased
     developed technology, etc.) is generally amortized on a straight-line
     basis over periods from 2 to 7 years.  The excess cost over the fair value
     of net assets acquired (goodwill) is generally amortized on a
     straight-line basis over periods generally not exceeding 7 years.  The
     carrying value of intangible assets and goodwill is reviewed on a regular
     basis for the existence of facts or circumstances both internally and
     externally that may suggest impairment.  To date no such impairment has
     been indicated.

2.   Inventories

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                  September 30, 1995      June 30, 1995
                                  ------------------      -------------
         <S>                      <C>                    <C>
         Raw materials                        $  780             $  684
         Work-in-process                       2,117              1,845
         Finished goods                        3,480              2,527
                                              ------             ------
                                              $6,377             $5,056
                                              ======             ======
</TABLE>

                                       7
<PAGE>   8

3.   Investment in Target Therapeutics, Inc.

     During the quarter ended September 30, 1995, the Company sold 300,000
     shares of the common stock of Target Therapeutics, Inc.  ("Target") for a
     pre-tax gain of approximately $11.4 million.  The Company also recorded an
     investment reserve of $900,000 in the quarter ended September 30, 1995 to
     write-down the carrying value of certain equity investments due to a
     decline in value determined to be other than temporary.

     Condensed Statement of Income information for Target is shown below:

<TABLE>
<CAPTION>

    Three months ended September 30,                1995             1994
    ---------------------------------------------------------------------
    (in thousands)
    <S>                                          <C>              <C>  
    Revenues                                     $15,741          $11,543
    Costs and expenses                            12,498            9,437
    Interest and other income                        606              611
                                                 ------------------------
    Income before income taxes                     3,849            2,717
    Provision for income taxes                    (1,149)          (1,006)
                                                 ------------------------
    Net income                                   $ 2,700          $ 1,711
                                                 ========================


</TABLE>

     Target's common stock is quoted on The Nasdaq Stock Market.  The closing
     price of Target's stock at September 29, 1995 was $70.00 per share.
     Subsequent to the end of September 1995, the Company sold an additional
     156,500 shares of its Target common stock at an average selling price of
     $66 per share for net pre-tax proceeds of approximately $10.4 million.  
     As of November 10, 1995, the Company's ownership position in Target was 
     approximately 22%.

4.   Acquisition of LipoMatrix

     LipoMatrix is a developer and manufacturer of the Trilucent(TM) breast
     implant, which is the first commercially available triglyceride-filled
     mammary implant in the world.  Collagen and LipoMatrix recently introduced
     the Trilucent(TM) implant in the United Kingdom and plan to introduce it
     in other countries of Western Europe over the remainder of the current
     fiscal year.

     On August 22, 1995, as part of the Company's strategy to expand in its
     marketing franchise in cosmetic medicine, the Company entered into a stock
     purchase agreement ("Agreement") with certain of the stockholders of
     LipoMatrix to purchase approximately 50% of its outstanding securities on
     a fully diluted basis.  At the same time, the Company has also entered
     into discussions with certain of the LipoMatrix's management and employees
     to purchase the remaining 10% of the outstanding securities of LipoMatrix
     on a fully diluted basis.


                                       8
<PAGE>   9

     This purchase will increase the Company's ownership interest in LipoMatrix
     from approximately 40% to approximately 100% of the outstanding securities
     on a fully diluted basis.  In connection with the Agreement, certain
     LipoMatrix's shareholders granted to the Company an irrevocable proxy
     covering the voting rights of approximately 50% of the outstanding
     securities.

