UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998      COMMISSION FILE NUMBER 0-19890

                              LIFECELL CORPORATION

          A  DELAWARE                              IRS  EMPLOYER  IDENTIFICATION
          CORPORATION                              NO.  76-0172936

                           3606 RESEARCH FOREST DRIVE
                           THE WOODLANDS, TEXAS  77381

                         Telephone Number (281) 367-5368

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          Common Stock, $.001 Par Value

     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  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [  ]

     Aggregate  market  value  of  the  voting  stock (Common Stock and Series B
Preferred  Stock,  assuming conversion of such Preferred Stock into Common Stock
at the current conversion rate) held by non-affiliates of registrant as of March
23,  1999:  $58,934,467.
Number  of shares of registrant's Common Stock outstanding as of March 23, 1999:
11,638,092.  (If the Series B Preferred Stock had converted into Common Stock as
of  such  date,  there  would be 15,458,221 shares of Common Stock outstanding.)

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Portions  of  registrant's  proxy  statement  relating  to  the 1999 annual
meeting  of  stockholders  have  been  incorporated  by  reference into Part III
hereof.

<PAGE>
<TABLE>
<CAPTION>
                                            TABLE OF CONTENTS

                                                DESCRIPTION

Item                                                                                                   Page
----                                                                                                   ----
<S>      <C>                                                                                           <C>
PART I                                                                                                    3
  Item 1.   Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
            General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
            Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
            Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
            Products and Product Development Activities . . . . . . . . . . . . . . . . . . . . . . .     5
            Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    10
            Sources of Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11
            Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11
            Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
            Patents, Proprietary Information and Trademarks . . . . . . . . . . . . . . . . . . . . .    16
            Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
            Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
            Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    18
            Special Note Regarding Forward-Looking Statements . . . . . . . . . . . . . . . . . . . .    18
            Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    18
  Item 2.   Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25
  Item 3.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25
  Item 4.   Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . .    25

PART II                                                                                                  25
  Item 5.   Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . .    25
            Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    26
  Item 6.   Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    27
  Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations . .    27
            General and Background. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    28
            Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    28
            Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    29
  Item 7A.  Quantitative and Qualitative Disclosure About Market Risk . . . . . . . . . . . . . . . .    30
  Item 8.   Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . .    30
  Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . .    30

PART III                                                                                                 31
  Item 10.  Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . .    31
  Item 11.  Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    31
  Item 12.  Security Ownership of Certain Beneficial Owners and Management  . . . . . . . . . . . . .    31
  Item 13.  Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . .    31
PART IV                                                                                                  31
  Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . .    31
</TABLE>

                                        2
<PAGE>
                                     PART I

     This  Annual  Report  on  Form  10-K  contains,  in  addition to historical
information,  "forward-looking statements" (within the meaning of Section 27A of
the  Securities  Act  of  1933,  as  amended,  and Section 21E of the Securities
Exchange  Act  of  1934,  as amended) that involve risks and uncertainties.  See
"Business-Special  Note  Regarding  Forward-Looking  Statements."

ITEM  1.     BUSINESS

GENERAL

     LifeCell  Corporation  ("LifeCell"  or  the  "Company") is a bioengineering
company  engaged in the development and commercialization of tissue regeneration
and  cell  preservation  products.  The Company's patented tissue processing and
cell preservation technologies serve as platforms for a broad range of potential
products  addressing  significant  clinical  needs  in  multiple  markets.  The
Company's first commercial product is AlloDerm  , a tissue processing technology
that  provides a graft ("AlloDerm") consisting of an extracellular tissue matrix
that  retains  the  essential  biochemical  and  structural composition of human
dermis.  The  Company  believes that AlloDerm is the only commercially available
tissue transplant product that provides a complete template for the regeneration
of normal human soft tissue.  AlloDerm currently is being marketed in the United
States  and  internationally  for use in reconstructive plastic, dental and burn
surgery applications.  The Company estimates that AlloDerm has been transplanted
in  more  than  40,000 patients.  LifeCell also is developing several additional
products,  including  a  micronized  form  of AlloDerm ("Micronized AlloDerm "),
vascular  grafts,  nerve  connective  tissue  grafts,  and ThromboSolTM platelet
storage  solutions  ("ThromboSol").

     LifeCell was incorporated in the State of Delaware in 1992 as the successor
to  a  Delaware  corporation  that  was  incorporated  in  1986.

TECHNOLOGY

     The  Company's  product  development  programs have been generated from the
following  proprietary  technologies:

     -    a method for  producing  an  extracellular  tissue  matrix by removing
          antigenic  cellular  elements  while  stabilizing  the matrix  against
          damage;

     -    a method for cell  preservation by  manipulating  cells through signal
          transduction  (i.e.,  manipulation of cellular  metabolism) to protect
          cells during prolonged storage; and

     -    a method for  freeze-drying  biological  cells and tissues without the
          damaging effects of ice crystals.


     Tissue  Processing  Technology

     LifeCell's  tissue  processing  technology removes antigenic cells from the
tissue  matrix  to  eliminate  the  potential  for  specific  rejection  of  the
transplanted  tissue.  The  Company's  tissue  processing  technology  also  (i)
stabilizes the tissue matrix by preserving its natural structure and biochemical
properties  that  promote cell repopulation and (ii) allows for extended storage
by  freeze-drying  the tissue matrix without significant ice crystal damage thus
avoiding  a  non-specific  immune  response  upon  transplantation.

     Soft  tissue  contains a complex, three-dimensional structure consisting of
multiple  forms  of  collagen,  elastin,  proteoglycans,  other proteins, growth
factors  and  blood  vessels (the "tissue matrix").  Together, the tissue matrix
and  the  cells  that  populate  it  form  the soft tissues of the body, such as
dermis,  heart  valves, blood vessels, nerve connective tissue, and other tissue
types.  As  part of the body's natural remodeling process, cells within a tissue
continuously  degrade  and, in the process, replace the tissue matrix.  However,
in the event that a large portion of the tissue matrix is destroyed or lost as a
result  of  trauma  or  surgery, the body cannot regenerate the damaged portion.
The  only  method  of  replacing  large sections of the tissue matrix is through
transplantation.

     Soft  tissue  transplants  from  one  part of the patient's body to another
(autograft)  generally  are  successful;  however,  the procedure results in the
creation  of  an additional wound site.  Historically, the ability to transplant
tissue  from  one  person  to  another  (allograft) has been limited because the
donor's  cells  within  the  transplanted tissue may trigger an immune response,
resulting  in  rejection  of the transplanted tissue.  The Company believes that
previous  attempts  to remove cells from soft tissue grafts before performing an
allograft transplant have resulted in disruption or damage of the tissue matrix,
causing  an  inflammatory  response  and  rejection  of  the  tissue  following
transplantation.

                                        3
<PAGE>
     LifeCell  believes its tissue  processing  technology  offers the following
     important benefits:

          Natural Tissue  Regeneration.  Tissue grafts  produced with LifeCell's
     tissue   processing   technology  retain  the  structural  and  biochemical
     properties that stimulate  normal cell  repopulation and normal soft tissue
     regeneration.  In addition,  the Company's clinical studies with dermis and
     preliminary  animal  studies with heart valve  leaflets,  nerve  connective
     tissue grafts, and vascular grafts processed with the Company's  technology
     indicate  that such tissues can be remodeled by the  recipient's  own cells
     and eventually become the recipient's own tissue.

          Multiple Potential Applications.  The Company believes that its tissue
     processing  technologies have the potential to generate additional products
     with  multiple   applications.   In  addition  to  the  current  commercial
     applications of AlloDerm  (i.e.,  reconstructive  plastic,  dental and burn
     surgery),  the  Company  believes  that  AlloDerm  may  provide  additional
     benefits in neurosurgery,  urological  surgery,  gynecological  surgery and
     orthopedic surgery. The Company also is evaluating the applicability of its
     technologies to other tissues and is conducting  animal studies with nerves
     and blood vessels processed with the Company's technology.

          Safety.  The  Company's  tissue  processing  technology is designed to
     produce products that will  revascularize and integrate into the body's own
     tissues.  The  patient's  immune cells also are able to penetrate  into the
     transplanted  tissue and thus aid in  preventing  infections.  In contrast,
     certain synthetic implants do not allow penetration of the patient's immune
     cells, thereby compromising the body's natural ability to fight infections.

          Prolonged  Shelf-Life.  The Company's  proprietary  tissue  processing
     technology  allows extended storage and ease of transportation of products.
     AlloDerm is validated for storage at normal  refrigerated  temperatures for
     up to two years.  In  contrast,  traditionally  processed  skin  allografts
     require low temperature (-80 C) storage and shipping with dry ice.

          Compatibility  with  Other  Technologies.  Several  types  of  tissues
     processed  with  the  Company's  technology  retain  important  biochemical
     components,   such  as  proteoglycans   including  hyaluronic  acid.  These
     biochemical   components   bind  growth  factors  that   stimulate   tissue
     regeneration.  As a result,  the  Company  believes  it may be  possible to
     utilize its technology to develop tissue-based  delivery vehicles for these
     factors and cells.

     Cell  Preservation  Technology

     Blood  cells  circulating  within  the body are exposed to multiple factors
which  maintain  their  stability  and prevent activation.  When blood cells are
removed  from  the body for storage, these stabilizing influences are absent and
results  in the destabilization and irreversible activation of the cells.  These
damaging  events  currently limit the shelf life of transfusable red blood cells
to  42  days  under  refrigeration  and  blood  platelets  to  five days at room
temperature.

     LifeCell's  cell  preservation technology mimics the stabilizing influences
that  are  present  in  the  body  through  manipulation  of signal transduction
mechanisms  that  control  cellular  metabolism,  combined  with  either  low
temperature  storage  or  the  Company's  patented freeze-drying technology.  If
successfully  implemented,  LifeCell's cell preservation technology could result
in  multiple  products for the preservation of directly transfusable blood cells
with  extended  shelf  life  which  could  be stored in a manner consistent with
current  blood  banking  practices.

STRATEGY

     LifeCell's  objective  is  to  be  a  leader  in the research, development,
manufacturing,  sales and marketing of tissue regeneration and cell preservation
products.  The  Company's primary focus is on the broad commercialization of its
first  product, AlloDerm.  LifeCell's  strategy includes the following principal
elements:

     EXPANDING PENETRATION OF ALLODERM INTO CURRENT TARGET MARKETS

     The Company intends to expand the penetration of its AlloDerm products into
certain  target  markets.  The  Company  currently  markets  AlloDerm for use in
reconstructive  plastic,  dental  and  burn  surgery  in  domestic  and selected
international  markets  through  its  own  sales force and through distributors.
LifeCell  intends  to increase the penetration of AlloDerm into these markets by
(i)  conducting  additional  clinical  studies  to  demonstrate  the benefits of
AlloDerm  compared  to  other current therapies, (ii) supporting publications in
leading  scientific journals describing the uses and benefits of AlloDerm, (iii)

                                        4
<PAGE>
utilizing  the Company's expanded sales and marketing staff to call on a broader
audience  of  hospital-based  surgeons, (iv) strengthening the Company's current
specialty  distributor  relationship  with Lifecore Biomedical, Inc., ("Lifecore
Biomedical"),  the  Company's  exclusive  distributor  in  the United States for
periodontal  applications  of  AlloDerm,  and  building  new  relationships with
potential  distributors for other specialty fields of use, and (v) participating
at trade shows and sponsoring educational and surgical training workshops on the
use  of  AlloDerm.

     EXPANDING THE USE OF ALLODERM INTO NEW APPLICATIONS

     LifeCell  intends  to  expand  the  use  of  AlloDerm  into  the  fields of
neurology,  urology  and  gynecology.  In  these  markets,  surgeons  have  used
AlloDerm  as implants and grafts for dura mater replacements, bladder slings and
pelvic  floor  repair.  In  March 1999, LifeCell signed an agreement with Boston
Scientific  Corporation  ("Boston  Scientific")  for  the  exclusive  worldwide
distribution  of  its  AlloDerm  processed  acellular  tissue  matrix for use in
urology  and gynecology.  LifeCell is evaluating the use of its tissue matrix in
each  of  these  procedures  in  animal  and  clinical  studies.

     LEVERAGING TECHNOLOGY PLATFORMS TO DEVELOP NEW PRODUCTS

     The  Company  plans  to  broaden  the  use  and  application  of its tissue
processing  and  cell  preservation  technologies  to develop new products.  The
Company  currently  is  developing  Micronized  AlloDerm,  a  micronized form of
AlloDerm  that  it  believes  may be useful in dermatological and reconstructive
applications  as well as in the treatment of urinary incontinence.  In addition,
the Company intends to apply its tissue processing technology in the development
of  products  based  on  other  tissues,  including  vascular  grafts, and nerve
connective  tissues.  The  Company  also  is  utilizing  its  proprietary  cell
preservation  technology  in the development of solutions that would  extend the
shelf-life  of  platelets  and  red  blood  cells.  LifeCell  plans to establish
collaborative  out-licensing  arrangements with appropriate partners to fund the
development  and  commercialization  of  certain  of  these  products.

     PRODUCTS AND PRODUCT DEVELOPMENT ACTIVITIES

<TABLE>
<CAPTION>
     The following table sets forth information about AlloDerm and the Company's products
     under  development.

CURRENT USES OF ALLODERM                  APPLICATIONS (1)                                     STATUS (2)
<S>                                       <C>                                                  <C>
Reconstructive Plastic Surgery            Soft tissue repair and replacement                   Commercial
Periodontal Surgery                       Gingival grafts, root coverage, ridge augmentation   Commercial
Burns                                     Dermal grafts                                        Commercial
POTENTIAL NEW USES OF ALLODERM PRODUCTS   APPLICATIONS (1)                                     STATUS (2)
Urological and Gynecological Surgery      Bladder sling                                        Near-commercial
  Pelvic floor repair                     Near-commercial
Neurosurgery (NeoDura )                   Duraplasty                                           Near-commercial
Micronized AlloDermTM                     Plastic and reconstructive procedures                Near-commercial
  Urinary incontinence                    Development
General Surgery                           Abdominal wall closure                               Development
  Prevention of surgical adhesions        Development
Orthopedic Surgery                        Capsular ligament reinforcement                      Development
  Tendon, meniscus, cartilage repair      Research
ADDITIONAL PRODUCTS                       APPLICATIONS (1)                                     STATUS (2)
Vascular Grafts                           Coronary artery bypass                               Development
  Below-knee peripheral bypass            Pre-clinical
  Arterial-venous fistula                 Pre-clinical
Nerve Connective Tissue                   Nerve regeneration                                   Pre-clinical
ThromboSol                                Platelet storage solution                            Clinical Feasibility
Red Blood Cell Preservation               Extended storage of red blood cells                  Research
<FN>

     (1) LifeCell  markets  AlloDerm for the repair or replacement of damaged or
inadequate  integumental  tissue.  LifeCell may not promote AlloDerm for certain
uses without  approval of the United  States Food and Drug  Administration  (the
"FDA").  Products  other than  AlloDerm  may require  separate  filings with and
approvals of the FDA. While some of these products may be commercialized at this
time,  there  can be no  assurance  that  the FDA will  not  require  pre-market
clearance  or  approval  in the  future or take  other  regulatory  action.  See
"-Government Regulation."

     (2) "Research"  indicates a project in which  proof-of-concept  has not yet
been established. "Preclinical" indicates a project in which animal studies have
been  conducted,  are being  conducted or are planned.  "Development"  indicates
projects  in which  proof-of-concept  has been  established  through in vitro or
early-stage  animal  studies  or  post-market  clinical  use and the  Company is
conducting or intends to conduct  further animal  studies and clinical  studies.
"Clinical   feasibility"  indicates  early-stage  trials  in  humans  are  being
conducted.  "Near-Commercial"  indicates applications that LifeCell expects will
be commercially available in 1999. "Commercial" indicates applications for which
surgeons  currently  are  using  the  product.  However,   commercial  does  not
necessarily  indicate that all factors,  such as long-term  efficacy,  have been
determined.
</TABLE>

                                        5
<PAGE>
     The  products  or  products under development listed in the preceding table
are  in various stages of research, development or commercialization.  There can
be  no  assurance  that  the  products  under  development  will be successfully
developed  or  manufactured.  Certain  of  the  products  under development will
require  regulatory  approval  before  commercialization.  Additionally,  the
regulatory  status  of  AlloDerm  when  promoted  for  certain uses is currently
uncertain.  There  can  be  no  assurance  that  any  product  or  product under
development  will  receive  regulatory  approval  if  required,  meet  price  or
performance  objectives,  be  developed  on  a  timely  basis  or prove to be as
effective  or  as  well  received  as  competing  products.  See  "-Government
Regulation."

     ALLODERM  PRODUCTS

     AlloDerm is an cellular  tissue  matrix  graft  processed  with  LifeCell's
proprietary a tissue  processing technology from donated human (cadaveric) skin.
The Company believes that AlloDerm is the only transplant  tissue product on the
market  today that  promotes  the  regeneration  of normal  human  soft  tissue.
Following transplant,  the AlloDerm graft becomes repopulated with the patient's
own cells and is  revascularized  (i.e.,  blood  supply is  restored),  becoming
engrafted into the patient.  AlloDerm has multiple surgical  applications and is
currently used  predominately in  reconstructive  plastic,  periodontal and burn
surgery.  There are additional  applications  for AlloDerm,  such as urological,
gynecological,  neurological and general surgery, for which LifeCell is pursuing
market entry and penetration.

     LifeCell  receives  donated  human  skin  from unaffiliated and independent
tissue banks in the United States.  LifeCell requires the tissue banks supplying
the  Company  with tissue to comply with the FDA's human tissue regulations.  In
addition,  the Company requires supplying tissue banks to comply with procedural
guidelines  outlined  by  the  American  Association  of Tissue Banks.  LifeCell
conducts  microbiological  and  other  quality assurance testing before AlloDerm
tissue  products  are  released  for  shipment.  See  "-Government  Regulation."

     LifeCell  has established what we believe to be adequate sources of donated
skin  tissue  at acceptable costs to satisfy the foreseeable demand for AlloDerm
tissue  products.  However,  there  can  be  no  assurance  that  the  future
availability  of donated human skin will be sufficient to meet LifeCell's demand
for  such  materials.  AlloDerm  is  shipped at ambient temperature by overnight
delivery  services  and  has  a  two-year  refrigerated  shelf-life.  See
"-Sources  of  Materials."

     RECONSTRUCTIVE PLASTIC SURGERY.  In November 1995, LifeCell began marketing
AlloDerm  to reconstructive plastic surgeons for use as a soft tissue implant to
repair  or  replace  tissue  deficits,  as  an  interpositional graft for tissue
closure  or  repair,  as  a  graft or implant for scar revision, as a protective
sheath  covering  nerves  and tendons and as a sling to support tissue following
nerve  or  muscle  damage.

     Based  on  industry  sources,  LifeCell estimates there are approximately 1
million  reconstructive  surgical  procedures  performed  annually in the United
States  in  which AlloDerm could be used.  The Company estimates that its target
market  for  sheet  AlloDerm  is  241,000  procedures.  These procedures include
various  head and neck aesthetic surgeries, cancer reconstruction, scar revision
and  oral  cavity  reconstruction. In these procedures, the greatest competitive
pressures  to  AlloDerm  are  from autologous tissue, synthetic and biosynthetic
materials.  The  disadvantages  of  using autologous tissue is the creation of a
separate  donor  site  wound and the associated pain, healing, and scarring from
this  additional  wound.  The disadvantages of using synthetic materials are the
susceptibility  of  synthetics  to  infection,  the  graft  moving away from the
transplanted  area  (mobility),  and  erosion  of  the  graft  through  the skin
(extrusion).  Additionally,  some  biosynthetic  materials  may  include  bovine
collagen,  which  requires  patient  sensitivity  testing.

     PERIODONTAL SURGERY.  LifeCell began marketing AlloDerm to periodontists in
September  1995.  Since  June  1997, Lifecore Biomedical, Inc. has served as the
Company's  exclusive  distributor  in  the  United States of AlloDerm for use in
periodontal  applications.  Periodontal  surgeons  use  AlloDerm to increase the
amount  of  attached  gum tissue supporting the teeth.  Until the development of
AlloDerm,  these  procedures were predominately performed with autologous tissue
excised  from  the roof of the patient's mouth and then transplanted to the gum.

     AlloDerm  also is used in periodontal procedures for covering exposed tooth
roots.  This procedure involves placing AlloDerm underneath gum tissue, which is
then  lifted  up to cover the exposed root.  AlloDerm allows for the coverage of
multiple  exposed  roots  in  a  single  surgery  without  being  limited by the
availability  of  autologous  palatal  tissue.  AlloDerm has been evaluated in a
clinical  study of 50 patients in which AlloDerm proved equivalent to autologous
connective  tissue grafts for covering roots.  The patients were also spared the
pain  and  discomfort  associated  with  the  excision of the palatal autograft.

                                        6
<PAGE>
     In  mid 1998, LifeCell and Lifecore Biomedical began marketing AlloDerm for
use  in  root  coverage  procedures.  Based  on  industry  sources,  the Company
estimates  250,000  root coverage procedures in which AlloDerm could be used are
performed  annually  in  the  United  States.

     AlloDerm  tissue products also are used as barrier membranes in guided bone
regeneration.  In  this  function,  the AlloDerm tissue serves as a barrier over
allograft bone grafts or bone substitutes, which are used to restore degenerated
alveolar  bone.

     According  to  the  most  recently  published data from the American Dental
Association,  there  were  approximately  480,000 soft tissue grafts and 230,000
bone-related  grafts  performed  in  1990  in  the  United  States.  Competitive
procedures  use  autologous  tissue  as well as synthetic material.  The Company
believes  that  AlloDerm  has  advantages  over autologous tissue because of the
reduced  trauma  to  the  patient,  and  over  certain  non-resorbable synthetic
materials because it integrates into the patient and does not require a separate
procedure  for  removal.

     BURNS.  During 1994, LifeCell began commercial sales of AlloDerm for use in
the  treatment  of  third-degree  and  deep  second-degree  burns requiring skin
grafting.  Skin  is  the  body's  largest organ and is the first line of defense
against  invasion of foreign substances.  It contains two functional layers, the
upper  surface  consisting  primarily  of  cells  (epidermis)  and an underlying
foundational  layer  consisting  primarily  of extracellular matrix proteins and
collagen  (dermis).  The  epidermis  functions  as a water barrier and maintains
hydration.  The  dermis  provides  other  important  skin  properties  including
tensile strength, durability and elasticity.  Dermis, like many other tissues of
the  body,  is  not  capable of de novo regeneration.  The most conservative and
common  surgical  treatment  of  third-degree  and  deep second-degree burns use
split-thickness  skin  autografts  (the  epidermal  layer  and  a portion of the
dermis)  taken  from  uninjured  areas  of  the  patient's  body.  The  surgical
procedure  when  using  AlloDerm in treating these patients is to place AlloDerm
where  the  patient  is missing dermis and cover the AlloDerm with an ultra-thin
split-thickness  skin  autograft (the epidermal layer and a much thinner portion
of  the  dermis).  This  procedure  has  produced  comparable  results to normal
autografts  while  significantly  reducing  donor  site  trauma.

     The  use  of  AlloDerm  in  burn  grafting has clinically shown performance
equivalent  to  autograft  in  reducing  the  occurrence  and  effects  of  scar
contracture.  Scar  contracture is a progressive tightening of scar tissue which
can  cause  skin and joint immobility. Severe scar contracture can limit the use
and function of all mobile joints, such as the arms, legs, feet, hands and neck.
Burn  patients  commonly undergo or need repetitive reconstructive surgeries for
scar  contracture.  LifeCell  believes  that  AlloDerm  provides  significant
therapeutic  value  when  used  in burn grafting over a patient's mobile joints.

     Based  on industry sources, the Company estimates that approximately 75,000
people  are  hospitalized  each  year in the United States due to burns and that
more  than  20,000 of such patients are admitted with major burns requiring skin
grafts.  LifeCell  believes AlloDerm could be used effectively with all of these
patients.

      NEUROSURGERY.   Dura  mater, the protective tissue lining of the brain and
spinal cord, can become damaged by trauma, disease, or as a result of a surgical
procedure.  Since  1996,  surgeons  have used AlloDerm as a replacement for dura
mater  for  patients  undergoing  brain  or  spinal surgeries. During a two year
period  from June 1996 to March 1998, an independent hospital used and evaluated
AlloDerm as a dura graft in over 200 patients. The patients experienced no known
complications  as  a  result  of  the  AlloDerm  graft.

