<PAGE>   1
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM 10-Q
                                  ---------

                 Quarterly Report Under Section 13 or 15(d)
                   of the Securities Exchange Act of 1934

For Quarter Ended June 30, 1997                  Commission File Number 0-19373

                               BIOMATRIX, INC.
       --------------------------------------------------------------
           (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                         <C>
           Delaware                                                     13-3058261          
-------------------------------                             ---------------------------------
(State or other jurisdiction of                             (IRS Employer Identification No.)
incorporation or organization)
</TABLE>

                 65 Railroad Avenue, Ridgefield, N.J.  07657
          ---------------------------------------------------------
             (Address of principal executive offices) (Zip Code)

                                (201)945-9550
                 -------------------------------------------
            (Registrant's telephone number, including area code)

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.

                          (1)     Yes   X          No 
                                      ----            ----    

The number of shares outstanding of the issuer's common stock as of the latest
practicable date:

<TABLE>
<CAPTION>
                          Class                             June 30, 1997
                          -----                             -------------
        <S>                                                    <C>

        Common stock, $ 0.0001 par value                       10,957,794
</TABLE>
<PAGE>   2
                                BIOMATRIX, INC.

                               TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                       PAGE NO.
                                                                                       --------
<S>              <C>                                                                     <C>
PART I.          FINANCIAL INFORMATION

                 ITEM 1 - Unaudited Consolidated Financial Statements

                 Consolidated Balance Sheets as of
                 June 30, 1997 and December 31, 1996                                       3

                 Consolidated Statements of Operations for the
                 Three and Six Months Ended June 30, 1997 and 1996                         4

                 Consolidated Statements of Cash Flows for the
                 Six Months Ended June 30, 1997 and 1996                                   5

                 Notes to Consolidated Financial Statements                               6-7

                 ITEM 2

                 Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                                     8-11

PART II.         OTHER INFORMATION

                 ITEM 1

                 Legal Proceedings                                                        12

                 ITEM 2

                 Changes in Securities                                                    12

                 ITEM 4

                 Submission of matters to a vote of security holders.                     13

                 ITEM 6

                 Exhibits and Reports on Form 8-K                                         14


                 Signatures                                                               15
</TABLE>





                                       2
<PAGE>   3
                        BIOMATRIX, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                        June 30,        December 31,
                                                                           1997             1996
                                                                           ----             ----
<S>                                                                   <C>              <C>
    ASSETS
Current assets:
  Cash and cash equivalents   . . . . . . . . . . . . . . . . . .      $14,072,948       $  3,034,764
  Held-to-maturity investments  . . . . . . . . . . . . . . . . .        3,601,094         10,603,358
  Accounts receivable, less allowance for doubtful accounts
    of $25,500 in 1997 and 1996   . . . . . . . . . . . . . . . .        1,480,709          1,230,456
  Inventory, at lower of cost or market   . . . . . . . . . . . .        1,736,367            727,083
  Prepaid expenses and other current assets   . . . . . . . . . .        1,090,788            730,302
                                                                       -----------       ------------

          Total current assets  . . . . . . . . . . . . . . . . .       21,981,906         16,325,963
Property, plant and equipment, net  . . . . . . . . . . . . . . .       11,291,716          9,506,005
Other assets  . . . . . . . . . . . . . . . . . . . . . . . . . .          277,023            162,059
                                                                       -----------       ------------
          Total assets  . . . . . . . . . . . . . . . . . . . . .      $33,550,645       $ 25,994,027
                                                                       ===========       ============

    LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Current portion of notes payable and capital lease obligations       $   149,775       $    167,408
  Accounts payable  . . . . . . . . . . . . . . . . . . . . . . .        1,534,148            724,743
  Accrued expenses  . . . . . . . . . . . . . . . . . . . . . . .        2,344,685          1,599,419
                                                                       -----------       ------------