     The acquisition of LipoMatrix, which was accounted for as a purchase, had
     an aggregate purchase price of approximately $23.7 million, which was
     determined as follows:

<TABLE>
<CAPTION>
                                                                                   (in thousands)
                 <S>                                                               <C>          
                 Payable to LipoMatrix's shareholders                                 $ 20,990

                 Assumption of LipoMatrix's liabilities in excess
                 of LipoMatrix's assets                                                    926

                 Balance of the Company's investment in
                 LipoMatrix prior to date of acquisition                                   909

                 Direct acquisition costs                                                  830
                                                                                      --------
                                                                                      $ 23,655 
                                                                                      ========
</TABLE>

     A cash payment of approximately $18 million is due from the Company to the
     selling LipoMatrix stockholders at the closing of the transaction in
     January 1996.  As part of the purchase, the Company expects to make
     further cash payments of the remaining $3 million by July 1, 1997 to the
     selling LipoMatrix's management and employees.

     The assets and liabilities assumed by the Company were recorded based on
     their independently appraised fair values at the date of the acquisition,
     which are subject to final adjustments which the Company believes will not
     be significant.  Of  the purchase price of $23.7 million, $14.8 million
     was allocated to in-process research and development, $3.8 million to
     intangible assets and $5.1 million to goodwill.  The amount allocated to
     in-process research and development was expensed in the three months ended
     September 30, 1995.  The Company's results of operations for the three
     months ended September 30, 1995 include LipoMatrix's results from August
     22, 1995 through quarter-end.

     The unaudited pro forma results of operations of the Company for the three
     months ended September 30, 1995 and 1994, respectively, assuming the
     acquisition of LipoMatrix occurred on July 1, 1994, on the bases described
     above with all material intercompany transactions eliminated are as
     follows:



                                       9

<PAGE>   10

<TABLE>
<CAPTION>

     Three months ended September 30,                   1995              1994
     -------------------------------------------------------------------------
     (in thousands, except income per share)

     <S>                                             <C>               <C>
     Total revenues                                  $16,955           $16,432

     Net income                                        5,248                62

     Net income per share                                .58               .01

</TABLE>

     The unaudited pro forma net income and per share amounts above do not
     include a charge for in-process research and development of $14.8 million
     arising from the acquisition of LipoMatrix.  The pro forma results reflect
     amortization of acquired goodwill and other intangible assets.

     The unaudited pro forma information is not necessarily indicative of the
     actual results of operations had the transaction occurred at the beginning
     of the periods indicated, nor should it be used to project the Company's
     results of operations for any future dates or periods.

5.   Stock Repurchase Program

     In February 1993, the Company's Board of Directors authorized a stock
     repurchase program.  During the three months ended September 30, 1995, the
     Company repurchased 50,000 shares of its common stock at an average
     acquisition price of approximately $16 per share.  Subsequent to the end
     of September 1995, the Company repurchased 42,000 shares of its common
     stock at an average acquisition price of approximately $18 per share.
     Since the inception of the stock repurchase program in February 1993, the
     Company has repurchased 1,592,000 shares of its common stock at an average
     acquisition price of approximately $22 per share.  As of November 10,
     1995, the Company is authorized to repurchase an additional 208,000 shares
     under the program.  The Company currently plans to keep the repurchased
     shares as treasury stock and may use this stock in various company stock
     benefit plans.

6.   Income Taxes

     The provision for income taxes for the three months ended September 30,
     1995 and 1994 was computed by applying the estimated annual income tax
     rates of approximately 49% (excluding the impact of in-process research
     and development charge for which no tax benefit is available) and 42%,
     respectively, to income before income taxes.  The higher effective tax
     rate in the current fiscal quarter was primarily due to increased equity
     in losses of certain affiliates and the write-down of certain of these
     investments.

                                       10

<PAGE>   11

7.   Per Share Information

     Loss per share for the three months ended September 30, 1995 has been
     computed based upon the weighted average number of common stock
     outstanding.  Common stock equivalents have been excluded since their
     effect would be anti-dilutive on loss per share for this period.

     Income per share for the three months ended September 30, 1994 has been
     computed based upon the weighted average number of common and dilutive
     common stock equivalents outstanding.  Common stock equivalents result from
     stock options.

