<PAGE>   1
                UNITED STATES 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 ended March 31, 1999

                                       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 AESTHETICS, INC.

             (Exact name of registrant as specified in its charter)


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

               1850 Embarcadero Road, Palo Alto, California 94303
                            Telephone: (650) 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 April 30, 1999, Registrant had outstanding 8,560,211 shares of common
stock, exclusive of 2,454,000 shares held by the Registrant as treasury stock.


                                       1


<PAGE>   2
                            COLLAGEN AESTHETICS, INC.

                                      INDEX


<TABLE>
<CAPTION>
PART I.        Financial Information                                           Page No.
-------        ---------------------                                           --------
<S>                                                                            <C>
Condensed Consolidated Balance Sheets -
March 31, 1999 and June 30, 1998                                                    3

Condensed Consolidated Statements of Operations -
Three and nine months ended March 31, 1999 and 1998                                 4

Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 1999 and 1998                                           5

Notes to Condensed Consolidated Financial Statements                              6-9

Management's Discussion and Analysis of Financial
Condition and Results of Operations                                             10-19


PART II.       Other Information
--------       -----------------

Other Information                                                               20-21


Signatures                                                                         22
</TABLE>


                                       2


<PAGE>   3
                            COLLAGEN AESTHETICS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                           March 31,               June 30,
                                                                             1999                    1998 *
                                                                           ---------               ---------
<S>                                                                        <C>                     <C>      
ASSETS
   Current assets:
     Cash and cash equivalents                                             $  10,980               $   7,916
     Short-term investments                                                    2,014                   8,011
     Accounts receivable, net                                                 15,068                  13,764
     Inventories, net                                                         11,898                  12,101
     Inventories of discontinued operations, net                                  --                     417
     Other current assets, net                                                10,927                  11,016
                                                                           ---------               ---------
           Total current assets                                               50,887                  53,225

   Property and equipment, net                                                12,412                  14,448
   Intangible assets and goodwill, net                                         7,324                   6,861
   Investment in Boston Scientific Corporation                                    --                  73,979
   Other investments and assets, net                                           3,799                  17,826
                                                                           ---------               ---------
                                                                           $  74,422               $ 166,339
                                                                           =========               =========

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
     Accounts payable                                                      $   6,048               $   3,561
     Accrued compensation                                                      2,869                   4,749
     Accrued liabilities and other                                             8,550                  14,020
     Income taxes payable                                                     10,693                  10,606
     Liabilities of discontinued operations, net                                  --                     781
                                                                           ---------               ---------
           Total current liabilities                                          28,160                  33,717

   Long-term liabilities:
     Deferred income taxes                                                        --                  30,589
     Other long-term liabilities                                               1,224                   1,393
                                                                           ---------               ---------
           Total long-term liabilities                                         1,224                  31,982

   Commitments and contingencies

   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: 11,010,711 shares at March 31, 1999
          (10,937,830 shares at June 30, 1998),
          outstanding: 8,556,711 shares at
          March 31, 1999 (8,864,930 shares at June 30, 1998)                     111                     109
     Additional paid-in capital                                               55,632                  69,619
     Retained earnings                                                        38,432                  32,128
     Accumulated other comprehensive income:
          Cumulative translation adjustment                                   (2,193)                 (2,030)
          Unrealized gains on available-for-sale investments                      --                  43,833
     Treasury stock, 2,454,000 shares at March 31, 1999
        (2,072,900 shares at June 30, 1998)                                  (46,944)                (43,019)
                                                                           ---------               ---------
           Total stockholders' equity                                         45,038                 100,640
                                                                           ---------               ---------
                                                                           $  74,422               $ 166,339
                                                                           =========               =========
</TABLE>


*Amounts derived from audited financial statements at the date indicated which
includes Cohesion Technologies, Inc. The accompanying Notes to Condensed
Consolidated Financial Statements are an integral part of these statements.


                                       3


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


<TABLE>
<CAPTION>
                                                      Three Months Ended              Nine Months Ended
                                                           March 31,                       March 31,
                                                   ------------------------        ------------------------
                                                     1999            1998*           1999*           1998*
                                                   --------        --------        --------        --------
<S>                                                <C>             <C>             <C>             <C>     
Revenues:
   Product sales                                   $ 21,057        $ 19,232        $ 62,156        $ 60,040

Costs and expenses:
   Cost of sales                                      6,166           5,567          17,509          17,570
   Selling, general and administrative                9,856          10,360          31,014          30,065
   Research and development                           1,937           5,866           7,002          16,078
   Acquired in-process research and
     development                                         --              --              --          10,530
                                                   --------        --------        --------        --------
         Total operating costs and expenses          17,959          21,793          55,525          74,243
                                                   --------        --------        --------        --------

Income (loss) from operations                         3,098          (2,561)          6,631         (14,203)

Other income (expense):
   Net gain on investments, principally
     
     Boston Scientific Corporation through
       August 18, 1998                                   --           4,964           3,721          13,739
   Equity in losses of affiliates, net                   --             (83)            (35)           (232)
   Interest income                                      143             164             473             702
   Interest expense                                      (6)            (15)            (62)            (50)
                                                   --------        --------        --------        --------

Income (loss) before income taxes, minority
   interest and discontinued operations               3,235           2,469          10,728             (44)

Provision for income taxes                            1,193              77           4,424           1,910
Minority interest                                        --             (11)              1             (38)
                                                   --------        --------        --------        --------

Income (loss) from continuing operations              2,042           2,403           6,303          (1,916)

Discontinued operations:
     Loss from operations                                --          (1,060)             --          (4,079)
     Benefit from income taxes                           --             327              --           1,258
                                                   --------        --------        --------        --------
     Loss from discontinued operations net
       of taxes                                          --            (733)             --          (2,821)
                                                   --------        --------        --------        --------
Net income (loss)                                  $  2,042        $  1,670        $  6,303        $ (4,737)
                                                   ========        ========        ========        ========