          Total current liabilities . . . . . . . . . . . . . . .        4,028,608          2,491,570
Notes payable less current maturities . . . . . . . . . . . . . .        5,741,276          5,798,522
                                                                       -----------       ------------
          Total liabilities . . . . . . . . . . . . . . . . . . .        9,769,884          8,290,092
                                                                       -----------       ------------
Commitments and contingent liabilities
Shareholders' equity:
  Common stock, $.0001 par value: 60,000,000 shares authorized;
    10,960,608 and 10,587,615 issued and 10,957,794 and
    10,584,801 outstanding  in 1997 and 1996, respectively  . . .            1,096              1,059
  Preferred stock, 3,000 shares authorized; none issued   . . . .                -                  -
  Notes receivable - related parties  . . . . . . . . . . . . . .       (2,773,288)        (2,450,000)
  Additional paid-in capital  . . . . . . . . . . . . . . . . . .       59,481,441         56,682,755
  Accumulated deficit   . . . . . . . . . . . . . . . . . . . . .      (31,817,826)       (35,564,348)
  Equity adjustment from foreign currency translation   . . . . .       (1,098,702)          (953,571)
  Treasury stock, 2,814 shares of common stock at cost  . . . . .          (11,960)           (11,960)
                                                                       -----------       ------------

          Total shareholders' equity  . . . . . . . . . . . . . .       23,780,761         17,703,935
                                                                       -----------       ------------
          Total liabilities and shareholders' equity  . . . . . .      $33,550,645       $ 25,994,027
                                                                       ===========       ============
</TABLE>





                     The accompanying notes are an integral
                 part of the consolidated financial statements





                                       3
<PAGE>   4

                        BIOMATRIX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)




<TABLE>
<CAPTION>
                                                            Three Months Ended               Six Months Ended
                                                                 June 30,                       June 30,
                                                                 --------                       --------

                                                            1997           1996            1997              1996
                                                            ----           ----            ----              ----
<S>                                                <C>                 <C>              <C>             <C>
Revenues:
Net sales   . . . . . . . . . . . . . . . .            $ 1,841,094     $ 1,064,578      $  3,743,050    $   2,161,478
Income from licenses, royalties,
  and research contracts  . . . . . . . . .              3,136,488       7,478,162         7,277,332        8,120,109
                                                       -----------     -----------      -------------   -------------
          Total revenues  . . . . . . . . .              4,977,582       8,542,740        11,020,382       10,281,587
                                                       -----------     -----------      -------------   -------------

Cost and expenses:
Cost of sales . . . . . . . . . . . . . . .                604,091         641,513         1,477,827        1,355,361
Research and development expenses . . . . .              1,425,659       1,367,432         2,805,545        2,624,851
Selling, general and
      administrative expenses . . . . . . .              1,883,320       1,525,837         3,300,576        2,641,136
                                                       -----------     -----------      -------------   -------------
          Total costs and expenses  . . . .              3,913,070       3,534,782         7,583,948        6,621,348
                                                       -----------     -----------      -------------   -------------

Income from operations  . . . . . . . . . .              1,064,512       5,007,958         3,436,434        3,660,239
Interest expense  . . . . . . . . . . . . .                (28,376)        (37,920)          (55,407)         (66,375)
Interest and miscellaneous income . . . . .                243,016         234,078           426,495          361,449
                                                       -----------     -----------      -------------   -------------
Income before taxes . . . . . . . . . . . .              1,279,152       5,204,116         3,807,522        3,955,313
                                                       -----------     -----------      -------------   -------------

Provision for income taxes  . . . . . . . .                (61,000)              -           (61,000)               -
                                                       -----------     -----------      -------------   -------------
Net income  . . . . . . . . . . . . . . . .            $ 1,218,152     $ 5,204,116      $  3,746,522    $   3,955,313
                                                       ===========     ===========      ============    =============

Net income per common and
     common equivalent share  . . . . . . .            $      0.11     $      0.50      $       0.34    $        0.39
                                                       ===========     ===========      ============    =============

Weighted average common and common
     equivalent shares outstanding  . . . .             11,158,598      10,378,868        11,077,380       10,270,152
                                                       ===========     ===========      ============    =============
</TABLE>



                     The accompanying notes are an integral
                 part of the consolidated financial statements





                                       4
<PAGE>   5
                        BIOMATRIX, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                                    June 30,       
                                                                             ----------------------

                                                                            1997             1996 
                                                                            ----             -----
<S>                                                                    <C>                <C>
Cash flows from operating activities:
         Net income . . . . . . . . . . . . . . . . . . . . . . .      $ 3,746,522        $ 3,955,313
         Adjustments to reconcile net income to net cash
             provided by operating activities:
             Depreciation and amortization  . . . . . . . . . . .          317,109            269,767
             Stock option compensation  . . . . . . . . . . . . .           46,250                  -
         Change in assets and liabilities:
             Accounts receivable  . . . . . . . . . . . . . . . .         (252,688)             7,242
             Inventory  . . . . . . . . . . . . . . . . . . . . .       (1,037,121)           102,175
             Prepaid expenses and other current assets  . . . . .         (391,798)          (105,046)
             Other assets . . . . . . . . . . . . . . . . . . . .         (150,184)            12,248
             Accounts payable and accrued expenses  . . . . . . .        1,475,086            197,795
                                                                        ----------         ----------