     Shares used in the per share computations are as follows (in thousands):

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                      ------------------
                                                        September 30,
                                                        -------------
                                                        1995        1994
                                                        ----        ----
     <S>                                              <C>        <C>
     Primary:

          Common stock                                  8,992       9,456
          Stock options                                    --         175
          Weighted average number of common             -----       -----
              and common equivalent shares
              outstanding                               8,992       9,631
                                                        =====       =====
</TABLE>

8.   Subsequent Events

     Subsequent to September 30, 1995, the Company completed an equity
     investment in and a collaborative product development agreement with
     Innovasive Devices, Inc. of Hopkinton, Massachusetts.  The investment,
     part of a larger round of equity financing for Innovasive, was for $4.0
     million, or an approximately 15 percent ownership position.  The Company
     and Innovasive are collaborating to develop certain resorbable or
     partially resorbable mechanical tissue-fixation devices utilizing
     collagen-based biomaterials for applications in orthopaedic tissue
     repairs.  Innovasive Devices is a company that develops, manufactures, and
     markets tissue and bone reattachment systems which are particularly
     relevant to the sports medicine and arthroscopy segments of the
     orthopaedic surgery market.


                                       11
<PAGE>   12

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS

The Company

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

The Company's revenues have been derived primarily from the sale of products
principally used in reconstructive and cosmetic applications for the face, the
treatment of stress urinary incontinence, and in bone repair.  The Company
markets its reconstructive and cosmetic products directly and through a network
of international distributors and its stress urinary incontinence and bone
repair products through marketing partners.

In addition to joint development arrangements, the Company has an active
program for developing new products through affiliated companies in which the
Company makes equity and debt investments.  The Company believes the formation
of new companies allows each to focus its technology on select market segments
to bring products to market efficiently and to expand its proprietary
knowledge.

On August 22, 1995, as part of the Company's strategy to expand in its
marketing franchise in cosmetic medicine, the Company entered into a stock
purchase agreement ("Agreement") with certain of the stockholders of
LipoMatrix, Incorporated ("LipoMatrix"), a developer and manufacturer of the
Trilucent(TM) breast implant ("Trilucent(TM) Implant"), to purchase
approximately 50% of the outstanding securities of LipoMatrix on a fully
diluted basis.  At the same time, the Company has also entered into discussions
with certain of the LipoMatrix's management and employees to purchase the
remaining 10% of the outstanding securities on a fully diluted basis.    This
purchase will increase the Company's ownership interest in LipoMatrix from
approximately 40% to approximately 100% of the outstanding securities on a
fully diluted basis.  In connection with the Agreement, certain LipoMatrix's
shareholders granted to the Company an irrevocable proxy covering the voting
rights of approximately 50% of the outstanding securities.

The acquisition of LipoMatrix, which was accounted for as a purchase, had an
aggregate purchase price of approximately $23.7 million.  (See Note 4 to
Condensed Consolidated Financial Statements.)  A cash payment of approximately
$18 million is due from the Company to the selling LipoMatrix stockholders at
the closing of the transaction in January 1996.  As part of the purchase, the
Company expects to make further cash payments of the remaining $3 million by
July 1, 1997 to the selling LipoMatrix's management and employees.


                                       12

<PAGE>   13

The assets and liabilities assumed by the Company were recorded based on their
independently appraised fair values at the date of the acquisition, which are
subject to final adjustments which the Company believes will not be
significant.  Of  the purchase price of $23.7 million, $14.8 million was
allocated to in-process research and development, $3.8 million to intangible
assets and $5.1 million to goodwill.  The amount allocated to in-process
research and development was expensed in the three months ended September 30,
1995.  The Company's results of operations for the three months ended September
30, 1995 include LipoMatrix's results from August 22, 1995 through quarter-end.

Results of Operations

The following table shows for the periods indicated the percentage relationship
to product sales of certain items in the Consolidated Statements of Operations
and the percentage changes in the dollar amounts of such items from period to
period.  