Net income (loss) per share - Basic
      Continuing operations                        $   0.24        $   0.27        $   0.73        $  (0.21)
      Discontinued operations                            --           (0.08)             --           (0.32)
                                                   --------        --------        --------        --------
           Net income (loss) per share                   -- 
            Basic                                  $   0.24        $   0.19        $   0.73        $  (0.53)
                                                   ========        ========        ========        ========

Net income (loss) per share - Diluted
      Continuing operations                        $   0.24        $   0.26        $   0.72        $  (0.21)
      Discontinued operations                            --           (0.08)             --           (0.32)
                                                   --------        --------        --------        --------
      Net income (loss) per share - Diluted        $   0.24        $   0.18        $   0.72        $  (0.53)
                                                   ========        ========        ========        ========

Shares used in calculating net income (loss)
   per share - Basic                                  8,546           8,989           8,678           8,901
                                                   ========        ========        ========        ========

Shares used in calculating net income (loss)
   per share - Diluted                                8,639           9,071           8,711           8,901
                                                   ========        ========        ========        ========
</TABLE>


*Includes results of Cohesion Technologies, Inc. through August 18, 1998.

The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       4


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


<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                             March 31,
                                                                      -----------------------
                                                                        1999           1998
                                                                      --------       --------
<S>                                                                   <C>            <C>      
Cash flows from operating activities:
   Net income (loss)                                                  $  6,303       $ (4,737)
   Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
     Acquired in-process research and development                           --         10,530
     Depreciation and amortization                                       3,671          3,627
     Equity in losses of affiliates                                         35            232
     Gain on investments, net of taxes paid of $1.6 million
      and $0 in 1999 and 1998, respectively                             (2,121)       (13,739)
     Net changes in assets and liabilities of discontinued
      operations                                                            --           (430)
     Other adjustments related to changes in assets and
      liabilities                                                       (3,595)         1,321
                                                                      --------       --------
    Net cash provided by (used in) operating activities                  4,293         (3,196)
                                                                      --------       --------

Cash flows from investing activities:
   Net proceeds from sales of Boston Scientific Corp. stock,
    net of taxes paid                                                    2,065         14,716
   Net proceeds from sale of other affiliate stock, net of
    taxes paid                                                             508            704
   Proceeds from sales and maturities of short-term investments          8,888          7,898
   Purchases of short-term investments                                  (3,907)        (5,324)
   Expenditures for property and equipment                              (2,560)        (3,279)
   Increase in intangible and other assets                              (2,767)            --
   Equity investments and loans to affiliates                               --         (1,125)
   Acquisition of Cohesion Corporation                                      --        (10,530)
                                                                      --------       --------
     Net cash provided by investing activities                           2,227          3,060
                                                                      --------       --------

Cash flows from financing activities:
   Repurchase of common stock                                           (3,924)          (441)
   Net proceeds from issuance of common stock                              818          1,698
   Cash dividends paid                                                    (896)        (1,773)
   Cohesion Technologies, Inc. Spinoff                                     546             --
   Repayments of bank loans                                                 --         (2,031)
                                                                      --------       --------
     Net cash used in financing activities                              (3,456)        (2,547)
                                                                      --------       --------

Net increase (decrease) in cash and cash equivalents                     3,064         (2,683)
Cash and cash equivalents at beginning of period                         7,916         18,381
                                                                      --------       --------
Cash and cash equivalents at end of period                            $ 10,980       $ 15,698
                                                                      ========       ========
</TABLE>


The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.


                                       5


<PAGE>   6
                            COLLAGEN AESTHETICS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  Summary of Significant Accounting Policies

    Basis of Presentation

    The consolidated financial statements include the accounts of Collagen
    Aesthetics, Inc. (formerly Collagen Corporation) ("Collagen" or the
    "Company"), a Delaware corporation, and its wholly owned and majority-owned
    subsidiaries. All significant intercompany accounts and transactions have
    been eliminated. The Company operates in one industry segment focusing on
    the development, manufacturing, and sale of medical devices and aesthetic
    products.

    The condensed consolidated balance sheet as of March 31, 1999, the condensed
    consolidated statements of operations for the three and nine months ended
    March 31, 1999 and 1998, and the condensed consolidated statements of cash
    flows for the nine months ended March 31, 1999 and 1998, have been prepared
    by the Company and are unaudited. In the opinion of management, all
    necessary adjustments (which include only normal recurring adjustments) have
    been made to present fairly the financial position, results of operations,
    and cash flows at March 31, 1999, and for all periods presented. Interim
    results are not necessarily indicative of results for a full fiscal year.
    The consolidated balance sheet as of June 30, 1998, has been derived from
    the audited consolidated financial statements at that date.

    On August 18, 1998, the Company spun off, in a one-for-one distribution
    ("the Distribution") of common stock to the Company's stockholders (the
    "Spinoff"), Cohesion Technologies, Inc. ("Cohesion"), which prior to the
    Spinoff was a wholly-owned subsidiary of the Company. The transaction
    resulted in the distribution of 100% of the outstanding shares of Cohesion.
    In accordance with a ruling from the Internal Revenue Service ("IRS"), the
    Spinoff did not result in recognition of taxable income or loss to the
    Company or the Company's stockholders for U.S. Federal income tax purposes.
    Subsequent to the Distribution, Cohesion has been traded on the NASDAQ
    National Market under the ticker symbol of CSON.

    For the first nine months of fiscal year 1999, the Company included
    Cohesion's results through August 18, 1998 (approximately six weeks),
    compared to the inclusion of nine months of Cohesion's results in fiscal
    year 1998.

    Net sales for the nine months ended March 31, 1999, reflect a reduction of
    $2.3 million in sales related to the repurchase of product inventory per the
    terms of an agreement with Lederle, the Company's former distributor in
    Japan.

    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 notes included in the Company's Annual
    Report on Form 10-K for the year ended June 30, 1998.

    Beginning with fiscal year 1998, basic earnings per share (EPS) and diluted
    EPS are computed using the methods required by Statement of Financial
    Accounting Standards No.


