BIOMATRIX INC, 10-K, 1997-03-31

BIOMATRIX INC
10-K, 1997-03-31
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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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, 1996 COMMISSION FILE NUMBER 0-19373

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

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<S> <C> <C>
DELAWARE (201) 945-9550 13-3058261
(State of other jurisdiction of (Registrant's telephone number, (IRS Employer
incorporation or organization) including area code) Identification No.)
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65 Railroad Avenue
Ridgefield, N.J. 07657
(Address of principal executive offices) (Zip Code)

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

None

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

Common Stock. $.0001 Par Value
(Title of Class)

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 1934
during 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 [ ].

The aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 1, 1997, was approximately $106,105,870, based
upon the last reported sales price of the registrant's Common Stock on the
NASDAQ National Market System.

At March 1, 1997 there were 10,755,644 shares of the registrant's
Common Stock outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 29, 1997, are incorporated by reference into Part
III of this report. Other documents incorporated by reference are listed in the
Exhibit Index.
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BIOMATRIX, INC.

1996 ANNUAL REPORT - FORM 10-K

TABLE OF CONTENTS

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Item No. Page
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Part I .............................................................................................. 1
1. Business...................................................................................... 1
Overview................................................................................... 1
Therapeutics............................................................................... 2
Therapeutics In Development................................................................ 3
Skin Care Products......................................................................... 4
Distribution Agreements.................................................................... 5
Government Loan............................................................................ 6
Manufacturing.............................................................................. 6
Human Resources............................................................................ 7
Research and Development Expenditures...................................................... 7
Risk Factors............................................................................... 7
2. Properties.................................................................................... 8
3. Legal Proceedings............................................................................. 8
4. Submission of Matters to a Vote of Security Holders........................................... 9
Executive Officers............................................................................ 10
Part II .............................................................................................. 12
5. Market for the Registrant's Common Equity and Related Shareholder Matters..................... 12
6. Selected Financial Data....................................................................... 13
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations.................................................................................... 13
8. Financial Statements and Supplementary Data................................................... 16
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.................................................................................... 16
Part III .............................................................................................. 16
10. Directors and Executive Officers of the Registrant............................................ 16
11. Executive Compensation........................................................................ 17
12. Security Ownership of Certain Beneficial Owners and Management................................ 17
13. Certain Relationships and Related Transactions................................................ 17
Part IV .............................................................................................. 17
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 17
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PART I

ITEM 1. BUSINESS

OVERVIEW

Biomatrix, Inc., (the "Company" ) which includes Biomatrix Medical
Canada Inc. ("BMC"), Biomatrix Svenska AB ("Biomatrix Svenska") and Biomatrix UK
Limited ("Biomatrix UK") develops, manufactures and sells a series of
proprietary viscoelastic products made of biological polymers called hylans for
use in therapeutic medical applications and skin care. Hylans are chemically
modified forms of the naturally occurring hyaluronan (also known as hyaluronic
acid or sodium hyaluronate). Hylans are the second generation of viscoelastics
used in medicine, and are characterized by significantly enhanced physical
(rheological) properties (elasticity, viscosity and pseudoplasticity) as
compared to naturally occurring hyaluronan, from which the first generation
viscoelastics are made. The discovery of hylans has allowed the Company to
develop a range of patented products with superior viscoelastic properties in
the forms of fluids, gels and solids.

The Company was founded in 1981. In 1983, the Company established its
research and development department, laboratory facilities and a pilot
manufacturing plant at its corporate headquarters in Ridgefield, New Jersey.
During the period from 1987 through 1995, the Company conducted research and
development work in Europe through its wholly-owned subsidiary Biomatrix Svenska
in Uppsala, Sweden. BMC was established in 1991 to manufacture medical products
and to market certain medical products in Canada.

The Company believes that it is distinguished from other companies in
the field by its association with Dr. Endre A. Balazs, a co-founder and current
Chief Executive Officer and Chief Scientific Officer of the Company, who has
authored numerous publications on the medical applications of viscoelastic
substances. Prior to the organization of the Company, Dr. Balazs developed the
first generation viscoelastics used in medicine worldwide. These products were
based on a highly purified fraction of the unmodified, naturally occurring
hyaluronan. In 1993, the Company obtained the rights to use this first
generation technology for certain medical applications, except for ophthalmic
viscosurgery.

Under Dr. Balazs' leadership, the Company's scientists began to develop
a new class of biopolymers, called hylans. These polysaccharide molecules are
derived by chemical modification of hyaluronan. The Company's hylan products are
highly biocompatible like the naturally occurring hyaluronan, which allows them
to be used in the body without causing foreign body reactions. The Company
believes that products made of hylans are superior to the products made of first
generation hyaluronan due to the enhanced rheological properties and the
prolonged residence time in tissues.