<TABLE>
<CAPTION>
                                                                            Percent
                                                                             Change
                                                                         Quarter Ended
                                                                         -------------
                                                                          Sep 30,1995
                                                                          -----------
                                       Percent of Product Sales           Compared to
                                     Quarter Ended    Quarter Ended      Quarter Ended
                                     -------------    -------------      -------------
                                      Sep 30,1995      Sep 30,1994        Sep 30,1994
                                      -----------      -----------        -----------
<S>                                   <C>              <C>                <C>
  Product sales                           100%             100%               (3%)
  Other revenues                           13%               6%              100%
--------------------------------------------------------------------------------------
  Costs and expenses:
       Cost of sales                       27%              29%                (9%)
       Selling, general and
            administrative                 56%              47%                15%
       Research and
            development                    17%              16%                 2%

</TABLE>

Product sales of $14.9 million for the three months ended September 30, 1995
decreased $500,000 or 3%, compared to product sales of $15.4 million for the
same period in the prior year.

Worldwide sales of plastic surgery and dermatological products for the three
months ended September 30, 1995 were approximately $12.8 million, up 24% from
sales of $10.3 million for the same period in the prior year.  U.S. sales of
plastic surgery and dermatological products, representing 49% of worldwide sales
in the current fiscal quarter, increased approximately $410,000 or 7% over the
same quarter in the prior year.

                                       13

<PAGE>   14

International sales of plastic surgery and dermatological products in the
current fiscal quarter increased approximately $2.0 million or 45% over the same
quarter in the prior year.  Of the $2 million, $200,000 was a result of
favorable foreign exchange rates, compared with the same quarter in the prior
year.  (See " Operating Income " below.) Total unit sales increased
approximately 39% on a worldwide basis compared with the same quarter in the
prior year.  The Company believes that the increase in both dollar and unit
sales in the current fiscal quarter was a result of strong distributor sales,
especially in Japan, successful marketing and public relations campaigns, the
launch of improved syringe configurations and increased physician interest in
cosmetic procedures not reimbursed by third-party payors.  The Company
anticipates continued growth in future worldwide demand for its plastic surgery
and dermatological products, but at rates significantly lower than those
achieved in the current fiscal quarter.

In the three months ended September 30, 1995, pursuant to terms of an agreement
between the Company and C.R. Bard Inc. ("Bard"), the Company's marketing
partner for Contigen(R) Bard(R) Collagen Implant ("Contigen(R) Implant"), the
Company recorded income of $1 million from Bard based on Bard's direct sales of
Contigen(R) Implant to physician customers.  The Company did not record any
income from shipments of Contigen(R) Implant to Bard in the three months ended
September 30, 1995.  In June 1995, the Company announced that it expected to
ship little, if any, Contigen(R) Implant to Bard during fiscal year 1996 due to
excess inventory at Bard.   In the three months ended September 30, 1994, the
Company recorded income of $3.5 million from shipments of Contigen(R) Implant
to Bard and income of $487,000 from Bard's direct sales of Contigen(R) Implant
to physician customers.  Future income from Bard's direct sales of Contigen(R)
Implant to physician customers is expected to continue but may fluctuate
significantly due to market demand.  As a result of the foregoing, total
revenues from Contigen(R) Implant during fiscal 1996 are expected to decline by
more than 50 percent compared with fiscal 1995.

For the three months ended September 30, 1995, combined sales of Collagraft(R)
Bone Graft Matrix ("Collagraft(R) Implant") and Collagraft(R) Bone Graft Matrix
Strip ("Collagraft(R) Strip") to the Company's marketing partner, Zimmer, Inc.
("Zimmer"), were $966,000 compared to combined sales of Collagraft(R) Implant
and Collagraft(R) Strip of approximately $1.0 million to Zimmer for the same
period in the prior year.

A number of uncertainties exist surrounding the marketing and distribution of
Contigen(R) Implant, Collagraft(R) Implant and Collagraft(R) Strip.  The
Company's primary means of distribution for these products is through third
party firms, Bard, in the case of Contigen(R) Implant, and Zimmer, in the case
of Collagraft(R) Implant and Collagraft(R) Strip.   The Company's business and
financial results could be adversely affected in the event that either or both
of these parties are unable to effectively market the

                                       14

<PAGE>   15

products, accurately anticipate customer demand, or effectively manage
industry-wide pricing and cost containment pressures in health care.