                                       6


<PAGE>   7
    128, Earnings Per Share ("SFAS 128"). Under SFAS 128, basic EPS is
    calculated using the weighted average number of common shares outstanding
    for the period. The computation of diluted EPS includes the effects of stock
    options, warrants and convertible preferred stock, if such effect is
    dilutive. Prior period amounts have been restated to conform with the
    presentation requirements of SFAS 128. Below is a reconciliation between the
    basic and diluted weighted average common and common-equivalent shares for
    the three and nine months ended March 31, 1999 and 1998:


<TABLE>
<CAPTION>
                                          Three Months Ended     Nine Months Ended
                                               March 31,             March 31,
                                           ----------------      ----------------
(in thousands)                              1999       1998       1999       1998
                                           -----      -----      -----      -----
<S>                                       <C>         <C>        <C>        <C>  
Basic (weighted average common
  Shares outstanding)                      8,546      8,989      8,678      8,901
Weighted average common stock options
  outstanding                                 93         82         33         --
                                           -----      -----      -----      -----
Diluted weighted average shares
  outstanding                              8,639      9,071      8,711      8,901
                                           =====      =====      =====      =====
</TABLE>


    New Accounting Standards

    Comprehensive Income. As of July 1, 1998, the Company adopted Statement of
    Financial Accounting Standards No. 130 ("Statement 130"), "Reporting
    Comprehensive Income". Statement 130 establishes new rules for the reporting
    and display of comprehensive income and its components; however, the
    adoption of this Statement had no impact on the Company's net income or
    stockholders' equity. Statement 130 requires unrealized gains or losses on
    the Company's available-for-sale securities and foreign currency translation
    adjustments, which prior to adoption were reported separately in
    stockholders' equity, to be included in other comprehensive income. Prior
    year financial statements have been reclassified to conform to the
    requirements of Statement 130.

    During the three months ended March 31, 1999 and 1998, total comprehensive
    income amounted to $1.4 million and $7.4 million, respectively, and income
    of $6.1 million compared to a loss of $9.6 million for the nine months ended
    March 31, 1999 and 1998, respectively. The components of comprehensive
    income, net of related tax, for the three and nine month periods ended March
    31, 1999 and 1998, are as follows (in thousands):


<TABLE>
<CAPTION>
                                                   Three Months Ended           Nine Months Ended
                                                       March 31,                    March 31,
                                               -----------------------       -----------------------
                                                 1999           1998           1999           1998
                                               --------       --------       --------       --------
<S>                                            <C>            <C>            <C>            <C>      
Net income (loss)                              $  2,042       $  1,670       $  6,303       $ (4,737)
Change in unrealized losses on securities            --          6,016             --         (4,263)
Foreign currency translation adjustments           (633)          (298)          (163)          (597)
                                               --------       --------       --------       --------
Comprehensive income (loss)                    $  1,409       $  7,388       $  6,140      $ (9,597)
                                               ========       ========       ========       ========
</TABLE>


    The movement in unrealized losses on securities in the nine months ended
    March 31, 1999, relates to the investments in Boston Scientific Corporation
    ("Boston Scientific") and


                                       7


<PAGE>   8
    Innovasive Devices Inc. ("Innovasive Devices") which were retained by
    Cohesion following the Spinoff from the Company.

2.  Inventories

    Inventories consist of the following (in thousands):


<TABLE>
<CAPTION>
                              March 31,    June 30,
                                1999         1998
                              ---------    --------
<S>                           <C>          <C>    
Raw materials                  $ 1,804      $ 1,765
Work-in-process                  2,622        3,948
Finished goods                   7,472        6,388
                               -------      -------
                               $11,898      $12,101
                               =======      =======
</TABLE>


3.  Sale of LipoMatrix, Inc.

    On November 9, 1998, the Company announced the sale of its LipoMatrix, Inc.
    ("LipoMatrix") subsidiary, manufacturer of the Trilucent(R) breast implant
    ("Trilucent implant"), to Sierra Medical Technologies ("Sierra") of Carson
    City, Nevada.

    Consideration to the Company included a cash payment and the right to
    receive royalties on future worldwide breast implant sales. Sierra also was
    granted the right to purchase the U.S. Trilucent implant patent portfolio
    and marketing rights for additional cash consideration. The Company has
    accounted for LipoMatrix as a discontinued operation in fiscal year 1998 and
    this transaction is expected to have no material impact on the Company's
    fiscal year 1999 business, operating results or financial condition. In
    connection with the operations of LipoMatrix through the date of sale and in
    connection with the recording of the sale transaction, there were no
    material adjustments to the provision for discontinued operations that had
    been established in the quarter ended June 30, 1998.

    On March 8, 1998 the United Kingdom Medical Devices Agency ("MDA") announced
    the voluntary suspension of marketing and voluntary withdrawal of the
    Trilucent implant in the United Kingdom. The MDA stated that its actions
    were taken for precautionary reasons and did not identify any immediate
    hazard associated with the use of the product. Subsequently, LipoMatrix's
    notified body in Europe suspended the product's CE Mark pending further
    assessment of the long-term safety of the product. Sierra has since stopped
    sales of the product. 


                                       8


<PAGE>   9
    The Company retains responsibility for Trilucent implants sold prior to
    November 6, 1998. The Company has agreed with the United Kingdom National
    Health Service for a specified period of time to perform certain product
    surveillance with respect to United Kingdom patients implanted with the
    Trilucent implant. In the ordinary course of its business, the Company is
    involved in product liability claims arising from the Trilucent implant and
    its other medical device products. While the outcome of such matters is
    currently not determinable, the Company does not expect that such claims,
    when considered in relation to the Company's product liability insurance
    coverage, will result in a material adverse effect on the Company's
    consolidated financial position or results of its operations.