     The  competitive  products  to NeoDura (AlloDerm for dura mater replacement
surgery)  are  autologous  tissue,  allograft dura mater and bovine pericardium.
The  use  of  allograft  dura  mater and bovine products has declined because of
concerns  over  disease  transmission.  The Company believes that NeoDura may be
preferred  over allograft dura mater because certain neurological diseases, such
as  Creutzfeld  Jacob  Disease, have not been documented to occur in dermis, the
source material for NeoDura.  The Company believes that NeoDura has an advantage
over autologous tissue because of the elimination of the autologous tissue donor
site  trauma.

     The  FDA  currently  regulates allograft dura mater as a medical device and
thus  is  subject to premarket notification requirements.  In December 1997, the
FDA  notified  the  Company  that AlloDerm, when labeled and promoted for use in
dura mater replacement procedures, also will be classified as a Class II medical
device.  LifeCell has submitted a 510(k) premarket notification to the FDA for a
dura  mater  substitute.  Regulatory  clearance  time  for  products for similar
indications  have  ranged  from  three  to nine months. However, there can be no
assurance  that this product will receive 510(k) clearance on a timely basis, if
at  all.

     UROLOGY  AND GYNECOLOGY SURGERY. Since 1997, surgeons have used AlloDerm in
urological and gynecological procedures in the treatment of urinary incontinence
and  to repair damaged or inadequate female pelvic tissues. Urinary incontinence
affects  approximately  13  million Americans, 85% of whom are women. Fewer than
half  of  these  individuals currently seek treatment due to combined factors of
embarrassment  and  a  lack  of acceptable therapeutic options for some types of
incontinence.  Some  forms  of urinary incontinence can be treated with a sling,
which  involves  lifting  and  supporting  the  bladder neck to provide urethral
support  and  compression.

                                        7
<PAGE>
     Cystocele,  rectocele  and  other  pelvic  floor  conditions  also  occur
frequently  in  women  and require soft tissue surgical repair. These conditions
are  particularly  common  after  multiple  vaginal births and cause significant
discomfort  to  the  patient.  It  is common that these conditions exist with or
cause  urinary  incontinence.  Therefore, it is becoming the current standard of
care  to  correct  pelvic  floor  conditions  at  the  same  time  as a sling or
suspension  procedure  to ensure that there are no conditions that can adversely
affect  patient  outcome.

     Currently,  materials  used  for  slings  and pelvic floor repair surgeries
include  autologous  tissue,  synthetic  materials  and  cadaveric  fascia.  The
autologous  tissue  often is taken from the patient's thigh or abdomen resulting
in  a  painful donor site. The greatest drawback of using synthetic materials is
the  occurrence  of erosion through the urethra or vaginal wall causing pain and
infection, necessitating repeat surgery.  Cadaveric fascia commonly is used with
minimal  complications  but currently is undergoing supply constraints. LifeCell
believes  that  its  acellular  tissue  matrix  as  a  sling provides a safe and
effective alternative that eliminates the need for a donor site, will repopulate
as the patient's own tissue, will not erode through the soft pelvic tissues, and
is  available  in  adequate  supply.

     Annually  in  the United States, there are approximately 190,000 retropubic
suspensions,  bladder  neck suspensions, and sling procedures performed of which
approximately  50,000  are  bladder  slings  that could use LifeCell's acellular
tissue  matrix  as  the  sling  material.  Also, there are approximately 215,000
pelvic floor procedures performed annually in the United States of which 180,000
could  utilize  LifeCell's  acellular  tissue matrix for the soft tissue repair.
LifeCell's  acellular  tissue  matrix has already been used in over 300 patients
for  the  treatment  of  incontinence and various pelvic floor repair surgeries.
LifeCell  believes  that  the  use  of its acellular tissue matrix in slings and
pelvic  floor  repair  falls  within  the  FDA  classification of "human tissue"
intended  for  transplantation.  However, there can be no assurance that the FDA
would  agree.   See  "-Government  Regulation."

     In  March  1999,  LifeCell  and Boston Scientific entered into an agreement
pursuant  to  which  Boston  Scientific  will  act  as  the  Company's exclusive
distributor  worldwide  for  the  Company's  acellular  tissue matrix for use in
urology  and  gynecology.

     POTENTIAL ORTHOPEDIC APPLICATIONS OF ALLODERM. The Company has been advised
that a small number of surgeons  have used  AlloDerm to  reinforce  the capsular
ligament  surrounding  certain  joints.  Based on  preliminary  results of these
procedures  reported to the Company by these  surgeons,  the Company  intends to
explore the use of AlloDerm to repair several  defects  associated  with joints.
These procedures may include capsular  ligament  reinforcement,  ligament repair
and articular and meniscal cartilage repair. See "-Government Regulation."

     FDA  STATUS  OF ALLODERM.  The FDA has notified the Company that the use of
AlloDerm  for replacement or repair of damaged or inadequate integumental tissue
is  "human  tissue"  within  the meaning of the human tissue for transplantation
regulations.  The FDA has notified the Company that AlloDerm should be regulated
as  a  Class  II  medical device when it is labeled and promoted as a dura mater
replacement.  However,  it  is  unclear  whether  the  FDA  would agree that the
following  indications  for  which AlloDerm has been used by physicians (and for
which the Company may want to promote AlloDerm in the future) is human tissue or
whether the FDA would regulate AlloDerm under its medical device authorities for
these  indications:  (i)  graft  for  guided bone regeneration; (ii) oncological
reconstruction; (iii) urological and gynecological applications; (iv) orthopedic
surgeries;  and  (v)  general surgeries.  There can be no assurance that the FDA
will  not require the submission of premarket approval applications supported by
extensive  clinical  data  for  some or all of these products.  See "-Government
Regulation."

     MICRONIZED ALLODERM(TM)

     LifeCell  is  developing a micronized form of AlloDerm (AlloDerm reduced to
the  size  necessary for delivery by a needle) for use in multiple applications,
including  urological,  dermatological,  and  reconstructive  applications.  The
Company  has conducted various animal studies and is conducting clinical studies
to  evaluate the safety and efficacy of a micronized form of AlloDerm.  Based on
the  information  from  these  studies  to  date,  the Company is developing the
product  manufacturing  processes  and  intends  to start commercial sale of the
product during 1999.   A micronized form of AlloDerm would allow for delivery of
AlloDerm through the use of a syringe, rather than a surgical incision. LifeCell
believes  that  the  delivery  of  AlloDerm by injection would create additional
market  opportunities  that  are  impenetrable  by  the  sheet form of AlloDerm.

                                        8
<PAGE>
     The  Company  believes  that  two  principal  urological uses of Micronized
AlloDerm  may  be  for  the treatment of urethral sphincter deficiency, a common
cause  of  urinary  incontinence,  and  vesicoureteric reflux, which is the most
common  cause  of renal failure in children.  One treatment for these conditions
has  been  injecting bovine collagen to bulk the sphincter muscle or to recreate
the  proper  angle of the urethra or the ureter.  Based on an independent market
research  report,  the  Company  estimates  there  were  approximately  118,000
injections  of  bovine  collagen  in 1996 to treat urinary conditions for 33,000
individuals  in the United States.  A significant drawback of bovine collagen in
these  procedures  is  that the body recognizes the bovine collagen as a foreign
material  and  eventually  resorbs  the  injected  material  requiring  repeated
injections  to  maintain  continence or reflux correction. LifeCell currently is
testing  the  persistence of Micronized AlloDerm in animals for the treatment of
urological  disorders.

     Micronized  AlloDerm  may  also  be  useful  in  plastic reconstructive and
dermatological  procedures,  such  as  correction of facial and body soft tissue
deficits,  the  revision  of  acne  scars and wrinkle correction.  Some of these
procedures currently use bovine collagen injections. LifeCell's target market in
plastic  and  reconstructive  procedures  is approximately 240,000 dermal grafts
currently  performed  annually  in  the  United States. The greatest competitive
pressure  will  be  from injectable bovine collagen. The disadvantages of bovine
collagen  include the requirement for pre-procedural sensitivity testing and its
limited  persistence over time due to resorption, generally requiring additional
injections  after  two  to  12  months.  The  Company  believes  that Micronized
AlloDerm will not require sensitivity testing and may potentially persist longer
than  bovine  collagen,  possibly  reducing the requirement for patients to have
multiple  injections.

     The  FDA  regulatory  status of Micronized AlloDerm in the United States is
uncertain.  Although  the  Company believes that this form of AlloDerm should be
classified  as  human  tissue intended for transplantation, there can be no such
assurance  that  the FDA would agree.  Additionally, even if some configurations
or  uses  of  Micronized  AlloDerm  are  classified  as  human  tissue,  other
configurations  such  as  those  packaged to facilitate use by the physician, as
well  as  certain clinical applications may be regulated by the FDA as a medical
device.  If  the  product is classified as a device by the FDA, extensive delays
may  be  encountered  before  the  time,  if  ever,  that  the  product  may  be
commercially  distributed.  See  "-Government  Regulation."

     CARDIOVASCULAR TISSUE PRODUCTS

     LifeCell  is  conducting animal studies to evaluate small-diameter vascular
graft  products  for  potential  use in cardiovascular and vascular surgery.  If
successfully developed, a vascular graft could be used in coronary artery bypass
procedures  or  used  to  restore  peripheral blood circulation in patients with
vascular  insufficiency,  such  as  below-knee bypass procedures.  Approximately
200,000  coronary  artery bypass procedures are performed annually in the United
States,  according to an independent market research report.  LifeCell currently
is  using  allograft  blood  vessels  for  this  development  project.   See
"-Government  Regulation."

     In  1994, LifeCell and Medtronic, Inc. ("Medtronic") entered into a license
and development agreement for the development and potential commercialization of
xenograft  and  allograft heart valves processed with LifeCell's technology.  In
December  1998, LifeCell and Medtronic mutually agreed to terminate this license
and  development  agreement.  This  allowed LifeCell to regain all rights to its
cardiovascular  technology  and  to focus on the more near-term opportunities of
this  technology.  See  "-Research  and  Development."

     Based on early-stage research, the Company believes that it may be possible
to  develop  porcine  heart valves based on the same technology that the Company
uses to produce AlloDerm tissue products.  However, due to the long-term process
required  to develop and commercialize a xenograft heart valve product, LifeCell
is  shifting  its  cardiovascular  technology  resources  from  heart  valves to
vascular  grafts.

     NERVE  CONNECTIVE  TISSUE

     LifeCell is conducting  research for the development of nerve matrix grafts
using the Company's  proprietary  technology.  If successfully  developed,  such
products would provide the template for nerve regeneration following trauma. The
Company's  research  program seeks to determine  whether nerve tissue  processed
with the  Company's  technology  to preserve  significant  biochemical  or other
matrix-based characteristics will enhance or promote the regeneration of nerves.
See "-Government Regulation."

     BLOOD  CELL  PRESERVATION

     LifeCell  is  developing ThromboSol platelet storage solution to extend the
shelf  life of transfusable platelets and other methods to extend the shelf life
of  red  blood  cells,  white  blood  cells  and  stem  cells.

     THROMBOSOL.  LifeCell  is  developing  ThromboSol,  a  patented biochemical
formulation  designed  to  protect  transfusable  platelets  from  damage during
storage  at low temperatures.  The expected use of the product would be by blood
banks  to  increase  the  safety  and  extend  the  shelf-life  of  transfusable
platelets,  thereby  increasing the supply of available platelets, as well as to
store  autologous  platelets  in  advance  for  individuals expecting to undergo
surgery  or  chemotherapy.  There  were approximately 7.9 million platelet units
transfused  in  the  United  States  in  1994,  according to an industry survey.

                                        9
<PAGE>
     Platelets  are blood cells that initiate clotting.  Untreated platelets are
sensitive to storage at low temperatures and cannot be effectively refrigerated.
Presently,  platelets  are  stored  at  room temperature and, due to the risk of
microbial  contamination,  have a limited shelf-life of five days.  LifeCell has
shown in laboratory tests that the addition of ThromboSol solution preserves the
in  vitro  functional  aspects of refrigerated platelets for up to nine days and
frozen  platelets  for  more  than  one  year.

     LifeCell currently is conducting biocompatability testing on the ThromboSol
solutions  that  it expects to complete in 1999.  A pilot clinical study under a
physician-sponsored  Investigational  New Drug ("IND") was conducted during 1998
and  the  study  found that ThromboSol treated cryopreserved platelets performed
better than standard cryopreserved platelets. LifeCell currently is conducting a
second  ThromboSol  pilot clinical study to test the performance of refrigerated
platelets  that it expects to complete in mid 1999.  LifeCell intends to license
this  product  to  major  pharmaceutical  and  or other companies for commercial
development.  See  "-Government  Regulation."

     RED  BLOOD CELLS.  LifeCell is conducting research to develop procedures to
freeze  and  freeze-dry red blood cells.  Such technology would be used by blood
banks  for  long-term storage of donated units of red blood cells, extending the
available  blood  supply,  and  for  storage  of  autologous red blood cells for
individuals  expecting to require blood transfusions as part of planned surgery.

     Approximately 13 million units of blood are donated each year in the United
States.  Red  blood  cells  currently  may  be  stored  up  to  42  days  under
refrigeration.  Current  procedures to freeze red blood cells require the use of
cryoprotectant  solutions that are toxic to the recipient and must be removed by
washing  the  cells  prior  to  transfusion.  This  removal  procedure  is
labor-intensive  and requires the immediate transfusion of the thawed and washed
blood.  The  Company  believes  that the successful development of non-toxic low
temperature  methods  of  storage  could  simplify  the  use of frozen blood and
potentially  allow  widespread  storage  of  autologous  blood.

     Numerous  companies are attempting to develop blood substitute products and
others  are  developing  simple  closed  loop cell washing methods or developing
technologies  to  inactivate  bacterial  or viral contaminants in donated blood.
Successful  development  of  these  products  could  affect  the  demand for any
products  developed  by  LifeCell.  Any product developed will require extensive
regulatory  approvals,  including  approval  of  an  IND  by  the FDA to conduct
clinical  trials.  See  "-Government  Regulation."

     CRYOPRESERVED  ALLOGRAFT SKIN

     In April 1995,  LifeCell began  processing and  distributing  cryopreserved
allograft skin for use as a temporary or  transitional  covering for severe burn
wounds. For patients with extensive burns, allograft skin assists in stabilizing
the patient and preparing the wound bed for a permanent graft. Revenues from the
sale of cryopreserved allograft skin were approximately $403,000,  $470,000, and
$601,000 during 1996, 1997 and 1998, respectively.

MARKETING

     The  Company  currently  distributes  AlloDerm  in  the  United  States for
reconstructive  plastic  and  burn  surgical  applications through the Company's
network  of direct technical sales representatives.  Periodontal applications of
AlloDerm  in  the United States are marketed through LifeCell's exclusive United
States  distributor,  Lifecore  Biomedical,  Inc.  In  March  1999, LifeCell and
Boston  Scientific  entered  into  an  exclusive  distribution agreement for the
worldwide distribution of its AlloDerm processed acellular tissue matrix for use
in urology and gynecology.  For several years prior to 1999, LifeCell utilized a
network  of  regional  and  international  distributors to augment the Company's
sales  efforts.  LifeCell  currently  maintains  a  network  of  international
distributors,  but  in  December  1998, the Company began eliminating the use of
domestic  distributors in favor of using distributors only on an exclusive field
of  use  basis.  The  Company  currently  intends  to  develop and commercialize
additional tissue products processed from cardiovascular, neurological and other
tissues  in  conjunction  with  corporate  marketing  partners.

     As  of  March  23,  1999,  LifeCell  had  a sales and marketing staff of 36
persons,  including  24  domestic  sales  personnel, two international sales and
marketing  personnel,  and  ten  domestic  marketing  and  other personnel.  The
Company's  sales  representatives are responsible for interacting with surgeons,
primarily  plastic  surgeons and burn surgeons, and educating them regarding the
use  and  anticipated  benefits  of  AlloDerm  tissue  grafts.  LifeCell  also
participates  in  national  and  international  conferences  and  trade  shows,
participates in or funds certain educational symposia or fellowship programs and
advertises  in  industry  trade  publications.

                                       10
<PAGE>
SOURCES  OF  MATERIALS

     LifeCell  pays  a  procurement  fee to and obtains allograft skin and other
tissues  from  contracted  tissue  banks  in  the  United  States.  LifeCell  is
expanding  its  current  procurement of skin and other tissues to include any of
approximately  150  tissue  banks,  including  approximately  36  skin  banks.
Procurement of certain human organs and tissue for transplantation is subject to
the  restrictions of the National Organ Transplant Act, which prohibits purchase
and sale of human organs, skin, and related tissue for "valuable consideration."
See  "-Government  Regulation."

     Pursuant  to  contractual arrangements LifeCell reimburses tissue banks for
expenses  incurred  that  are  associated  with  the  recovering and shipping of
donated human skin suitable for processing into AlloDerm and allograft skin as a
temporary  wound  dressing.  In  obtaining  such tissues, LifeCell competes with
treatment  centers  that  use  donated  skin  for  temporary  wound  dressings.

     The  Company  has  established  what  it believes to be adequate sources of
donor  skin  at  acceptable costs to satisfy the foreseeable demand for AlloDerm
products  during  1999.  Although  the  Company has not experienced any material
difficulty  in  procuring  adequate  supplies  of  donor  skin,  there can be no
assurance  that the future availability of donated human skin will be sufficient
to  meet LifeCell's demand for such materials.  Any supply shortage of available
tissues  in  the  future  would  have  a  material  adverse effect on LifeCell's
financial  condition  and  results  of  operations.

     The  Company  currently  does  not  have procurement arrangements for other
tissues  related  to  products under development, and does not intend to develop
such  arrangements  until  such time as the products approach commercialization.

     In November 1997, LifeCell became accredited by the American Association of
Tissue  Banks  ("AATB").  The AATB is recognized for the development of industry
standards  and its program of inspection and accreditation.  The AATB provides a
standards-setting  function  similar to the FDA's quality system regulations for
medical  device  companies,  and has procedures for accreditation similar to the
International  Standards  Organization  ("ISO")  standards.  LifeCell  began the
accreditation  process  in  1995.  The  AATB  decision was made after a detailed
audit  of  LifeCell's  operations  and  procedures.  The  accreditation  must be
renewed every three years and is for the processing, storage and distribution of
tissue  used  in  AlloDerm  and  allograft  skin.

     Government  Regulation

     OVERVIEW

     Government  regulation,  both domestic and foreign, is a significant factor
in  the manufacture and marketing of LifeCell's current and developing products.
In  the United States, the Company's currently marketed human skin allograft and
AlloDerm  products  are subject to regulation by the United States Food and Drug
Administration (the "FDA").  The United States Food, Drug and Cosmetics Act (the
"FDC  Act"),  the  Public  Health  Service Act (the "PHS Act") and other federal
statutes and regulations govern or influence the testing, manufacture, labeling,
storage,  record  keeping, approval, advertising and promotion of such products.
Non-compliance  with  applicable  requirements can result in fines, injunctions,
civil  penalties,  recall or seizure of products, total or partial suspension of
production, refusal of the government to authorize the marketing of new products
or to allow the Company to enter into supply contract, and criminal prosecution.
Any  such  enforcement  action  could  have  a  material  adverse  affect on the
Company's  financial  condition  and  results  of  operations.

     The  FDA applies varying levels of regulation to human tissues and products
derived from human tissue.  Such products may be regulated as biologics, medical
devices,  or  transplanted  human  tissue.  As  discussed  more  fully  below, a
fundamental  difference  between  the  regulatory treatment of these products is
that transplanted human tissue generally may be commercially distributed without
premarket  clearance  or  approval  from  the  FDA,  while products regulated as
devices  or  biologics  usually require such approval.  The process of obtaining
premarket  clearance  or  approval  is  often  expensive, lengthy and uncertain.
Frequently,  the necessary filings must be supported by extensive clinical data,
and  no  assurance  can  be  given  that  premarket clearance or approval can be
obtained  on  a  timely  basis,  or  at  all.

     At  present, the FDA has indicated that AlloDerm is considered transplanted
human  tissue  when  it  is used for reconstructive plastic surgery, periodontal
surgery  and  burn  grafts.  However,  the  FDA's  regulatory approach to tissue
products  continues  to evolve.  No assurance can be given that the FDA will not
in  the  future  choose  to regulate this product as a medical device subject to
premarket  clearance  or  approval  requirements.  The  FDA  has determined that
NeoDura  (AlloDerm  for  dura  mater replacement surgery) will be regulated as a
medical  device  requiring  premarket clearance.  The Company's position is that
the  following  products  should be regulated as transplanted human tissue:  (i)
AlloDerm  for  general  and  orthopedic  surgical  uses (abdominal wall closure,
prevention  of  surgical  adhesions,  and capsular ligament reinforcement), (ii)
AlloDerm  for  urological and gynecological surgery (bladder sling; pelvic floor
repair),  (iii)  Micronized  AlloDerm  for  urinary incontinence and plastic and

                                       11
<PAGE>
reconstructive  procedures,  and  (iv)  the vascular grafts and nerve connective
tissue  products  under development.  The Company has not discussed its position
with  the  FDA;  no assurance can be given that the FDA would not determine that
any  or all of these products are medical devices rather than transplanted human
tissue.  The  Company  has  begun  commercial  distribution  of  some  of  these
products,  including  AlloDerm for urological and gynecological surgery.  If the
FDA  were  to  classify  products  already  on the market as medical devices, no
assurances  can be given that the FDA would not order the cessation of marketing
until  premarket  approval  is  obtained, or order the recall of product already
marketed.  The  Company's proposed blood cell preservation products (ThromboSol;
Red  Blood Cell Preservation) will be regulated as biologics requiring premarket
approval.

     TISSUE  REGULATION

     In  July  1997,  the  FDA  published  a final rule that became effective in
January  1998  regulating  "human  tissue."  The  rule clarified and modified an
earlier interim rule and defines human tissue as any tissue derived from a human
body  which  is  (i)  intended  for  administration  to  another  human  for the
diagnosis, cure, mitigation, treatment or prevention of any condition or disease
and  (ii) recovered, processed, stored or distributed by methods not intended to
change  tissue  function or characteristics.  The FDA definition excludes, among
other  things,  tissue  that  currently is regulated as a human drug, biological
product  or  medical device and excludes kidney, liver, heart, lung, pancreas or
any  other  vascularized  human  organ.  Unlike  certain  drugs, biologicals and
medical  devices,  human  tissue  is  not  subject  to premarket notification or
approval  by  the  FDA.

     The  final  tissue rule requires establishments engaged in the procurement,
processing,  and  distribution  of  human  tissue to conduct donor screening and
infectious  disease testing and to maintain records available for FDA inspection
documenting  that  the procedures were followed.  The rule also provides the FDA
with  authority  to  conduct inspections of tissue establishments and to detain,
recall,  or destroy tissue where the procedures were not followed or appropriate
documentation of the procedures is not available.  Noncompliance with applicable
requirements  can  result  in  enforcement  actions  that  could have a material
adverse  effect  on the Company's financial condition and results of operations.

     In September 1996, the Company received a letter from the FDA to the effect
that  AlloDerm  intended  for  use  for  replacement  or  repair  of  damaged or
inadequate integumental tissue is human tissue within the meaning of the interim
final  rule.  This  FDA  position  reversed the preliminary agency determination
that  AlloDerm  should  be  regulated under the medical device authorities.  The
provisions  of  the  interim  rule  relied upon by the FDA in the September 1996
letter  were unchanged in the final rule.  Consequently, AlloDerm is not subject
to premarket notification or approval by the FDA and the Company may promote and
sell AlloDerm for use in the treatment of wounds, such as third-degree burns, in
periodontal  surgical  procedures,  such  as  free-gingival  grafting and guided
tissue  regeneration,  and in reconstructive plastic surgery procedures, such as
contracture  release  grafting  and scar revision.  The agency also informed the
Company  that this decision applies only to AlloDerm when it is intended for use
in transplantation, and the regulatory status of the product when it is promoted
for other uses, such as a void filler for soft tissue, for cosmetic augmentation
or  as  a  wound  healing agent (the "Additional Indications"), would need to be
determined  by  the  FDA  on  a case-by-case basis.  The Micronized AlloDerm for
plastic  and reconstructive procedures can be used for cosmetic augmentation and
as a void filler for soft tissue, both of which would fall within the Additional
Indications.