                 Net cash provided by operating activities  . . .        3,753,176          4,439,494
                                                                        ----------         ----------

Cash flows from investing activities:
         Maturity of held-to-maturity securities  . . . . . . . .        7,002,264          4,161,510
         Purchases of held-to-maturity securities . . . . . . . .                -        (12,306,708)
         Capital expenditures . . . . . . . . . . . . . . . . . .       (2,120,430)          (326,606)
                                                                        ----------         ----------

                 Net cash provided by (used for) investing
                    activities  . . . . . . . . . . . . . . . . .        4,881,834         (8,471,804)
                                                                        ----------         ----------

Cash flows from financing activities:
         Payments of notes payable and capital lease obligations           (74,376)          (159,344)
         Sale of common stock to related parties  . . . . . . . .        1,890,000                  -
         Stock options exercised  . . . . . . . . . . . . . . . .          543,334            300,524
                                                                        ----------         ----------

                 Net cash provided by financing activities  . . .        2,358,958            141,180
                                                                        ----------         ----------

             Effect of exchange rate changes on cash  . . . . . .           44,216             (1,647)
                                                                        ----------        -----------

    Net increase (decrease) in cash and cash equivalents  . . . .       11,038,184         (3,892,777)
    Cash and cash equivalents at beginning of period  . . . . . .        3,034,764          8,888,869
                                                                        ----------        -----------
    Cash and cash equivalents at end of period  . . . . . . . . .      $14,072,948        $ 4,996,092
                                                                       ===========        ===========

    Supplemental cash flow data:
             Interest paid, net of capitalized interest . . . . .      $    28,376        $    37,920
             Taxes paid . . . . . . . . . . . . . . . . . . . . .      $   144,000                  -

    Non-cash financing activities:
             Sale of common stock financed with note receivable .      $   303,000                  -
</TABLE>


                     The accompanying notes are an integral
                 part of the consolidated financial statements





                                       5
<PAGE>   6
                        BIOMATRIX, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

         The consolidated financial statements at June 30, 1997 and for the
three and six months ended June 30, 1997 and 1996 are unaudited, but include
all adjustments which the Company considers necessary for a fair presentation
of the financial position at such date and the operating results and cash flows
for those periods. These condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial
statements for the year ended December 31, 1996, which were included as part of
the Company's Form 10-K, filed with the Securities and Exchange Commission.
Results for the interim periods are not necessarily indicative of results for
the entire year.

NOTE 2 - CONTINGENCIES

In August 1990, the Company received a notice from the Pennsylvania Department
of Environmental Resources ("DER") that it is one of approximately 1,000
potentially responsible parties ("PRPs") that may have clean-up responsibility
at the Industrial Solvents and Chemical Company site in York Haven,
Pennsylvania (the "Site"). During the late 1980s, the Company, through a
licensed waste disposal transport company, shipped industrial solvents to the
Site, which was operating as a recycling facility.  The DER reviewed hazardous
waste found at the Site as well as the DER's own records in order to identify
additional PRPs and to quantify each PRPs volumetric contributions.  The
Company is a member of a steering committee that consists of many PRPs.
Although neither the total clean-up cost nor the portion of the total clean-up
cost assigned to each PRP has been determined, the Company estimated, based
upon the advice of a consultant, that its liability would be approximately
$780,000.  Further, the same consultant has reported to the Company that there
is less than a 10% chance that its liability might exceed $1,070,033.  During
the second quarter of 1995 the Company paid its first assessment for clean-up
costs of $79,390.  Additionally, the Company paid $15,000 during the first
quarter of 1997; therefore, the reserve at June 30, 1997 represented $685,610.
The steering committee for the PRPs has prepared a buy-out proposal pursuant to
a consent order with the DER.  This buy-out proposal identifies each PRP's
assigned portion of assumed total clean-up costs.  When the final remedy is     
selected by the DER, the Company plans to settle out of the matter pursuant
to the buyout proposal.  The Company will monitor this situation and make any
necessary adjustments to the reserve once additional information is available
with regard to the DER's acceptance of the steering committee's proposal.