Other revenues.   Other revenues in the three months ended September 30, 1995
consisted of a final milestone payment of $2 million from Bard in accordance
with an agreement between the Company and Bard.  The Company recorded a
milestone payment of $1 million from Bard in the same period in the prior year.

Cost of sales.   Cost of sales as a percentage of product sales was 27% for the
three months ended September 30, 1995, compared with 29% for the same period in
the prior year.  The decrease in the current fiscal quarter was primarily due
to increased product revenues resulting from income received from Bard's direct
sales of Contigen(R) Implant to physician customers, which lowered the cost of
sales as a percentage of product sales.  Unit cost of sales was considerably
higher in the current fiscal quarter due to decreased production volumes,
primarily of Contigen(R) Implant.  Due to the high fixed costs of the Company's
manufacturing facility, unit cost of sales is expected to remain highly
dependent on the level of output at the Company's manufacturing facility, which
is itself heavily dependent on production of Contigen(R) Implant.  The Company
anticipates that unit cost will be higher in fiscal 1996 compared to fiscal
1995 as a result of minimal or no shipments of Contigen(R) Implant to Bard.
Cost of sales as a percentage of sales is also contingent on the product mix of
future sales for which demand and pricing characteristics may vary.

SG&A.   Selling, general and administrative ("SG&A") expenses were $8.3 million
for the three months ended September 30, 1995, an increase of 15% over $7.2
million for the same period in the prior year.    SG&A expenses as a percentage
of product sales were 56% for the three months ended September 30, 1995,
compared to 47% for the same period in the prior year.  Domestically, the
increase in SG&A expenses in the current fiscal quarter resulted primarily from
the hiring of the Company's Chief Operating Officer, higher legal expenses (See
Other Information - Legal Proceedings) and amortization expenses on purchased
intangibles and goodwill resulting from the acquisition of LipoMatrix.
Internationally, the increase in SG&A expenses resulted primarily from the
costs of launching the Trilucent(TM) Implant in the United Kingdom, higher
international spending and an overall unfavorable impact of foreign exchange
rates, slightly offset by lower commission expense related to international
sales.  The Company expects SG&A expenses this fiscal year, both in absolute
dollars and as a percentage of product sales, to be at levels higher than those
of the prior year primarily due to the inclusion of the operating results of
LipoMatrix, and the continued costs of launching the Trilucent(TM) Implant in
Europe.

R&D.   Research and development ("R&D") expenses, which include expenditures
for regulatory compliance, were $2.6 million (17% of product sales) for the
three months ended September 30, 1995, an increase of 2%

                                       15

<PAGE>   16

over $2.5 million (16% of product sales) for the same period in the prior year.
The increase in R&D spending in the current fiscal quarter was primarily
attributable to R&D spending incurred by LipoMatrix, partially offset by
completion of soft tissue programs, including the clinical trials for Zyplast
II(R) Implant, a concentrated collagen material for soft tissue augmentation, as
well as by lower expenses related to ISO 9000 certification.  The Company
expects R&D spending for this fiscal year, both in absolute dollars and as a
percentage of product sales, to be at levels higher than those of the prior year
due to the inclusion of the operating results of LipoMatrix.

Acquired In-process Research and Development.   The charge for acquired
in-process research and development ("in-process R&D") of $14.8 million in the
current fiscal quarter was a non-recurring charge related to the acquisition of
LipoMatrix.  The value attributed to the in-process R&D was determined by an
independent appraisal.

Operating income (loss).   Operating loss was $12.7 million in the three months
ended September 30, 1995, compared to operating income of $2.3 million for the
same period in the prior year.  The loss in the current fiscal quarter was
primarily due to the acquisition related, non-recurring, in-process R&D charge
of $14.8 million.