     While  the  Company's  marketing  efforts had not previously focused on the
Additional  Indications,  as  a  follow-up to its September 1996 letter, the FDA
informed  the  Company that AlloDerm for Additional Indications would have to be
formally  presented to the FDA to determine if, with these indications, AlloDerm
would continue to fall within the scope of the interim rule for human tissue and
thus not require premarket clearance as a medical device.  The Company was asked
to  indicate  what  changes  in  advertisement  and  promotion it would make for
AlloDerm.  The Company responded to the FDA letter in October 1996, and informed
the  agency  that the Company believes that the distinctions drawn regarding the
definition  of  transplantation and human tissue and between integumental tissue
and all other tissue in the September 1996 letter were fairly novel and ones for
which  the  Company would require clarification from the FDA as it goes forward.
The Company believes that AlloDerm, when used for cosmetic augmentation and as a
void  filler, may still qualify as human tissue.  Similarly, the Company advised
the  FDA  that since almost every replacement or repair of damaged or inadequate
tissue  involves a cosmetic aspect, the Company believes that many cosmetic uses
of  AlloDerm  are within the purview of human tissue.  Nevertheless, the Company
informed the FDA that it intends to follow the agency's decision and, until this
matter  is  clarified on a case-by-case basis, will not promote AlloDerm for the
Additional  Indications.

     In February 1997, the FDA issued a comprehensive "proposed approach" to the
regulation  of  cellular  and tissue-based products, other than human tissue for
transplantation.  The  FDA  proposal  set  forth  a  tiered approach to cell and
tissue  regulation  that  ranges  from  no  regulatory requirements for cells or
tissue  that  are  removed  and  transplanted  into the same patient in a single
surgical  procedure  to  full  premarket approval requirements for biologics and
medical  devices  that  raise  potential  health,  safety  or efficacy concerns.
Although  the  FDA  notified  the Company in September 1996 that AlloDerm is not
considered  a  medical  device  subject  to premarket clearance or approval when

                                       12
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indicated  for  reconstructive  plastic  surgery,  periodontal surgery, and burn
grafts,  there  can  be  no assurance that the FDA will not impose additional or
different  regulatory  requirements  on  AlloDerm after the agency finalizes its
approach  to  the  regulation  of  cellular  and  tissue-based  products.

     In  May  1998,  the  FDA  issued  a proposed rule that, if finalized in its
current  form,  would  require  certain  manufacturers  of  human  cellular  and
tissue-based  products  to  register with the agency and list their products.  A
tissue product manufacturer would be subject to the proposed rule if its product
is  (i)  minimally  manipulated (i.e., tissue processing does not alter original
characteristics  relevant to the tissue's utility), (ii) not promoted or labeled
for use other than a homologous use (i.e., tissue has the same basic function as
in its native state and, for structural tissue, has the same location); (iii) is
not  combined  with  or modified by the addition of any noncellular or nontissue
component  that  is  a  drug  or device; and (iv) does not have a system effect,
except  in  cases  of  autologous use, transplantation into a first-degree blood
relative, or reproductive use.  The FDA has indicated that this proposed rule is
a  first step toward instituting the comprehensive "proposed approach" set forth
in  February  1997.

     The  National  Organ  Transplant  Act  ("NOTA")  prohibits the acquisition,
receipt or transfer of certain human organs, including skin and heart valves and
vascular  grafts,  for  "valuable  consideration",  but  permits  the payment of
"reasonable"  expenses  associated with the removal, transportation, processing,
preservation,  quality  control and storage of human tissue and skin.  There can
be  no  assurance  that NOTA will not be applied to those LifeCell products that
are  regulated  as transplanted human tissue, or that it will not be interpreted
to  limit  the  prices  that LifeCell may charge for processing and transporting
such  products.  LifeCell  includes in its AlloDerm pricing structure certain of
its educational costs associated with the processing and transportation of human
tissue.  Although  LifeCell  believes  that  recovery  of  educational  costs is
permitted  under  NOTA, a future inability of LifeCell to pass these costs on to
purchasers of its products could adversely affect LifeCell's financial condition
and  results  of operations.  There can be no assurance that the government will
not adopt interpretations of NOTA that would adversely affect LifeCell's pricing
structure  or  otherwise  call  into  question one or more aspects of LifeCell's
method  of operation.  Certain states and foreign countries have laws similar to
NOTA.  These  laws  may  restrict  the  amount  that  the Company can charge for
AlloDerm,  and  may  restrict  the  importation  or  distribution of AlloDerm to
licensed  not-for-profit  organizations.

     The  FDA  has stated that it will propose additional requirements for human
tissue.  Additional  requirements  could  include registration of tissue banking
establishments  and  tissue  listing  with  the  FDA  If  significant additional
regulatory  requirements  were  to  be  established,  the  Company  could  incur
significant  additional  costs  in  order  to  comply  with  such  requirements.

     MEDICAL  DEVICE  REGULATION

     A  medical  device generally may be marketed in the United States only with
the  FDA's  prior  authorization.  Devices  classified by the FDA as posing less
risk  are  placed  in  class  I or class II and require the manufacturer to seek
"510(k)  clearance"  from  the FDA prior to marketing, unless exempted from this
requirement  by  regulation.  Such clearance generally is granted when submitted
information  establishes that a proposed device is "substantially equivalent" in
intended  use  and  safety and effectiveness to a "predicate device", which is a
legally  marketed class I or class II device, or a "preamendment" (in commercial
distribution  before  May  28,  1976) class III device for which the FDA has not
called  for  PMA applications (defined below).  The FDA in recent years has been
requiring  a  more rigorous demonstration of substantial equivalence than in the
past,  including  in  some  cases  requiring  clinical  trial data.  The Company
believes  that  it  usually  takes  from  four  to  12  months  from the date of
submission  to obtain 510(k) clearance, but it may take longer, and there can be
no  assurance that 510(k) clearance will ever be obtained.  During this process,
the  FDA  may  determine that it needs additional information or that a proposed
device  is  precluded  from  receiving clearance because it is not substantially
equivalent to a predicate device.  After a device receives 510(k) clearance, any
modification  that  could  significantly  affect its safety or effectiveness, or
that  would  constitute  a  major change in the intended use of the device, will
require  a  new  510(k)  submission.  There  can be no assurance that any of the
Company's  devices will receive 510(k) clearance in a timely fashion, or at all.
Delays  in market introduction resulting from the 510(k) clearance process could
materially  adversely  affect  the  Company's financial condition and results of
operations.

     A  medical  device  that does not qualify for 510(k) clearance is placed in
class  III,  which  is  reserved for devices classified by the FDA as posing the
greatest risk (e.g., life-sustaining, life-supporting or implantable devices, or
devices  that  are not substantially equivalent to a predicate device).  A class
III  device generally must undergo the premarket approval ("PMA") process, which
requires the manufacturer to prove the safety and effectiveness of the device to
the  FDA's  satisfaction.  A  PMA application must provide extensive preclinical
and clinical trial data and also information about the device and its components
regarding,  among  other things, manufacturing, labeling and promotion.  As part
of  the  PMA  review,  the  FDA  will  inspect the manufacturer's facilities for
compliance  with the Quality System Regulation ("QSR"), which includes elaborate
testing,  control,  documentation  and  other  quality  assurance  procedures.

                                       13
<PAGE>
     Upon  submission, the FDA determines if the PMA application is sufficiently
complete to permit a substantive review, and, if so, the application is accepted
for  filing.  The  FDA then commences an in-depth review of the PMA application,
which  the  Company  believes  typically  takes one to three years, but may take
longer.  The  review time is often significantly extended as a result of the FDA
asking  for  more  information or clarification of information already provided.
The  FDA  also  may  respond  with  a  "not  approvable"  determination based on
deficiencies  in the application and require additional clinical trials that are
often  expensive  and  time  consuming and can delay approval for months or even
years.  In  recent  years,  the FDA has heightened its scrutiny of clinical data
submitted  in  support  of  PMA  applications.  During the review period, an FDA
advisory  committee, typically a panel of clinicians, likely will be convened to
review  the  application  and  recommend  to  the  FDA  whether,  or  upon  what
conditions, the device should be approved.  Although the FDA is not bound by the
advisory  panel  decision,  the panel's recommendation is important to the FDA's
overall  decision  making  process.

     If  the  FDA's  evaluation  of  the  PMA  application is favorable, the FDA
typically  issues  an "approvable letter" requiring the applicant's agreement to
comply  with  specific  conditions  (e.g.,  changes  in  labeling)  or to supply
specific  additional data (e.g., longer patient follow up) or information (e.g.,
submission  of  final  labeling)  in  order  to secure final approval of the PMA
application.  Once  the approvable letter is satisfied, the FDA will issue a PMA
order  for  the  approved  indications,  which  can  be  more limited than those
originally  sought  by the manufacturer.  The PMA order can include postapproval
conditions  that  the  FDA  believes  necessary  to  ensure  the  safety  and
effectiveness  of  the  device  including,  among  other things, restrictions on
labeling,  promotion,  sale  and  distribution.  Failure  to  comply  with  the
conditions of approval can result in enforcement action, including withdrawal of
the  approval.  The  PMA  process can be expensive and lengthy, and no assurance
can be given that any PMA application will ever be approved for marketing.  Even
after approval of a PMA, a new PMA or PMA supplement is required in the event of
a  modification to the device.  There can be no assurance that a PMA application
will  be  submitted  for  any  of  the Company's class III devices or that, once
submitted,  the  PMA  application will be accepted for filing, found approvable,
or, if found approvable, will not take longer than expected to obtain or include
unfavorable  restrictions.

     A clinical study in support of a PMA application or 510(k) submission for a
"significant  risk"  device requires an Investigational Device Exemption ("IDE")
application  approved  in  advance  by the FDA for a limited number of patients.
The  IDE  application  must be supported by appropriate data, such as animal and
laboratory testing results.  The clinical study may begin if the IDE application
is approved by the FDA and the appropriate institutional review board ("IRB") at
each clinical study site.  If the device presents a "nonsignificant risk" to the
patient,  a  sponsor  may  begin the clinical study after obtaining IRB approval
without  the  need  for  FDA approval.  In all cases, the clinical study must be
conducted under the auspices of an IRB pursuant to FDA's regulatory requirements
intended for the protection of subjects and to assure the integrity and validity
of  the  data.  The  Company's  failure  to  adhere  to  regulatory requirements
generally  applicable  to  clinical studies or to any conditions of IDE approval
could  result  in a material adverse affect on the Company's financial condition
and  results  of  operations,  including a refusal by the FDA to grant marketing
clearance  or  approval  for  the Company's products.  There can be no assurance
that  any  clinical  study  proposed by the Company will be approved by the FDA,
will  be  completed  or,  if  completed,  will provide data and information that
support  PMA  approval  or  510(k)  clearance  or that support authorization for
additional  clinical  investigations of the type necessary to obtain approval or
clearance.

     In  December  1997,  the FDA told the Company that AlloDerm for use in dura
mater  replacement  procedures would be classified as a medical device requiring
510(k) clearance or PMA approval.  In March 1999, the Company submitted a 510(k)
notification  for NeoDura.  Although the Company has sought 510(k) clearance for
NeoDura, there can be no assurance that NeoDura, or any other device the Company
wishes  to  market,  will  be  found substantially equivalent and receive 510(k)
clearance  in  a  timely  fashion,  or  at  all.  Delays  in market introduction
resulting  from  the  510(k) clearance process could materially adversely affect
the  Company's  financial condition and results of operations.  No assurance can
be given that FDA will not require  NeoDura, or the Company's other products, to
follow  the  more  rigorous  PMA  approval path to market.  Nor can assurance be
given that PMA approval for any product will be obtained in a timely fashion, or
at  all.

     Devices  manufactured  or  distributed  by  the  Company  pursuant  to  FDA
clearance  or approval are subject to pervasive and continuing regulation by the
FDA  and  certain  state agencies.  The Company will be subject to inspection by
the  FDA  and  such  state  agencies,  and  will have to comply with the host of
regulatory  requirements  that  usually apply to medical devices marketed in the
United  States,  including  the FDA's labeling regulations, the QSR, the Medical
Device  Reporting  ("MDR") regulations (which require that a manufacturer report
to  the  FDA  certain  types  of adverse events involving its products), and the
FDA's  general  prohibitions  against  promoting  products  for  unapproved  or
"off-label"  uses.  In  addition,  class II devices can be subject to additional
special  controls (e.g., performance standards, postmarket surveillance, patient
registries,  and  FDA  guidelines)  that  do  not apply to class I devices.  The
Company's failure to comply with applicable regulatory requirements could result
in  enforcement action by the FDA, which could have a material adverse effect on
the  Company's  financial  condition  and  results  of  operations.

                                       14
<PAGE>
     The  export  by  the  Company  of devices that have not yet been cleared or
approved  for  domestic  distribution may be subject to FDA export restrictions.
There can be no assurance that the Company will receive on a timely basis, if at
all,  any  United  States  export  approvals  necessary for the marketing of its
products  abroad.

     BIOLOGICS  REGULATION

     Biologic products are regulated under the FDC Act and the Section 351(a) of
the  PHS  Act.  The  PHS  Act imposes special additional licensing requirements,
known  as  Establishment  Licenses and Product Licenses, or a new substitute for
those  two,  called  a  Biologic  License.  These  licenses impose very specific
requirements  upon  the facility and the manufacturing and marketing of licensed
products  to assure their safety, purity, and potency.  Some licensed biological
products  are  also  subject to batch release by the FDA.  That is, the products
from  a  newly  manufactured batch cannot be shipped until the FDA has evaluated
either  a  sample or the specific batch records and given permission to ship the
batch of product.  The PHS Act also grants the FDA authority to impose mandatory
product  recalls  and  provides for civil and criminal penalties for violations.

     Before conducting the required clinical testing of a biological product, an
applicant  must  submit  an  investigational new drug application ("IND") to the
FDA,  containing  preclinical  data  demonstrating the safety of the product for
human  investigational  use,  information  about the manufacturing processes and
procedures  and  the  proposed clinical protocol.  Clinical trials of biological
products  typically  are  conducted in three sequential phases, but may overlap.
Phase I trials test the product in a small number of healthy subjects, primarily
to  determine  its  safety  and tolerance at one or more doses.  In Phase II, in
addition  to  safety, the efficacy, optimal dose and side effects of the product
are  evaluated  in  a patient population somewhat larger than the Phase I trial.
Phase  III  involves  further safety and efficacy testing on an expanded patient
population at geographically dispersed test sites.  All clinical studies must be
conducted  in  accordance  with  FDA  approved  protocols and are subject to the
approval  and  monitoring  of  one  or  more  Institutional  Review  Boards.  In
addition,  clinical  investigators  must  adhere  to  good  clinical  practices.
Completion  of  all three phases of clinical studies may take several years, and
the  FDA  may  temporarily  or permanently suspend a clinical study at any time.
Upon  completion  and  analysis  of clinical trials, the applicant assembles and
submits  a  Product License Application and an Establishment License Application
or  a  Biologic  License  Application containing, among other things, a complete
description  of  the manufacturing process.  Before the licenses can be granted,
the  Company or its designee must undergo a successful establishment inspection.
FDA  review  and approval of a biological product can take several years.  There
can  be  no  assurance  that  LifeCell  will  obtain  the required approvals for
ThromboSol platelet storage solution or any of its proposed biological products.

     All  biologic products marketed by LifeCell pursuant to the above-described
approvals  will  be  subject  to pervasive and continuing regulation by the FDA.
Products  must  be  produced  in  accordance  with  the FDA's Good Manufacturing
Practice  ("GMP")  requirements  for  biologics, which impose elaborate testing,
control,  documentation  and  other  quality  assurance procedures.    There are
post-marketing  surveillance  and  adverse  event  reporting  requirements.
Manufacturing  facilities and processes are subject to FDA inspection.  Labeling
and  advertising  are  also  subject  to  scrutiny  by  the FDA, and, in certain
instances,  the  Federal  Trade  Commission.  The  export  of  biologics is also
subject  to  regulation and may require prior FDA approval.  No assurance can be
given  that the Company will receive such approval on a timely basis, or at all.

     OTHER  REGULATION

     LifeCell  is  subject to various federal, state and local laws, regulations
and  recommendations  relating  to  such  matters  as  safe  working conditions,
laboratory  and  manufacturing  practices, and the use, handling and disposal of
hazardous  or  potentially  hazardous substances used and produced in connection
with  LifeCell's  research  and development work.  See "-Environmental Matters".
There can be no assurance that the Company will not incur significant additional
costs  to  comply  with  these  laws  or  regulations  in  the  future.

     INTERNATIONAL  REGULATION

     Sales  of medical devices and biological products outside the United States
are  subject to foreign regulatory requirements that vary widely from country to
country.  Approval  of a product by comparable regulatory authorities of foreign
countries  must  be  obtained prior to commercialization of the product in those
countries.  Certain  countries  regulate  AlloDerm  as a pharmaceutical product,
requiring  extensive  filings  and  regulatory  approvals to market the product.
Certain  countries  classify  AlloDerm  as  "human  tissue" but may restrict its
import  or  sale.  Other  countries have no applicable regulations regarding the
import  or  sale of products similar to AlloDerm, creating uncertainty regarding
the  import  or  sale  of  the product.  The inability to classify AlloDerm as a
medical  device  has  restricted  LifeCell's  ability  to  obtain an appropriate
regulatory designation for the product for Western Europe, which would provide a
clearer  marketing  path  in  the  European  Union.  The time required to obtain

                                       15
<PAGE>
foreign  approvals  may be longer or shorter than that required for FDA approval
and  there  can  be no assurance that approvals would be obtained for any of the
Company's  products.  AlloDerm  currently  is  being marketed in certain foreign
countries,  and  LifeCell  is  actively pursuing clearance to market AlloDerm in
certain additional countries.  There can be no assurance that the uncertainty of
regulations  in  each country will not delay or impede the marketing of AlloDerm
or  impede  the  ability  of  LifeCell to negotiate distribution arrangements on
favorable  terms.

RESEARCH  AND  DEVELOPMENT

     LifeCell has historically funded the development of its tissue products and
blood cell preservation products primarily through external sources, including a
corporate  alliance  and government grants and contracts, as well as through the
proceeds  from  equity  offerings.  See "Management's Discussion and Analysis of
Financial  Condition and Results of Operations-Liquidity and Capital Resources."
LifeCell's  research  and  development  costs  in  1996,  1997  and 1998 for all
programs,  including  those  programs  funded  through  corporate and government
support,  were  approximately  $1.6  million,  $2.0  million  and  $3.4 million,
respectively.

     The  Company  has  received  a  substantial portion of its government grant
funding  pursuant  to  the  United States government's Small Business Innovation
Research  ("SBIR") program.  The SBIR grant program provides funding to evaluate
the scientific and technical merit and feasibility of an idea. To date, LifeCell
has  been  awarded  approximately  $5.2 million through 15 approved SBIR program
awards and Department of Defense contracts. LifeCell intends to continue to seek
funding  through  the  SBIR programs, as well as to pursue additional government
grant  and  contract  programs.  Generally, LifeCell has the right to patent any
technologies  developed  from government grants and contract funding, subject to
the  United  States  government's  right  to  receive a royalty-free license for
federal  government  use  and  to  require  licensing  to  others  in  certain
circumstances.

     In  1994,  LifeCell  and  Medtronic  entered into a license and development
agreement for the development and potential commercialization of xenograft heart
valves  processed  with  LifeCell's  technology.  As  part  of  the  agreement,
LifeCell  granted  Medtronic  certain  rights  of  first  refusal  to  evaluate
technology  and  negotiate license and development agreements for vascular graft
products.  In December 1998, LifeCell and Medtronic mutually agreed to terminate
this agreement thus allowing LifeCell to regain all rights to its cardiovascular
technology.

PATENTS,  PROPRIETARY  INFORMATION  AND  TRADEMARKS

     LifeCell's ability to compete effectively with other companies is dependent
materially  upon  the  proprietary  nature of its technologies.  LifeCell relies
primarily  on  patents,  trade secrets and confidentiality agreements to protect
its  technologies.  LifeCell  currently  licenses  the  exclusive  right to nine
United States patents and related foreign patents and the non-exclusive right to
14  United  States  patents.  In  addition, LifeCell has been issued four United
States  utility  patents,  one United States design patent and has seven pending
United  States  patent  applications.

     The  Company's technology is protected by three primary families of patents
and  patent  applications.  One United States patent covers methods of producing
the  Company's  tissue-based  products.  Two  United  States  patents  and three
pending  patent  applications  cover  methods  of  extending  the  shelf-life of
platelets, red blood cells and other blood cells.  Nine additional United States
patents  supplement  the  Company's  other  patents  and  cover  methods  of
freeze-drying  without  the  damaging  effects  of  ice  crystal  formation.

     LifeCell  also  has  applied  for  patent  protection  in  several  foreign
countries.  Because  of  the  differences  in  patent  laws  and laws concerning
proprietary  rights,  the extent of protection provided by United States patents
or  proprietary  rights owned by or licensed to LifeCell may differ from that of
their  foreign  counterparts.

     During  April  1998,  the  Company  entered  into an agreement settling its
pending  litigation  with  Integra  LifeSciences  Corporation  and its affiliate
("Integra")  and  the  Massachusetts  Institute  of  Technology ("MIT").  During
November  1997,  Integra  and  MIT  had  alleged  that the Company infringed two
patents  licensed by MIT to Integra (the "Integra Patents").  Under the terms of
the  settlement  agreement,  Integra  and  MIT  agreed not to assert the Integra
Patents  against  current  or  future products produced using LifeCell's current
technology.  LifeCell  also  obtained  the  right  to  develop and commercialize
future  products  using  Integra's  technology  through  a license to certain of
Integra's  patents.

     In  general, the patent position of biotechnology and medical product firms
is  highly  uncertain  and  involves  complex  legal,  scientific  and  factual
questions.  There  can  be  no  assurance that any other patents will be granted
with  respect  to  the  patent  applications filed by the Company.  Furthermore,
there  can  be  no  assurance that any patents issued or licensed to the Company
will  provide  commercial  benefit  to  the  Company  or  will not be infringed,
invalidated  or  circumvented by others.  The United States Patent and Trademark
Office  currently  has  a  significant  backlog  of patent applications, and the
approval  or  rejection  of  patents  may  take  several years.  Prior to actual

                                       16
<PAGE>
issuance,  the  contents  of United States patent applications are generally not
made  public.  Once  issued,  such  a patent would constitute prior art from its
filing  date,  which might predate the date of a patent application on which the
Company relies.  Conceivably, the issuance of such a patent, or the discovery of
"prior art" of which the Company is currently unaware, could invalidate a patent
of  the  Company  or  its  licensor  or  prevent  commercialization of a product
disclosed  therein.

     No  assurances may be given that the Company's products or planned products
may not be the subject of additional infringement actions by third parties.  Any
successful  patent  infringement  claim  relating  to  any  products  or planned
products  could  have  a  material  adverse  effect  on  the Company's financial
condition  and  results  of operations.  Further, there can be no assurance that
any  patents  or proprietary rights owned by or licensed to LifeCell will not be
challenged, invalidated, circumvented, or rendered unenforceable based on, among
other  things,  subsequently  discovered  prior  art, lack of entitlement to the
priority  of  an  earlier,  related  application  or  failure to comply with the
written  description,  best  mode,  enablement or other applicable requirements.

     The  Company  conducts a cursory review of issued patents prior to engaging
in research or development activities.  Accordingly, the Company may be required
to  obtain  a  license  from  others  to commercialize any of its products under
development.  There  can  be  no  assurance  that  any  such license that may be
required  could  be  obtained  on  favorable  terms  or  at  all.

     LifeCell  may  decide for business reasons to retain certain knowledge that
it  considers  proprietary as confidential and elect to protect such information
as  a  trade  secret,  as business confidential information, or as know-how.  In
that  event,  LifeCell  must  rely  upon  trade secrets, know-how and continuing
technological  innovation to maintain its competitive position.  There can be no
assurance  that  others  will not independently develop substantially equivalent
proprietary  information  or  otherwise  gain  access  to  or  disclose  such
information.

     LifeCell  has  federal  trademark  or  service  mark  registrations that it
currently  uses  for  LifeCell , which concerns processing and preserving tissue
samples,  and  AlloDerm  , which concerns LifeCell's commercial acellular dermal
graft  product.  The Company has filed trademark applications for the protection
of  the  phrases Mirconized AlloDerm , the particulate form of AlloDerm, and for
NeoDura  ,  the  AlloDerm  product  designed  for  neurosurgery.

COMPETITION

     The  biomedical  field  is  undergoing  rapid and significant technological
change.  LifeCell's  success  depends  upon  its  ability  to  develop  and
commercialize  its  technology.  There  are  many  companies  and  academic
institutions  that  are  capable  of  developing  products  based  on  similar
technology, and that have developed and are capable of developing products based
on other technologies, which are or may be competitive with LifeCell's products.
Many  of  those  companies  and academic institutions are well-established, have
substantially  greater  financial  and other resources, research and development
capabilities  and  more  experience  in  conducting  clinical  trials, obtaining
regulatory  approvals,  manufacturing  and  marketing  than  LifeCell.  These
companies and academic institutions may succeed in developing competing products
that  are  more  effective  than  LifeCell's products or that receive government
approvals  more quickly than LifeCell's products, which may render the Company's
products  or  technology  uncompetitive,  uneconomical  or  obsolete.