4.  Restructuring of Collagen International, Inc.

    In June 1998, the Company recorded a pre-tax restructuring charge of $1.5
    million to cover the direct cost of restructuring its domestic and
    international operations to improve its operational efficiency by reducing
    costs and facilitating a product refocus. The international effort included
    moving the Company's European headquarters from Switzerland to the United
    Kingdom and terminating the employment of eleven employees. The domestic
    effort was substantially smaller and included the reorganization of the
    North American sales force and termination of one employee. The Company
    began implementation of its restructuring plan in the fourth quarter of
    fiscal 1998 and has substantially completed the implementation at March 31,
    1999. The major aspects of the restructuring plan and remaining amounts in
    accrued liabilities are discussed below.

    The components of the restructuring charge, charges against the reserve
    during the nine months ended March 31, 1999, and remaining accrued
    restructuring expense as of March 31, 1999, are as follows:


<TABLE>
<CAPTION>
                                                                                 Remaining
                                             Incurred to                        Accrual at
                         Restructuring        March 31,                          March 31,
                            Accrual             1999           Transfers           1999
                          -----------       -----------       -----------       -----------
<S>                      <C>                <C>               <C>               <C>   
Severance                 $   734,449       $  (856,260)      $   151,811            30,000
Move costs and other          280,791          (147,837)          (65,106)           67,848
Lease commitments             450,714          (305,283)         (145,431)               --
Other                          74,989          (118,715)           58,726            15,000
                          -----------       -----------       -----------       -----------
                          $ 1,540,943       $(1,428,095)      $        --       $   112,848
                          ===========       ===========       ===========       ===========
</TABLE>


    As of March 31, 1999, the European headquarters relocation was substantially
    complete.



5.  Income Taxes

    The provision for income taxes for the nine months ended March 31, 1999 and
    1998, was computed by applying the estimated annual income tax rate to
    income before taxes. The estimated annual effective income tax rate
    considers non-deductible items such as goodwill amortization and excludes
    losses from certain foreign subsidiaries.


                                       9


<PAGE>   10
         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS


Except for historical information contained herein, the matters discussed in
this report are forward-looking statements, the accuracy of which is necessarily
subject to risks and uncertainties. These risks include, among others, the
timing of product introductions, receipt of regulatory approvals, clinical
efficacy of and market demand for products, product development cycles, results
of clinical studies, development and rate of growth of new markets, potential
unfavorable publicity regarding Collagen Aesthetics, Inc. (the "Company") or
their products, among other matters discussed in this report. Actual results are
subject to risks and uncertainties and actual events and results may differ
significantly from the discussion of such matters in the forward-looking
statements. Such differences may be based upon factors within the Company's
control, such as strategic planning decisions by management and reallocation of
internal resources, or on factors outside of the Company's control, such as
scientific advances by third parties, introduction of competitive products and
delays by regulatory and tax authorities, as well as those factors under the
heading "Factors That May Affect Future Results of Operations" set forth below,
those in the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1998, and those in the Company's Form 10-Q for the quarter ended December
31, 1998.

The Company

The Company designs, develops, manufactures and markets on a worldwide basis
biomedical devices for the treatment of defective, diseased, traumatized or
aging human tissues. The Company's core products are used principally in facial
aesthetic applications and the treatment of stress urinary incontinence. The
Company markets its facial aesthetic products directly and through a network of
international distributors and its stress urinary incontinence product through a
marketing partner.

Spinoff

On August 18, 1998, the Company spun off, in a one-for-one distribution ("the
Distribution") of common stock to the Company's stockholders (the "Spinoff"),
Cohesion Technologies, Inc. ("Cohesion"), which prior to the Spinoff was a
wholly-owned subsidiary of the Company. The transaction resulted in the
distribution of 100% of the outstanding shares of Cohesion. In accordance with a
ruling from the Internal Revenue Service ("IRS"), the Spinoff did not result in
recognition of taxable income or loss to the Company or the Company's
stockholders for U.S. Federal income tax purposes. Subsequent to the
Distribution, Cohesion has been traded on the NASDAQ National Market under the
ticker symbol of CSON.

For the first nine months of fiscal year 1999 the Company included Cohesion's
operating results through August 18, 1998 (approximately six weeks), compared to
the inclusion of nine months of Cohesion's operating results in fiscal year
1998.


                                       10


<PAGE>   11
Sale of LipoMatrix, Inc.

On November 9, 1998, the Company announced the sale of its LipoMatrix, Inc.
("LipoMatrix") subsidiary, manufacturer of the Trilucent(R) breast implant
("Trilucent implant"), to Sierra Medical Technologies ("Sierra") of Carson City,
Nevada.

Consideration to the Company include a cash payment and the right to receive
royalties on future worldwide breast implant sales. Sierra was also granted the
right to purchase the U.S. Trilucent implant patent portfolio and marketing
rights for additional cash consideration.

On March 8, 1998 the United Kingdom Medical Devices Agency ("MDA") announced the
voluntary suspension of marketing and voluntary withdrawal of the Trilucent
implant in the United Kingdom. The MDA stated that its actions were taken for
precautionary reasons and did not identify any immediate hazard associated with
the use of the product. Subsequently, LipoMatrix's notified body in Europe
suspended the product's CE Mark pending further assessment of the long-term
safety of the product. Sierra has since stopped sales of the product.  


The Company retains responsibility for Trilucent implants sold prior to November
6, 1998. The Company has agreed with the United Kingdom National Health Service
for a specified period of time to perform certain product surveillance with
respect to United Kingdom patients implanted with the Trilucent implant. In the
ordinary course of its business, the Company is involved in product liability
claims arising from the Trilucent implant and its other medical device products.
While the outcome of such matters is currently not determinable, the Company
does not expect that such claims, when considered in relation to the Company's
product liability insurance coverage, will result in a material adverse effect
on the Company's consolidated financial position or results of its operations.


