<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 period ended December 31, 1997

                                       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.

               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 January 31, 1998, Registrant had outstanding 8,972,324 shares of common
stock, exclusive of 1,960,400 shares held by the Registrant as treasury stock.





                                       1
<PAGE>   2

                              COLLAGEN CORPORATION

                                      INDEX



PART I.           Financial Information                             Page No.
---------------------------------------                             --------

Consolidated Balance Sheets -
December 31, 1997 and June 30, 1997                                      3

Consolidated Statements of Operations -
Three and six months ended December 31, 1997 and 1996                    4

Condensed Consolidated Statements of Cash Flows -
Six months ended December 31, 1997 and 1996                              5

Notes to Condensed Consolidated Financial Statements                   6-9

Management's Discussion and Analysis of Financial
Condition and Results of Operations                                  10-18






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


Other Information                                                   19- 20

Signatures                                                              21






                                       2




<PAGE>   3

                              COLLAGEN CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
               (In thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                                                          December 31,       June 30,
                                                                              1997            1997 *
                                                                           ---------        ---------
<S>                                                                        <C>             <C>  
ASSETS
   Current assets:
      Cash and cash equivalents                                            $   9,076        $  18,481
      Short-term investments                                                   3,656            5,117
      Accounts receivable, net                                                12,671           10,759
      Inventories, net                                                        12,687           14,293
      Other current assets, net                                               11,645            9,314
                                                                           ---------        ---------
             Total current assets                                             49,735           57,964

   Property and equipment, net                                                15,453           15,260
   Intangible assets and goodwill, net                                        13,273           14,764
   Investment in Boston Scientific Corporation                                55,411           83,874
   Other investments and assets, net                                          25,105           13,049
                                                                           ---------        ---------
                                                                           $ 158,977        $ 184,911
                                                                           =========        =========

LIABILITIES AND STOCKHOLDERS' EQUITY 
   Current liabilities:
      Accounts payable                                                     $   1,734        $   2,638
      Other accrued liabilities                                               14,683           13,638
      Income taxes payable                                                     9,060            9,376
      Notes payable                                                               64               70
                                                                           ---------        ---------
             Total current liabilities                                        25,541           25,722

   Long-term liabilities:
      Deferred income taxes                                                   28,179           35,448
      Other long-term liabilities                                              1,762            3,795
                                                                           ---------        ---------
             Total long-term liabilities                                      29,941           39,243

   Commitments and contingencies
   Minority Interest                                                              20               49

   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: 10,910,629 shares at December 31, 1997 (10,756,935
         shares at June 30, 1997), outstanding: 8,962,729 shares at
         December 31, 1997 (8,809,035 shares at June 30, 1997)                   110              108
      Additional paid-in capital                                              68,659           67,204
      Retained earnings                                                       40,699           47,999
      Cumulative translation adjustment                                       (2,017)          (1,717)
      Unrealized gain on available-for-sale investments                       36,790           47,069
      Treasury stock, 1,947,900 shares at December 31, 1997
         and June 30, 1997                                                   (40,766)         (40,766)
                                                                           ---------        ---------
             Total stockholders' equity                                      103,475          119,897
                                                                           ---------        ---------
                                                                           $ 158,977        $ 184,911
                                                                           =========        =========
</TABLE>


* Amounts derived from audited financial statements at the date indicated.




                                       3

<PAGE>   4




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



<TABLE>
<CAPTION>
                                                                        Three Months Ended               Six Months Ended
                                                                           December 31,                    December 31,
                                                                     ------------------------        ------------------------
                                                                       1997            1996            1997             1996
                                                                     --------        --------        --------        --------
<S>                                                                  <C>             <C>             <C>             <C>     
Revenues:
   Product Sales                                                     $ 22,551        $ 19,057        $ 42,953        $ 35,842

Costs and expenses:
   Cost of sales                                                        7,535           5,321          14,037          10,466
   Selling, general and administrative                                 10,986          10,479          21,555          19,328
   Research and development                                             5,767           4,525          11,493           8,686
   Acquired in-process research and development                        10,530              --          10,530              --
                                                                     --------        --------        --------        --------
                                                                       34,818          20,325          57,615          38,480
                                                                     --------        --------        --------        --------

Loss from operations                                                  (12,267)         (1,268)        (14,662)         (2,638)

Other income (expense):
   Net gain on investments, principally Boston
     Scientific Corporation (Target Therapeutics,
     Inc. in fiscal 1997)                                               2,843           3,038           8,775           9,222
   Equity in losses of affiliates, net                                    (76)           (123)           (149)           (597)
   Interest income                                                        237             305             537             660
   Interest expense                                                       (10)           (146)            (34)           (231)
                                                                     --------        --------        --------        --------