     For  most  current  applications  of  AlloDerm,  the  principal  form  of
competition  is  with  the  use  of  the  patient's autologous tissue.  LifeCell
anticipates  direct  competition  for  AlloDerm  tissue  products and all of its
proposed  transplantable  tissue  products, as well as indirect competition from
advances in therapeutic agents, such as growth factors now used to enhance wound
healing.  LifeCell  believes  that  therapeutic  growth  factors  may be used in
conjunction with its proposed products and may potentially enhance the products'
efficacy.  LifeCell  is  not  aware  of any person or entity currently marketing
transplantable  tissue  products with features similar to AlloDerm or LifeCell's
other  proposed  transplantable  products.  There  can be no assurance, however,
that  LifeCell  will  be  able  to  compete  effectively with other commercially
available  products  or  that  development  of  other  technologies  will  not
detrimentally  affect  LifeCell's  commercial  opportunities  or  competitive
advantage.

ENVIRONMENTAL  MATTERS

     LifeCell's  research  and  development  and  processing techniques generate
waste  that  is  classified  as  hazardous  by  the  United States Environmental
Protection  Agency  and  the  Texas  Natural  Resources  Commission.  LifeCell
segregates  such  waste  and  disposes  of it through a licensed hazardous waste
transporter.  Although  LifeCell  believes  it is currently in compliance in all
material  respects  with  applicable  environmental  regulations, its failure to
comply  fully  with  any  such  regulations  could  result  in the imposition of
penalties,  fines  or  sanctions that could have an adverse effect on LifeCell's
financial  condition  and  results  of  operations.

                                       17
<PAGE>
EMPLOYEES

     At  March  23,  1999,  the  Company  had  109  full-time  and two part-time
employees  of  which 36 were employed in sales and marketing, 39 in engineering,
production  and  quality  assurance, 19 in research and development and clinical
studies,  and  15  in  administration  and accounting.  Also, at such date,  the
Company  employed,  full-time,  two  persons with M.D. degrees and eight persons
with  Ph.D.  degrees.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This  Annual  Report  on  Form  10-K  includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section  21E  of  the  Securities Act of 1934, as amended.  All statements other
than  statements  of  historical  facts  included  herein,  including,  without
limitation,  statements  regarding  the  Company's  financial position, business
strategy,  products,  products  under  development,  markets, budgets, plans and
objectives  of  management  for  future  operations and Year 2000 Readiness, are
forward-looking statements.  Although the Company believes that the expectations
reflected  in  such  forward-looking  statements  are reasonable, it can give no
assurance  that  such  expectations will prove to be correct.  Important factors
that  could  cause  actual  results  to  differ  materially  from  the Company's
expectations  ("Cautionary  Statements")  are disclosed under "Risk Factors" and
elsewhere  herein,  including,  without  limitation,  in  conjunction  with  the
forward-looking  statements  included  herein.  All  subsequent written and oral
forward-looking  statements attributable to the Company or persons acting on its
behalf  are  expressly qualified in their entirety by the Cautionary Statements.

RISK  FACTORS

     In  addition  to  the other information in this Annual Report on Form 10-K,
the  following factors should be considered carefully in evaluating the Company.
Special  Note:  Certain  statements  set forth below constitute "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and  Section  21E  of the Securities Exchange Act of 1934, as amended.
See  "-Special  Note  Regarding  Forward-Looking  Statements."

     HISTORY OF OPERATING LOSSES; SUBSTANTIAL ACCUMULATED EARNINGS DEFICIT

     Since  its  inception  in  1986,  the  Company  has  generated only limited
revenues  from  product  sales  and  has  incurred substantial losses, including
losses  of  approximately  $4.1  million, $6.1 million, and $7.3 million for the
years  ended  December  31, 1996, 1997, and 1998, respectively.  At December 31,
1998,  the  Company  had  an accumulated deficit of approximately $44.5 million.
The  Company  expects  to  incur additional operating losses as well as negative
cash  flow  from  operations  at  least  through  1999  as  it  continues to use
substantial  resources  to expand its marketing efforts with respect to AlloDerm
and  to expand its product development programs.  There can be no assurance that
the  Company  will  ever  become  profitable.  The Company's ability to increase
revenues  and achieve profitability and positive cash flows from operations will
depend  on  increased  market  acceptance  and  sales  of  AlloDerm  and
commercialization of products under development.  There can be no assurance that
the Company will be successful in expanding AlloDerm sales or that the Company's
development  efforts  will  result  in commercially available products, that the
Company  will  obtain  required  regulatory  clearances or approvals for any new
products  in  a timely manner, or at all, that the Company will be successful in
introducing any new products or that any new products will achieve a significant
level  of  market  acceptance.  The  development  and  commercialization  of new
products will require additional development, sales and marketing, manufacturing
and other expenditures.  The required level and timing of such expenditures will
affect  the  Company's  ability to achieve profitability and positive cash flows
from  operations.  There  can be no assurance that the Company will ever achieve
higher  levels  of  revenues  or  a  profitable  level  of  operations  or  that
profitability,  if  achieved,  can  be  sustained  on  an  ongoing  basis.

     NO ASSURANCE OF ADDITIONAL NECESSARY CAPITAL

     The  Company  intends  to expend substantial funds for product research and
development,  expansion  of  sales  and  marketing  activities,  expansion  of
manufacturing capacity, product education efforts, and other working capital and
general  corporate  purposes.  Although  the  Company believes that its existing
resources  and  anticipated  cash  flows  from  operations will be sufficient to
satisfy  its capital needs through at least 2000, there can be no assurance that
the  Company  will  not  require  additional  financing  before  that time.  The
Company's  actual  liquidity  and capital requirements will depend upon numerous
factors,  including  the  costs  and  progress  of  the  Company's  research and
development  efforts;  the  number  and  types  of  product development programs
undertaken; the costs and timing of expansion of sales and marketing activities;
the  costs  and  timing  of  expansion  of manufacturing capacity; the amount of
revenues  from  sales  of  the  Company's existing and new products; changes in,
termination  of,  and the success of existing and new distribution arrangements;
the  cost of maintaining, enforcing and defending patents and other intellectual

                                       18
<PAGE>
property  rights;  competing technological and market developments; developments
related  to regulatory and third-party reimbursement matters; and other factors.
In  the event that additional financing is needed, the Company may seek to raise
additional  funds  through  public  or  private  financing,  collaborative
relationships  or  other  arrangements.  Any  additional equity financing may be
dilutive  to  stockholders,  and  debt  financing,  if  available,  may  involve
significant  restrictive covenants.  Collaborative arrangements, if necessary to
raise  additional  funds,  may  require  the Company to relinquish its rights to
certain  of  its  technologies,  products  or marketing territories.  Failure to
raise  capital when needed could have a material adverse effect on the Company's
financial  condition  and results of operations.  There can be no assurance that
such  financing,  if  required,  will  be available on terms satisfactory to the
Company, if at all.  If adequate funds are not available, the Company expects it
will  be  required  to delay, scale back or eliminate one or more of its product
development  programs.

     GOVERNMENT REGULATION-UNITED STATES

     Government  regulation,  both domestic and foreign, is a significant factor
in  the manufacture and marketing of LifeCell's current and developing products.
In  the United States, the Company's currently marketed human skin allograft and
AlloDerm  products  are subject to regulation by the United States Food and Drug
Administration (the "FDA").  The United States Food, Drug and Cosmetics Act (the
"FDC  Act"),  the  Public  Health  Service Act (the "PHS Act") and other federal
statutes and regulations govern or influence the testing, manufacture, labeling,
storage,  record  keeping, approval, advertising and promotion of such products.
Non-compliance  with  applicable  requirements can result in fines, injunctions,
civil  penalties,  recall or seizure of products, total or partial suspension of
production, refusal of the government to authorize the marketing of new products
or  to  allow  the  Company  to  enter  into  supply  contracts,  and  criminal
prosecution.  Any  such  enforcement action could have a material adverse effect
on  the  Company's financial condition and results of operations.  Unanticipated
changes  in  existing  FDA  regulatory  requirements,  failure of the Company to
comply  with  such  requirements  or  adoption  of new requirements could have a
material  adverse  affect  on  the  Company's  business, financial condition and
results  of  operations.

     Products  regulated  as  transplanted  human  tissue  generally  may  be
commercially  distributed  without premarket clearance or approval from the FDA,
but  establishments  engaged in the procurement, processing, and distribution of
human  tissue  must  conduct  donor screening and infectious disease testing and
maintain  records  available  for FDA inspection documenting that the procedures
were  followed.  The  FDA  has  authority  to  conduct  inspections  of  tissue
establishments  and  to  detain,  recall, or destroy tissue where the procedures
were  not  followed  or  appropriate  documentation  of  the  procedures  is not
available.  Non-compliance  with  applicable  requirements  can  result  in
enforcement  actions  that could have a material adverse affect on the Company's
financial  condition  and  results  of  operations.  At  present,  the  FDA  has
indicated  that AlloDerm is considered transplanted human tissue when it is used
for  reconstructive  plastic  surgery,  periodontal  surgery  and  burn  grafts.
However,  the  FDA's regulatory approach to tissue products continues to evolve.
No assurance can be given that the FDA will not in the future choose to regulate
this  product  as  a  medical  device subject to premarket clearance or approval
requirements.

     The  National  Organ  Transplant  Act  ("NOTA")  prohibits the acquisition,
receipt or transfer of certain human organs, including skin and heart valves and
vascular  grafts,  for  "valuable  consideration",  but  permits  the payment of
"reasonable"  expenses  associated with the removal, transportation, processing,
preservation,  quality  control and storage of human tissue and skin.  There can
be  no  assurance  that NOTA will not be applied to those LifeCell products that
are  regulated  as transplanted human tissue, or that it will not be interpreted
to  limit  the  prices  that LifeCell may charge for processing and transporting
such  products.  LifeCell  includes in its AlloDerm pricing structure certain of
its educational costs associated with the processing and transportation of human
tissue.  Although  LifeCell  believes  that  recovery  of  educational  costs is
permitted  under  NOTA, a future inability of LifeCell to pass these costs on to
purchasers of its products could adversely affect LifeCell's financial condition
and  results  of operations.  There can be no assurance that the government will
not adopt interpretations of NOTA that would adversely affect LifeCell's pricing
structure  or  otherwise  call  into  question one or more aspects of LifeCell's
method  of operation.  Certain states and foreign countries have laws similar to
NOTA.  These  laws  may  restrict  the  amount  that  the Company can charge for
AlloDerm,  and  may  restrict  the  importation  or  distribution of AlloDerm to
licensed  not-for-profit  organizations.

     The  Company's  position is that the following products should be regulated
as  transplanted human tissue:  (i) AlloDerm for general and orthopedic surgical
uses  (abdominal  wall  closure,  prevention of surgical adhesions, and capsular
ligament  reinforcement), (ii) AlloDerm for urological and gynecological surgery
(bladder  sling;  pelvic  floor  repair),  (iii) Micronized AlloDerm for urinary
incontinence  and  plastic  and reconstructive procedures, and (iv) the vascular
grafts  and nerve connective tissue products under development.  The Company has
not discussed its position with the FDA;  no assurance can be given that the FDA
would not determine that any or all of these products are medical devices rather
than  transplanted  human  tissue.  If  these  products are regulated as medical
devices,  the  Company  would  be  prohibited  from marketing them in the United
States  without  either  510(k)  clearance  or  PMA  approval from the FDA.  The
Company believes that it usually takes from four to 12 months from submission to
obtain  510(k)  clearance,  but  can  take longer.  The process of obtaining PMA
approval  is much more costly, lengthy and uncertain.  The Company believes that

                                       19
<PAGE>
the  FDA's  review  of a PMA application after filing can last from one to three
years,  or  even  longer.  No  assurance can be given that FDA would not require
these products to follow the more rigorous PMA approval path to market.  Nor can
assurance  be  given that 510(k) clearance or PMA approval will be obtained in a
timely  fashion,  or  at  all.

     The  Company  has  begun commercial distribution of AlloDerm for urological
and  gynecological  surgery.  If  FDA  were  to  classify  AlloDerm  for  these
indications  as  a  medical device, no assurance can be given that FDA would not
order  the  cessation  of  marketing  until  premarket  clearance or approval is
obtained,  or  order  the  recall  of  product  already  marketed.

     In  December  1997,  the FDA told the Company that AlloDerm for use in dura
mater  replacement  procedures would be classified as a medical device requiring
510(k) clearance or PMA approval.  In March 1999, the Company submitted a 510(k)
premarket  notification  for  NeoDura.  Although  the  Company has sought 510(k)
clearance  for  NeoDura,  there  can  be no assurance that NeoDura, or any other
device  the Company wishes to market, will be found substantially equivalent and
receive  510(k)  clearance  in  a  timely  fashion, or at all.  Delays in market
introduction  resulting  from  the  510(k)  clearance  process  could materially
adversely  affect  the  Company's financial condition and results of operations.
No  assurance  can  be  given  that  the  FDA  will  not require NeoDura, or the
Company's  other  products,  to  follow  the  more rigorous PMA approval path to
market.  Nor  can  assurance  be given that PMA approval for any product will be
obtained  in  a  timely  fashion,  or  at  all.

     The  export  by  the  Company  of devices that have not yet been cleared or
approved  for  domestic  distribution may be subject to FDA export restrictions.
There can be no assurance that the Company will receive on a timely basis, if at
all,  any  United  States  export  approvals  necessary for the marketing of its
products  abroad.

     The  Company's proposed blood cell preservation products will be subject to
regulation as biologics.  Such products require FDA premarket licensing prior to
commercialization  in the United States.  To obtain licensing approval for these
products,  the  Company  must  submit proof of their safety, purity and potency.
Testing,  preparation  of  necessary  applications  and  processing  of  those
applications  by  the  FDA  is  expensive  and  time consuming.  There can be no
assurance that the FDA will act favorably or quickly in making such reviews, and
significant  difficulties  or  costs  may  be  encountered by the Company in its
efforts  to  obtain  FDA  licenses that could delay or preclude the Company from
marketing  any  biologic  product  it  may  develop.  The  FDA  may  also  place
conditions  on  clearances  that  could restrict commercial applications of such
products.  Product  approvals  may  be  withdrawn  if compliance with regulatory
standards  is  not  maintained or if problems occur following initial marketing.
Delays  imposed  by  the  FDA licensing process may materially reduce the period
during  which  the  Company  has  the  exclusive right to commercialize patented
products.

     Products  marketed  by LifeCell pursuant to FDA or foreign approval will be
subject  to  pervasive and continuing regulation.  In the United States, devices
and  biologics  must  be  manufactured  in registered establishments and must be
produced  in  accordance  with the QSR or medical devices or "Good Manufacturing
Practices"  ("GMP")  regulations  for  biologics.  Manufacturing  facilities and
processes  are  subject  to  periodic  FDA inspection.  Labeling and promotional
activities are also subject to scrutiny by the FDA and, in certain instances, by
the  Federal  Trade  Commission.  The  export  of  devices and biologics is also
subject  to regulation and may require FDA approval.  From time to time, the FDA
may  modify  such  requirements,  imposing additional or different requirements.
Failure to comply with any applicable FDA requirements could result in civil and
criminal  enforcement  actions  and  other  penalties that would have a material
adverse  effect on the Company.  In addition, there can be no assurance that the
various  states in which LifeCell's products are sold will not impose additional
regulatory  requirements  for  marketing  impediments.

     LifeCell  is  subject to various federal, state and local laws, regulations
and  recommendations  relating  to  such  matters  as  safe  working  condition,
laboratory  and  manufacturing  practices, and the use, handling and disposal of
hazardous  or  potentially hazardous substances used and produced in connections
with  LifeCell's  research and development work.  There can be no assurance that
the  Company  will  not  incur significant additional costs to comply with these
laws  or  regulations  in  the  future.

     FOREIGN REGULATORY STATUS OF ALLODERM

     The  regulation  of  AlloDerm  outside the United States varies by country.
Certain  countries  regulate  AlloDerm  as  a  pharmaceutical product, requiring
extensive  filings  and  regulatory  approvals  to  market the product.  Certain
countries  classify  AlloDerm as a transplant tissue but may restrict its import
or sale.  Other countries have no applicable regulations regarding the import or
sale  of products similar to AlloDerm, creating uncertainty regarding the import
or  sale  of  the  product.  There  can be no assurance that the various foreign
countries  in  which  LifeCell's  products  are  sold will not impose additional
regulatory  requirements.

                                       20
<PAGE>
     AlloDerm  currently  is  being  marketed  in certain foreign countries, and
LifeCell  is  pursuing  clearance  to  market  AlloDerm in additional countries.
There  can  be  no assurance that the uncertainty of regulations in each country
will  not  delay  or  impede  the marketing of AlloDerm or impede the ability of
LifeCell  to  negotiate  distribution  arrangements on favorable terms.  Certain
foreign  countries  have  laws  similar  to  the  United  States' National Organ
Transplant  Act.  These laws may restrict the amount that the Company can charge
for  AlloDerm  and  may  restrict the importation or distribution of AlloDerm to
licensed  not-for-profit  organizations.

     UNCERTAINTY OF MARKET ACCEPTANCE

     Much  of  the  Company's  ability  to  increase  revenues  and  to  achieve
profitability and positive cash flow will depend on expanding the use and market
penetration  of  its  AlloDerm  products  and the successful introduction of its
products in development.  Products based on the Company's technologies represent
new methods of treatment.  Physicians will not use the Company's products unless
they  determine that the clinical benefits to the patient are greater than those
available  from  competing  products or therapies.  Even if the advantage of the
Company's  products is established as clinically significant, physicians may not
elect  to use such products for any number of reasons.  As such, there can be no
assurance  that  any  of  the  Company's  AlloDerm  products  or  products under
development  will  gain  any  significant  degree  of  market  acceptance  among
physicians,  health  care  payers  and patients.  Broad market acceptance of the
Company's  products  may  require  the  training  of  numerous  physicians  and
clinicians,  as well as conducting or sponsoring clinical studies to demonstrate
the  benefits  of  such  products.  The amount of time required to complete such
training  and  studies  could  result  in  a  delay  or dampening of such market
acceptance.  Moreover,  health  care  payers'  approval of reimbursement for the
Company's  products  in  development will be an important factor in establishing
market  acceptance.

     DELAYED OR UNSUCCESSFUL PRODUCT DEVELOPMENT

     The  Company's  growth  and  profitability  will  depend, in part, upon its
ability to complete development of and successfully introduce new products.  The
Company  may  be  required  to  undertake  time-consuming and costly development
activities and seek regulatory clearance or approval for new products.  Although
the  Company  has  conducted  animal  studies  on  many  of  its  products under
development  which  indicate  that  the product may be feasible for a particular
application,  there  can be no assurance that the results obtained from expanded
studies  will  be consistent with earlier trial results or be sufficient for the
Company to obtain any required regulatory approvals or clearances.  There can be
no  assurance that the Company will not experience difficulties that could delay
or  prevent  the  successful  development,  introduction  and  marketing  of new
products,  that  regulatory  clearance  or approval of these or any new products
will  be  granted  on  a  timely  basis,  if ever, or that the new products will
adequately  meet  the  requirements  of  the applicable market or achieve market
acceptance.  The  completion of the development of any of the Company's products
under  development  remains  subject  to  all  the  risks  associated  with  the
commercialization  of  new  products based on innovative technologies, including
unanticipated  technical  or  other problems, manufacturing difficulties and the
possible  insufficiency  of  the  funds  allocated  for  the  completion of such
development,  which  could  result  in  a  change  in  the  design, delay in the
development  or the abandonment of such products.  Consequently, there can be no
assurance  that  any  of  the  Company's  products  under  development  will  be
successfully  developed  or manufactured or, if developed and manufactured, that
such  products  will  meet  price  or  performance objectives, be developed on a
timely  basis  or prove to be as effective as competing products.  The inability
to  complete  successfully  the  development  of  a product or application, or a
determination  by the Company, for financial, technical or other reasons, not to
complete development of any product or application, particularly in instances in
which  the  Company  has  made  significant  capital  expenditures, could have a
material  adverse  effect  on  the  Company's  business, financial condition and
results  of  operations.

     DEPENDENCE ON DISTRIBUTOR SALES

      The  Company  has  engaged  Lifecore  Biomedical,  Inc.  as  the exclusive
distributor  for AlloDerm for periodontal applications in the United States, and
Boston  Scientific  Corporation  as  the exclusive worldwide distributor for its
AlloDerm  processed  acellular  tissue matrix for use in urology and gynecology.
Other  distributors  also  may be granted exclusive distribution rights.  To the
extent  any  exclusive  distributor fails adequately to promote, market and sell
the  Company's  products,  the  Company  may not be able to secure a replacement
distributor  until  after  the  term of the distribution contract is complete or
until  such  contract  can  otherwise  be  terminated.

     DEPENDENCE ON CERTAIN SOURCES OF MATERIALS

     The  Company's  business  will  be dependent on the availability of donated
human skin, cardiovascular tissue and other tissues.  A finite supply of donated
tissue  is  available.  Although the Company has established what it believes to
be  adequate  sources  of  donated human skin to satisfy the expected demand for
AlloDerm  during  1999, LifeCell has not yet developed a supply of other tissues
and  there  can  be no assurance that the availability of donated human skin and
other  tissues  will be sufficient to meet LifeCell's demand for such materials.
Any  significant  interruption  in  supply  of  such  tissue would likely have a
material  adverse  effect  on  the  Company's financial condition and results of
operations.

                                       21
<PAGE>
     The  Company  acquires  donated  human  skin  from  various  non-profit
organizations  which  procure  skin  and  other  donated  human  tissue.  The
procurement of skin generally constitutes a small portion of the operating funds
for such non-profit organizations.  The development of products that replace the
need  for  donated tissue, such as the development of synthetic bone substitutes
to  replace  allograft  bone  procured  by the organizations, could threaten the
existence  of  the non-profit organizations and, therefore, adversely affect the
supply  of donated human skin to LifeCell or increase the required payments from
LifeCell.

     The  Company  has  performed  limited  activities to develop products using
porcine  dermis and other animal tissues as a substitute for donated human skin.
If successfully developed, animal tissue could replace the need for human tissue
as  a  raw material.  There can be no assurance that such animal tissue products
can  be  successfully  developed,  that such development and required regulatory
approvals could result in timely replacement of human tissue used by LifeCell in
the  event  of  a reduced supply of human tissue or that the cost of such animal
tissue  would  not materially adversely affect the business, financial condition
and  results  of  operations  of  the  Company.

     Donors  of  organs  and tissues, including donated human skin, have various
motivations.  Although  LifeCell  does  not  promote  the  use  of  AlloDerm for
cosmetic  applications,  AlloDerm  has  been  used  by  surgeons in a variety of
applications  that  may  be  considered  "cosmetic."  Knowledge  of  such use by
potential  donors  could  impact their willingness to donate skin for such uses.

     DEPENDENCE  ON  KEY  MANAGEMENT  AND  PERSONNEL

     The  success  of  LifeCell  will be dependent largely on the efforts of its
executive  officers,  including  Paul  G.  Thomas, President and Chief Executive
Officer  of  the  Company,  and  Stephen A. Livesey, M.D., Ph.D., Executive Vice
President  and Chief Science Officer and a director of the Company.  The loss of
Mr.  Thomas's  and  Dr. Livesey's services may have a material adverse affect on
LifeCell's financial condition and results of operations.  LifeCell has obtained
"keyman"  life insurance on Dr. Livesey of $3.0 million.  Further the success of
LifeCell  is  also  dependent  upon  its  ability  to  hire and retain qualified
operating,  marketing  and  technical  personnel.  The competition for qualified
personnel  in the biochemical industry is intense, and accordingly, there can be
no  assurance  that  LifeCell  will  be  able  to hire or retain such personnel.

     TECHNOLOGICAL CHANGE AND COMPETITION

     The  biomedical  field  is  undergoing  rapid and significant technological
change.  LifeCell's  success  depends  upon  its  ability  to  develop  and
commercialize  efficient  and effective products based on its technology.  There
are  many  companies  and  academic  institutions that are capable of developing
products based on similar technology, and that have developed and are capable of
developing products based on other technologies, which are or may be competitive
with LifeCell's products.  Many of these companies and academic institutions are
well-established,  have  substantially  greater  financial  and other resources,
research and development capabilities and more experience in conducting clinical
trials,  obtaining  regulatory  approvals,  manufacturing  and  marketing  than
LifeCell.  These  companies  and academic institutions may succeed in developing
competing  products  that  are  more effective than LifeCell's products, or that
receive  government  approvals  more quickly than LifeCell's products, which may
render  the  Company's  products  or  technology  uncompetitive, uneconomical or
obsolete.