U.S. Launch of Refinity(TM) Medical Skin Solutions

In December 1998, the Company launched the Refinity Medical Skin Solutions line
of high-performance alphahydroxy acid ("AHA") skin care products ("Refinity skin
solution products") to U.S. dermatologists and plastic surgeons. The Refinity
Medical Skin Solutions line contains a novel and patented anti-irritant,
Cosmederm-7(TM), which enables Refinity to deliver an unprecedented combination
of comfort and efficacy. The Refinity products are available only through
physician offices, and include an in-office peel containing glycolic acid and
home-use products containing lactic acid. Both the in-office and home-use
products diminish the appearance of fine lines and wrinkles, and improve skin
texture and tone.

Unsolicited Proposal by Mentor Corporation

In February 1999, Mentor Corporation (traded on The Nasdaq Stock Market under
the symbol MNTR) made an unsolicited proposal to acquire the Company. In
consultation with its financial advisor, the Company will undertake an
evaluation of strategic alternatives available to the Company with the
objective of maximizing shareholder value, including possible sale or merger of
the Company.


                                       11


<PAGE>   12
Results of Operations

The following table shows for the periods indicated the percentage relationship
to product sales of certain items in the Condensed Consolidated Statements of
Operations.


<TABLE>
<CAPTION>
                                            PERCENT OF PRODUCT                 PERCENT OF PRODUCT
                                                   SALES                              SALES
                                             Three Months Ended                 Nine Months Ended
                                                  March 31,                         March 31,
                                          -------------------------         -------------------------
                                            1999             1998             1999             1998
                                          --------         --------         --------         --------
<S>                                       <C>              <C>              <C>              <C> 
Product sales                               100%             100%             100%             100%

Costs and expenses:
     Cost of sales                           29%              29%              28%              29%
     Selling, general and administrative     47%              54%              50%              50%
     Research and development                 9%              31%              11%              27%
     Acquired in-process R&D                 --               --               --               18%
</TABLE>


Product sales. Product sales of $21.1 million in the three months ended March
31, 1999, increased approximately $1.8 million or 9% compared to product sales
of $19.2 million for the same prior year period. Product sales of $62.2 million
in the nine months ended March 31, 1999, increased approximately $2.1 million or
4% compared to product sales of $60.0 million for the same prior year period.
The increase in sales for the three and nine months ended March 31, 1999,
compared with the same period in the prior year, primarily was due to increased
sales of injectable collagen products, Hylaform(R) viscoelastic gel ("Hylaform
gel") and sales of Refinity, partially offset by lower Contigen sales.

Worldwide sales of facial aesthetic products for the three and nine months ended
March 31, 1999, were $17.5 million and $50.1 million, respectively, compared to
$14.2 million and $45.6 million for the same periods in the prior year. The
increase in worldwide sales for the three months ended March 31, 1999, primarily
was due to an increase in U.S. sales of injectable collagen products, an
increase in international sales of Hylaform gel and sales of Refinity, partially
offset by lower sales of SoftForm. The increase in worldwide sales for the nine
months ended March 31, 1999, primarily was due to an increase in U.S. sales of
injectable collagen products, an increase in international sales of Hylaform gel
and sales of Refinity. The Company anticipates dollar growth in worldwide
product sales of facial aesthetic products during fiscal year 1999.

During the three and nine months ended March 31, 1999, pursuant to the Company's
sales agreement with C.R. Bard ("Bard"), the Company recorded revenue of $1.4
million and $5.2 million, respectively, from Bard based on Bard's direct sales
of Bard Contigen(R) implant ("Contigen implant") to physician customers,
compared to revenue of $2.1 million and $5.6 million, respectively, in the same
periods in the prior year. In addition, the Company recorded $1.8 million and
$6.0 million, respectively, of revenue from shipments of Contigen implant to
Bard in the three and nine months ended March 31, 1999, compared to $2.7 million
and $7.4


                                       12


<PAGE>   13
million, respectively, for the same periods in the prior year. The Company
expects that revenues from Contigen implant sales in fiscal year 1999 will be
slightly lower than sales in fiscal year 1998.

A number of uncertainties exist surrounding the marketing and distribution of
Contigen implant. The Company's primary means of distribution for this product
is through a third party firm, Bard. The Company's business and financial
results could be adversely affected in the event that this party is unable to
market the product effectively, anticipate customer demand accurately, or
effectively manage industry-wide pricing and cost containment pressures in
health care.

Sales of Collagraft(R) bone graft matrix and Collagraft(R) bone graft matrix
strip ("Collagraft bone graft products") to Cohesion's marketing partner,
Zimmer, Inc. ("Zimmer"), were $45,000 for the nine months ended March 31, 1999,
compared to $1.1 million for the same prior year period. The decrease in sales
resulted from recording approximately six weeks of sales for the nine months
ended March 31, 1999, due to the Spinoff of Cohesion on August 18, 1998,
compared to nine months of recorded sales in the same prior year period.

Cost of sales. Cost of sales as a percentage of product sales was 29% and 28%,
respectively, for the three and nine months ended March 31, 1999, compared with
29% for the same prior year periods. The lower cost of sales as a percentage of
product sales in the nine months ended March 31, 1999, primarily was due to
recording approximately six weeks of cost of sales for Cohesion products, which
have lower margins, compared to nine months of cost of sales for Cohesion
products in the same prior year period and selling more collagen-based
injectable products, which have higher gross margins than the Company's other
product offerings. The Company anticipates that cost of sales as a percentage of
sales may increase slightly as a result of introducing additional product line
extensions, having higher costs per unit, partially offset by lower
manufacturing costs per unit for collagen-based injectable products and the
Spinoff.