Using its patented technology, the Company has developed clear
elastoviscous fluids, transparent and opaque viscoelastic semi-solid gels, solid
particles, sheaths, tubes and other useful configurations. This broad spectrum
of proprietary products is manufactured through several patented chemical
modifications and cross-linking processes.

The Company's business is to develop, manufacture, market and sell
viscoelastics used as medical therapeutic devices. The use of viscoelastics in
medicine during the past decades has created several new medical therapeutic
modalities including:

o Viscosurgery, the use of elastoviscous fluids to facilitate surgical
procedures in ophthalmology, orthopedics and neurosurgery. The
viscoelastic acts as a surgical tool or implant to protect,
manipulate and separate delicate tissues.

o Viscosupplementation, the use of elastoviscous solutions and
viscoelastic gels in disease conditions to replace tissues and body
fluids.

o Viscoprotection, the use of elastoviscous fluids and viscoelastic
gels to shield and protect sensitive tissue surfaces, such as those
of the eye, from dryness and noxious environmental conditions.

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o Viscoseparation, the use of viscoelastic gels, membranes and fluids
to separate tissues, prevent adhesions, and cover internal and
external wounds to facilitate wound healing and decrease scar
formation.

o Viscoaugmentation, the use of viscoelastic gels for tissue
augmentation to provide a scaffolding for tissue regeneration or an
inert elastic filler in such applications as augmentation of dermal
tissue for the correction of facial wrinkles and depressed scars.

o Viscoregulation, the use of the rheological (physical) properties of
elastoviscous fluids and viscoelastic gels to regulate cell activity
and can be used for targeted delivery of drugs.

Viscoelastic devices are ideally made from the body's own molecules
found in the intercellular matrix, the highly organized structure separating
cells and integrating them into functional tissues. Viscoelastic products are
used in medicine by introducing them into the intercellular matrix during, after
or instead of surgical procedures to supplement, augment, regulate and
manipulate the healing and regenerative processes of the body and to restore the
homeostasis of the intercellular matrix. Therefore, the use of viscoelastics for
therapeutic purposes, i.e. engineering of the intercellular matrix, is called
matrix engineering.

THERAPEUTICS

The following discussion addresses the Company's medical therapeutic
products, some of which, as noted below, are on the market in certain countries;
certain other products are in late stage development. SEE "BUSINESS-GOVERNMENT
REGULATION."

Synvisc(R)
Synvisc(R), a viscoelastic device made of patented hylan biopolymers,
is used for the treatment of osteoarthritis to reduce pain and improve joint
mobility. Synvisc treatment involves a series of injections into the affected
joint. It supplements the elastoviscosity of the synovial fluid of the arthritic
joint, and is regarded as a liquid prosthesis for the joint because it replaces
the pathologically low elastoviscous fluid with a supplement of fluid with
enhanced elastoviscous properties. This medical treatment modality is called
viscosupplementation. Synvisc is a two week treatment which involves a series of
three injections into the arthritic joint.

The Company conducted eight clinical studies involving Synvisc in which
approximately 1,070 patients participated. These studies were carried out and
completed in the United States, Germany and Canada. The results of these studies
indicate that Synvisc is a safe and efficacious treatment for osteoarthritis of
the knee.

The Company received approval to market Synvisc for treatment of
osteoarthritis of the knee joint in Canada in 1993, in Sweden in 1994 and
obtained the CE Mark in late 1995, which permits marketing in the 19 countries
of the European Economic Area ("EEA").

The Company has submitted a Pre-Market Approval application ("PMA") to
the United States Food and Drug Administration ("FDA") for the use of Synvisc
for the treatment of osteoarthritis of the knee. In November 1996, an FDA
expert advisory panel recommended that the FDA approve the Company's PMA with
the condition that a postmarket clinical study be performed. This application is
currently under review by the FDA.

The Company began marketing of Synvisc in Canada with its own
salesforce in early 1993 and in 1995 signed a distribution agreement with
Rhone-Poulenc Rorer Canada Inc. ("RPR") to share the marketing effort. As of
September 1995, BMC and RPR began marketing Synvisc jointly in Canada. In June
1995, Roche AB, a subsidiary of F. Hoffmann-La Roche Ltd., commenced sales of
Synvisc in Sweden. In November 1996, the Company entered into an agreement with
Boehringer Ingelheim France, S.A. ("Boehringer") for the distribution of Synvisc
in France and in February 1997 entered into an agreement with Wyeth-Ayerst
("Wyeth"), a division of American Home Products for the distribution of Synvisc
in the United States, Germany, Austria, Spain Portugal, Greece and certain
countries in the Middle East and Central Europe. The Company expects Boehringer
and Wyeth to begin marketing during 1997 in those countries within the EEA where
Synvisc is licensed. In Italy, the

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Company's distribution partner is Recordati Industria Chimica e Farmaceutica
S.p.A. ("Recordati"). The Company is currently seeking and negotiating with
potential marketing partners for distribution of Synvisc in certain other
European, Asian and Latin American countries.