     LIMITED THIRD-PARTY REIMBURSEMENT

     Generally,  hospitals,  physicians and other health care providers purchase
products,  such  as the products being sold or developed by LifeCell, for use in
providing  care  to their patients.  These parties typically rely on third-party
payers,  including Medicare, Medicaid, private health insurance and managed care
plans,  to  reimburse  all  or part of the costs of acquiring those products and
costs  associated  with  the  medical  procedures performed with those products.
Cost control measures adopted by third-party payers in recent years have had and
may  continue  to  have a significant effect on the purchasing practices of many
health  care  providers,  generally  causing  them  to  be more selective in the
purchase  of  medical  products.  Significant  uncertainty  exists  as  to  the
reimbursement  status  of  newly  approved  health  care  products.  The Company
believes  that  certain  third-party  payers  provide  reimbursement for medical
procedures  at  a  specified rate without additional reimbursement for products,
such  as  those  being  sold  or developed by LifeCell, used in such procedures.
There  can be no assurance that adequate third-party payer reimbursement will be
available for the Company to maintain price levels sufficient for realization of
an  appropriate  return  on  its  investment  in  developing  new  products.  In
addition,  government  and  other third-party payers continue to refuse, in some
cases, to provide any coverage for uses of approved products for indications for
which  the  FDA  has not granted marketing approval.  Many uses of AlloDerm have
not  been granted such marketing approval and there can be no assurance that any
such uses will be approved.  Further, certain of the Company's products are used
in medical procedures that typically are not covered by third-party payers, such
as  "cosmetic"  procedures,  or  for  which  patients  sometimes  do  not obtain
coverage,  such  as  dental procedures.  These and future changes in third-party
payer reimbursement practices regarding the procedures performed with LifeCell's
products  could  adversely  affect the market acceptance of LifeCell's products.

                                       22
<PAGE>
     DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS

     LifeCell's  ability  to  compete  effectively  with  other  companies  is
materially  dependent upon the proprietary nature of its technologies.  LifeCell
relies  primarily  on  patents  and  trade  secrets to protect its technologies.
LifeCell  currently  licenses  the exclusive right to nine United States patents
and  related  foreign  patents  and  non-exclusive  rights  to  14  patents.  In
addition,  LifeCell  has  been  issued  three United States utility patents, one
United  States  design  patent  and  has  seven  pending  United  States  patent
applications.  There  can  be  no  assurance  that  LifeCell  will  obtain  any
additional  patents  or other protection, that the patents currently applied for
will  be  granted,  that,  if the patents currently applied for are granted, the
claims  allowed  will  be  sufficient  to protect LifeCell's technology, or that
existing  patents  or  proprietary  rights owned by or licensed to LifeCell will
provide  significant  commercial  benefits.  Further,  there can be no assurance
that any patents or proprietary rights owned by or licensed to LifeCell will not
be  challenged,  invalidated,  circumvented, or rendered unenforceable based on,
among  other  things,  subsequently discovered prior art, lack of entitlement to
the  priority  of  an earlier, related application or failure to comply with the
written  description,  best  mode,  enablement or other applicable requirements.
The  invalidation,  circumvention  or  unenforceability  of  key  patents  or
proprietary  rights  owned  by  or  licensed  to  LifeCell could have a material
adverse  effect on LifeCell and on its business, financial condition and results
of  operations.

     LifeCell's  success  will  depend  in  part  on its ability to maintain and
obtain  patent protection for its technology both in the United States and other
countries.  Other  companies  and  research  and  academic institutions may have
developed technologies, filed patent applications or received patents on various
technologies  that  may be related to LifeCell's business.  Some of these patent
applications,  patents  or  technologies  may  conflict  with  LifeCell's patent
applications,  patents  or  technologies.  Any such conflict could invalidate or
limit  the  scope  of LifeCell's patents or could result in denial of LifeCell's
patent  applications.

     In  general, the patent position of biotechnology and medical product firms
is  highly  uncertain  and  involves  complex  legal,  scientific  and  factual
questions.  There  can  be  no  assurance that any other patents will be granted
with  respect  to  the  patent  applications filed by the Company.  Furthermore,
there  can  be  no  assurance that any patents issued or licensed to the Company
will  provide  commercial  benefit  to  the  Company  or  will not be infringed,
invalidated  or  circumvented by others.  The United States Patent and Trademark
Office  currently  has  a  significant  backlog  of patent applications, and the
approval  or  rejection  of  patents  may  take  several years.  Prior to actual
issuance,  the  contents  of United States patent applications are generally not
made  public.  Once  issued,  such  a patent would constitute prior art from its
filing  date,  which might predate the date of a patent application on which the
Company relies.  Conceivably, the issuance of such a patent, or the discovery of
"prior art" of which the Company is currently unaware, could invalidate a patent
of  the  Company  or  its  licensor  or  prevent  commercialization of a product
disclosed  therein.

     The  Company generally conducts a cursory review of issued patents prior to
engaging in research or development activities.  Accordingly, the Company may be
required  to  obtain  a license from others to commercialize any of its products
under  development.  There can be no assurance that any such license that may be
required  could  be  obtained  on  favorable  terms  or  at  all.

     In  addition,  if  patents  that  cover  LifeCell's existing activities are
issued to other companies, there can be no assurance that LifeCell would be able
to  obtain  licenses to such patents at a reasonable cost, if at all, or be able
to develop or obtain alternative technology.  Any of the foregoing matters could
have  a material adverse effect on the Company's financial condition and results
of  operations.  In  addition,  the  Company may be required to obtain a license
under  one  or more patents prior to commercializing any heart valve or vascular
product,  if  developed.  There  can be no assurance that such a license will be
available,  or  if  available, that a license will be granted on terms which are
commercially  acceptable  to  the  Company.

     During  April  1998,  the  Company  entered  into an agreement settling its
pending  litigation  with  Integra  LifeSciences  Corporation  and its affiliate
("Integra")  and  the  Massachusetts  Institute  of  Technology ("MIT").  During
November  1997,  Integra  and  MIT  had  alleged  that the Company infringed two
patents  licensed by MIT to Integra (the "Integra Patents").  Under the terms of
the  settlement  agreement,  Integra  and  MIT  agreed not to assert the Integra
Patents  against  current  or  future products produced using LifeCell's current
technology.  LifeCell  also  obtained  the  right  to  develop and commercialize
future  products  using  Integra's  technology  through  a license to certain of

                                       23
<PAGE>
Integra's patents.  For a further discussion of the settlement terms, see "Legal
Proceedings."  There  can  be  no  assurances  that  the  Company's  existing or
proposed  products  or  processes  will not be subject to infringement claims by
others.  Any  successful  infringement claim relating to any patent could have a
material  adverse  effect  on  the  Company's financial condition and results of
operations.

     There  can  be no assurance that LifeCell will not be required to resort to
litigation  to  protect its patented technologies or other proprietary rights or
that  the  Company  will  not  be the subject of additional patent litigation to
defend  its  existing or proposed products or processes against claims of patent
infringement  or  other  intellectual  property  claims.  Any of such litigation
could  result  in  substantial costs and diversion of resources and could have a
material  adverse  effect  on  the  Company's financial condition and results of
operations.

     LifeCell  also  has  applied  for  patent  protection  in  several  foreign
countries.  Because  of  the  differences  in  patent  laws  and laws concerning
proprietary  rights,  the extent of protection provided by United States patents
or  proprietary  rights owned by or licensed to LifeCell may differ from that of
their  foreign  counterparts.

     LifeCell  may  decide for business reasons to retain certain knowledge that
it  considers  proprietary as confidential and elect to protect such information
as a trade secret, as business confidential information or as know-how.  In that
event,  LifeCell  must  rely  upon  trade  secrets,  know-how  and  continuing
technological  innovation to maintain its competitive position.  There can be no
assurance  that  others  will not independently develop substantially equivalent
proprietary  information  or  otherwise  gain  access  to  or  disclose  such
information.  The  independent  development  or  disclosure  of LifeCell's trade
secrets  could  have  a  material  adverse  effect  on  the  Company's financial
condition  and  results  of  operations.

     PRODUCT LIABILITY AND INSURANCE

     The  Company's  business  exposes  it  to potential product liability risks
which  are  inherent  in  the  testing,  manufacturing  and marketing of medical
products.  Although the Company has product liability insurance coverage with an
aggregate  limit  of  $8.0  million  and a per occurrence limit of $6.0 million,
there  can  be  no  assurance that such insurance will provide adequate coverage
against  potential  liabilities,  that adequate product liability insurance will
continue  to  be  available  in  the  future  or  that  it  can be maintained on
acceptable  terms.  The  obligation to pay any product liability claim in excess
of  whatever  insurance  the  Company  is  able to acquire could have a material
adverse effect on the business, financial condition and results of operations of
the  Company.  The  Company  uses  donated  human  skin  as the raw material for
AlloDerm.  The  non-profit  organizations  that supply such skin are required to
follow  FDA  regulations and guidelines published by the American Association of
Tissue  Banks  to  screen  donors  for  potential  disease  transmission.  Such
procedures  include  donor  testing  for  certain  viruses,  including HIV.  The
Company's  manufacturing  process  also  has  been  demonstrated  to  inactivate
concentrated  suspensions  of  HIV  in  tissue.  While the Company believes such
procedures  are adequate to reduce the threat of disease transmission, there can
be  no assurance that AlloDerm products will not be associated with transmission
of  disease  or  that  a  patient  otherwise  infected  with  disease  would not
erroneously  assert  a  claim  that  the use of AlloDerm resulted in the disease
transmission.  Any  such  transmission  or  alleged  transmission  could  have a
material  adverse  effect  on the Company's ability to manufacture or market its
products  or  could  otherwise  have  a material adverse effect on the Company's
financial  condition or results of operations.  See "-Risk Factors-Dependence on
Certain  Sources  of  Materials."

     LIMITATION ON THE USE OF NET OPERATING  LOSSES AND RESEARCH AND DEVELOPMENT
     TAX CREDITS

     As  of  December  31,  1998,  LifeCell  had  accumulated net operating loss
("NOL")  carryforwards  for  federal  income tax purposes of approximately $40.5
million  and  research and development tax credits of approximately $395,000 and
may  continue to incur NOL carryforwards.  United States tax laws provide for an
annual  limitation  on  the use of NOL carryforwards following certain ownership
changes  and  also  limit the time during which NOL and tax credit carryforwards
may  be  applied against future taxable income and tax liabilities.  The sale of
the  Company's  Common  Stock  in  a  public offering completed in December 1997
resulted  in  an  ownership change for federal income tax purposes.  The Company
estimates  that the amount of its NOL carryforwards and the credits available to
offset  taxable income as of December 31, 1998 is approximately $14.0 million on
a  cumulative  basis.  Accordingly,  if LifeCell generates taxable income in any
year in excess of the then cumulative limitation, the Company may be required to
pay  federal  income  taxes  even  though  it  has  unexpired NOL carryforwards.

     DISPOSAL OF HAZARDOUS MATERIALS

     LifeCell's  research  and  development  and  processing techniques generate
waste  that  is  classified  as  hazardous  by  the  United States Environmental
Protection  Agency  and  the  Texas  Natural  Resources  Commission.  LifeCell
segregates  such  waste  and  disposes  of it through a licensed hazardous waste
transporter.  Although  LifeCell  believes  it is currently in compliance in all
material  respects  with  applicable  environmental  regulations, its failure to
comply  fully  with  any  such  regulations  could  result  in the imposition of
penalties,  fines  or  sanctions  that  could  have a material adverse effect on
LifeCell's  financial  condition  and  results  of  operations.

                                       24
<PAGE>
ITEM  2.     PROPERTIES

     LifeCell  leases approximately 27,000 square feet of laboratory, office and
warehouse  space  at  its  facilities  in  The  Woodlands,  Texas,  under  lease
agreements that expire in January 2001.  The Company's monthly rental obligation
for  its  facilities  is  approximately  $30,000.

ITEM  3.     LEGAL  PROCEEDINGS

     During  April  1998,  the  Company  entered  into an agreement settling its
pending  litigation  with  Integra  LifeSciences  Corporation  and its affiliate
("Integra")  and  the  Massachusetts  Institute  of  Technology ("MIT").  During
November  1997,  Integra  and  MIT  had  alleged  that the Company infringed two
patents  licensed  by  MIT  to Integra (the "Integra Patents").  During December
1997, the Company filed a separate lawsuit against Integra and MIT alleging that
they  tortiously  interfered  with certain of LifeCell's business relationships,
including  relationships  with  investors  and potential investors in LifeCell's
recent  public  offering.  The  lawsuit  also  alleged  anticompetitive acts and
business  disparagement.  Under  the  terms of the settlement agreement, Integra
and  MIT  agreed  not  to  assert  the Integra Patents against current or future
products  produced  using LifeCell's current technology.  LifeCell also obtained
the  right  to  develop  and  commercialize  future  products  using  Integra's
technology  through a license to certain of Integra's patents.  As an additional
condition  of  the  settlement, Integra purchased from LifeCell 65,600 shares of
LifeCell  Common  Stock  for  a  purchase  price  of  $500,000.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

          None.

                                     PART II

ITEM  5.     MARKET  FOR  THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS

     The Company's  Common Stock is listed on the Nasdaq  National  Market under
the  symbol  "LIFC." On March 23,  1999,  the last  reported  sale price for the
Company's  Common Stock on The Nasdaq National  Market was $3.81 per share.  The
following table sets forth the high and low sales  information for the Company's
Common Stock for the periods indicated, as reported by The Nasdaq Stock Market.

<TABLE>
<CAPTION>
                          High    Low
<C>     <S>              <C>    <C>
1997    First Quarter    $8.88  $3.06
        Second Quarter    7.13   4.63
        Third Quarter     8.38   4.81
        Fourth Quarter    8.25   3.50
1998    First Quarter    $5.19  $4.50
        Second Quarter    8.03   5.03
        Third Quarter     6.50   3.75
        Fourth Quarter    5.50   3.31
</TABLE>

     As of February 28, 1999, there were  approximately 336 holders of record of
shares of Common  Stock and 38 holders of record of shares of Series B Preferred
Stock.  The  Company  estimates  that  there are in  excess of 4,000  beneficial
holders of Common Stock.

     During  1998,  the  Company issued 4,965 shares of Common Stock in exchange
for  a  warrant  to  purchase  11,290 shares of Common Stock.  In June 1998, the
Company  issued 65,600 shares of Common Stock for consideration of $500,000 to a
third  party  in settlement of litigation.  In December 1998, the Company issued
310,771  shares  of  Common Stock to Medtronic upon conversion of a $1.5 million
license  fee  paid in 1994.  In March 1999, the Company issued 108,577 shares of
Common Stock for consideration of $1 million to Boston Scientific as part of the
distribution  agreement  signed  in March 1999.  None of such issuances involved
underwriters.  The  Company  considers these securities to have been offered and
sold  in  transactions  not  involving  a  public offering and, therefore, to be
exempted  from registration under Section 4(2) of the Securities Act of 1933, as
amended.

                                       25
<PAGE>
DIVIDEND  POLICY

     LifeCell  has not paid a cash dividend to holders of shares of Common Stock
and does not anticipate paying cash dividends to the holders of its Common Stock
in  the  foreseeable  future.  Pursuant  to  the terms of the Company's Series A
Preferred Stock, on (i) March 26, 1997, the Company paid a per share dividend of
$0.50  in shares of Common Stock to the holders of the Series A Preferred Stock;
and  (ii) March 26, 1997, the Company paid a per share dividend of $0.25 in cash
to  such security holders.  Also on March 26, 1997, in accordance with the terms
of  the  Series  A  Preferred Stock, the Company redeemed all of the outstanding
shares  of  the  Series  A Preferred Stock through the conversion of such shares
into  shares  of Common Stock.  Accordingly, no further dividends are payable in
respect  of  the  Series  A  Preferred  Stock.

     On February 15, 1997, May 15, 1997, August 15, 1997, and November 17, 1997,
the  Company paid a per share dividend in shares of its Series B Preferred Stock
equivalent  to  $1.17,  $2.41,  $1.50 and $1.51, respectively, to the holders of
shares  of Series B Preferred Stock.  On February 17, 1998, May 15, 1998, August
15, 1998 and November 15, 1998, and February 15, 1999, the Company paid a $1.51,
$1.48,  $1.50, $1.51, and $1.51, respectively, per share dividend in cash to the
holders  of  shares  of  Series B Preferred Stock.  The Series B Preferred Stock
bears  dividends  per  share  at  the  annual  rate  of the greater of (i) $6.00
(subject  to  adjustment  in  certain  events)  and  (ii)  the per annum rate of
dividends  per  share  paid, if applicable, by the Company, on the Common Stock.
The  dividends may be paid, at the Company's option, in cash or shares of Series
B  Preferred  Stock or in a combination of cash and shares of Series B Preferred
Stock.  Dividends on the Series B Preferred Stock accrue and are paid quarterly.
The  Series  B  Preferred  Stock ceases bearing dividends on September 30, 2001.

     Under the General Corporation Law of the State of Delaware, a corporation's
board  of directors may declare and pay dividends only out of surplus, including
additional  paid  in  capital,  or  current  net  profits.

                                       26
<PAGE>
Item  6.     SELELECTED FINANCIAL DATA

     The following table sets forth certain selected  financial data of LifeCell
for each of the years in the five-year  period ended December 31, 1998,  derived
from the Company's audited financial statements. This information should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and  Results of  Operations"  and the  Financial  Statements  and notes  thereto
included elsewhere in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                         Year  Ended  December  31,
                                      1994           1995           1996           1997           1998
                                  -------------  -------------  -------------  -------------  -------------
<S>                               <C>            <C>            <C>            <C>            <C>
Operations Statement Data:
--------------------------------                                                                           
Revenues:
  Product sales                   $     93,940   $    742,238   $  2,012,205   $  4,904,971   $  7,245,102 
  Research funded by others            722,675      1,064,337        933,365      1,074,954        746,789 
                                  -------------  -------------  -------------  -------------  -------------
       Total revenues                  816,615      1,806,575      2,945,570      5,979,925      7,991,891 
                                  -------------  -------------  -------------  -------------  -------------
Costs and expenses:
  Cost of goods sold                   515,500        925,174      1,281,353      2,540,644      2,837,037 
  Research and development           2,085,851      2,169,764      1,588,186      2,007,062      3,375,545 
  General and administrative         1,381,470      1,422,588      1,911,254      3,081,512      3,484,460 
  Selling and marketing                727,615      1,475,296      2,389,573      4,955,597      6,500,000 
                                  -------------  -------------  -------------  -------------  -------------
  Total costs and expenses           4,710,436      5,992,822      7,170,366     12,584,815     16,197,042 
                                  -------------  -------------  -------------  -------------  -------------
Loss from operations                (3,893,821)    (4,186,247)    (4,224,796)    (6,604,890)    (8,205,151)
                                  -------------  -------------  -------------  -------------  -------------
  Interest income and other, net       167,300        280,843        135,082        466,255        863,837 
                                  -------------  -------------  -------------  -------------  -------------
Net loss                          $ (3,726,521)  $ (3,905,404)  $ (4,089,714)  $ (6,138,635)  $ (7,341,314)
                                  =============  =============  =============  =============  =============

Loss per share(1)-basic and
  diluted                         $      (0.90)  $      (1.10)  $      (1.14)  $      (1.04)  $      (0.72)
                                  =============  =============  =============  =============  =============

Shares used in computing loss
 per share-basic and diluted         4,294,179      4,313,366      4,542,519      6,820,122     11,228,912 
                                  =============  =============  =============  =============  =============


                                                              As of December 31,
                                      1994           1995           1996           1997           1998
                                  -------------  -------------  -------------  -------------  -------------
Balance Sheet Data:
--------------------------------                                                                           
Cash and cash equivalents         $  1,877,295   $  3,015,332   $ 10,748,250   $ 20,781,026   $  8,025,415 
Short-term investments               5,154,824              -              -              -      4,000,745 
Working capital                      6,613,304      2,888,048     10,884,779     20,515,559     12,596,612 
Total assets                         7,997,404      4,376,039     12,890,015     24,155,598     17,030,699 
Deferred credit                      1,500,000      1,500,000      1,500,000      1,500,000             -- 
Accumulated deficit                (20,678,402)   (24,774,753)   (29,310,934)   (36,411,480)   (44,475,992)
Total stockholders' equity           5,743,127      2,093,906     10,197,104     20,259,603     14,260,638 
<FN>
 (1)   Includes effect of accounting treatment of preferred stock  and  warrants of  $0.03,  $0.19,  $0.24,
       $0.14  and  $0.07  in  1994,  1995,  1996,  1997  and  1998,  respectively.
</TABLE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RUSULTS
         OF OPERATIONS

     The  following discussion of operations and financial condition of LifeCell
should  be  read  in conjunction with the Financial Statements and Notes thereto
included  elsewhere  in  this  Annual  Report  on  Form  10-K.

     Special  Note:  Certain  statements  set  forth  below  constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act  and  Section 21E of the Exchange Act.  See "Business-Special Note Regarding
Forward-Looking  Statements."

                                       27
<PAGE>
GENERAL  AND  BACKGROUND

     LifeCell  was organized in 1986 and, since its inception, has been financed
through the public and private sale of equity securities, through product sales,
through  a  corporate  alliance  with  Medtronic  and  through  the  receipt  of
government  grants  and  contracts.

     LifeCell  began  the sale of AlloDerm grafts as a dermal replacement in the
grafting  of  third-degree  burns  in  December  1993  and  commenced commercial
activities  in  1994.  LifeCell  commenced  the sale of AlloDerm for periodontal
surgery  in  September  1995  and for reconstructive plastic surgery in November
1995.  To  date,  proceeds  from  the  sale  of  AlloDerm products have not been
sufficient  to  fund  in  full  the  Company's  operating  activities.

RESULTS  OF  OPERATIONS

     YEAR ENDED DECEMBER 31, 1998 AND 1997

     The  net  loss  for  the  year  ended  December  31, 1998, increased 20% to
approximately $7.3 million compared to approximately $6.1 million for 1997.  The
increase  was  principally  attributable  to  higher  costs  associated with the
Company's  increased  marketing  activities for its AlloDerm products, increased
investment in the Company's product development programs, increased expenditures
for  the  infrastructure to support these activities and severance costs related
to  changes  in  executive  management.  The  increase  in  net  loss was offset
partially  by  increased  product  sales, as well as higher interest income from
investments.

     Total  revenues  for  the  year  ended  December 31, 1998, increased 34% to
approximately  $8.0 million compared to approximately $6.0 million for 1997.  An
approximately  $2.4  million  increase  in  sales  of products was the result of
expanded  sales  and marketing activities, and increased distribution activities
during  1998.  This  increase  was  offset  in part by an approximately $328,000
decrease  in  revenues  from  funded research and development.  The research and
development  funding  available  to the Company through grants and alliances was
lower  during  1998  than  in  1997.  Amounts  recognized as revenues under such
cost-reimbursement  arrangements  are  for expenses incurred during the periods.
Cost  of goods sold for the year ended December 31, 1998, was approximately $2.8
million, resulting in a gross margin of approximately 61%.  The gross margin for
the  year ended December 31, 1997, was approximately 48%.  The increase in gross
margin  was principally attributable to the implementation of certain production
efficiencies,  the  allocation  of fixed costs to higher volumes of products, an
increase  in sales of certain higher-margin AlloDerm products and an increase in
the  price  of  certain  AlloDerm  products  in  1998.

     Research  and  development  expenses  for the year ended December 31, 1998,
increased  68%  to  approximately  $3.4  million  compared to approximately $2.0
million  for  1997.  The  increase  in  research  and  development  expense  was
primarily  attributable  to  increased  animal  and  clinical  studies  for  the
expanding  uses  for  AlloDerm  .  In  addition, the Company dedicated increased
resources  to  product  development  programs  such  as  Micronized  AlloDerm  .

     General  and  administrative expenses for the year ended December 31, 1998,
increased  13%  to  approximately  $3.5  million  compared to approximately $3.1
million  for  1997.  The  increase was primarily attributable to severance costs
related  to  a  change  in  executive  management.