Income (loss) before income taxes and minority
    interest                                                           (9,273)          1,806          (5,533)          6,416

Provision (benefit) for income taxes                                     (857)            957             901           3,400
Minority interest                                                           1            (162)            (27)           (302)
                                                                     --------        --------        --------        --------


Net income (loss)                                                    $ (8,417)       $  1,011        $ (6,407)       $  3,318
                                                                     ========        ========        ========        ========

Net income (loss) per share-Basic                                    $   (.95)       $    .12        $   (.72)       $    .38
                                                                     ========        ========        ========        ========

Net income (loss) per share-Diluted                                  $   (.95)       $    .11        $   (.72)       $    .37
                                                                     ========        ========        ========        ========


Shares used in calculating earnings (loss) per share-Basic              8,895           8,691           8,857           8,827
                                                                     ========        ========        ========        ========


Shares used in calculating earnings (loss) per share-Diluted            8,895           8,841           8,857           8,963
                                                                     ========        ========        ========        ========
</TABLE>





                                       4


<PAGE>   5


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



<TABLE>
<CAPTION>
                                                                                         Six Months Ended
                                                                                            December 31,
                                                                                    ------------------------
                                                                                      1997            1996
                                                                                    --------        --------
<S>                                                                                 <C>             <C>     
Cash flows from operating activities:
   Net income (loss)                                                                $ (6,407)       $  3,318
   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                                                  3,423           3,107
        Equity in losses of affiliates                                                   149             597
        Gain on investments, net of taxes paid of $0 and $5.2 million
          in fiscal 1998 and 1997, respectively                                       (8,775)         (4,051)
        Other adjustments related to changes in
          assets and liabilities                                                      (5,085)         (4,776)
                                                                                    --------        --------
      Net cash used in operating activities                                           (6,165)         (1,805)
                                                                                    --------        --------

Cash flows from investing activities:
   Proceeds from sale of Boston Scientific Corporation stock
      (Target Therapeutics, Inc. in fiscal 1997), net of taxes paid                    9,362           5,578
   Proceeds from sale of other affiliate stock                                           704              --
   Proceeds from sales and maturities of short-term investments                        6,823           1,675
   Purchases of short-term investments                                                (5,324)         (4,625)
   Expenditures for property and equipment                                            (2,345)         (2,989)
   Increase in intangible and other assets                                                --             (99)
   Expenditures for investments in and loans to affiliates, net of repayments           (475)         (1,491)
   Acquisition of equity securities of Cohesion Corporation                          (10,530)             --
                                                                                    --------        --------
      Net cash used in investing activities                                           (1,785)         (1,951)
                                                                                    --------        --------

Cash flows from financing activities:
   Repurchase of common stock                                                             --          (2,546)
   Net proceeds from issuance of common stock                                          1,457           1,063
   Cash dividends paid                                                                  (881)           (885)
   Repayment of bank loans                                                            (2,031)            500
                                                                                    --------        --------
      Net cash used in financing activities                                           (1,455)         (1,868)
                                                                                    --------        --------

Net decrease in cash and cash equivalents                                             (9,405)         (5,624)

Cash and cash equivalents at beginning of period                                      18,481          21,676
                                                                                    --------        --------

Cash and cash equivalents at end of period                                          $  9,076        $ 16,052
                                                                                    ========        ========
</TABLE>






                                       5

<PAGE>   6

                              COLLAGEN CORPORATION
              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
     Corporation (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. 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. Investments in companies in which the Company has less than 20%
     interest with either no readily determinable fair value or with transfer
     restrictions are carried at cost or estimated realizable value, if less,
     and those unrestricted investments with a readily determinable fair value
     are carried at market value with the unrealized gains or losses, net of
     tax, as a component of stockholders' equity.

     The consolidated balance sheet as of December 31, 1997, the consolidated
     statements of operations for the three and six months ended December 31,
     1997 and 1996, and the condensed consolidated statements of cash flows for
     the six months ended December 31, 1997 and 1996, 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 December 31, 1997 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, 1997 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 notes included in the Company's
     Annual Report on Form 10-K for the year ended June 30, 1997.

     New Accounting Standards & Required Disclosures


     REPORTING COMPREHENSIVE INCOME AND DISCLOSURES ABOUT SEGMENTS OF AN
     ENTERPRISE AND RELATED INFORMATION. In June 1997, the Financial Accounting
     Standards Board issued Statements of Financial Accounting Standards No. 130
     ("SFAS 130"), "Reporting Comprehensive Income," and Financial Accounting
     Standards No. 131 ("SFAS 131"), "Disclosures About Segments of an
     Enterprise and Related Information," which will be required to be adopted
     by the Company in fiscal 1999. Adoption of these statements is not expected
     to have a significant impact on the Company's consolidated financial
     position, results of operations or cash flows.