         In October 1996, Michael Jarcho ("Jarcho") filed suit in the United
States District Court for the Southern District of California seeking to
recover damages and declaratory judgment for the alleged breach by the Company
of Jarcho's consulting agreement.  A consulting agreement had been entered into
between the Company and Jarcho on December 2, 1988.  The agreement contains
certain royalty provisions for products that result from Jarcho's consultancy.
Jarcho contends, inaccurately in the Company's view, that Hylaform resulted
from his consultancy.  Jarcho seeks compensatory damages of $300,000 plus a
royalty on the Company's net sales of Hylaform as well as punitive damages and
recovery of attorney fees.  The Company believes that no royalties are owed
Jarcho as a result of Hylaform sales.  Jarcho's case was dismissed on January
10, 1997, on the grounds that the agreement requires such disputes to be
brought exclusively in New Jersey state court.  Jarcho moved for a partial
reconsideration of the decision, the Company opposed that request, and the
request was denied.  On June 16, 1997 Jarcho filed suit in New Jersey state
court.  The Company intends to defend this matter vigorously.  However, the
ultimate outcome of this litigation is unknown at the present time, and
accordingly, it could have a material adverse impact on the Company's financial
position, results of operations and cash flows.  The Company has not made any
provision on the accompanying consolidated financial statements for any
liability that might result.





                                       6
<PAGE>   7
                        BIOMATRIX, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


NOTE 3 - INVENTORIES

         Inventories at June 30, 1997 and December 31, 1996 consisted of:

<TABLE>
<CAPTION>
                                                                June 30,         December 31,
                                                                  1997              1996 
                                                              ------------       ------------
         <S>                                                 <C>                  <C>
         Finished Goods . . . . . . . . . . . . . . . . .      $229,848           $148,925
         Work-in-Process  . . . . . . . . . . . . . . . .       840,913            300,704
         Raw Materials  . . . . . . . . . . . . . . . . .       665,606            277,454
                                                              ---------           --------
                                                             $1,736,367           $727,083
                                                             ==========           ========
</TABLE>

NOTE 4 - NOTES RECEIVABLE - RELATED PARTIES

         The notes receivable - related parties relates to the acquisition of
common stock of the Company by two officers of the Company during 1996 and
1997.  The notes are with recourse and payable with interest upon maturity.
All notes issued during 1997 have been for common stock issued pursuant to the
Company's 1997 Restricted Stock Plan.

NOTE 5 - IMPACT OF THE ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No.  128 "Earnings per
Share" which changes the reporting requirements for earnings per share ("EPS")
for publicly traded companies by replacing primary EPS with basic EPS and
requiring the dual presentation of basic and diluted EPS on the face of the
consolidated statements of operations. The Company is required to adopt this
standard in its December 31, 1997 financial statements.  Had the new standard
been in effect on June 30, 1997 the Company would have experienced no material
impact from adoption.

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" which establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements.  The Company is required to adopt this standard in 1998
and believes the principle component of comprehensive income will be foreign
currency translation.

         In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" which establishes standards for the way that public enterprises
report information about operating segments, geographic areas, products and
major customers.  The Company is required to adopt this standard in 1998 and is
currently evaluating the impact of this standard.





                                       7
<PAGE>   8
                        BIOMATRIX, INC. AND SUBSIDIARIES

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

OVERVIEW

         Biomatrix, Inc., together with its subsidiaries (the "Company"), is
principally engaged in the research, development and commercial application of
proprietary viscoelastic biological polymers, called hylans, for use in
therapeutic medical applications and skin care.  For approximately the past
three years, a significant source of revenue for the Company has been from
certain up-front payments relating to corporate license and distribution
agreements. The Company expects milestone payments from existing agreements and
other one-time payments from partners to continue to be an important source of
revenues.