     Selling  and  marketing expenses increased 31% to $6.5 million for the year
ended  December  31, 1998, compared to approximately $5.0 million for 1997.  The
increase  was  primarily  attributable  to  the  addition  of domestic sales and
marketing  personnel,  expansion  of  marketing  activities as well as severance
costs  related  to  changes  in  executive  marketing  personnel.

     Interest  income and other, net increased 85% to approximately $864,000 for
the  year  ended December 31, 1998, compared to approximately $466,000 for 1997.
The  increase  was  principally  attributable  to  higher  funds  available  for
investment  during  the  current  period  as  a  result of the $16.0 million net
proceeds  received  from  the  public offering of Common Stock in December 1997.

     YEARS ENDED DECEMBER 31, 1997 AND 1996

     The  net  loss  for  the  year  ended  December  31, 1997, increased 50% to
approximately  $6.1  million compared to approximately $4.1 million for the same
period  of  1996.  The increase was principally attributable to costs associated
with  expanding  the  sales  of AlloDerm, including the development of sales and
marketing  programs,  recruitment  and  retention  of  staff  and  the  related
infrastructure  necessary  to  support  such  activities.

     Total  revenues  for  the  year  ended December 31, 1997, increased 103% to
approximately  $6.0  million compared to approximately $2.9 million for the same
period of 1996.  Approximately $2.9 million of such increase was attributable to

                                       28
<PAGE>
increases  in  sales  of  products,  which were the result of expanded sales and
marketing  activities  and  increased  distribution  activities  during the 1997
period.  The remaining $142,000 increase in revenues was the result of increased
research  activities  under funding arrangements; amounts recognized as revenues
under  such  cost-reimbursement  arrangements  are  for  the associated expenses
incurred  during  the  periods.

     Cost  of goods sold for the year ended December 31, 1997, was approximately
$2.5  million,  resulting  in  a  gross  margin of approximately 48%.  The gross
margin  for  the  year  ended  December  31,  1996,  was approximately 36%.  The
increase  in  gross margin was principally attributable to the implementation of
certain production efficiencies, the allocation of fixed costs to higher volumes
of products, an increase in sales of certain higher-margin AlloDerm products and
an  increase  in  the  price  of  certain  AlloDerm  products  in  1997.

     Research  and  development  expenses  for the year ended December 31, 1997,
increased  26%  to  approximately  $2.0  million  compared to approximately $1.6
million  for 1996.  Of such increase, approximately $142,000 was attributable to
increased  activities  related  to  research  funded by others.  Such activities
increased in 1997 as a result of the receipt during 1996 of three contracts with
government  agencies to fund research and development activities.  The remaining
$277,000  increase  in  research  and  development  expense  was attributable to
increased production of products for clinical and research activities as well as
higher  allocations of resources to certain proprietary research and development
programs.

     General  and  administrative expenses for the year ended December 31, 1997,
increased  61%  to  approximately  $3.1  million  compared to approximately $1.9
million  for  1996.  Such  increase  was  principally attributable to legal fees
accrued  for  the  defense  of  the patent infringement lawsuit, increased staff
levels,  recruiting  fees  and  other professional fees related to the Company's
expansion  of  the  infrastructure  to  support  its increased sales activities.

     Selling and marketing expenses increased 107% to approximately $5.0 million
for the year ended December 31, 1997, compared to approximately $2.4 million for
1996.  The  increase  was  primarily  attributable  to  increased  promotional
activities  as  well  as  the  addition  of  sales personnel related to AlloDerm
marketing.

     Interest income and other, net increased 245% to approximately $466,000 for
the  year  ended December 31, 1997, compared to approximately $135,000 for 1996.
The  increase  was  principally  attributable  to  higher  funds  available  for
investment  during  the  current  period  as  a  result  of the sale of Series B
Preferred  Stock  in  November  1996  and  the proceeds received from the public
offering  of  Common  Stock  in  December  1997.

LIQUIDITY  AND  CAPITAL  RESOURCES

     Since its inception, LifeCell's principal sources of funds have been equity
offerings,  product  sales, external funding of research activities and interest
on  investments.  LifeCell  has  historically  funded  research  and development
activities  for  products other than AlloDerm primarily with external funds from
its  corporate  alliance  with  Medtronic and government grants. In August 1996,
LifeCell  was  awarded  a  two  year  $300,000 National Science Foundation grant
related  to its keratinocytes program.  In December 1996, LifeCell was awarded a
two-year  contract  of approximately $1.1 million from the United States Army to
support  the  development  of  vascular graft and other products.  In June 1998,
LifeCell  was awarded a $600,000 contract from the United States Navy related to
the  development  and  clinical  research  of  ThromboSol  .

     In  1994,  LifeCell  entered  into  an agreement with Medtronic pursuant to
which  Medtronic paid LifeCell a license fee of $1.5 million and agreed, subject
to  certain rights to terminate at Medtronic's discretion, to fund certain costs
of  the  research  and  development  of LifeCell's proprietary tissue processing
technology  in  the  field of heart valves.  Through December 31, 1998, LifeCell
has  recognized  approximately $2.0 million in revenues for development funding,
excluding  the initial license fee, for this program  In December 1998, LifeCell
and  Medtronic  mutually  agreed  to  terminate  their  early  stage license and
development  agreement  related  to  heart valves in order to focus on near-term
opportunities.  LifeCell  regained  all rights to its cardiovascular technology.
As  a  result  of terminating the agreement, the $1.5 million up-front licensing
fee  paid  by  Medtronic  to  LifeCell  in 1994 converted into 310,771 shares of
Common  Stock.

     In  December  1997,  LifeCell  received net proceeds of approximately $16.0
million  pursuant  to  a  public  offering  of 4 million shares of Common Stock.

     In March 1999, the Company received proceeds of $1 million from the sale of
108,577  shares of the Company's Common Stock to Boston Scientific in connection
with  the  agreement  for  worldwide  distribution  of its proprietary acellular
tissue  matrix  for  applications  in  urology  and  gynecology.

     LifeCell  expects  to  incur  substantial  expenses  in connection with its
efforts  to  expand  sales  and marketing of AlloDerm, develop expanded uses for
AlloDerm, conduct the Company's product development programs (including costs of
clinical  studies),  prepare and make any required regulatory filings, introduce
products,  participate  in technical seminars and support ongoing administrative
and  research and development activities.  The Company currently intends to fund

                                       29
<PAGE>
these  activities  from  its  existing  cash  resources,  sales  of products and
research  and  development  funding  received  from  others.  While  the Company
believes  that  its  existing  available  funds  will  be sufficient to meet its
present  operating  and capital requirements through at least 2000, there can be
no  assurance that such sources of funds will be sufficient to meet these future
expenses.  If  adequate  funds are not available, the Company expects it will be
required  to  delay,  scale  back  or  eliminate  one  or  more  of  its product
development  programs.  The  Company's  need  for  additional  financing will be
principally  dependent  on  the  degree  of  market  acceptance  achieved by the
Company's  products  and the extent to which the Company can achieve substantial
growth in product sales during 1999 and 2000, as well as the extent to which the
Company  may  decide to expand its product development efforts.  There can be no
assurance  that the Company will be able to obtain any such additional financing
on  acceptable  terms,  if  at  all.

     LifeCell  has  had  losses  since  its inception and therefore has not been
subject  to  federal  income  taxes.  As  of December 31, 1998, LifeCell had net
operating loss ("NOL") and research and development tax credit carryforwards for
income  tax  purposes of approximately $40.5 million and $395,000, respectively,
available  to  reduce  future  income tax and tax liabilities.  Federal tax laws
provide  for  a  limitation  on  the  use  of  NOL  and tax credit carryforwards
following  certain  ownership changes that could limit LifeCell's ability to use
its NOL and tax credit carryforwards.  The Company's sale of Common Stock in the
1997  public  offering  resulted  in  an ownership change for federal income tax
purposes.  The  Company  estimates  that the amount of NOL carryforwards and the
credits  available  to  offset  taxable  income  as  of  December  31,  1998  is
approximately  $14.0  million  on  a cumulative basis.  Accordingly, if LifeCell
generates  taxable  income  in  any  year  in  excess  of  its  then  cumulative
limitation,  the Company may be required to pay federal income taxes even though
it  has  unexpired  NOL  carryforwards.

YEAR  2000  COMPLIANCE

          In  recent  years,  the  Company  has been replacing and enhancing its
information  systems  to  gain  operational  efficiencies and keep pace with the
Company's  growth.  In  conjunction  with these activities, the Company has been
preparing  its  information  systems  for  the  year  2000.

     The  Company  has completed a comprehensive assessment of the impact of the
year  2000  on  its internal information systems and applications and intends to
make the necessary revisions or upgrades to its systems to render them year 2000
compliant.  The  Company  is  also focusing on compliance attainment efforts and
key  interfaces  with  vendors.  To date, all of the Company's critical software
applications  have  been  certified Year 2000 compliant.  The Company's computer
hardware  is  in  the  process of final testing, and the Company expects that it
will  be  compliant by the first quarter of 1999.  Notwithstanding the Company's
efforts,  the  Company  could  experience  disruptions  to  some  aspects of its
activities  and  operations as a result of non-compliant systems utilized by the
Company  or  unrelated  third  parties.  The  Company  is, therefore, developing
contingency  plans  to  mitigate  the extent of any such potential disruption to
business  operations.  The  Company does not expect that the costs of addressing
potential  year 2000 issues will have a material adverse impact on the Company's
results  of  operations  or  financial  position.

     There  can be no  assurances  that the  efforts  or the  contingency  plans
related to the Company's systems, or those of others relied upon by the Company,
will be successful or that any failure to convert, upgrade or plan appropriately
for contingencies would not have a material adverse effect on the Company.

     The foregoing statements are intended to be and are hereby designated "Year
2000  Readiness  Disclosure"  statements  within  the  meaning  of the Year 2000
Information  and  Readiness  Disclosure  Act.

ITEM  7A.    QUANTITATIVE  AND  QUALITATIVE  DISCLOSURE  ABOUT  MARKET  RISK

     None.

ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

     The  financial  statements and supplementary financial information required
to  be filed under this Item are presented commencing on page F-1 of this Annual
Report  on  Form  10-K,  and  are  incorporated  herein  by  reference.

ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL  DISCLOSURE

     None.

                                       30
<PAGE>
                                    PART III

ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be  held June 3, 1999, under the captions "Election of Directors"
and  "Executive  Compensation,"  and  such information is incorporated herein by
reference.

ITEM  11.     EXECUTIVE  COMPENSATION

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be held June 3, 1999, under the caption "Executive Compensation,"
and  such  information  is  incorporated  herein  by  reference.

ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be  held  June  3, 1999, under the caption "Security Ownership of
Certain  Beneficial Owners and Management," and such information is incorporated
herein  by  reference.

ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to be held June 3, 1999, under the caption "Certain Relationships and
Related Transactions," and such information is incorporated herein by reference.

                                     PART IV

ITEM  14.     EXHIBITS,  FINANCIAL  STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
(A)  DOCUMENTS  INCLUDED  IN  THIS  REPORT:

  1.   FINANCIAL STATEMENTS                                                                   PAGE
                                                                                              ----
<S>                                                                                          <C>
      Report of Independent Public Accountants                                                 F-1
      Balance Sheets as of December 31, 1997 and 1998                                          F-2
      Statements of Operations for the years ended December 31, 1996, 1997 and 1998            F-3
      Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998  F-4
      Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998            F-6
      Notes to Financial Statements                                                            F-7
</TABLE>

(B)     REPORTS  ON  FORM  8-K:

      None.

(C)     EXHIBITS:

     Exhibits  designated  by  the symbol * are filed with this Annual Report on
Form  10-K.  All  exhibits  not so designated are incorporated by reference to a
prior  filing  as  indicated.

     Exhibits designated by the symbol + are management  contracts or
Compensatory  plans  or  arrangements  that  are  required to be filed with this
Report pursuant to this Item 14.

     LifeCell  undertakes to furnish to any  stockholder so requesting a copy of
any of the  following  exhibits  upon  payment to the Company of the  reasonable
costs incurred by Company in furnishing any such exhibit.

                                       31
<PAGE>
     3.1  Restated  Certificate of  Incorporation,  as amended  (incorporated by
          reference  to Exhibit 3.1 to the  Company's  Quarterly  Report on Form
          10-Q for the period ended June 30, 1998, filed with the Securities and
          Exchange Commission ("the Commission") on August 10, 1998).

     3.2  Amended and Restated By-laws (incorporated by reference to Exhibit 3.2
          to the  Company's  Quarterly  Report on Form 10-Q for the period ended
          June 30, 1996, filed with the Commission on August 14, 1996.)

    10.1+ LifeCell  Corporation  Amended and Restated 1992 Stock Option Plan, as
          amended  (incorporated  by reference to Exhibit 10.1 to the  Company's
          Quarterly  Report on Form 10-Q for the  period  ended  June 30,  1998,
          filed with the Commission on August 10, 1998).

    10.2+ LifeCell  Corporation  Second  Amended and Restated 1993  Non-Employee
          Director Stock Option Plan, as amended  (incorporated  by reference to
          Exhibit  10.4 to the  Company's  Annual  Report  on Form  10-K for the
          fiscal year ended  December 31,  1996,  filed with the  Commission  on
          March 31, 1997).

    10.3  Form  of   Confidentiality/Non-Compete   Agreement   (incorporated  by
          reference to Exhibit 10.28 to the Company's  Registration Statement on
          Form S-1,  Registration  No.  33-44969,  filed with the  Commission on
          January 9, 1992).
    
    10.4  Lease  Agreement  dated December 10, 1986,  between the Registrant and
          The Woodlands  Corporation,  Modification  and  Ratification  of Lease
          Agreement  dated  April 11,  1988,  between the  Registration  and The
          Woodlands  Corporation  Modification  and  Ratification of Lease dated
          August 1, 1992, between the Company and The Woodlands  Corporation and
          Modification, Extension and Ratification of Lease dated March 5, 1993,
          between the Registrant and The Woodlands Corporation, and Modification
          and  Ratification of Lease Agreement dated December 21, 1995,  between
          the  Company  and  The  Woodlands   Office  Equities  --  '95  Limited
          (incorporated by reference to Exhibit 10.1 to the Company's  Quarterly
          Report on Form 10-Q for the period ended March 31, 1996).

    10.5  Lease Agreement  dated  September 1, 1988,  between the Registrant and
          The Woodlands  Corporation,  and Modification of Lease Agreement dated
          March 5, 1993,  between the Registrant  and The Woodlands  Corporation
          (incorporated  by reference to Exhibit 10.22 to the  Company's  Annual
          Report on Form 10-K for the fiscal year ended December 31, 1992).

    10.6  Securities   Purchase  Agreement  dated  November  18,  1996,  between
          LifeCell Corporation and the Investors named therein  (incorporated by
          reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K
          for the fiscal year ended December 31, 1996).

    10.7  Voting Agreement dated November 18, 1996,  among LifeCell  Corporation
          and certain  stockholders named therein  (incorporated by reference to
          Exhibit  10.16 to the  Company's  Annual  Report  on Form 10-K for the
          fiscal year ended December 31, 1996).

    10.8  Registration   Rights  Agreement  dated  November  18,  1996,  between
          LifeCell   Corporation   and  certain   stockholders   named   therein
          (incorporated  by reference to Exhibit 10.17 to the  Company's  Annual
          Report on Form 10-K for the fiscal year ended December 31, 1996).

    10.9  Form of Stock Purchase Warrant dated November 18, 1996, issued to each
          of the  warrant  holders  named on  Schedule  10.18  attached  thereto
          (incorporated  by reference to Exhibit 10.18 to the  Company's  Annual
          Report on Form 10-K for the fiscal year ended December 31, 1996).

    10.10 Stock Purchase  Warrant dated  November 18, 1996,  issued to Gruntal &
          Co.,  Incorporated  (incorporated  by  reference  to Exhibit  10.19 to
          Amendment  No. 1 to the  Company's  Annual Report on Form 10-K for the
          fiscal year ended December 31, 1996 on Form 10-K/A).

    10.11+Agreement  dated August 19, 1998,  between  LifeCell  Corporation  and
          Paul M.  Frison  (incorporated  by  reference  to Exhibit  10.1 to the
          Company's Quarterly Report on Form 10-Q for the period ended September
          30, 1998 filed with the Commission on November 13, 1998).

    10.12+Agreement  dated  July  1,  1997,  between  LifeCell  Corporation  and
          Stephen A. Livesey. (incorporated by reference to Exhibit 10.20 to the
          Company's  Registration Statement No. 333-37123 on Form S-2 filed with
          the Commission on October 3, 1997).

                                       32
<PAGE>
    10.13+Agreement dated October 5, 1998 between LifeCell  Corporation and Paul
          G. Thomas  (incorporated by reference to Exhibit 10.2 to the Company's
          Quarterly  Report on Form 10-Q filed with the  Commission  on November
          13, 1998.)

    10.14+Letter agreement dated September 8, 1998 between LifeCell  Corporation
          and Paul G. Thomas, as amended by letter agreements dated September 9,
          1998 and September 29, 1998 (incorporated by reference to Exhibit 10.3
          to the  Company's  Quarterly  Report  on  Form  10-Q  filed  with  the
          Commission on November 13, 1998.)

    23.1* Consent of Arthur Andersen LLP.

    27.1+ Financial  data  schedule.

                                       33
<PAGE>
                                   SIGNATURES

     In  accordance  with  Section 13 or 15(d) of the Securities Exchange Act of
1934,  the  registrant  caused  this  report  to  be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

                       LIFECELL CORPORATION
                           (Registrant)

                       By: /s/  Paul G. Thomas
                           -----------------------------------------------------
                           Paul G. Thomas, President and Chief Executive Officer


Dated:  March  25,  1999.

     In  accordance  with  the  Securities Exchange Act of 1934, this report has
been  signed  by  the  following  persons on behalf of the registrant and in the
capacities  and  on  the  dates  indicated:

     SIGNATURE                            TITLE                        DATE
     ---------                            -----                        ----

/s/  Paul  G.  Thomas      President and Chief Executive          March 25, 1999
---------------------      Officer (Principal Executive Officer)
(Paul  G.  Thomas)

/s/  Lynne  P.  Hohlfeld   Controller                             March 25, 1999
------------------------   (Principal  Accounting  Officer)
(Lynne  P.  Hohlfeld)

/s/  Paul  M.  Frison      Director and Chairman                  March 25, 1999
---------------------      of  the  Board
(Paul  M.  Frison)

/s/  Michael  E.  Cahr     Director                               March 25, 1999
----------------------
 (Michael  E.  Cahr)

/s/  James  G.  Foster     Director                               March 25, 1999
----------------------
(James  G.  Foster)

/s/  Lori  G.  Koffman     Director                               March 25, 1999
----------------------
(Lori  G.  Koffman)

/s/  Stephen  A. Livesey   Director                               March 25, 1999
------------------------
(Stephen  A.  Livesey)

/s/  K.  Flynn  McDonald   Director                               March 25, 1999
------------------------
(K.  Flynn  McDonald)

/s/  David  A.  Thompson   Director                               March 25, 1999
------------------------
(David  A.  Thompson)

                                       34
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To  LifeCell  Corporation:

     We have audited the accompanying  balance sheets of LifeCell Corporation (a
Delaware  corporation)  as of  December  31,  1997  and  1998,  and the  related
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period ended December 31, 1998.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

     We  conducted  our  audits  in  accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

     In  our opinion, the financial statements referred to above present fairly,
in  all  material respects, the financial position of LifeCell Corporation as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with  generally  accepted  accounting  principles.



          ARTHUR  ANDERSEN  LLP

Houston,  Texas
February  12,  1999

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                                         LIFECELL CORPORATION
                                            BALANCE SHEETS

                                                                                  DECEMBER  31,
                                                                         ----------------------------
                                                                             1997           1998
                                                                         -------------  -------------
<S>                                                                      <C>            <C>
                                   Assets
Current Assets
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .  $ 20,781,026   $  8,025,415 
  Short-term investments                                                          ---      4,000,745 
  Accounts and other receivables, net . . . . . . . . . . . . . . . . .     1,095,904      1,383,920 
  Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       936,398      1,749,023 
  Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . .        98,226        207,570 
                                                                         -------------  -------------
    Total current assets. . . . . . . . . . . . . . . . . . . . . . . .    22,911,554     15,366,673 
Furniture and Equipment, net. . . . . . . . . . . . . . . . . . . . . .       864,058      1,388,339 
Intangible Assets, net. . . . . . . . . . . . . . . . . . . . . . . . .       379,986        275,687 
                                                                         -------------  -------------
    Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 24,155,598   $ 17,030,699 


                     Liabilities and Stockholders' Equity

Current Liabilities
  Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . .  $    780,393   $    704,938 
  Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .     1,556,083      2,065,123 
  Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . .        59,519             -- 
                                                                         -------------  -------------
    Total current liabilities . . . . . . . . . . . . . . . . . . . . .     2,395,995      2,770,061 
Deferred Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,500,000             -- 
Commitments and Contingencies
Stockholders' Equity
Series B preferred stock, $.001 par value, 182,205 shares
  authorized, 125,441and 119,084 issued and outstanding . . . . . . . .           125            119 
Undesignated preferred stock, $.001 par value 1,817,795
  shares authorized, none issued and outstanding. . . . . . . . . . . .            --             -- 
Common stock, $.001 par value, 25,000,000 and 48,000,000 shares
  authorized, respectively, 11,012,906 and 11,612,852 shares issued and
  outstanding, respectively . . . . . . . . . . . . . . . . . . . . . .        11,013         11,612 
Warrants outstanding to purchase 3,163,478 and 3,182,188
  shares of common stock, respectively. . . . . . . . . . . . . . . . .       299,480        298,344 
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . .    56,360,465     58,426,555 
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . .   (36,411,480)   (44,475,992)
                                                                         -------------  -------------
    Total stockholders' equity. . . . . . . . . . . . . . . . . . . . .    20,259,603     14,260,638 
                                                                         -------------  -------------
    Total liabilities and stockholders' equity. . . . . . . . . . . . .  $ 24,155,598   $ 17,030,699 
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                               LIFECELL CORPORATION
                             STATEMENTS OF OPERATIONS

                                             FOR THE YEAR ENDED DECEMBER 31,
                                         ----------------------------------------
                                             1996          1997          1998
                                         ------------  ------------  ------------
<S>                                      <C>           <C>           <C>
Revenues
  Product sales . . . . . . . . . . . .  $ 2,012,205   $ 4,904,971   $ 7,245,102 
  Research funded by others . . . . . .      933,365     1,074,954       746,789 
                                         ------------  ------------  ------------
    Total revenues. . . . . . . . . . .    2,945,570     5,979,925     7,991,891 
                                         ------------  ------------  ------------
Costs and Expenses
  Cost of goods sold. . . . . . . . . .    1,281,353     2,540,644     2,837,037 
  Research and development. . . . . . .    1,588,186     2,007,062     3,375,545 
  General and administrative. . . . . .    1,911,254     3,081,512     3,484,460 
  Selling and marketing . . . . . . . .    2,389,573     4,955,597     6,500,000 
                                         ------------  ------------  ------------
    Total costs and expenses. . . . . .    7,170,366    12,584,815    16,197,042 
                                         ------------  ------------  ------------
Loss From Operations. . . . . . . . . .   (4,224,796)   (6,604,890)   (8,205,151)
                                         ------------  ------------  ------------
  Interest income and other, net. . . .      135,082       466,255       863,837 
                                         ------------  ------------  ------------
Net Loss. . . . . . . . . . . . . . . .  $(4,089,714)  $(6,138,635)  $(7,341,314)

Loss Per Common Share-Basic and Diluted  $     (1.14)  $     (1.04)  $     (0.72)

Shares Used in Computing Loss Per
  Common Share-Basic and Diluted. . . .    4,542,519     6,820,122    11,228,912 
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                                                LIFECELL CORPORATION
                                         STATEMENTS OF STOCKHOLDERS' EQUITY

                                                        SERIES A                 SERIES B
                                                     PREFERRED STOCK          PREFERRED STOCK       COMMON STOCK
                                                 ------------------------  --------------------  -------------------
                                                   SHARES       AMOUNT       SHARES     AMOUNT     SHARES    AMOUNT
                                                 ----------  ------------  ----------  --------  ----------  -------
<S>                                              <C>         <C>           <C>         <C>       <C>         <C>