                                       6
<PAGE>   7

     YEAR 2000. Some of the Company's older computer programs were written using
     two digits rather than four to define the applicable year. As a result,
     those computer programs have time-sensitive software that recognize a date
     using "00" as the year 1900 rather than the year 2000. This could cause a
     system failure or miscalculations causing disruptions of operations,
     including, among other things, a temporary inability to process
     transactions, send invoices, or engage in similar normal business
     activities.

     The Company has completed an assessment and will have to modify or replace
     portions of its software so that its computer systems will function
     properly with respect to dates in the year 2000 and thereafter. The total
     Year 2000 project cost is estimated at approximately $600,000 (which will
     be incurred over the next two fiscal years) and substantially all costs are
     expected to be capitalized. To date, the Company has incurred nominal
     costs.

2.   Inventories

     Inventories consist of the following (in thousands):


<TABLE>
<CAPTION>
                                               December 31,         June 30,
                                                  1997                1997
                                                -------             -------
<S>                                             <C>                 <C>    
     Raw materials                              $ 1,803             $   938
     Work-in-process                              2,928               7,188
     Finished goods                               7,956               6,167
                                                -------             -------
                                                $12,687             $14,293
                                                =======             =======
</TABLE>


3.   Investment in Boston Scientific Corporation


     The Company accounts for its investment in Boston Scientific Corporation
     ("Boston Scientific") as an available-for-sale equity security, which
     accordingly is carried at market value. During the three and six months
     ended December 31, 1997, the Company sold 70,000 shares and 157,340 shares,
     respectively, of Boston Scientific common stock for a pre-tax gain of
     approximately $2.8 million and $8.8 million, respectively. Boston
     Scientific common stock is quoted on the New York Stock Exchange under the
     symbol BSX. The closing price of Boston Scientific common stock at December
     31, 1997 was $45.88 per share. At December 31, 1997, the Company held
     1,207,860 shares of Boston Scientific common stock and all holding
     restrictions resulting from the acquisition of Target Therapeutics, Inc. by
     Boston Scientific that were applicable at June 30, 1997, had expired.
     Pursuant to a hedging strategy implemented by the Company in mid-August
     1997, approximately half of the Company's position in Boston Scientific is
     hedged, utilizing the purchase of puts and calls in combination to minimize
     the downside risk of loss should the price of Boston Scientific stock
     decline while allowing for limited upside participation should the stock
     price rise. The call option is collateralized by shares of Boston
     Scientific common stock held by the Company.

     At December 31, 1997 and June 30, 1997, the Company's shares of Boston
     Scientific common stock were recorded at $55.4 and $83.9 million,
     respectively.




                                       7
<PAGE>   8

     The $50.2 million unrealized gain ($55.4 million estimated fair value less
     $5.2 million cost) at December 31, 1997 and the $78.0 million unrealized
     gain ($83.9 million estimated fair value less $5.9 million cost) at June
     30, 1997, on these available-for-sale securities has been reported as a
     separate component of stockholders' equity, net of tax.

4.   Investment in Innovasive Devices, Inc.


     Prior to October 1996, the Company's 844,000 shares of common stock of
     Innovasive Devices, Inc. ("Innovasive Devices") were valued at cost, or
     $4,064,000, due to restrictions which prevented the sale of any of the
     Company's shares of common stock of Innovasive Devices. At December 31,
     1997, restrictions were no longer applicable on 93,000 shares of common
     stock which the Company holds in Innovasive Devices. As a result, the
     Company now carries the non-restricted portion of its investment in
     Innovasive Devices as an available-for-sale investment at market value, or
     $.8 million, reflecting an unrealized gain of $.4 million, which has been
     included in a separate component of stockholders' equity, net of tax. The
     remaining 751,000 restricted shares of common stock continue to be valued
     at cost.

     During the three and six months ended December 31, 1997, the Company did
     not sell any of its shares of common stock of Innovasive Devices.
     Innovasive Devices common stock is quoted on The Nasdaq Stock Market under
     the symbol IDEA. The closing price of Innovasive Devices common stock at
     December 31, 1997, was $9.13 per share. At December 31, 1997, the Company
     held approximately a 9% ownership position in Innovasive Devices.