Hylaform(R)
Hylaform(R) is a patented viscoelastic devise made of hylan and is used
for viscoaugmentation of dermal tissue to correct facial wrinkles and depressed
scars by injection directly into the dermal tissue. In late 1995, the Company
obtained approval (CE mark) to market this product as a medical device in the 19
countries of the EEA. In June 1996, the Company entered into an agreement with
Collagen Corporation ("Collagen") for the distribution of Hylaform in Europe,
Japan, Australia and other select countries. Collagen began marketing Hylaform
in certain European countries in November 1996 and expects to begin marketing in
additional EEA countries during 1997. The Company's PMA application for Hylaform
was submitted to the FDA in 1995 and has been accepted for filing and review.
The Company has also entered into a distribution agreement with Collagen for
Hylaform in the United States. Under such agreement, Collagen has an option for
the exclusive distribution rights to Hylaform in the United States for an
additional payment of $7,000,000, upon and subject to, FDA approval.

Gelvisc(R)Vet
Gelvisc(R)Vet, a viscoelastic device made of hylan biopolymers, was
developed by the Company for the treatment of arthritis in veterinary medicine.
It is used as a viscosupplementation device to treat traumatic arthritis in race
horses. Approval to market this product in Sweden and France was obtained in
1995 and 1996 respectively. The product is now marketed directly by Equinord KB
("Equinord") itself in Sweden and through Boehringer Ingelheim in France. An
application for marketing approval has been filed in Italy.

Hylashield(R)
Hylashield(R) and Hylashield(R) Nite are sterile, preservative-free,
elastoviscous eye drops that are used to protect, lubricate and moisten the
surface of the eye for patients who experience discomfort or pain associated
with dryness, noxious enviromental conditions and other common ocular symptoms
including itching, burning and foreign body sensation. In Canada, these products
are marketed through I-MED Pharma Inc. ("I-MED"). Other global distribution
agreements are currently being negotiated with leading ophthalmic companies in
Europe, the Middle East and Asia.

HsS(TM)
HsS(TM) is a sterile, preservative-free, viscoelastic, clear corneal
eye drop which is presented in a single-use container. HsS provides prolonged
moisture control and protection to corneal surfaces during surgery. Use of HsS
reduces the need for frequent applications of saline solution on the corneal
surface, allowing for safer and more efficient surgery. Marketing of HsS in
Canada and other global markets is anticipated following completion of the
development of HsS packaging for use in the operating room.

THERAPEUTICS IN DEVELOPMENT

The following discussion addresses the Company's medical therapeutic
products which are in development. Preclinical studies have been completed for
these products, and some have been tested in exploratory clinical trials. None
of these products have been submitted for marketing approval to regulatory
agencies anywhere in the world.

Hylagel(R) Vasc
Hylagel(R) Vasc is a proprietary viscoelastic hylan device for
viscoregulation. It was developed to facilitate the delivery of blood
coagulating agents and drugs to targeted sites in arteriovenous malformations
and vascular tumors. The Company has completed exploratory human clinical trials
on this product. The cost of these trials was partially supported by a grant
from the Orphan Products Division of the FDA. The Company is planning to extend
and continue these clinical trials.

Hylasol(TM)
Hylasol(TM) is a proprietary elastoviscous hylan solution designed for
various ophthalmic surgical indications including contemporary surgical
techniques associated with cataract removal and intraocular lens implantation.

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Exploratory clinical trials that indicate the safety, efficacy and surgical
utility of these products have been completed. Additional trials are planned for
1997.

Hylagel(R)Eye
Hylagel(R)Eye is a proprietary elastoviscous hylan device. It was
developed by the Company as a viscosupplementation product for replacement of
the vitreus in retinal detachment surgery. Based on the results of exploratory
clinical trials, this product is being redesigned to meet newly created
therapeutic needs.

Hylagel(R)
Hylagel(R) is a proprietary hylan product engineered as a gel or
membrane device for viscoseparation. It was developed for the prevention of
postsurgical adhesions and for the reduction and control of scar formation after
surgery. It is designed to be used in surgery of the musculoskeletal system, in
neurosurgery, abdominal surgery and gynecological surgery. In some of these
clinical areas, the Company has completed exploratory clinical studies. Clinical
studies will start in the United States and abroad in 1997.