         The Company's business is subject to significant risks.
Forward-looking comments included herein are subject to and should be read in
conjunction with the "Risk Factors" section of the Company's 1996 Annual Report
on Form 10-K, including the risks and uncertainties associated with the
regulatory approval process, with obtaining and enforcing patents important to
the Company's business and other risks detailed in the Company's reports filed
under the Securities Exchange Act.  As a significant amount of Biomatrix'
future revenues may be based on payments from corporate distribution
agreements, the Company's total revenues and income or losses are expected to
fluctuate from quarter-to-quarter.  Some of these fluctuations may be
significant and, as a result, quarter-to-quarter comparisons may not be
meaningful.  As of June 30, 1997, the Company's accumulated deficit was
$31,817,826.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996

          REVENUES.  Total revenues for the three months ended June 30, 1997
were $4,977,582, a decrease of $3,565,158 from the same period in 1996.
Product sales for the three months ended June 30, 1997 were $1,841,094,
representing an increase of $776,516, or 72.9%, over the same period in 1996.
This increase was primarily attributable to new sales of Synvisc in France and
new sales of Hylaform in Europe.  Also contributing to the increase was an
increase in skin care product sales of $177,013, or 43%, resulting from the
timing of shipments and increased demand.  Revenues from licenses, royalties,
and research contracts were $3,136,488 in the second quarter of 1997, which was
primarily attributable to a non-refundable license fee payment of $3 million
from Bayer AG.  The decrease in revenues from licenses, royalties, and research
contracts of $4,341,674 from the same period of 1996 was attributable to the
receipt in the prior year of a non-refundable $5 million payment from Collagen
for the marketing rights to Hylaform and the receipt of a payment allowing the
Company to reacquire the marketing rights for Synvisc in certain countries.

          COST AND EXPENSES.  Total cost and expenses for the second quarter of
1997 were $3,913,070, an increase of $378,288, or 10.7%, from the same period
in 1996.  Cost of sales for the second quarter of 1997 and 1996 were $604,091
and $641,513, respectively, which represented 32.8% and 60.3% of sales for the
second quarter of 1997 and 1996, respectively.  The decrease in the percentage
of cost of sales to sales was primarily a result of increased production
volumes and better utilization of capacities.  Research and development
expenses in the second quarter were $1,425,659, representing an increase of
$58,227, or 4.3%, from the same period of 1996.  Selling, general and
administrative expenses for the second quarter of 1997 were $1,883,320,
representing an increase of $357,483, or 23.4%, over the second quarter of
1996.  The increase in selling, general and administrative was primarily
attributable to costs associated with the negotiation of corporate distribution
and joint venture agreements and higher personnel and consulting expenses
associated with the establishment of European operations and the expansion of
operations in Canada and the United States.

         INTEREST AND MISCELLANEOUS INCOME.  Interest expense was $28,376 for
the second quarter of 1997, a decrease of $9,544 from the same period of 1996.
Interest and miscellaneous income was $243,016 for the second quarter of 1997,
an increase of $8,938 from the same period in 1996.





                                       8
<PAGE>   9
                        BIOMATRIX, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND 1996

         REVENUES.  Total revenues for the six months ended June 30, 1997 and
1996 were $11,020,382 and $10,281,587, respectively, which represented an
increase of $738,795 in the 1997 period. Product sales were $3,743,050 in the
first half of 1997, representing an increase of $1,581,572 or 73.2%, over the
same period in 1996. This increase was due primarily to increased sales of
Synvisc in Sweden, new sales of Synvisc in France, and new sales of Hylaform in
Europe.  Product sales accounted for 34% and 21% of total revenues for the six
months ended June 30, 1997 and 1996, respectively.  Revenues from research
contracts, licenses and royalties were $7,277,332 and $8,120,109 for the six
months ended June 30, 1997 and 1996, respectively, and accounted for 66% and
79% of total revenues in the six months ended June 30, 1997 and 1996,
respectively.

         COST AND EXPENSES.    Total cost and expenses were $7,583,948 for the
six months ended June 30, 1997, which represented an increase of $962,600, or
14.5%,  from the corresponding period of 1996.  Cost of sales was $1,477,827
for the six months ended June 30, 1997, representing an increase of $122,466
over the same period of 1996, due to the higher sales volume.  Cost of sales as
a percentage of sales was 39.5% in the six months ended June 30, 1997 versus
62.7% for the same period of 1996.  Research and development expenses were
$2,805,545 in the first half of 1997, representing an increase of $180,694, or
6.9%, due primarily to increased clinical research activities.  Selling,
general and administrative expenses were $3,300,576 in the first half of 1997,
representing an increase of $659,440, or 25%.  The increase was due primarily
to costs associated with the negotiation of corporate distribution and joint
venture agreements and higher personnel and consulting expenses associated with
the establishment of European operations and the expansion of operations in
Canada and the United States.