5.   Acquisitions

     The Company increased its ownership position in Cohesion Corporation (of
     Palo Alto, California) from approximately 81% to approximately 99% during
     the month of December 1997. Cohesion Corporation is a privately-held
     company that is developing novel biomaterials with superior performance
     characteristics in the area of tissue adhesives, hemostats, biosealants,
     and adhesion prevention barriers for surgical applications. In connection
     with the Company's purchase of substantially all the remaining outstanding
     shares of Cohesion Corporation, $10.5 million of the purchase price (which
     includes compensatory amounts pertaining to the purchase of vested employee
     stock options) was allocated to in-process research and development, and
     was expensed at the time of the investment. The Company determined the
     amounts to be allocated to in-process technology for Cohesion Corporation
     based on initial studies of whether technological feasibility had been
     achieved and whether there was any alternative future use for the
     technology. Such studies are still preliminary and are subject to revision.
     The Company has concluded that the in-process technology has no alternative
     future use after taking into consideration the potential for both usage of
     the technology in different products and for resale of the technology. At
     December 31, 1997, there were additional unvested options outstanding
     providing for the purchase of the remaining shares of Cohesion Corporation
     common stock. The Company is currently determining the future activity, if
     any, it will take with respect to these options.

6.   Income Taxes

     The provision for income taxes for the six months ended December 31, 1997,
     and 1996 were computed by applying the estimated annual income tax rate to
     income






                                       8

<PAGE>   9

     before income taxes excluding the impact of the acquired in-process R&D
     charge. The estimated annual income tax rate considers non-deductible items
     such as goodwill amortization and excludes losses from certain foreign
     subsidiaries. The provision for income taxes for the three months ended
     December 31, 1997 was reduced by approximately $1.1 million as a result of
     tax benefits related to the in-process R&D charge.

7.   Earnings per share

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS#128"),
     which was adopted on December 31, 1997. The Company was required to change
     the method previously used to compute earnings per share and to restate all
     prior periods. The impact of SFAS #128 resulted in no impact for the three
     and six months ended December 31, 1997 and an increase of $0.01 per share
     for the three and six months ended December 31, 1996, with respect to basic
     earnings per share.







                                       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. The Company's actual activities with regard
to its Cohesion Technologies Inc. and Aesthetic Technologies Group may differ
significantly from those discussed in the forward-looking statements, given the
legal, tax, market and operational uncertainties associated with the separation
of these divisions. Actual results may differ significantly from the results
discussed in the forward-looking statements and may be affected by, among other
things, future results of operations, strategic decisions by management or the
Company's Board of Directors, uncertainties regarding timing of regulatory
approvals, new product introductions and market acceptance of new products,
product development cycles, results of clinical trials, potential unfavorable
publicity regarding the Company or its products, possible reversals of sales
trends, introduction of competitive products, changes in the delivery of
healthcare products to consumers, receipt of IRS rulings concerning the
anticipated tax-free spin-off of Cohesion Technologies, Inc., and, in particular
the factors described below under "Factors That May Affect Future Results of
Operations" as well as those under the same heading in the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1997.


The Company

Collagen Corporation (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 aesthetic and reconstructive applications, the treatment of
stress urinary incontinence, and bone repair. The Company markets its aesthetic
and reconstructive products directly and through a network of international
distributors and its stress urinary incontinence and bone repair products
through marketing partners.

In addition to internal research and development ("R&D") and joint product
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.


Separation of Aesthetic Technologies Group and Cohesion Technologies Inc.

In October 1997, the Company announced that it had determined to proceed to
separate its Aesthetic Technologies Group and its Collagen Technologies Group
into two independent, publicly-traded companies. In December 1997, the Company
purchased substantially all of the outstanding shares of Cohesion Corporation
and integrated Cohesion Corporation into the Company's Collagen Technologies 
Group. The Collagen Technologies Group is scheduled to be spun off as a separate
company, named Cohesion Technologies, Inc., to Collagen Corporation 
shareholders via a tax-free distribution by mid-1998. The separation is subject
to a number of conditions, including, without limitation, receipt of a ruling 
from the Internal Revenue Service ("IRS") that the transaction will be tax-free
to the Company and its stockholders. The Company is currently awaiting a 
determination by the IRS. Actual timing of the distribution will depend upon 
tax, legal, and other considerations.



                                       10
<PAGE>   11
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.


                            PERCENT OF PRODUCT SALES



<TABLE>
<CAPTION>
                                                         Three Months Ended               Six Months Ended
                                                             December 31,                   December 31,
                                                        --------------------            ---------------------
                                                        1997            1996            1997             1996
                                                         ---             ---             ---             --- 
<S>                                                     <C>             <C>             <C>             <C>

     Product sales                                       100%            100%            100%            100%

     Costs and expenses:

          Cost of sales                                   33%             28%             33%             29%
          Selling, general and administrative             49%             55%             50%             54%
          Research and development                        26%             24%             27%             24%
          Acquired in-process research and
              development                                 47%             --              25%             --
</TABLE>