Balance at December 31, 1995. . . . . . . . . .    264,500   $ 5,496,793          --   $    --    4,403,658  $ 4,404
  Stock options exercised . . . . . . . . . . .         --            --          --        --        6,062        6
  Warrants exercised. . . . . . . . . . . . . .         --            --          --        --      339,066      339
  Expiration of warrants. . . . . . . . . . . .         --            --          --        --           --       --
  Conversion of preferred stock . . . . . . . .     (4,500)      (90,000)         --        --       30,104       30
  Common stock issued as dividends
    on Series A preferred stock . . . . . . . .         --      (415,920)         --        --      121,054      121
  Earned portion of restricted stock. . . . . .         --            --          --        --           --       --
  Stock options issued for services . . . . . .         --            --          --        --           --       --
  Series B preferred stock and common
    stock warrants issued for cash. . . . . . .         --            --     124,157       124           --       --
  Dividends accrued on preferred stock. . . . .         --       300,600          --         2           --       --
  Net Loss. . . . . . . . . . . . . . . . . . .         --            --          --        --           --       --
                                                 ----------  ------------  ----------  --------  ----------  -------
Balance at December 31, 1996. . . . . . . . . .    260,000     5,291,473     124,157       126    4,899,944    4,900
  Stock options exercised . . . . . . . . . . .         --            --          --        --       47,987       48
  Warrants exercised. . . . . . . . . . . . . .         --            --          --        --       76,813       77
  Expiration of warrants. . . . . . . . . . . .         --            --          --        --           --       --
  Redemption of Series A preferred stock. . . .   (260,000)   (5,200,000)         --        --    1,739,128    1,739
  Conversion of Series B preferred stock. . . .         --            --      (6,688)       (7)     215,729      216
  Common stock and cash issued as dividends
    on Series A preferred stock . . . . . . . .         --      (195,000)         --        --       33,305       33
  Common stock sold in public offering. . . . .         --            --          --        --    4,000,000    4,000
  Stock options issued for services . . . . . .         --            --          --        --           --       --
  Series B preferred stock issued as
    dividends on Series B preferred stock . . .         --            --       7,972         6           --       --
  Dividends accrued on Series B preferred stock         --       103,527          --        --           --       --
  Net Loss. . . . . . . . . . . . . . . . . . .         --            --          --        --           --       --
                                                 ----------  ------------  ----------  --------  ----------  -------

Balance at December 31, 1997. . . . . . . . . .         --            --     125,441       125   11,012,906   11,013
  Stock options exercised . . . . . . . . . . .         --            --          --        --       12,550       13
  Warrants exercised. . . . . . . . . . . . . .         --            --          --        --        4,965        5
  Expiration of warrants. . . . . . . . . . . .         --            --          --        --           --       --
  Warrants issued to purchase Common Stock. . .         --            --          --        --           --       --
  Conversion of Series B preferred stock. . . .         --            --      (6,357)       (6)     205,060      205
  Common stock issued for cash, and . . . . . .         --            --          --        --      376,371      376
    conversion of license fee
  Stock options issued for services . . . . . .         --            --          --        --           --       --
  Dividends paid on Series B preferred stock. .         --            --          --        --           --       --
  Dividends accrued on Series B preferred stock         --            --          --        --           --       --
Net Loss. . . . . . . . . . . . . . . . . . . .         --            --          --        --           --       --
                                                 ----------  ------------  ----------  --------  ----------  -------
Balance at December 31, 1998. . . . . . . . . .         --   $        --     119,084   $   119   11,611,852  $11,612
</TABLE>

                                   (continued)
   The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                                   LIFECELL CORPORATION
                                      STATEMENTS OF STOCKHOLDERS' EQUITY-(CONTINUED)

                                                                                UNEARNED
                                                                               PORTION OF
                                                   WARRANTS TO PURCHASE     RESTRICTED STOCK    ADDITIONAL       TOTAL
                                                       COMMON STOCK           COMPENSATION       PAID-IN      ACCUMULATED
                                                 ------------------------                                          
                                                    SHARES       AMOUNT       AND WARRANTS       CAPITAL        DEFICIT
                                                 ------------  ----------  ------------------  ------------  -------------
<S>                                              <C>           <C>         <C>                 <C>           <C>

Balance at December 31, 1995. . . . . . . . . .      574,066   $ 226,560   $         (19,906)  $21,160,808   $(24,774,753)
  Stock options exercised . . . . . . . . . . .           --          --                  --        17,274             -- 
  Warrants exercised. . . . . . . . . . . . . .     (339,066)   (104,300)                 --     1,155,617             -- 
  Expiration of warrants. . . . . . . . . . . .      (15,000)     (6,000)                 --         6,000             -- 
  Conversion of preferred stock . . . . . . . .           --          --                  --        89,970             -- 
  Common stock issued as dividends
    on Series A preferred stock . . . . . . . .           --          --                  --       409,700             -- 
  Earned portion of restricted stock. . . . . .           --          --              19,906            --             -- 
  Stock options issued for services . . . . . .           --          --                  --       150,000             -- 
  Series B preferred stock and common
    stock warrants issued for cash. . . . . . .    3,158,264     306,958                  --    10,653,087             -- 
  Dividends accrued on preferred stock. . . . .           --          --                  --       145,865       (446,467)
  Net Loss. . . . . . . . . . . . . . . . . . .           --          --                  --            --     (4,089,714)
                                                 ------------  ----------  ------------------  ------------  -------------
Balance at December 31, 1996. . . . . . . . . .    3,378,264     423,218                  --    33,788,321    (29,310,934)
  Stock options exercised . . . . . . . . . . .           --          --                  --       128,719             -- 
  Warrants exercised. . . . . . . . . . . . . .      (89,786)   (123,738)                 --       432,527             -- 
  Expiration of warrants. . . . . . . . . . . .     (125,000)         --                  --            --             -- 
  Redemption of  Series A preferred stock . . .           --          --                  --     5,198,261             -- 
  Conversion of Series B preferred stock. . . .           --          --                  --          (209)            -- 
  Common stock and cash issued as dividends
    on Series A preferred stock . . . . . . . .           --          --                  --       129,919             -- 
  Common stock sold in public offering. . . . .           --          --                  --    16,018,766             -- 
  Stock options issued for services . . . . . .           --          --                  --        12,834             -- 
  Series B preferred stock issued as
    dividends on Series B preferred stock . . .           --          --                  --       651,327       (669,749)
  Dividends accrued on Series B preferred stock           --          --                  --            --       (292,162)
  Net Loss. . . . . . . . . . . . . . . . . . .           --          --                  --            --     (6,138,635)
                                                 ------------  ----------  ------------------  ------------  -------------
Balance at December 31, 1997. . . . . . . . . .    3,163,478     299,480                  --    56,360,465    (36,411,480)
  Stock options exercised . . . . . . . . . . .           --          --                  --        43,416             -- 
  Warrants exercised. . . . . . . . . . . . . .      (11,290)     (1,136)                 --         1,125             -- 
  Expiration of warrants. . . . . . . . . . . .      (20,000)         --                  --            --             -- 
  Warrants issued to purchase common stock. . .       50,000          --                  --            --             -- 
  Conversion of Series B preferred stock. . . .           --          --                  --          (199)            -- 
  Common stock issued for cash, and
    conversion of license fee . . . . . . . . .           --          --                  --     1,999,929             -- 
  Stock options issued for services . . . . . .           --          --                  --        21,819             -- 
  Dividends paid on Series B preferred stock. .           --          --                  --            --       (542,998)
  Dividends accrued on Series B preferred stock           --          --                  --            --       (180,200)
  Net Loss. . . . . . . . . . . . . . . . . . .           --          --                  --            --     (7,341,314)
                                                 ------------  ----------  ------------------  ------------  -------------
Balance at December 31, 1998. . . . . . . . . .    3,182,188   $ 298,344   $              --   $58,426,555   $(44,475,992)


                                                  STOCKHOLDERS'
                                                     EQUITY
                                                 ---------------
<S>                                              <C>

Balance at December 31, 1995. . . . . . . . . .  $    2,093,906 
  Stock options exercised . . . . . . . . . . .          17,280 
  Warrants exercised. . . . . . . . . . . . . .       1,051,656 
  Expiration of warrants. . . . . . . . . . . .              -- 
  Conversion of preferred stock . . . . . . . .              -- 
  Common stock issued as dividends
    on Series A preferred stock . . . . . . . .          (6,099)
  Earned portion of restricted stock. . . . . .          19,906 
  Stock options issued for services . . . . . .         150,000 
  Series B preferred stock and common
    stock warrants issued for cash. . . . . . .      10,960,169 
  Dividends accrued on preferred stock. . . . .              -- 
  Net Loss. . . . . . . . . . . . . . . . . . .      (4,089,714)
                                                 ---------------
Balance at December 31, 1996. . . . . . . . . .      10,197,104 
  Stock options exercised . . . . . . . . . . .         128,767 
  Warrants exercised. . . . . . . . . . . . . .         308,866 
  Expiration of warrants. . . . . . . . . . . .              -- 
  Redemption of  Series A preferred stock . . .              -- 
  Conversion of Series B preferred stock. . . .              -- 
  Common stock and cash issued as dividends
    on Series A preferred stock . . . . . . . .         (65,048)
  Common stock sold in public offering. . . . .      16,022,766 
  Stock options issued for services . . . . . .          12,834 
  Series B preferred stock issued as
    dividends on Series B preferred stock . . .         (18,416)
  Dividends accrued on Series B preferred stock        (188,635)
  Net Loss. . . . . . . . . . . . . . . . . . .      (6,138,635)
                                                 ---------------
Balance at December 31, 1997. . . . . . . . . .      20,259,603 
  Stock options exercised . . . . . . . . . . .          43,429 
  Warrants exercised. . . . . . . . . . . . . .              (6)
  Expiration of warrants. . . . . . . . . . . .              -- 
  Warrants issued to purchase common stock. . .              -- 
  Conversion of Series B preferred stock. . . .              -- 
  Common stock issued for cash, and
    conversion of license fee . . . . . . . . .       2,000,305 
  Stock options issued for services . . . . . .          21,819 
  Dividends paid on Series B preferred stock. .        (542,998)
  Dividends accrued on Series B preferred stock        (180,200)
  Net Loss. . . . . . . . . . . . . . . . . . .      (7,341,314)
                                                 ---------------
Balance at December 31, 1998. . . . . . . . . .  $   14,260,638 
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                         LIFECELL CORPORATION
                                       STATEMENTS OF CASH FLOWS

                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                            -----------------------------------------
                                                                1996          1997          1998
                                                            ------------  ------------  -------------
<S>                                                         <C>           <C>           <C>
Cash Flows from Operating Activities
  Net Loss . . . . . . . . . . . . . . . . . . . . . . . .  $(4,089,714)  $(6,138,635)  $ (7,341,314)
  Adjustments to reconcile net loss to net cash used in
    operating activities -
    Depreciation and amortization. . . . . . . . . . . . .      229,237       225,092        495,523 
    Stock and warrant compensation expense . . . . . . . .      169,906        12,834         21,819 
  Change in assets and liabilities -
    Increase in accounts and other receivables . . . . . .     (185,330)     (659,065)      (288,016)
    Increase in inventories. . . . . . . . . . . . . . . .     (488,319)      (96,576)      (812,625)
    Increase in prepayments and other. . . . . . . . . . .         (942)      (45,446)      (109,344)
    Increase in accounts payable and accrued
      liabilities. . . . . . . . . . . . . . . . . . . . .      450,988     1,282,357        253,384 
    (Decrease) in deferred revenues. . . . . . . . . . . .      (40,210)      (79,273)       (59,519)
                                                            ------------  ------------  -------------
Total adjustments. . . . . . . . . . . . . . . . . . . . .      135,330       639,923       (498,778)
                                                            ------------  ------------  -------------
      Net cash used in operating activities. . . . . . . .   (3,954,384)   (5,498,712)    (7,840,092)
                                                            ------------  ------------  -------------
Cash Flows from Investing Activities
  Capital expenditures . . . . . . . . . . . . . . . . . .     (278,673)     (597,685)      (831,982)
  Intangible assets. . . . . . . . . . . . . . . . . . . .      (57,032)      (59,129)       (83,524)
  Purchases of short-term investments. . . . . . . . . . .           --            --     (4,000,745)
                                                            ------------  ------------  -------------
      Net cash used in investing activities. . . . . . . .     (335,705)     (656,814)    (4,916,251)
                                                            ------------  ------------  -------------
Cash Flows from Financing Activities
  Proceeds from issuance of stock and exercise of warrants   12,029,105    16,460,399        543,730 
  Proceeds from issuance of notes payable. . . . . . . . .      370,000            --             -- 
  Dividends paid . . . . . . . . . . . . . . . . . . . . .       (6,098)     (272,097)      (542,998)
  Payments of notes payable. . . . . . . . . . . . . . . .     (370,000)           --             -- 
                                                            ------------  ------------  -------------
      Net cash provided by financing activities. . . . . .   12,023,007    16,188,302            732 
                                                            ------------  ------------  -------------
Net Increase (Decrease) in Cash and Cash Equivalents . . .    7,732,918    10,032,776    (12,755,611)
Cash and Cash Equivalents at Beginning of Year . . . . . .    3,015,332    10,748,250     20,781,026 
                                                            ------------  ------------  -------------
Cash and Cash Equivalents at End of Year . . . . . . . . .  $10,748,250   $20,781,026   $  8,025,415 

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the year for interest . . . . . . . . .  $    13,766   $     4,583   $      1,769 

Supplemental Schedule of Noncash Financing Activities:
  Common Stock issued as payment of dividends. . . . . . .  $   415,920   $   195,000   $         -- 

  Series B Preferred stock issued as payment of dividends.  $        --   $   797,200   $         -- 

  Common Stock issued in exchange for deferred credit. . .  $        --   $        --   $  1,500,000 
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>
                              LIFECELL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1998

1.     ORGANIZATION:

     LifeCell Corporation, a Delaware corporation ("LifeCell" or "the Company"),
is  a bioengineering company engaged in the development and commercialization of
tissue  regeneration  and  cell  preservation  products.  The  Company  was
incorporated  on January 6, 1992 for the purpose of merging with its predecessor
entity,  which was formed in 1986.  LifeCell began commercial sales of its first
product,  AlloDerm  acellular  dermal  graft, during 1994.  The future operating
results of the Company will be principally dependent on the market acceptance of
its  current  product,  development of and market acceptance of future products,
competition  from  other  products  or technologies, protection of the Company's
proprietary  technology,  and access to funding as required.  Accordingly, there
can  be  no  assurance  of  the  Company's  future  success.  See "Business-Risk
Factors"  and  "Management's  Discussion and Analysis of Financial Condition and
Results  of  Operations"  elsewhere  herein.

2.     ACCOUNTING  POLICIES:

     Cash  and  Cash  Equivalents  and  Short-term  Investments

     The  Company  considers  all  highly  liquid  investments purchased with an
original  maturity  of three months or less to be cash equivalents.  Investments
with  longer  maturities  that  the  Company  intends  to  hold  to maturity are
classified as either current or non-current assets based on the maturity date of
the  security.  As  of  December 31, 1997 and 1998, the Company held $20,427,627
and  $11,734,522,  respectively,  of  interest-bearing money market accounts and
A1/P1  commercial  paper which were classified as "held to maturity" securities.
The  carrying  basis  of these investments approximated fair value and amortized
cost.

     Inventories

     Inventories  are  stated  at  the  lower  of  cost  or  market,  cost being
determined  on  a  first-in,  first-out  (FIFO)  basis.

     Furniture  and  Equipment

     Furniture  and  equipment are stated at cost.  Maintenance and repairs that
do  not  improve  or  extend  the  life  of the assets are expensed as incurred.
Expenditures  for renewals and improvements are capitalized.  The cost of assets
retired  and  the related accumulated depreciation are removed from the accounts
and  any gain or loss is included in the results of operations.  Depreciation of
furniture  and  equipment  is  provided on the straight-line method based on the
estimated  useful lives of the assets of five years.  Leasehold improvements are
depreciated  over  the  life  of  the  lease.

     Intangible  Assets

     Intangible  assets  primarily consist of the costs of obtaining patents for
the proprietary technology owned by or licensed to the Company.  These costs are
being  amortized  over  the  lesser  of  the  legal  (generally 17 years) or the
estimated economic life of the patent.  Accumulated amortization at December 31,
1997  and  1998,  amounted  to  $66,673  and  $18,660,  respectively.

     Allowance  for  Doubtful  Accounts

     The  Company  provides an allowance based upon the estimated collectibility
of  its  accounts receivable.  The balance of the allowance at December 31, 1997
and  1998,  was  $83,690  and  $5,915,  respectively.

     Revenue  Recognition

     Product sales are recognized as revenue when the product is shipped to fill
customer  orders.    Revenues  from  research funded by others are recognized as
the work is performed unless the Company has continuing performance obligations,
in  which  case revenue is recognized upon the satisfaction of such obligations.
Revenue  received,  but  not  yet  earned,  is  classified  as deferred revenue.

                                      F-7
<PAGE>
     Research  and  Development  Expense

     Research  and  development  costs  are expensed when incurred.  The Company
performs  research  funded by others, as well as its own independent proprietary
research,  development  and  clinical  testing  of  its  products.

     Sales  and  Marketing  Expense

     Sales  and  marketing  costs include salaries, commissions, advertising and
promotional  costs  related  to the sale of the Company's products.  Advertising
costs  are  expensed as incurred.  The cost of promotional activities, including
free  goods,  product  samples  and  promotional  allowances,  are  expensed  as
incurred.

     Loss  Per  Common  Share

     Loss  per  Common  share  has been computed by dividing net loss, which has
been  increased  for  periodic  accretion  and  imputed  and stated dividends on
outstanding  Preferred  Stock  and  the  discount  offered  on warrant exercises
induced  during  1996,  by the weighted average number of shares of Common Stock
outstanding  during  each  period.  In  all  applicable  years, all Common Stock
equivalents,  including  the Series A Preferred Stock and the Series B Preferred
Stock, were antidilutive and, accordingly, were not included in the computation.

     During  1997,  the  Company  adopted  Statement  of  Financial  Accounting
Standards  No.  128,  "Earnings  Per  Share,"  and  all  prior periods have been
retroactively  adjusted  to  conform  to  this statement.  The implementation of
Statement  128 had no effect on the Company's presentation of earnings per share
due to the antidilutive nature of all of the Company's Common Stock equivalents.

     Basic  loss  per  Common  share  was  calculated  as  follows:

<TABLE>
<CAPTION>
                                                               1996          1997          1998
                                                           ------------  ------------  ------------
<S>                                                        <C>           <C>           <C>
  Net Loss. . . . . . . . . . . . . . . . . . . . . . . .  $(4,089,714)  $(6,138,635)  $(7,341,314)
  Less: Preferred dividends, accretion of preferred stock
    and warrant exercises . . . . . . . . . . . . . . . .   (1,071,035)     (961,911)     (723,198)
                                                           ------------  ------------  ------------
  Net Loss available to common shareholders-basic . . . .  $(5,160,749)  $(7,100,546)  $(8,064,512)
                                                           ============  ============  ============
  Weighted average shares outstanding-basic . . . . . . .    4,542,519     6,820,122    11,228,912 
                                                           ============  ============  ============
  Loss per Common share-basic . . . . . . . . . . . . . .  $     (1.14)  $     (1.04)  $     (0.72)
                                                           ============  ============  ============
</TABLE>

     Use  of  Estimates

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of assets and liabilities and
disclosure  of  contingent  assets  and liabilities at the date of the financial
statements  and  the  reported  amounts  of  revenues  and  expenses  during the
reporting  period.  Actual  results  could  differ  from  those  estimates.

3.     INVENTORIES:

     Inventories  consist  of  products  in various stages produced for sale and
includes  the  costs  of  raw  materials,  labor,  and  overhead.  A  summary of
inventories  is  as  follows:

<TABLE>
<CAPTION>
                                    1997       1998
                                  --------  ----------
<S>                               <C>       <C>
Raw materials used in production  $428,406  $  723,921
Work-in-process. . . . . . . . .   228,071     423,839
Finished goods . . . . . . . . .   279,921     601,263
                                  --------  ----------
  Total inventories. . . . . . .  $936,398  $1,749,023
                                  ========  ==========
</TABLE>

                                      F-8
<PAGE>
4.  FURNITURE  AND  EQUIPMENT:

          A  summary  of  furniture  and  equipment  is  as  follows:

<TABLE>
<CAPTION>
                                               1997          1998
                                           ------------  ------------
<S>                                        <C>           <C>   
Office furniture and fixtures . . . . . .  $   120,548   $   709,412 
Machinery and equipment . . . . . . . . .    1,748,956     1,853,164 
Leasehold improvements. . . . . . . . . .      334,282       465,924 
                                           ------------  ------------
                                             2,203,786     3,028,500 
Accumulated depreciation and amortization   (1,339,728)   (1,640,161)
                                           ------------  ------------
  Net furniture and equipment . . . . . .  $   864,058   $ 1,388,339 
                                           ============  ============
</TABLE>

5.  ACCRUED  LIABILITIES:

       Accrued  liabilities  consist  of  the  following:

<TABLE>
<CAPTION>
                                              1997        1998
                                           ----------  ----------
<S>                                        <C>         <C>  
Employee compensation and benefits. . . .  $  399,498  $  403,633
Severance expense . . . . . . . . . . . .          --     608,789
Operating expenses and other. . . . . . .     468,670   1,052,701
Litigation costs. . . . . . . . . . . . .     374,635          --
Public offering costs . . . . . . . . . .     313,280          --
                                           ----------  ----------
  Total accrued liabilities . . . . . . .  $1,556,083  $2,065,123
                                           ==========  ==========
</TABLE>

6.     CAPITAL  STOCK:

     Series  A  Preferred  Stock

     During  November  1994,  the  Company  issued  264,500  shares  of Series A
Convertible  Preferred  Stock (Series A Preferred Stock) and warrants to acquire
264,500  shares of Common Stock for gross proceeds of approximately $5.3 million
in  a private placement.  Each share of Series A Preferred Stock was convertible
at  any  time  at  the  option  of  the holder into 6.69 shares of Common Stock.
During 1996, 4,500 shares of Series A Preferred Stock were converted into 30,104
shares  of  Common  Stock.

     The  Series  A  Preferred  Stock  bore  dividends at annual rates of $1.20,
$1.60,  and  $2.00  per  share  for  each  of the first, second and third years,
respectively,  after  the  date of original issuance.  Dividends were payable in
cash, Common Stock, or any combination of cash and Common Stock at the Company's
discretion.  The Series A Preferred Stock had no ordinary voting rights.  During
1996,  the  Company paid 415,920 in dividends on the Series A Preferred Stock by
issuing  121,054 shares of Common Stock.  During 1997, the Company paid $195,000
in dividends by issuing 33,305 shares of Common Stock and paying a cash dividend
of  $65,000.

     The  preferred  stock  was  automatically  convertible into Common Stock on
November 9, 1997, and could be redeemed sooner by the Company if, after November
9,  1995,  the  closing  bid  price  of  the  Company's Common Stock averaged or
exceeded  $5.17 per share for 20 consecutive days.  Pursuant to such provisions,
during  February  1997,  the  Company  called  for conversion of all outstanding
shares  of  Series  A  Preferred  Stock.  During  March  1997 the Company issued
1,739,128  shares  of  Common  Stock  to  redeem  the  Series A Preferred Stock.

     Series  B  Preferred  Stock

     During  November  1996,  the  Company  issued  124,157  shares  of Series B
Preferred  Stock  ("Series B Preferred Stock") and warrants to acquire 2,803,530
shares  of  Common  Stock for gross proceeds of approximately $12.4 million in a
private  placement.  Each  share  of  Series  B  Preferred  Stock  is  initially
convertible  at  any  time  at the option of the holder into approximately 32.26
shares  of Common Stock (3,841,650 shares of Common Stock at December 31, 1998),
subject  to  adjustment  for  dilutive  issuances  of  securities.  The Series B
Preferred  Stock  has a liquidation preference of $100 per share, or $11,908,400
as of December 31, 1998, and shares ratably in any residual assets after payment
of  such  liquidation  preference.

                                      F-9
<PAGE>
     The Series B Preferred Stock bears cumulative dividends, payable quarterly,
for  five years at the greater of the annual rate of $6.00 per share or the rate
of  any dividends paid on other series of stock (effectively $10 per share until
the Series A Preferred Stock was redeemed in March 1997).  Dividends may be paid
in  cash,  in  additional shares of Series B Preferred Stock based on the stated
value of $100 per share, or any combination of cash and Series B Preferred Stock
at  the  Company's  option.  On all matters for which the Company's stockholders
are  entitled  to  vote, each share of Series B Preferred Stock will entitle the
holder to one vote for each share of Common Stock into which the share of Series
B  Preferred  Stock  is then convertible.  Additionally, the holders of Series B
Preferred  Stock  have  the  right  to elect up to two directors to the Board of
Directors  of  the  Company.  While  the preferred shares are outstanding or any
dividends  are  owned thereon, the Company may not declare or pay cash dividends
on its Common Stock.  During 1998, the Company paid cash dividends on the Series
B  Preferred  Stock  of $542,998.  The Company has accrued dividends at December
31,  1998,  of  $180,200.