SG&A. Selling, general, and administrative ("SG&A") expenses were $9.9 million
for the three months ended March 31, 1999, a decrease of 5% over $10.4 million
for the same prior year period. SG&A expenses were $31.0 million for the nine
months ended March 31, 1999, an increase of 3% over $30.1 million for the same
prior year period. SG&A expenses as a percentage of product sales were 47% and
50% for the three and nine months ended March 31, 1999, compared to 54% and 50%
for the same prior year periods. The decrease in SG&A expenses in dollars and as
a percentage of sales in the three months ended March 31, 1999, primarily
resulted from no Cohesion SG&A expenses, lower U.S. and international spending,
partially offset by costs related to the U.S. launch of Refinity skin solution
products, costs related to the international launch of SoftForm implant and
increased spending in Japan. The increase in SG&A expenses in dollars for the
nine months ended March 31, 1999, primarily resulted from costs related to the
U.S. launch of Refinity, increased spending in Japan and increased international
spending, partially offset by recording six weeks of Cohesion expenses compared
to nine months in the prior year period. The Company expects SG&A expenses in
fiscal year 1999 as a percentage of product sales to be at levels lower than
those of fiscal year 1998.

R&D. Research and development ("R&D") expenses, which include expenditures for
regulatory compliance, were $1.9 million and $7.0 million (9% and 11% of product
sales) for the three and nine months ended March 31, 1999, a decrease of 67% and
56% over $5.9 million and $16.1 million (31% and 27% of product sales), for the
same prior year periods. The decrease in R&D spending in the three and nine
months ended March 31, 1999, primarily was attributable to the inclusion of
approximately six weeks of Cohesion R&D expenses in July and August of fiscal
year 1999, compared to three and nine months in fiscal year 1998, respectively.
The Company


                                       13


<PAGE>   14
expects R&D spending in fiscal year 1999 to be at levels lower than fiscal year
1998 as a result of the Spinoff.

Acquired in-process research and development. The charge for the acquired
in-process research and development ("in-process R&D") of $10.5 million in the
nine months ended March 31, 1998, was a non-recurring charge related to the
purchase of substantially all of the remaining shares of Cohesion Corporation,
including the purchase of certain vested employee stock options.

Income (loss) from operations. Income from operations was $3.1 million for the
three months ended March 31, 1999, compared with a loss from operations of $2.6
million for the same prior year period. Income from operations was $6.6 million
for the nine months ended March 31, 1999, compared with a $14.2 million loss
from operations for the same prior year period. The increase in income in the
three months ended March 31, 1999, primarily was due to recording no R&D
expenses for Cohesion, compared to a full quarter for the same prior year
period, increased revenues primarily resulting from U.S. sales of injectable
collagen products and international sales of Hylaform gel, partially offset by
increased marketing expenses related to the U.S. launch of Refinity skin
solution products and to the international launch of SoftForm implant and
increased spending in Japan. The increase in income in the nine months ended
March 31, 1999, primarily was due to recording no acquired in-process R&D
charges for Cohesion, recording approximately six weeks of Cohesion R&D expenses
for the nine months ended March 31, 1999, compared to nine months of expenses in
the same prior year period, increased revenues primarily resulting from U.S.
sales of injectable collagen products and international sales of Hylaform gel,
partially offset by increased marketing expenses related to the U.S. launch of
Refinity skin solution products, the international launch of SoftForm implant,
increased spending in Japan and lower sales in Japan resulting from the $2.3
million reduction in sales in fiscal 1999.

The impact of foreign exchange rates on operating income for the three and nine
months ended March 31, 1999 was immaterial. Until December 1994, the Company's
policy was to hedge material foreign currency transaction exposures. At March
31, 1999 and June 30, 1998, no foreign currency transaction exposures were
hedged. Unhedged net foreign assets were $6.3 million and $6.5 million at March
31, 1999 and June 30, 1998, respectively.

Net gain on investments, principally Boston Scientific Corporation. In the three
months ended March 31, 1999, the Company did not record a gain on investments,
compared to $5.0 million, primarily resulting from the sale of 90,000 shares of
Boston Scientific Corporation ("Boston Scientific") common stock, in the same
prior year period. In the nine months ended March 31, 1999, the Company recorded
a pre-tax gain on investments of $3.7 million primarily resulting from the sale
of approximately 50,000 shares of Boston Scientific common stock compared to
$13.7 million, primarily resulting from the sale of approximately 247,340 shares
of Boston Scientific common stock in the nine months ended March 31, 1998. The
Company's investment in Boston Scientific common stock was transferred to
Cohesion in connection with the Spinoff.


                                       14


<PAGE>   15
Equity in losses of affiliates, net. In the three months ended March 31, 1999,
the Company did not record any equity in losses of affiliate companies, compared
to equity in losses of affiliates of approximately $83,000 recorded in the same
prior year period. For the nine months ended March 31, 1999, equity in losses of
affiliate companies was $35,000 compared with losses of $232,000 for the same
prior year period.

Interest income. Interest income was $143,000 and $473,000 for the three and
nine months ended March 31, 1999, respectively, compared to $164,000 and
$702,000 for the same periods in the prior year. The decrease in the three and
nine months ended March 31, 1999, was due to lower average monthly balances of
cash, cash equivalents and short-term investments.

Provision for income taxes. The provision for income taxes was approximately 37%
and 41% of pretax income for the three and nine months ended March 31, 1999,
respectively, compared to 43% for the corresponding periods in 1998 excluding
the tax effect of the loss from discontinued operations of LipoMatrix and the
non-deductible charge for in-process R&D.


Liquidity and Capital Resources
At March 31, 1999, the Company's cash, cash equivalents and short-term
investments were $13.0 million compared to $15.9 million at June 30, 1998. Net
cash provided by operating activities was approximately $4.3 million in the nine
months ended March 31, 1999, compared to approximately $3.2 million of net cash
used in operating activities for the same prior year period.

The $4.3 million of net cash provided by operating activities in the nine months
ended March 31, 1999, primarily was attributable to: net income of $7.9 million
adjusted for gain on investments (net of taxes paid), depreciation and
amortization expense and equity in losses of affiliates, partially offset by a
net $3.6 million related to changes in assets and liabilities.