Compared with foreign exchange rates for the same quarter in the prior year,
the impact of foreign exchange rates in the current fiscal quarter on operating
income was a net increase of approximately $23,000, resulting from an increase
of approximately $200,000 in revenue on equivalent local currency sales and an
increase of approximately $177,000 in operating expenses.

Gain on investments, net.  In the three months ended September 30, 1995, the
Company recorded a net gain on investments of $10.5 million, resulting from the
sale of 300,000 shares of the common stock of Target Therapeutics, Inc.
("Target") for a pre-tax gain of approximately $11.4 million, partially offset
by the recording of an investment reserve of $900,000 to write-down the
carrying value of certain equity investments due to a decline in value
determined to be other than temporary.

Equity in earnings/losses of affiliate companies.   Equity in losses of
affiliate companies was $508,000 in the three months ended September 30, 1995,
compared to losses of $129,000 in the same period in the prior year.  The
increase in losses in the current fiscal quarter was primarily due to increased
losses recognized by affiliate companies, partially offset by equity in
increased earnings of Target.  Equity in losses of affiliate companies in the
current fiscal quarter consisted of approximately $996,000 of losses from
affiliate companies other than Target, partially offset by approximately
$488,000 of earnings from Target.  The Company intends to continue to expand
its new product development activities through more equity investments in or
loans to affiliate companies.  These affiliate companies

                                       16

<PAGE>   17

typically are in an early stage of development and may be expected to incur
substantial losses which in turn will have an adverse effect on the Company's
results.  Furthermore, there can be no assurance that any investments in
affiliates will result in any return nor as to the timing of such return, or
that the Company will not lose its entire investment.

Interest income.   Interest income was $154,000 for the three months ended
September 30, 1995, an 18% increase compared to $130,000 for the same period in
the prior year.  The increase in the current fiscal quarter was primarily due
to higher average investment balances resulting primarily from the sale of
Target stock, which was partially offset by the repurchase of 50,000 shares of
the Company's common stock, and slightly higher interest rates.

Income tax.   The provision for income taxes for the three months ended
September 30, 1995 and 1994 was computed by applying the estimated annual
income tax rates of approximately 49% (excluding the impact of in-process
research and development charge for which no tax benefit is available) and 42%,
respectively, to income before income taxes.  The higher effective tax rate in
the current fiscal quarter was primarily due to increased equity in losses of
certain affiliates and the write-down of certain of these investments.

Liquidity and Capital Resources

At September 30, 1995, the Company's cash, cash equivalents and short-term
investments were $21.2 million compared to $9.4 million at June 30, 1995.  Net
cash provided by operating activities was approximately $1.2 million in the
three months ended September 30, 1995, compared to approximately $2.2 million
of net cash provided by operating activities in the same period in the prior
year.

Pre-tax proceeds of $14.3 million from the sale of 300,000 shares of common
stock of Target by the Company during the quarter ended September 30, 1995 were
partially offset by $804,000 used to repurchase 50,000 shares of the Company's
common stock at an average acquisition price of approximately $16 per share,
the payments of an aggregate cash dividend of approximately $676,000 to the
Company's stockholders in July 1995, and $1,775,000 of additional investments
in and loans to affiliates.

Subsequent to the end of September 1995, the Company paid $4.0 million for an
equity investment in and a collaborative product development agreement with
Innovasive Devices, Inc. of Hopkinton, Massachusetts.  (See Note 8 to Condensed
Consolidated Financial Statement.)  The Company also repurchased 42,000 shares
of its common stock at an average acquisition price of approximately $18 per
share.  As of November 10, 1995, the


                                       17

<PAGE>   18

Company is authorized to repurchase an additional 208,000 shares of its common
stock under the stock repurchase program.