         INTEREST AND MISCELLANEOUS INCOME.  Interest expense was $55,407 for
the first half of 1997, which represented a decrease of $10,968 from the same
period of 1996.  Interest and miscellaneous income was $426,495 for the six
months ended June 30, 1997 as compared to $361,449 for the same period of 1996.
The increase in interest and miscellaneous income was due primarily to greater
interest income resulting from higher average cash and investment balances.

LIQUIDITY AND CAPITAL RESOURCES

         The Company had cash and cash equivalents of $14,072,948 and
held-to-maturity investments, invested in U.S. government securities, of
$3,601,094 at June 30, 1997.  Overall, the Company's cash and held-to-maturity
investment position increased by $4,035,920 in the six months ended June 30,
1997.  The Company invests its excess cash in U.S. government securities.  Any
security purchased with a maturity of three months or less is classified as
cash and cash equivalents.

         The Company's operations over the past several years have been
financed primarily from the private placement of equity securities and up-front
non-refundable license fee payments from corporate partners.  Over the past
three years, the Company has received funding of $7,717,775 from the private
placement of equity securities and $26,533,000 from license fee payments.





                                       9
<PAGE>   10
                        BIOMATRIX, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

         For the six months ended June 30, 1997 the Company had positive cash
flows from operations of $3,753,176 which primarily resulted from non-recurring
fees received during the six months of $7,000,000.  During the six month
period, the Company invested $2,120,430 in property, plant, and equipment,
primarily associated with increasing the production capacity of its Canadian
manufacturing facility and the capitalization of costs related to a lease which
the Company entered into for a 93,000 square foot building in New Jersey in
which the Company intends to locate its U.S. manufacturing operation.  The
lease term is approximately ten years with annual lease payments increasing
from $350,000 to $500,000 over the term of the lease.  Within the first three
years of the lease, the Company has an option to acquire this building at a
price of approximately $4,500,000.  Should the Company not exercise its option
within this three-year period, the landlord has the right to require the
Company to purchase this building for approximately the same price.  The
Company plans to continue to modify this building to accommodate manufacturing
capability for the U.S. and foreign markets.  The Company also plans to
relocate its executive and administrative offices and research and development
laboratories to this building upon the expiration in 1999 of the Company's
lease on its current headquarters in New Jersey.  Additionally, the Company
received $543,334 from the exercise of Company stock options and $1,890,000
from the sale of common stock during the six months ended June 30, 1997.

         In February 1997, the Company entered into a marketing and
distribution agreement with Wyeth-Ayerst Laboratories to sell Synvisc in the
United States, Germany, Austria, Spain, Portugal, Greece and certain countries
in the Middle East and Central Europe.  As part of this agreement, the Company
received a non-refundable up-front license fee payment of $4,000,000 and could
receive up to a total of $19,000,000 related to the launch of Synvisc in
Europe, U.S. FDA approval and the launch of Synvisc in the United States, plus
additional payments for other milestones.

         In April 1997, the Company entered into a marketing and distribution
agreement with Bayer AG to sell Synvisc in Australia, New Zealand, Taiwan,
Singapore, Indonesia, Thailand, Malaysia and Israel.  In return, the Company
received an up front non-refundable license fee payment of $3,000,000, and
could receive an additional milestone payment of $2,000,000.

         The planned increase in manufacturing capacity and commercialization
of medical products will continue to increase costs and expenses during the
remainder of 1997.  The Company's capital spending associated with developing
its additional capacity is expected to approximate $9,300,000 during the
remainder of 1997.  The Company plans to seek lease financing which, if
obtained, could fund a portion of these capital costs.  The Company will
continue to incur higher expenses during 1997 associated with developing its
internal infrastructure to support the administration of its sales force for
its distribution agreements with Boehringer Ingelheim France, S.A., Wyeth, and
Bayer, as well as the establishment of a sales and marketing function for the
Company's direct sales in certain European and Asian countries.  The Company
believes that its capital needs and higher operating expenses will be supported
by its current working capital position, potential milestone payments from
existing corporate partners, and other one-time payments from partners.