Product sales. Product sales of $22.6 million in the three months ended December
31, 1997, increased approximately $3.5 million or 18%, compared to product sales
of $19.1 million for the same prior-year period. Product sales of $43.0 million
in the six months ended December 31, 1997, increased approximately $7.1 million
or 20%, compared to product sales of $35.8 million for the same prior-year
period. The increase in sales primarily was due to the increase in revenue from
direct sales of Contigen(R) Bard collagen implant ("Contigen implant") to
physician customers by C.R. Bard Inc. ("Bard"), the Company's marketing partner
for Contigen implant, increase in sales of Hylaform(R) viscoelastic gel
("Hylaform gel") in certain European countries, and United States sales of
plastic surgery and dermatological products (including SoftForm(R) facial
implant ("SoftForm implant") and injectable collagen products) for the three and
six months ended December 31, 1997 compared with the same periods in the prior
year. (See "Operating income/loss " below.)


Worldwide sales of plastic surgery and dermatological products for the three and
six months ended December 31, 1997 were $18.2 million and $33.6 million,
respectively,




                                       11

<PAGE>   12


both up 9% from sales of $16.8 million and $30.9 million for the same periods in
the prior year. Worldwide unit sales of plastic surgery and dermatological
products for the three and six months ended December 31, 1997 increased
approximately 8% and 9% over the same periods in the prior year. The increase in
both worldwide sales and units primarily was due to the introduction of Hylaform
gel in certain European countries and SoftForm implant in the United States, an
increase in sales in Europe of Trilucent(TM) breast implant ("Trilucent
implant"), a triglyceride-filled breast implant, and strong collagen injectable
sales by the Company's Japanese distributor, partially offset by lower sales of
collagen injectable products by international subsidiaries. The Company believes
the increase in injectable collagen sales in the United States in the three and
six months ended December 31, 1997, was a result of the continuation of United
States marketing programs designed to increase average treatment volume per
patient and to attract and retain new and existing patients, the implementation
of a new sales incentive program for its sales force, and contact made with
physicians not previously purchasing collagen-injectable products as a result of
the introduction of SoftForm implant. The Company anticipates continued dollar
growth in worldwide product sales of plastic surgery and dermatological products
during fiscal 1998. The Company announced previously its plan to restructure
manufacturing of the Trilucent implant to achieve long-term manufacturing
efficiencies. This plan involves relocating shell manufacturing to a third party
and moving the filling process to its facilities in Fremont, California. To
implement this plan, the Company entered into an agreement in December 1997 with
Laboratoire Perouse Implant ("LPI") in France to manufacture the Trilucent
implant shell. The Company is electing to shift a portion of its selling and
marketing efforts away from this product during this interim transition in an
effort to avoid a short supply situation. As a result, the Company does not
anticipate growth in Trilucent implant sales in fiscal year 1998 over fiscal
year 1997.

During the three and six months ended December 31, 1997, pursuant to the
Company's sales agreement with Bard, the Company recorded revenue of $1.9
million and $3.5 million, respectively, from Bard based on Bard's direct sales
of Contigen implant to physician customers compared to revenue of $1.7 million
and $3.2 million, respectively, in the same periods in the prior year. In
addition, the Company recorded $1.9 million and $4.6 million, respectively, of
revenue from shipments of Contigen implant to Bard in the three and six months
ended December 31, 1997 and no comparable revenue for the same period in the
prior year due to excess inventory situation at Bard. The Company expects that
revenues from Contigen implant sales in fiscal 1998 will increase as a result of
the resumption of shipments of Contigen implant to Bard.

For the three and six months ended December 31, 1997, sales of Collagraft(R)
bone graft matrix and Collagraft(R) bone graft matrix strip ("Collagraft bone
graft products") to the Company's marketing partner, Zimmer, Inc. ("Zimmer"),
were approximately $400,000 and $1.0 million compared to $300,000 and $1.0
million in the same periods in the prior year. The Company expects sales of
Collagraft bone graft products in fiscal 1998 to be at the same levels recorded
in fiscal 1997.

A number of uncertainties exist surrounding the marketing and distribution of
Contigen implant and Collagraft bone graft products. The Company's primary means
of distribution for these products is through third party firms, Bard in the
case of Contigen implant and Zimmer in the case of Collagraft bone graft
products. The Company's business and financial results could be adversely
affected in the event that either or both of these parties are unable to market
the products effectively, anticipate customer demand accurately, or effectively
manage industry-wide pricing and cost containment pressures in health care.