The Company anticipates capital expenditures, equity investments in, and loans
to affiliate companies to be approximately $18.0 million in fiscal 1996.  As of
September 30, 1995, the Company's capital expenditures, equity investments in,
and loans to affiliate companies totaled approximately $1.8 million.  In
addition, a cash payment of approximately $18 million is due from the Company
to the selling LipoMatrix stockholders at the closing of the aforementioned
acquisition of LipoMatrix securities in January 1996.  Further cash payments of
approximately $3 million are expected to be paid by July 1, 1997 to the selling
LipoMatrix's management and employees.  The Company intends to finance the cash
payments by selling additional shares from its holdings of Target stock, and/or
by borrowing funds, as needed, under its existing or other credit facility.

The Company's principal sources of liquidity include cash generated from
operations and its cash, cash equivalents and short-term investments.  In
addition, during the fiscal quarter ended September 30, 1994, the Company's
Board of Directors authorized the Company to sell portions of its holdings then
of approximately 2.3 million shares of Target's common stock.  Between July 1,
1994 and September 30, 1995, the Company sold an aggregate of 545,000 shares of
Target common stock for an aggregate pre-tax gain of approximately $17.4
million.  Subsequent to September 30, 1995, the Company sold 156,500 shares of
its Target common stock at an average selling price of $66 per share for net
pre-tax proceeds of approximately $10.4 million.  The Company anticipates that
stock sales pursuant to the authorization will be made from time to time,
subject to SEC Rule 144, with the objective of generating cash, for, among
other things, further investments in both current and new affiliate companies.
In addition, the Company established a $7.0 million revolving credit facility
with a bank in November 1994.  As of November 10, 1995, the credit facility
remained unused.  The Company intends to use funds from this source to
partially finance the acquisition of LipoMatrix securities as well as for
general corporate purposes.  The Company believes that these sources should be
adequate to fund its anticipated cash needs through at least the next twelve
months.

Factors That May Affect Future Results of Operations

A large portion of the Company's revenues in recent years has come from its
international operations.  As a result, the Company's operations and financial
results could be significantly affected by international factors, including
numerous regulatory agencies, changes in foreign currency exchange rates and
foreign economic and political conditions generally.  The Company's operating
strategy takes into account changes in these factors over time; however, the
Company's results of operations could be


                                       18
<PAGE>   19

significantly affected in the short term by fluctuations in foreign currency
exchange rates or disruptions to shipments.

All of the Company's manufacturing capacity for collagen products, the majority
of its research and development activities, its corporate headquarters, and
other critical business functions are located near major earthquake faults.  In
addition, all of the Company's manufacturing capacity for collagen products and
the Trilucent(TM) Implant are located in two primary facilities (one for
collagen products and one for the Trilucent(TM) Implant), with the Company
currently maintaining only limited amounts of finished product inventory.
While the Company has some limited protection in the form of disaster recovery
programs and basic insurance coverages, the Company's operating results and
financial condition would be materially adversely affected in the event of a
major earthquake, fire or other similar calamity.

The Company is involved in various legal actions arising in the course of
business, some of which involve product liability and intellectual property
claims.  The Company operates in an industry susceptible to claims that may
allege that the use of the Company's technology or products has resulted in
adverse effects or infringes on third-party technology. With respect to product
liability claims, such risks will exist even with respect to those products
that have received or in the future may receive regulatory approval for
commercial sale.  It is possible that adverse product liability or intellectual
property actions could negatively affect the Company's future results of
operations.

The Company has been and may be in the future the subject of negative
publicity, which can arise from various sources, ranging from the news media on
cosmetic procedures in general to legislative and regulatory investigations
specific to the Company concerning, among other things, the safety and efficacy
of its collagen-based products.  The Company is confident of the safety and
effectiveness of its collagen-based products; however, there can be no
assurance that such investigations or negative publicity from such
investigations or from the news media will not result in a material adverse
effect on the Company's future financial position, its results of operations or
the market price of its stock.  In addition, significant negative publicity
could result in an increased number of product liability claims.

The Company's manufacturing activities and products sold in the United States
are subject to extensive and rigorous regulations by the FDA and by comparable
agencies in certain foreign countries where these products are manufactured or
distributed.  The FDA regulates the manufacture and sale of medical devices in
the U.S., including labeling, advertising and record keeping.  Failure to
obtain, or delays in obtaining, the required regulatory approvals for new
products, as well as product recalls, both inside and outside of the U.S. could
adversely affect the Company.