The $1.2 million of net cash used in investing and financing activities in the
nine months ended March 31, 1999, primarily was due to payments of approximately
$3.9 million to repurchase 381,100 shares of the Company's common stock,
payments of $3.9 million to purchase short-term investments, an increase in
intangible and other assets of $2.8 million, capital expenditures of
approximately $2.6 million and payments of cash dividends of approximately $0.9
million to the Company's stockholders in July 1998, partially offset by proceeds
of $8.9 million received from the sale of short-term investments, proceeds of
$2.1 million (net of taxes paid) from the sale of 50,000 shares of common stock
of Boston Scientific by the Company, proceeds of $0.8 million from the issuance
of 47,076 shares of the Company's common stock, proceeds of $0.5 million
resulting from the Spinoff of Cohesion Technologies, Inc., and proceeds of $0.5
million from the sale of other affiliate stock (net of taxes paid).

The Company anticipates capital expenditures, equity investments in, and loans
to affiliate companies to be approximately $4.0 million in fiscal year 1999. As
of March 31, 1999, the Company's capital expenditures, equity investments in,
and loans to affiliate companies totaled approximately $2.6 million. In August
1998, the Board of Directors authorized the Company to repurchase an additional
500,000 shares of the Company's common stock in the open market, of which the
Company has repurchased 331,100 shares as of March 31, 1999. At March 31, 1999,
168,900 shares remain to be repurchased according to the Board of Directors'
authorization. Subsequent to June 30, 1998, the Company has not declared a cash
dividend on its common stock and does not anticipate paying cash dividends in
the foreseeable future.


                                       15


<PAGE>   16
The Company's principal sources of liquidity include cash generated from
operations and its cash, cash equivalents, and short-term investments.

The Company believes that the above sources of liquidity 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 results of
operations could be significantly affected by fluctuations in foreign currency
exchange rates or disruptions in shipments.

Sales of the Company's collagen-based injectable products, Zyderm(R) and
Zyplast(R) collagen implants ("Zyderm implants" and "Zyplast implants"),
SoftForm implant as well as Contigen implant, accounted for approximately 86% of
consolidated product sales for the quarter ended March 31, 1999, and 89% of
consolidated product sales for the nine months ended March 31, 1999. The
Company's product sales may continue to consist primarily of sales of these
principal products. Factors such as adverse rulings by regulatory authorities,
product liability lawsuits, the introduction of competitive products by third
parties, other loss of market acceptance or other adverse publicity for these
principal products may significantly and adversely affect the Company's sales of
these products and, as a result, also adversely affect the Company's business,
financial condition or results of operations.

The Company's quarterly operating results may vary significantly in the future
depending upon factors such as the timing of significant orders and shipments,
changes in pricing policies by the Company and its competitors, increased
competition, demand for the Company's products, the number, timing and
significance of new product and product enhancement announcements by the Company
and its competitors, the ability of the Company to develop, introduce and market
new and enhanced versions of the Company's products on a timely basis, the mix
of direct and indirect sales, the timing of investments in affiliate companies
and general economic factors, among others. If revenue levels are below
expectations, operating results are likely to be materially adversely affected.
In particular, because only a small portion of the Company's expenses varies
with revenue in the short term, net income may be disproportionately affected by
a reduction in revenue.

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-based
products is located in one primary facility 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 coverage, the Company's business, financial condition or
operating results would be materially adversely affected in the event of a major
earthquake, fire or other similar calamity, affecting its manufacturing or other
facilities.

The Company is involved in various legal actions arising in the course of
business, some of which involve product liability claims. The Company operates
in an industry susceptible to


                                       16


<PAGE>   17
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 business,
financial condition or results of operations.

The Company has been, and may in the future, be 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 products. 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 business, 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 Food and Drug
Administration ("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 United States, 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 United States could adversely
affect the Company's business, financial condition or results of operations.

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.

Year 2000. The information provided herein related to the Year 2000 risks
constitutes a "Year 2000 Readiness Disclosure" for purposes of the Year 2000
Readiness Disclosure Act. The "Year 2000" issue results from the use in computer
hardware and software of two digits rather than four digits to define the
applicable year. When computer systems must process dates both before and after
January 1, 2000, two-digit year "fields" may create processing ambiguities that
can cause errors and system failures. The results of these errors may range from
minor undetected errors to complete shutdown of an affected system. These errors
or failures may have limited effects, or the effects may be widespread,
depending on the computer chip, system or software, and its location and
function. The effects of the Year 2000 problem are exacerbated because of the
interdependence of computer and telecommunications systems in the United States
and throughout the world. Because of this interdependence, the failure of one
system may lead to the failure of many other systems even though the other
systems are themselves "Year 2000 compliant."

The Company has reviewed the Year 2000 issue as it may affect the Company's
business activity. The Company has implemented a Year 2000 plan (the "Plan")
which is designed to cover the Company's business-critical activities. The Plan 
will be modified as circumstances 


                                       17


<PAGE>   18
change and the Company becomes aware of both hardware and software modifications
that must be made to systems that are non-Year 2000 compliant. Under the Plan,
the Company is using a five-phase methodology for addressing the issue. The
phases are Awareness, Assessment, Renovation, Validation and Implementation. A
heightened emphasis on completion will continue through the next quarter.

Awareness consists of defining the Year 2000 problem and gaining executive level
support and sponsorship. A Year 2000 program team has been established and an
overall strategy created. Our Year 2000 project team has been in place for
nearly two years and is engaged in a company-wide project using a combination of
internal and external resources in an effort to optimize the renovation process,
maximize benefits, and lower risk. Members of the team include information
systems staff, information technology staff, business analysts, auditing and
quality insurance staff, and various other client user groups. This project team
reports to executive management. During Assessment, business-critical internal
systems, products and supply chain partners are inventoried and prioritized for
renovation. The Company believes it has completed a majority of the Awareness
and Assessment phases, however, ongoing work will be required in these areas as
the Company completes its assessment of existing supply chain partners and
enters into new supply chain relationships in the ordinary course of business.