         During the second quarter of 1997, the Company committed to repurchase
86,666 shares of common stock from one of its partners, Recordati International
Holdings, S.A. ("Recordati"), as was the Company's right under a Stock Purchase
Agreement entered into with Recordati in 1995.  Also during the second quarter,
the Company sold 105,000 shares of common stock at fair market value to certain
officers of the Company under the 1997 Restricted Stock Purchase Plan.  The
sale of these shares to the officers at fair market value were settled in cash
by the close of the second quarter and generated $1,890,000 of proceeds to the
Company.  The Company repurchased 43,333 of the shares from Recordati during
July, which required approximately $929,000 of funds.  The repurchased shares
will be treated as treasury stock.  The Company still has the right to
repurchase the remaining 43,333 shares during the next six months upon notice
of sale from Recordati.





                                       10
<PAGE>   11
                        BIOMATRIX, INC. AND SUBSIDIARIES

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)


         In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No.  128 "Earnings per
Share" which changes the reporting requirements for earnings per share ("EPS")
for publicly traded companies by replacing primary EPS with basic EPS and
requiring the dual presentation of basic and diluted EPS on the face of the
consolidated statements of operations. The Company is required to adopt this
standard in its December 31, 1997 financial statements. Had the new standard
been in effect on June 30, 1997 the Company would have experienced no material
impact from adoption.

In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income" which establishes standards for reporting
and display of comprehensive income and its components in a full set of
financial statements.  The Company is required to adopt this standard in     
1998 and believes the principle component of comprehensive income will be
foreign currency translation.

         In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise and Related
Information" which establishes standards for the way that public enterprises
report information about operating segments, geographic areas, products and
major customers.  The Company is required to adopt this standard in 1998 and is
currently evaluating the impact of this standard.





                                       11
<PAGE>   12

                        BIOMATRIX, INC. AND SUBSIDIARIES


ITEM 1.  LEGAL PROCEEDINGS

         In October 1996, Michael Jarcho ("Jarcho") filed suit in the United
States District Court for the Southern District of California seeking to
recover damages and declaratory judgment for the alleged breach by the Company
of Jarcho's consulting agreement.  A consulting agreement had been entered into
between the Company and Jarcho on December 2, 1988.  The agreement contains
certain royalty provisions for products that result from Jarcho's consultancy.
Jarcho contends, inaccurately in the Company's view, that Hylaform resulted
from his consultancy.  Jarcho seeks compensatory damages of $300,000 plus a
royalty on the Company's net sales of Hylaform as well as punitive damages and
recovery of attorney fees.  The Company believes that no royalties are owed
Jarcho as a result of Hylaform sales.  Jarcho's case was dismissed on January
10, 1997, on the grounds that the agreement requires such disputes to be
brought exclusively in New Jersey state court.  Jarcho moved for a partial
reconsideration of the decision, the Company opposed that request, and the
request was denied.  On June 16, 1997 Jarcho filed suit in New Jersey state
court.  The Company intends to defend this matter vigorously.  However, the
ultimate outcome of this litigation is unknown at the present time, and
accordingly, it could have a material adverse impact on the Company's financial
position, results of operations and cash flows.  The Company has not made any
provision on the accompanying consolidated financial statements for any
liability that might result.


ITEM 2.  CHANGES IN SECURITIES

         On May 29, 1997, the shareholders approved the Company's 1997
Restricted Stock Purchase Plan (the "Plan").  Pursuant to the Plan,  the
Company sold 6,000 shares of common stock to each of Dr. Janet L. Denlinger and
Mr. Rory B. Riggs, at a purchase price of $15.875 per share (such price being
the closing price on May 28, 1997).  Dr. Denlinger and Mr. Riggs each purchased
the shares described above with a full recourse, ten-year, secured promissory
note that accrues interest at the rate of 7.18% per year.  Such shares are
pledged to the Company as collateral for the notes and are subject to
repurchase by the Company according to agreements between the Company and each
of Dr. Denlinger and Mr. Riggs, as applicable.

         On the same date, the Board of Directors approved Dr. Denlinger and
Mr. Riggs each foregoing a previous option grant of 5,000 shares at a price of
$11.25 per share in exchange for the purchase of 5,000 shares under the Plan.
Dr. Denlinger and Mr.  Riggs each purchased the shares with an interest
bearing, full recourse, ten-year, secured promissory note equal to the
underlying option price per share.  Both officers recognized a gain on this
conversion based on the fair market value of $15.875 per share as of May 28,
1997.   Such shares are pledged to the Company as collateral for the notes and
are subject to repurchase by the Company according to agreements between the
Company and each of Dr. Denlinger and Mr. Riggs, as applicable.