                                       19

<PAGE>   20

Due to the factors noted above, as well as other factors that may affect the
Company's operating results, the Company's future earnings and stock price may
be subject to significant volatility, particularly on a quarterly basis.  Any
shortfall in revenue or earnings from levels expected by securities analysts
could have an immediate and significant adverse effect on the trading price of
the Company's common stock in any given period.  Additionally, the Company may
not learn of, or be able to confirm, such shortfalls until late in the fiscal
quarter, or following the end of the quarter, which could result in an even
more immediate and adverse effect on the trading price of the Company's common
stock.  Finally, the Company participates in a highly dynamic industry, which
often results in significant volatility of the Company's common stock price.

                                       20
<PAGE>   21
                          PART II.  OTHER INFORMATION
                              COLLAGEN CORPORATION

Item 1. Legal Proceedings
              On December 21, 1994, the Company filed suit against Matrix
              Pharmaceutical, Inc., ("Matrix") alleging fraud, misappropriation
              of trade secrets, unfair competition, breach of fiduciary duty,
              inducing breach of contract, breach of duty of loyalty and
              tortious interference.  The Company alleges that Matrix, which
              uses collagen for certain drug delivery applications, unlawfully
              obtained the Company's confidential and proprietary information
              relating to Collagen's products and operations by hiring ten
              former employees that the Company alleges had access to or were
              knowledgeable about the Company's proprietary information.  On
              February 12, 1995, Matrix denied the Company's allegations and
              filed a cross-complaint charging the Company with, among other
              things, unfair competition, defamation and restraint of trade.
              Matrix also has requested certain declaratory relief.  Howard
              Palefsky, the Company's Chairman of the Board and Chief Executive
              Officer, was personally named as an additional defendant to the
              Matrix defamation charge.  In September, 1995, Collagen filed an
              amended complaint naming two additional former employees, and
              alleging the acquisition of additional proprietary information
              obtained unlawfully.  On November 3, 1995, those two additional
              former employees filed a cross-complaint against the Company and
              Mr. Palefsky, claiming damages for, among other things, libel,
              invasion of privacy and intentional infliction of emotional
              distress.

Item 2. Changes in Securities

              None

Item 3. Defaults Upon Senior Securities

              None

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

              None

Item 5. Other Information

             None


                                       21

<PAGE>   22
Item 6. Exhibits and Reports on Form 8-K

              A.   Exhibits

                   Exhibit 27 - Financial Data Schedule

              B.   Reports on Form 8-K

                   The Company filed the following reports on Form 8-K during
                   the fiscal quarter ended September 30, 1995, each relating
                   to the Company's acquisition of LipoMatrix, Incorporated.

                   Form 8-K
                   Report Date:  August 22, 1995
                   Filing Date:  September 6, 1995
                   Item 2 - Acquisition or Disposition of Assets
                   Item 7a - Financial Statements of Acquired Business
                   Item 7b - Pro Forma Financial Statements
                   Item 7c - Exhibits

                   Form 8-K/A
                   Report Date:  August 22, 1995
                   Filing Date:  November 6, 1995
                   Item 7a - Financial Statements of Acquired Business
                   Item 7b - Pro Forma Financial Statements
                   Item 7c - Exhibits



                                       22

<PAGE>   23

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                                   COLLAGEN CORPORATION


Date:  November 13, 1995                           /s/ David Foster
                                                   -----------------------
                                                   David Foster
                                                   Vice President and
                                                   Chief Financial Officer
                                                   (Principal Financial
                                                   and Accounting Officer)



                                       23
<PAGE>   24



                              COLLAGEN CORPORATION


                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
                                                                    Sequentially
Exhibit                                                                 Numbered
Number               Exhibit                                                Page
--------------------------------------------------------------------------------
<S>                  <C>                                                     <C>
27                   Financial Data Schedule...............................   25

</TABLE>




                                       24