                                       12



<PAGE>   13

Cost of sales. Cost of sales as a percentage of product sales was 33% for the
three and six months ended December 31, 1997, compared with 28% and 29% for the
same prior-year periods. The higher cost of sales as a percentage of product
sales in the three and six months ended December 31, 1997, primarily was due to
the introduction of product line extensions from third parties, Hylaform gel and
SoftForm implant, and increased direct sales of Contigen implant to physician
customers by Bard. Both Hylaform gel and SoftForm implant are manufactured by
third parties and Contigen implant is distributed by a third party and as a
result, have higher costs per unit. Due to the high fixed costs of the Company's
Fremont, California manufacturing facility, unit cost of manufacturing is
expected to remain highly dependent on the level of output at the Company's
manufacturing facility, which is affected by incremental production of
collagen-based injectable products. The Company anticipates that cost of sales
as a percentage of sales will continue to 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.


SG&A. Selling, general, and administrative ("SG&A") expenses were $11.0 million
for the three months ended December 31, 1997, an increase of 5% over $10.5
million for the same prior-year period. SG&A expenses were $21.6 million in the
six months ended December 31, 1997, an increase of approximately $2.2 million or
12% compared to SG&A expenses of $19.3 million for the same prior-year period.
SG&A expenses as a percentage of product sales were 49% and 50% for the three
and six months ended December 31, 1997, compared to 55% and 54% for the same
prior-year periods. The increase in SG&A expenses, in absolute dollars, in the
three and six month ended December 31, 1997, primarily resulted from expenses
related to the separation of the Aesthetic Technologies Group and Cohesion
Technologies Inc. and marketing costs related to the SoftForm implant and
Hylaform gel, partially offset by lower international expenditures.  The Company
expects SG&A expenses in fiscal 1998 as a percentage of product sales to be at
levels lower than those of fiscal 1997.

R&D. Research and development ("R&D") expenses, which include expenditures for
regulatory compliance, were $5.8 million and $11.5 million (26% and 27% of
product sales) for the three and six months ended December 31, 1997, an increase
of 27% and 32% over $4.5 million and $8.7 million (24% of product sales), for
the same prior-year periods, respectively. The increase in R&D spending in the
three and six months ended December 31, 1997, primarily was attributable to the
ramp-up of expenses at Cohesion Corporation ("Cohesion", a controlled affiliate)
to support planned development programs, including clinical trials and the
ramp-up of the human recombinant program. In early 1997, the Company began a
feasibility study conducted with a polyethylene glycol-collagen ("PEG-collagen")
formulation, called "CP-1," for the treatment of facial wrinkles. The study of
CP-1 was conducted to determine CP-1's potential to lengthen the persistence of
wrinkle correction compared to Zyplast(R) collagen implant. Because the results
of the feasibility study did not meet the Company's pre-determined expectations,
the Company has decided not to pursue expanded clinical studies at this time.
The Company expects R&D spending in fiscal 1998 to be at levels higher than
fiscal 1997 primarily due to increased expenses for Cohesion, the human
recombinant program and orthopaedics programs.

Acquired in-process research and development. The charge for acquired in-process
research and development ("in-process R&D") of $10.5 million in the three and
six months ended December 31, 1997, 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. (See Note 5 of
Notes to Condensed Financial Statements.)




                                       13
<PAGE>   14


Loss from operations. Loss from operations was $12.3 million for the three
months ended December 31, 1997, compared with a loss from operations of $1.3
million for the same prior-year period. The Company's consolidated operating
loss was $14.7 million for the six months ended December 31, 1997, compared with
a $2.6 million loss for the same prior-year period. The losses in the three and
six months ended December 31, 1997 primarily were due to acquired in-process
R&D, representing the purchase of substantially all of the remaining shares of
Cohesion, the ramp-up of R&D expenses at Cohesion to support planned development
programs, including clinical trials, the ramp-up of the Company's human
recombinant program, and expenses related to the separation of the Aesthetic
Technologies Group and Cohesion Technologies, Inc., partially offset by higher
Contigen implant sales and sales from product line extensions.

Compared with foreign exchange rates for the same prior-year quarter, the impact
of foreign exchange rates in the current fiscal quarter on operating income was
a net increase of $85,000 on equivalent local currency basis, resulting from a
decrease of approximately $890,000 in operating expenses, partially offset by a
decrease of approximately $805,000 in revenue. Compared with foreign exchange
rates for the same prior-year period, the impact of foreign exchange rates in
the current fiscal year on operating income was a net increase of $269,000 on
equivalent local currency basis, resulting from a decrease of approximately
$1,737,000 in operating expenses, partially offset by a decrease of
approximately $1,468,000 in revenue. Until December 1994, the Company's policy
was to hedge material foreign currency transaction exposures. At June 30, 1997
and December 31, 1997, no foreign currency transaction exposures were hedged.
Unhedged net foreign assets were $7.0 million and $7.6 million at December 31,
1997 and June 30, 1997, respectively.