Renovation consists of converting, replacing, upgrading or eliminating systems
that have Year 2000 problems. Renovation has been completed on most of our
business-critical systems and is targeted for completion by July 1999.
Validation involves ensuring that hardware and software fixes will work properly
in 1999 and beyond and can occur both before and after implementation.
Validation began in the second quarter of fiscal year 1999 on most of our
business-critical systems and will continue through June 1999 to allow for
thorough testing before the Year 2000. Implementation is the installation of
hardware and software components in a production environment. The Company is in
the final stages of the Implementation phase and is targeted for completion by
September 1999.

The Impact of Year 2000 issues on the Company will depend not only on corrective
actions that the Company takes, but also on the way in which Year 2000 issues
are addressed by governmental agencies, business and other third parties that
provide services or data to, or receive services or data from, the Company, or
whose financial condition or operational capability is important to the Company.
To reduce this exposure, the Company has an ongoing process of identifying and
contacting business-critical third party vendors and other significant third
parties to determine their Year 2000 plans and target dates. Risks associated
with any such third parties located outside the United States may be higher
insofar as it is generally believed that non-U.S. businesses may not be
addressing their Year 2000 issues on as timely a basis as U.S. businesses.
Notwithstanding the Company's efforts, there can be no assurance that the
Company, business-critical third party vendors or other significant third
parties will adequately address their Year 2000 issues.

The Company is developing contingency plans for implementation in the event that
the Company, business-critical third party vendors or other significant third
parties fail to adequately address Year 2000 issues. Such plans principally
involve identifying alternative vendors or internal remediation. There can be no
assurance that any such plans will fully mitigate any such failures or problems.
Furthermore, there may be certain business-critical third parties, such as
utilities, telecommunication companies, or material vendors where alternative
arrangements or sources are limited or unavailable.

Although it is difficult to estimate the total costs of implementing the Plan,
through June 1999 and beyond, the Company's preliminary estimate is that such
costs will total approximately $600,000, which does not include the costs to
redeploy existing staff. However, although management believes its estimates are
reasonable, there can be 


                                       18


<PAGE>   19
no assurance, for the reasons stated in the next paragraph, that the actual
costs of implementing the Plan will not differ materially from the estimated
costs. Through March 31, 1999, the Company has incurred approximately $475,000
on this project of which $400,000 has been capitalized and $75,000 has been
expensed. The remaining $125,000 is expected to be expensed by December 31,
1999. The Company does not believe that the redeployment of existing staff will
have a material adverse effect on its business, results of operations or
financial position. Incremental expenses related to the Year 2000 project are
not expected to materially impact operating results in any one period.

The extent and magnitude of the Year 2000 Problem as it will affect the Company,
both before and for some period after January 1, 2000, is difficult to predict
or quantify for a number of reasons. Among the most important are lack of
control over systems that are used by third parties who are critical to the
Company's operation, dependence on third party software vendors to deliver Year
2000 upgrades in a timely manner, complexity of testing inter-connected networks
and applications that depend on third party networks and the uncertainty
surrounding how others will deal with liability issues raised by Year 2000
related failures. There can be no assurance for example, that systems used by
third parties will be adequately remediated so that they are Year 2000 ready by
January 1, 2000, or by some earlier date, so as not to create a material
disruption to the Company's business. Moreover, the estimated costs of
implementing the Plan do not take into account the costs, if any, that might be
incurred as a result of Year 2000 related failures that occur despite the
Company's implementation of the Plan.

Although the Company is not aware of any material operational issues associated
with preparing its internal systems for the Year 2000, or material issues with
respect to the adequacy of mission-critical third party systems, there can be no
assurance that the Company will not experience material unanticipated negative
consequences and/or material costs caused by undetected errors or defects in
such systems or by the Company's failure to adequately prepare for the results
of such errors or defects, including costs of related litigation, if any. The
impact of such consequences could have a material adverse effect on the
Company's business, financial condition or results of operations.

For a more complete discussion of risks and uncertainties involving the
Company's business, please see the risk factors described under the heading
"Factors That May Affect Future Results of Operations" set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1998,
and those set forth in the Form 10-Q for the quarter ended December 31, 1998.


                                       19


<PAGE>   20
                           PART II. OTHER INFORMATION
                            COLLAGEN AESTHETICS, INC.


Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities and Use of Proceeds

         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


                                       20


<PAGE>   21
Item 6. Exhibits and Reports on Form 8-K

        A.  Exhibits
 
        Exhibit 3.6       By-Laws of Collagen Aesthetics, Inc.

        Exhibit 10.107*   License and Distribution Agreement effective as of
                          January 27, 1999 by and between Arthrocare Corporation
                          and Collagen Aesthetics, Inc.

        Exhibit 10.108*   Distribution and Loan Agreement executed on January
                          11, 1999 by and between Collagen Aesthetics
                          International and BioPharmex S.A.

        Exhibit 27        Financial Data Schedule


        B.   Reports on Form 8-K

        None


*Confidential treatment requested.


                                       21


<PAGE>   22
                                   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 AESTHETICS, INC.



Date:  May 13, 1999       /s/ Gary S. Petersmeyer             
       ------------       ------------------------------------
                          Gary S. Petersmeyer
                          President and Chief Executive Officer


Date:  May 13, 1999       /s/ Michael A. Bates                 
       ------------       ------------------------------------
                          Michael A. Bates
                          Vice President Finance and Chief Financial Officer


                                       22


<PAGE>   23
                            COLLAGEN AESTHETICS, INC.
                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit Number                Description
--------------                -----------
<S>                     <C>
Exhibit 3.6             By-Laws of Collagen Aesthetics, Inc.

Exhibit 10.107*         License and Distribution Agreement effective as of
                        January 27, 1999 by and between Arthrocare Corporation
                        and Collagen Aesthetics, Inc.

Exhibit 10.108*         Distribution and Loan Agreement executed on January 11,
                        1999 by and between Collagen Aesthetics International
                        and BioPharmex S.A.

Exhibit 27              Financial Data Schedule
</TABLE>


*Confidential treatment requested.


                                       23