     The  preferred  stock  will be automatically converted into Common Stock if
(i)  the  closing  price of the Company's Common Stock averages or exceeds $9.30
per  share  for  30  consecutive  trading  days.

     Common  Stock

     In  December  1997,  the  Company  issued  4,000,000 shares of Common Stock
in  a  public  offering  at  a  price  of  $4.50 per share.  The proceeds of the
offering  were  approximately  $16.7  million before deducting offering costs of
approximately  $717,000.

     During  1996  and 1997, respectively, the Company issued 121,054 shares and
33,305  shares  of  Common  Stock  as  payment  of accrued dividends on Series A
Preferred Stock.  Additionally, during 1996, the Company induced the exercise of
warrants  by  temporarily  lowering exercise prices and issued 339,066 shares of
Common  Stock  at  a  weighted  average  price of $3.10 upon exercise of certain
warrants.

     During 1997, the Company issued 74,786 shares of Common Stock upon exercise
of  certain  warrants  and 2,027 shares of Common Stock upon the net exercise of
warrants  to  acquire  15,000  shares  of  Common  Stock.

     During  1998,  the Company issued 4,965 shares of Common Stock upon the net
exercise  of  warrants  to  acquire  11,290  shares of Common Stock, the Company
issued 65,600 shares of Common Stock to an unaffiliated party in connection with
the  settlement  of  prior  litigation  and the Company issued 310,771 shares of
Common  Stock as a result of the mutually agreed upon termination of the license
and  development  agreement  relating  to  heart  valves.

     In  1992,  the  Company  adopted a Restricted Stock Plan and issued 241,372
shares  of Common Stock to employees, a director and a consultant of the Company
for  $.001  per  share.  The  restricted  stock  vested over a four year period.
Deferred  compensation  expense  totaling $965,000 was expensed over the vesting
period  of  the  grants.  The  non-cash charge related to these stock grants was
$20,000  for  1996.

     Options

     The  Company's Amended and Restated 1992 Stock Option Plan, as amended
in  1998  (the "1992 Plan"), provides for the grant of options to purchase up to
2,500,000  shares of Common Stock.  Granted options generally become exercisable
over  a four year period, 25 percent per year beginning on the first anniversary
of  the date of grant.  To the extent not exercised, options generally expire on
the  tenth  anniversary  of the date of grant, except for employees who own more
than  10  percent  of  all  the voting shares of the Company, in which event the
expiration  date  is  the  fifth  anniversary of the date of grant.  All options
granted  under  the  plan have exercise prices equal to the fair market value at
the  dates  of  grant.

     The  Second  Amended  and  Restated 1993 Non-Employee Director Stock Option
Plan,  as  amended  ("Director  Plan")  was adopted in 1993.  A total of 750,000
shares  of  Common  Stock are available for grant under the Director Plan.  Upon
amendment  of  the  Director  Plan in 1996, options to purchase 50,000 shares of
Common  Stock  were  granted  to  each then-current non-employee director of the
Company at an exercise price equal to the fair market value of a share of Common
Stock  on  the  date of the Director Plan.  Options to purchase 25,000 shares of
Common  Stock  will  be  granted to newly elected directors at an exercise price
equal to the fair market value of a share of Common Stock on such election date.
The  provisions of the Director Plan provide for an annual grant of an option to
purchase  10,000  shares of Common Stock to each non-employee director.  Options
under  the  Director Plan generally vest one year after date of grant and expire
after  10  years.

                                      F-10
<PAGE>
     A  summary  of  stock  option  activity  is  as  follows:

<TABLE>
<CAPTION>
                                    1992 Stock Option Plan        Director Plan
                                   ------------------------  ------------------------
                                                Weighted                   Weighted
                                              Avg. Exercise             Avg. Exercise
                                    Option       Price($)     Options      Price($)
                                  ----------  -------------  ---------  -------------
<S>                               <C>         <C>            <C>        <C>    
Balance at December 31, 1995 . .    454,195            2.63    60,000           8.29
Granted. . . . . . . . . . . . .    558,000            3.80   240,000           3.07
Exercised. . . . . . . . . . . .     (1,062)           2.74    (5,000)          2.88
Forfeited. . . . . . . . . . . .    (42,313)           3.18        --             --
Reissue                                  --              --  (220,000)          4.14
                                  ----------                 ---------
Balance at December 31, 1996 . .    968,820            3.28    75,000           4.11
Granted. . . . . . . . . . . . .    131,050            5.21    70,000           5.10
Exercised. . . . . . . . . . . .    (47,987)           2.68        --             --
Forfeited. . . . . . . . . . . .    (14,563)           3.75        --             --
                                  ----------                 ---------
Balance at December 31, 1997 . .  1,037,320            3.54   145,000           4.59
Granted. . . . . . . . . . . . .    936,700            5.04    30,000           6.69
Exercised. . . . . . . . . . . .    (12,550)           3.49        --             --
Forfeited. . . . . . . . . . . .   (141,767)           5.65        --             --
                                  ----------                 ---------
Balance at December 31, 1998 . .  1,819,703            4.15   175,000           4.95
                                  ==========                 =========

Exercisable at December 31, 1996    255,429            2.61    15,000           8.29
Exercisable at December 31, 1997    484,427            3.02   100,000           4.05
Exercisable at December 31, 1998    701,528            3.21   145,000           4.59
</TABLE>

      At  December  31, 1998, 617,299   and   570,000 options were available for
future  grant  under  the  1992  Plan  and the Director Plan, respectively.  The
exercise prices of options outstanding under the 1992 Plan and the Director Plan
at  December  31,  1998,  range  from  $0.07  to  $6.75  and  $2.75  to  $11.00,
respectively.  The  weighted  average contractual life of options outstanding at
December  31,  1998,  was  8.25  years  for  the 1992 Plan and 7.7 years for the
Director  Plan.

     In  addition  to  the amounts set forth in the table above, during 1996 the
Company  granted options to purchase 220,000 shares of Common Stock to directors
who  resigned  upon  the  closing of the sale of the Series B Preferred Stock in
exchange  for options previously granted under the Director Plan.  These options
have  provisions  identical to the options previously granted under the Director
Plan,  including  exercise  prices  and  vesting  periods.  The weighted average
exercise price of the options granted was $4.14.  The weighted average remaining
contractual  life  of  the  grants  was  6.8 years as of December 31, 1998.  The
Company expensed $150,000, which was the difference between the market price and
the  option  price  on  the  date  of  the  grant,  during  1996 related to this
reissuance.

     The  Company accounts for its employee stock-based compensation plans under
APB  No. 25 and its related interpretations.  Accordingly, deferred compensation
expense is recorded for stock options based on the excess of the market value of
the  common  stock  on  the  date  the  options  were granted over the aggregate
exercise price of the options.  This deferred compensation is amortized over the
vesting  period  of each option.  As the exercise price of options granted under
the 1992 Plan and the Director Plan has been equal to or greater than the market
price  of  the  Company's  stock  on  the date of grant, no compensation expense
related to these plans has been recorded.  Had compensation expense for its 1992
Plan  and  Director  Plan  been  determined  consistent  with  SFAS No. 123, the
Company's net loss and loss per share would have been increased to the following
pro  forma  amounts:

<TABLE>
<CAPTION>
                                           1996          1997           1998   
                                       ------------  ------------  ------------
<S>                                    <C>           <C>           <C>    
Net Loss:                                                                      
As reported. . . . . . . . . . . . .   $(4,089,714)  $(6,138,635)  $(7,341,314)
Pro forma. . . . . . . . . . . . . .   $(5,372,049)  $(7,058,879)  $(9,103,482)
Loss Per Share (Basic and Diluted):.                                           
As reported. . . . . . . . . . . . .   $     (1.14)  $     (1.04)  $     (0.72)
Pro forma. . . . . . . . . . . . . .   $     (1.42)  $     (1.18)  $     (0.81)
</TABLE>

     Because  the  Statement  123  method  of accounting has not been applied to
options  granted  prior to January 1, 1995, the resulting pro forma compensation
cost  may  not  be  representative  of  that  to  be  expected  in future years.

                                      F-11
<PAGE>
     Under  the  provisions  of SFAS No. 123, the weighted average fair value of
options  granted  in 1996, 1997, and 1998 was $3.21, $4.24, and $3.99 per share,
respectively,  under  the 1992 Plan.  The weighted average fair value of options
granted  in  1996,  1997,  and  1998  was  $2.40,  $4.08,  and  $5.33 per share,
respectively,  under  the Director Plan.  The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model with
the  following  weighted  average  assumptions used for grants in 1996, 1997 and
1998,  respectively: a weighted average risk-free interest rate of approximately
6  percent for all years; no expected dividend yield during the expected life of
the  option;  expected  lives  of 5 years for each grant and expected volatility
between  97  and  113  percent.

     The  stock  options  issued  to  retiring  directors in 1996 had a weighted
average  fair  value of $2.57.  The fair values of such options are estimated on
the  date  of  grant  using  Black-Scholes option price model with the following
assumptions  used:  a  weighted  average  risk-free  interest rate of 6 percent,
expected  lives  of  3  to  5  years,  expected  volatility of 99 percent and no
expected  dividends.

     Warrants

     As of December 31, 1998, warrants to acquire a total of 3,182,188 shares of
Common  Stock  were  outstanding  as  set  forth  below.

     During  1996,  the  Company  issued warrants to acquire 2,803,530 shares of
Common  Stock  in conjunction with the sale of the Series B Preferred Stock (the
"1996  Warrants").  The  1996  Warrants  are exercisable at an exercise price of
$4.13  per  share.  The  warrants expire on the fifth anniversary of the date of
grant,  are  callable if the average closing price of the Company's Common Stock
for  30  trading days equals or exceeds three times the then-exercise price, and
allow  cashless  exercise.  The  warrants also have provisions for adjustment of
the  exercise  price  and  number of shares for below-exercise price issuance of
securities.  During  1998, warrants to acquire 4,965 shares of Common Stock were
exercised.  As  of  December  31,  1998,  the 1996 warrants to acquire 2,717,454
shares  of  Common  Stock  were  outstanding.

     Additionally,  the  Company  issued  warrants  to acquire 354,734 shares of
Common  Stock  to  the  placement agent for the Series B Preferred Stock ("Agent
Warrant").  The Agent Warrants are exercisable at an exercise price of $4.50 per
share.  The  warrants  expire  on the fifth anniversary of the date of grant and
allows cashless exercise.  The warrant also has provisions for adjustment of the
exercise  price  and  number  of  shares  for  below-exercise  price issuance of
securities.

     In  connection  with  the sale of the Series A Preferred Stock, the Company
issued  warrants to acquire 264,500 shares of Common Stock at exercise prices of
$3.26  per  share  during  the  first year and $3.54 per share during the second
year.  Additionally, the placement agent was issued a warrant to purchase 90,816
shares  of  Common  Stock  at $6.00 per share.  A total of 339,066 warrants were
exercised  during  1996  through inducement of exercise by lowering the exercise
price  to  $3.10 per share.  The difference between the market price on the date
of  inducement  and the induced exercise price has been deducted from net income
to  determine  loss  per  Common  share.  A  total  of  20,000  warrants expired
unexercised.

     As  of  December 31, 1998, additional warrants to acquire 110,000 shares of
Common  Stock were outstanding with exercise prices ranging from $2.50 to $8.00.
Such  warrants  expire during periods ranging from April 5, 2000, to February 1,
2001.

7.     EMPLOYEE  BENEFIT  PLANS:

     The  Company  maintains  a  retirement savings plan as described in Section
401(k)  of  the  Internal Revenue Code of 1986, as amended.  The Company may, at
its  discretion,  contribute amounts not to exceed each employee's contribution.
During  January  1997,  February 1998, and February 1999, the Company made total
contributions of $8,187, $13,088, and $21,387 to the plan for a partial matching
of  employee  contributions  during  1996,  1997,  and  1998,  respectively.

     During  1996,  the  Company  established an Employee Stock Purchase Plan to
allow  for  the  purchase of the Company's Common Stock on the open market using
employee  and any employer matching contributions.  During 1996, 1997, and 1998,
the Company contributed $1,328, $7,631, and $13,661, to this plan, respectively.

                                      F-12
<PAGE>
8.  FEDERAL  INCOME  TAXES:

     The  Company  has  not made any income tax payments since inception.  As of
December  31,  1998, the Company has a net operating loss (NOL) carryforward for
federal  income  tax  purposes  of  approximately  $40.5 million, subject to the
limitations  described  below,  expiring  as  follows:

<TABLE>
<CAPTION>
Year Expires
------------
<S>                                     <C>
  2001 . . . . . . . . . . . . . . . .  $   500,000
  2002 . . . . . . . . . . . . . . . .    1,500,000
  2003 . . . . . . . . . . . . . . . .    2,800,000
  2004 . . . . . . . . . . . . . . . .    2,200,000
  2005 . . . . . . . . . . . . . . . .    1,700,000
  2006 . . . . . . . . . . . . . . . .    1,400,000
  2007 . . . . . . . . . . . . . . . .    2,400,000
  2008 . . . . . . . . . . . . . . . .    3,000,000
  2009 . . . . . . . . . . . . . . . .    2,500,000
  2010 . . . . . . . . . . . . . . . .    4,000,000
  2011 . . . . . . . . . . . . . . . .    4,000,000
  2012 . . . . . . . . . . . . . . . .    5,700,000
  2013 . . . . . . . . . . . . . . . .    8,800,000
                                        -----------
                                        $40,500,000
                                        -----------
</TABLE>

     Additionally,  the  Company  has  approximately  $395,000  of  research and
development  tax  credit  carryforwards  which  will  expire  in varying amounts
commencing in 2001.  Federal tax laws provide for a limitation on the use of NOL
and  tax  credit  carryforwards  following  certain ownership changes that could
limit  LifeCell's ability to use its NOL and tax credit carryforwards.  The sale
of Common Stock in the public offering in December 1997 resulted in an ownership
change  for  federal income tax purposes.  The Company estimates that the amount
of  NOL  carryforwards  and  the  credits  available to offset taxable income at
December  31,  1998,  is  approximately  $14.0  million  on  a cumulative basis.
Accordingly,  if  LifeCell generates taxable income in any year in excess of its
then  cumulative  limitation,  the Company may be required to pay federal income
taxes  even  though  it  has  unexpired  NOL  carryforwards.

     For  financial reporting purposes, a valuation allowance of $14,251,000 has
been  recorded  as  of December 31, 1998, to fully offset the deferred tax asset
related  to  these  carryforwards.  The principal components of the deferred tax
asset  as of December 31, 1997 and 1998, assuming a 34% federal tax rate, are as
follows:

<TABLE>
<CAPTION>
                                                   1997          1998
                                              -------------  -------------
<S>                                           <C>            <C>   
Temporary differences:
   Deferred revenue. . . . . . . . . . . . .  $    530,000   $         -- 
   Restricted stock compensation . . . . . .            --             -- 
   Uniform capitalization of inventory costs        45,000         70,000 
   Other items . . . . . . . . . . . . . . .       (58,000)        16,000 
                                              -------------  -------------
   Total temporary differences . . . . . . .       517,000         86,000 
   Federal net operating loss carryforwards.    11,309,000     14,165,000 
                                              -------------  -------------
Total deferred tax assets. . . . . . . . . .    11,826,000     14,251,000 
   Less valuation allowance. . . . . . . . .   (11,826,000)   (14,251,000)
                                              -------------  -------------
Net deferred tax asset . . . . . . . . . . .  $         --   $         -- 
                                              -------------  -------------
</TABLE>

     The  net increase in the deferred tax valuation allowance for 1997 and 1998
was $1,929,000, and $2,425,000, respectively.  Other than the net operating loss
and  tax  credit  carryforwards,  there is no significant difference between the
statutory  federal  income  tax rate and the Company's effective tax rate during
1996,  1997  and  1998.

9.  COLLABORATIONS  AND  CORPORATE  ALLIANCES:

     Medtronic  Collaboration

     During  March  1994,  the  Company  entered  into a license and Development
agreement  with  Medtronic, Inc.  ("Medtronic") to develop jointly the Company's
heart  valve products.  Pursuant to the agreement, Medtronic paid the Company an
initial $1.5 million license fee.  Medtronic funded in part the cost of research
and  development  under a mutually agreed upon budget, had theexclusive right to
market  any  resulting  commercial products and must pay theCompany royalties on
sales of products covered by the agreement.  LifeCell's research and development
funding  by  Medtronic  in  1996,  1997,  and  1998  were $546,460, $217,854 and
$59,519.  Royalties  payable  to the Company under the agreement were limited to
an  aggregate maximum of $25.0 million.  In December 1998 LifeCell and Medtronic
mutually agreed to terminate their early stage license and development agreement
related  to  heart valves to focus onnear-term opportunities.  LifeCell regained
all  rights  to  its cardiovascular technology, which may be applied to its more
advanced  program  in  vascular  grafts  for  bypass procedures.  As a result of
terminating  the  agreement,  the  $1.5  million  up-front licensing fee paid by
Medtronic  to LifeCell in 1994 and recorded as a deferred credit, converted into
310,771  shares  ofnewly issued LifeCell Common Stock, at the price of $4.83 per
share  whichwas  determined  by  the  agreement.

                                      F-13
<PAGE>
     Other  Product  Sales  Arrangements

     The  Company  has  negotiated  other  distribution  or  sales Collaboration
arrangements  with  various  parties  with  exclusive  regional or International
territories  under  each  agreement.  The  agreements generally provide that the
distributor  must  meet  certain  performance  measures  or the agreement may be
terminated  by  the  Company.

10.  COMMITMENTS  AND  CONTINGENCIES:

     Litigation

     The Company is subject to numerous risks and uncertainties and from time to
time  may be subject to various claims in the ordinary course of its operations.
The Company maintains insurance coverage for events and in amounts that it deems
appropriate.  There  can  be no assurance that the level of insurance maintained
will  be sufficient to cover any claims incurred by the Company or that the type
of  claims  will  be  covered  by  the  terms  of  insurance  coverage.

     During  April  1998,  the  Company  entered  into an agreement settling its
pending  litigation  with  Integra  LifeSciences  Corporation  and its affiliate
("Integra")  and  the  Massachusetts  Institute  of  Technology ("MIT").  During
November  1997,  Integra  and  MIT  had  alleged  that the Company infringed two
patents  licensed  by  MIT  to Integra (the "Integra Patents").  During December
1997, the Company filed a separate lawsuit against Integra and MIT alleging that
they  tortiously  interfered  with certain of LifeCell's business relationships,
including  relationships  with  investors  and potential investors in LifeCell's
recent  public  offering.  The  lawsuit  also  alleged  anticompetitive acts and
business  disparagement.  Under  the  terms of the settlement agreement, Integra
and  MIT  agreed  not  to  assert  the Integra Patents against current or future
products  produced  using LifeCell's current technology.  LifeCell also obtained
the  right  to  develop  and  commercialize  future  products  using  Integra's
technology  through  a  license  to certain of Integra's patents.  In June 1998,
LifeCell  received  proceeds  of  $500,000 from the sale of the Company's Common
Stock  to  Integra  in  connection  with the settlement of this litigation.  The
selling  price,  as determined by the settlement agreement, was $7.62 per share.

     External  Funding  for  Research

     Certain  of  the  Company's  research  programs  have  been funded by Small
Business  Innovation  Research (SBIR) grants and other direct federal government
funding  contracts.  The  grants and contracts generally obligate the company to
perform  specified  research  activities  in  return  for  such funding, and the
utilization  of  funds  under  the grants is subject to audit by the appropriate
governmental  agencies.

     License  Agreements

     The  Company  has  entered  into several license agreements, both exclusive
and nonexclusive  in  conjunction with its business.  The Company is required to
pay  royalties  on net sales of products encompassing the licensed technologies.
For the  years  ended  December  31,  1996,  1997,  and 1998, $18,630, $141,539,
and $10,248  of  expenses  were  incurred  under these agreements, respectively.

     Leases

     The  Company  leases  approximately  27,000  square  feet  for  office  and
laboratory  space  and  has  various other operating leases.  The future minimum
lease  payments  under  noncancelable  lease  terms  in excess of one year as of
December  31,  1998,  were  as  follows:

<TABLE>
<CAPTION>
<S>                                                           <C>
1999. . . . . . . . . . . . . . . . . . . . . . . . . .   371,194
2000. . . . . . . . . . . . . . . . . . . . . . . . . .   361,008
2001. . . . . . . . . . . . . . . . . . . . . . . . . .    37,636
2002. . . . . . . . . . . . . . . . . . . . . . . . . .       -- 
                                                          -------
   Total. . . . . . . . . . . . . . . . . . . . . . . .  $769,838
                                                         ========
</TABLE>

                                      F-14
<PAGE>
     Employment  and  Severance  Agreements

     In 1998, the Company entered into an agreement related to the employment of
its new  President  and  Chief  Executive Officer, which provides for a one year
severance  agreement  of one year of the employee's base salary.During 1998, the
Company  entered  into various severance arrangements related to the termination
of  several  executive officers of the Company.  Severance expense in the amount
of  approximately  $680,000  was recognized related to these agreements in 1998.

11.  SEGMENT  AND  MAJOR  CUSTOMER  DATA

     THE  COMPANY  OPERATES  PRINCIPALLY  IN  ONE BUSINESS SEGMENT - THE SALE OF
ALLODERM.  PRODUCT  SALES  BY  GEOGRAPHIC  AREA  ARE  SUMMARIZED  AS  FOLLOWS:

<TABLE>
<CAPTION>
                                                   1996        1997        1998
                                                ----------  ----------  --------- 
<S>                                             <C>         <C>         <C>   
United States. . . . . . . . . . . . . . . . .  $1,967,406  $4,401,351  $6,575,206
Other foreign countries. . . . . . . . . . . .      44,799     503,620     669,896
                                                ----------  ----------  ----------
                 TOTAL PRODUCT SALES . . . . .  $2,012,205  $4,904,971  $7,245,102
                                                ==========  ==========  ==========
</TABLE>

     During  1998,  two  customers  comprised  22.3%  and 11.0% of total product
sales.  During  1997,  two  customers comprised 18.8% and 13.8% of total product
sales.  During  1996,  one  customer  comprised  19.9%  of  total product sales.

12.     TRANSACTIONS  WITH  RELATED  PARTIES:

     As  of December 31, 1998, the Company had notes receivable totaling $95,060
from  participants,  two of whom are directors and officers of the Company, in a
previous  restricted  stock  plan.  Such notes represent loans of federal income
tax  amounts  payable  by  the individuals as a result of grants under the plan.

13.     QUARTERLY  FINANCIAL  DATA  (UNAUDITED):

     The following table presents summary unaudited financial data for the years
ended  December  31,  1997 and 1998.  The Company believes that this information
reflects  all adjustments, consisting of only normal recurring items, considered
necessary  for  a  fair  presentation  of  the  quarterly  financial information
presented.  The  operating  results for any quarterly period are not necessarily
indicative  of  the  results  that  may  be  expected  for  future  periods.

<TABLE>
<CAPTION>
                                            First     Second    Third    Fourth
                                           Quarter   Quarter   Quarter   Quarter
                                           --------  --------  --------  --------
                                          (In thousands except per share amounts)
<S>                                        <C>       <C>       <C>       <C>
1997
  Product Sales . . . . . . . . . . . . .  $   821   $ 1,007   $ 1,410   $ 1,667 
  Total Revenues. . . . . . . . . . . . .  $ 1,111   $ 1,273   $ 1,634   $ 1,962 
  Gross Margin on Product Sales . . . . .  $   331   $   487   $   715   $   831 
  Net Loss. . . . . . . . . . . . . . . .  $(1,650)  $(1,573)  $(1,393)  $(1,523)
  Loss Per Common Share-Basic and Diluted  $ (0.41)  $ (0.25)  $ (0.23)  $ (0.20)

1998
  Product Sales . . . . . . . . . . . . .  $ 1,815   $ 2,003   $ 2,007   $ 1,419 
  Total Revenues. . . . . . . . . . . . .  $ 1,957   $ 2,172   $ 2,220   $ 1,643 
  Gross Margin on Product Sales . . . . .  $   973   $ 1,298   $ 1,276   $   860 
  Net Loss. . . . . . . . . . . . . . . .  $(1,802)  $(1,530)  $(1,316)  $(2,696)
  Loss Per Common Share-Basic and Diluted  $ (0.18)  $ (0.15)  $ (0.13)  $ (0.25)
</TABLE>

                                      F-15
<PAGE>