Net gain on investments, principally Boston Scientific Corporation. In the three
months ended December 31, 1997, the Company recorded a gain on investments of
$2.8 million primarily resulting from the sale of 70,000 shares of Boston
Scientific Corporation ("Boston Scientific") common stock compared to $3.0
million resulting from the sale of 100,000 shares of Target Therapeutics, Inc.
("Target") common stock in the three months ended December 31, 1996. In the six
months ended December 31, 1997, the Company recorded a gain on investments of
$8.8 million, primarily resulting from the sale of 157,340 shares of Boston
Scientific common stock compared to $9.2 million resulting from the sale of
330,000 shares of Target common stock in the six months ended December 31, 1996.
The Company may defer further sales of Boston Scientific common stock over the
next few quarters to optimize tax planning in connection with the anticipated
spin-off of Cohesion Technologies, although decisions concerning prospective
Boston Scientific common stock sales will also be affected by the then-current
market price for Boston Scientific common stock.

Equity in losses of affiliates, net. Equity in losses of affiliate companies was
approximately $76,000 for the three months ended December 31, 1997, compared to
equity in losses of approximately $123,000 for the same prior-year period. For
the six months ended December 31, 1997, equity in losses of affiliate companies
was $149,000 compared with losses of $597,000 in the same prior-year period. The
decrease in equity in losses of affiliates primarily was due to lower
CollOptics, Inc. ("CollOptics") losses as a result of CollOptics reducing its
R&D efforts until it obtains additional funding.

The Company intends to continue to expand its new product development activities
through more equity investments in or loans to affiliate companies during fiscal
year 1998. These affiliate companies typically are in an early stage of
development and may






                                       14
<PAGE>   15

be expected to incur substantial losses which in turn will have an adverse
effect on the Company's operating results. There can be no assurance that these
investments will result in positive returns nor can there be any assurance on
the timing of any return on investment, or that the Company will not lose its
entire investment.

Interest income. Interest income was $237,000 and $537,000 for the three and six
months ended December 31, 1997, respectively, compared to $305,000 and $660,000
for the same periods in the prior year. The decrease in the three and six months
ended December 31, 1997, primarily was due to lower average cash, cash
equivalents and short-term investment balances and a lower average interest
rate.

Provision for income taxes. The provision for income taxes for the six months
ended December 31, 1997 prior to the in-process R&D charge was approximately 40%
as compared to 53% for the corresponding period in 1996. The decrease in the
estimated annual tax rate results primarily from fluctuations in estimated
annual pretax income without similar changes in non-deductible goodwill
amortization in addition to reduced losses from foreign subsidiaries which
previously could not be offset against U.S. federal taxable income. The
provision for income taxes for the three months ended December 31, 1997 was
reduced by approximately $1.1 million as a result of tax benefits related to the
in-process R&D charge.

Liquidity and Capital Resources

At December 31, 1997, the Company's cash and cash equivalents were $9.1 million
compared to $18.5 million at June 30, 1997. Net cash used in operating
activities was approximately $6.2 million in the six months ended December 31,
1997, compared to approximately $1.8 million of net cash provided by operating
activities for the same prior-year period.

The $6.2 million of net cash used in operating activities in the six months
ended December 31, 1997, mainly was attributable to a $3.2 million increase in
miscellaneous receivables related to the sale of Boston Scientific common stock,
a $1.9 million increase in accounts receivable resulting from the resumption of
Contigen implant shipments to Bard, a $1.8 million increase in prepaid expenses,
a $900,000 net loss after adjusting for gain on investments (net of taxes paid),
depreciation and amortization expense, equity in losses of affiliates, and
acquired in-process research and development, partially offset by a $1.6 million
decrease in inventory.

The $3.2 million of net cash used in investing and financing activities in the
six months ended December 31, 1997, primarily was due to payments totaling $10.5
million for the purchase of substantially all of the remaining equity interests
in Cohesion Corporation, a payment of $5.3 million to purchase short-term
investments, capital expenditures of approximately $2.3 million, repayment of
$2.0 million of the Company's credit facility, payment of cash dividends of
approximately $900,000 to the Company's stockholders in July 1997, and net
payments of approximately $500,000 for additional investments made in and loans
to affiliates, partially offset by proceeds of $9.4 million (net of taxes paid)
from the sale of 157,340 shares of common stock of Boston Scientific by the
Company, proceeds of $6.8 million received from the sale of short-term
investments, proceeds of $1.4 million from the issuance of 153,694 shares of the
Company's common stock and proceeds of approximately $700,000 from the sale of
the Company's shares in affiliates.