         These shares were issued pursuant to the shareholder approved Plan,
however, because the Plan was not yet filed with the Securities and Exchange
Commission the shares were sold in private offerings, which the Company
believes qualify as transactions by an issuer not involving a public offering
within the meaning of Section 4(2) of the Securities Act of 1933, as amended.





                                       12
<PAGE>   13
                        BIOMATRIX, INC. AND SUBSIDIARIES


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

         On May 29, 1997, at the Company's Annual Meeting of Shareholders, the
Company's shareholders met to consider and vote upon the following five
proposals:

   (1)  A proposal to elect three Class 3 directors to hold office for a      
        three-year term and until their respective successors have been duly  
        qualified and elected.                                                
                                                                              
   (2)  A proposal to ratify an amendment to the Company's Certificate of     
        Incorporation to increase the number of authorized shares of Common   
        Stock from 20,000,000 to 60,000,000 shares.                           
                                                                              
   (3)  A proposal to ratify the amendment to the Company's 1994 Stock Option 
        Plan increasing the number of shares authorized for issuance under the
        Plan from 2,000,000 to 2,500,000 shares.                              
                                                                              
   (4)  A proposal to ratify the adoption by the Board of Directors of the    
        Company's 1997 Restricted Stock Plan.                                 
                                                                              
   (5)  A proposal to ratify the appointment of Coopers & Lybrand L.L.P. as   
        the independent public accountants for the Company for the fiscal year
        ending December 31, 1997.                                             
                                                                              
    Results with respect to the voting on each of the above proposals were    
    as follows:                                                               

<TABLE>
         <S>          <C>                   <C>
         Proposal 1:  H. Stuart Campbell    For - 8,198,761  Withhold Authority - 404,800
                                            ---   ---------  ------------------   -------
                                            
                      Rory B. Riggs         For - 8,198,661  Withhold Authority - 404,900
                                            ---   ---------  ------------------   -------
                                            
                      Justin P. Morreale    For - 8,198,761  Withhold Authority - 404,800
                                            ---   ---------  ------------------   -------
</TABLE>


<TABLE>
         <S>               <C>                  <C>
         Proposal 2:       7,817,240            Votes For
                           ---------                     
                             778,211            Votes Against
                           ---------                         
                               8,110            Abstentions
                           ---------                       
                                   0            Broker Non-Votes
                           ---------                            


         Proposal 3:       5,458,058            Votes For
                           ---------                     
                             802,669            Votes Against
                           ---------                         
                              20,620            Abstentions
                           ---------                       
                           2,322,214            Broker Non-Votes
                           ---------                            


         Proposal 4:       5,690,242            Votes For
                           ---------                     
                             571,545            Votes Against
                           ---------                         
                              18,560            Abstentions
                           ---------                       
                           2,323,214            Broker Non-Votes
                           ---------                            


         Proposal 5:       8,587,211            Votes For
                           ---------                     
                              11,800            Votes Against
                           ---------                         
                               4,500            Abstentions
                           ---------                       
                                   0            Broker Non-Votes
                                   -                            
</TABLE>





                                       13
<PAGE>   14

                        BIOMATRIX, INC. AND SUBSIDIARIES


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

A.  EXHIBITS

         10.1             Form of Restricted Stock Purchase Agreement under the
                          Company's 1997 Restricted Stock Plan.

         10.2             Form of Secured Promissory Note under the Company's
                          1997 Restricted Stock Plan.

         10.3             Form of Stock Pledge Agreement under the Company's
                          1997 Restricted Stock Plan.

         11               Computation of Earnings Per Share

         27.1             Financial Data Schedule

B.   REPORTS ON FORM 8-K

         None





                                       14
<PAGE>   15
                        BIOMATRIX, INC. AND SUBSIDIARIES




                                   SIGNATURES


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



DATE:   August 7, 1997                BIOMATRIX, INC.
                                      
                                      
                                      
                                      By: /s/Endre A. Balazs              
                                          --------------------------------
                                          Endre A. Balazs
                                          Chief Executive Officer and
                                          Chief Scientific Officer
                                      
                                      
                                      
                                      
                                      By: /s/Rory B. Riggs                
                                          --------------------------------
                                          Rory B. Riggs
                                          President and Chief Financial Officer





                                       15