                                       15

<PAGE>   16


The Company anticipates capital expenditures, equity investments in, and loans
to affiliate companies to be approximately $20.9 million in fiscal 1998. As of
December 31, 1997, the Company's capital expenditures, equity investments in,
and loans to affiliate companies totaled approximately $13.4 million. In June
1996, 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 147,900 shares as of December 31, 1997. After December
31, 1997, however, the Company began repurchasing stock in the open market.
Approximately 327,100 shares remain to be repurchased according to the Board of
Directors authorization. In November 1997, the Board of Directors declared a
dividend of ten cents per share for stockholders of record as of December 15,
1997 with a payment on or about January 15, 1998.

The Company's principal sources of liquidity include cash generated from
operations, sales of Boston Scientific common stock, and the Company's cash,
cash equivalents, and short-term investments. At December 31, 1997, the Company
held 1,207,860 shares of Boston Scientific common stock and all holding
restrictions resulting from the acquisition of Target by Boston Scientific that
were applicable at June 30, 1997, had expired. The Company's Board of Directors
has authorized the Company to sell portions of its holdings in Boston
Scientific. The Company anticipates that stock sales pursuant to this
authorization will be made from time to time with the objective of generating
cash, for among other things, further investments in both current and new
affiliate companies.

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 to shipments.

Sales of the Company's collagen-based injectable products, Zyderm(R) I implant,
Zyderm(R) II implant and Zyplast(R) implant, as well as Trilucent implant and
Contigen implant, accounted for approximately 84% of consolidated product sales
for the quarter ended December 31, 1997 and 87% of consolidated product sales
for the six months ended December 31, 1997. 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,
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.

The Company's quarterly operating results may vary significantly in the future
depending upon factors such as 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



                                       16

<PAGE>   17

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 operating results and financial
condition would be materially adversely affected in the event of a major
earthquake, fire or other similar calamity, affecting its manufacturing
facility.

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 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 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 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 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.

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 




                                       17
<PAGE>   18
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.

For a more complete discussion of risks and uncertainties involving the
Company's business, please see the risks 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, 1997.


















                                       18

<PAGE>   19

                           PART II. OTHER INFORMATION
                              COLLAGEN CORPORATION


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

          A.   On October 29, 1997, the Registrant held its Annual Meeting of
               Stockholders.

          B.   As listed below, all of management's nominees for directors were
               elected at the meeting pursuant to proxies solicited pursuant to
               Regulation 14 under the Securities and Exchange Act of 1934 (in
               thousands).


<TABLE>
<CAPTION>
               -----------------------------------------------------------------------------------------------------
                                             No. of           No. of        No of          No of           No of
                                              Votes            Votes         Votes          Votes        Broker Non-
               Name of Nominee                 For            Against      Withheld       Abstained        Votes
               -----------------------------------------------------------------------------------------------------
<S>                                          <C>                <C>           <C>              <C>            <C>
               Gary S. Petersmeyer             7,240              0            193              0              0


               Anne L. Bakar                   7,259              0            174              0              0


               John R. Daniels, MD             7,320              0            113              0              0


               William G. Davis                7,323              0            111              0              0


               Reid W. Dennis                  7,318              0            116              0              0


               Craig W. Johnson                7,265              0            168              0              0
               -----------------------------------------------------------------------------------------------------
</TABLE>

          C.   The adoption of an amendment to the 1995 Employee Stock Purchase
               Plan to increase the number of shares of common stock reserved
               for issuance thereunder by 100,000 shares and to permit
               participants to purchase up to 3,000 shares during any offering
               period, was approved with 6,034,083 shares voting in favor,
               1,300,778 shares voting against, 51,268 shares abstaining and
               46,930 broker non-votes.

          D.   The appointment of Ernst & Young LLP as independent auditors of
               the Company for the fiscal year ending June 30, 1998 was ratified
               with 7,357,482 shares voting in favor, 65,679 voting against and
               9,898 shares abstaining.





                                       19

<PAGE>   20

Item 5.  Other Information

           None



Item 6.  Exhibits and Reports on Form 8-K

          A.   Exhibits

          Exhibit 10.94 - Manufacturing agreement between Registrant and LPI,
                          dated December 16, 1997.

          Exhibit 27 - Financial Data Schedule



          B.   Reports on Form 8-K

           None

















                                       20


<PAGE>   21
                                   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:  February 12, 1998                      /s/ Norman Halleen
       -----------------                      ------------------------------

                                              Norman Halleen
                                              Vice President Finance
                                              Chief Financial Officer












                                       21



<PAGE>   22

                              COLLAGEN CORPORATION
                                INDEX TO EXHIBITS




Exhibit Number                          Description
--------------                          -----------

Exhibit 10.94               Manufacturing  Agreement between Registrant and
-------------               LPI, dated December 16, 1997.

Exhibit 27                  Financial Data Schedule
----------



                                       22