Hylagel(R)Uro
Hylagel(R)Uro is a proprietary hylan polymer device. It was developed
to act as a long-lasting viscoelastic tissue implant for viscoaugmentation. Its
primary use is to enhance the function of the urinary sphincter muscle by acting
as a filler between weakened muscle tissue and the mucosa in cases of urinary
incontinence. Preclinical studies have demonstrated the safety and efficacy of
this product in animal models.
The Company is planning to begin clinical trials of this product.

Hylasine(TM)
Hylasine(TM) is a viscoelastic proprietary hylan device for use in
viscoseparation of healing mucous membranes following ear, nose and throat
surgery. It is designed to prevent excessive scar formation and adhesions
between mucous membranes which could cause occulsion (stenosis) of vital air
passage ways. The Company has successfully completed preclinical and clinical
studies in the United States. Scheduled clinical studies will start during 1997.

SKIN CARE PRODUCTS

The Company has developed and manufactures nine viscoelastic products,
so-called specialty intermediates, for the skin care industry. The Company's
skin care intermediates are proprietary hyaluronan or hylan products, and their
enhanced rheological properties (viscosity, elasticity and pseudoplasticity)
make them superior to first generation products. These highly elastoviscous
formulations of hyaluronan and hylan are unique in their high water-binding,
free radical-scavenging and space-filling properties. The following specialty
intermediates are marketed worldwide by Amerchol Corp. ("Amerchol"), a
subsidiary of Union Carbide Corp.:

Biomatrix(R): a patented, highly elastoviscous complex of hyaluronan,
dermal lipids and proteins. Biomatrix is utilized as a component in several
cosmetic products introduced into the market in the early 1980s, and by EstEe
Lauder in its Night Repair and certain other products.

Hyladerm(R): a patented hylan polymer in the form of a highly
elastoviscous solution. Its high molecular weight enables it to be used at
relatively low concentrations in skin care preparations.

Biocare(R) HA-24: a patented elastoviscous polymer complex formed
between hylan and certain polymers that tightly anchors hylan to skin and hair
in a way that resists wash-off. In this way, the moisturizing and smoothening
benefits of hylan are augmented and made long-lasting.

Biocare(R) HA-24-Bio: a patented elastoviscous polymer complex similar
to Biocare HA-24 in all respects, but using hyaluronan of non-animal origin.

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Biocare(R) BHA-10: the first product available to the personal care
industry that enhances the utility of a bacteria-derived hyaluronan product.
Biocare BHA-10 is approximately ten-fold more elastoviscous and more substantive
than the bacterial hyaluronan from which it is prepared.

Biocare(R) SA: a patented elastoviscous combination of albumin, dextran
sulfate and hylan, Biocare SA is designed to create a light-reflecting layer
that diminishes the appearance of surface imperfections.

HGC(R): an elastoviscous complex of hyaluronan and certain polymers
designed to enhance the properties of cosmetic formulations.

Polytrix(R): a patented viscoelastic polymer complex formed between
hylan and certain polymers. It is designed to expand the product applications of
hylan into shaving products, body lotions/creams and hand lotions/creams.

Hylasome(R): a patented viscoelastic, cosmetic grade, water-insoluble
hylan formed into very small gel particles. This product, acting as a molecular
sponge, has the ability to entrap various substances, and it can be used as a
vehicle for the controlled release of cosmetic ingredients.

DISTRIBUTION AGREEMENTS

The Company has entered into distribution agreements with respect to
certain of the Company's products, as follows:

Wyeth-Ayerst ("Wyeth"). In February 1997, the Company entered into a
distribution agreement with Wyeth, a division of American Home Products. The
agreement provides Wyeth with exclusive marketing rights to Synvisc in the
United States, Germany, Austria, Spain, Portugal, Greece and certain countries
in the Middle East and Central Europe. In return, the Company received an
up-front non-refundable payment of $4,000,000 and could receive milestone
payments of up to $19,000,000 related to the launch of Synvisc in Europe, U.S.
FDA approval and the launch of Synvisc in the United States. The Company will
manufacture and supply Synvisc to Wyeth for a contractual percentage of Wyeth's
sales price. Additionally, Wyeth will reimburse the Company, up to a fixed
amount and for a certain period of time, for its costs of maintaining a team of
specialists to assist in selling Synvisc in Europe and the United States.

F. Hoffmann-La Roche Ltd. ("Roche"). In 1995, pursuant to the amendment
of previous distribution agreements, Roche maintained exclusive marketing rights
to Synvisc in Sweden and South Africa. The Company will manufacture and supply
Synvisc to Roche for a contractual percentage of Roche's sales price. Roche
began selling Synvisc in Sweden in June 1995 and is awaiting marketing approval
in South Africa.

RhUne-Poulenc Rorer Canada Inc. ("RPR"). In September 1995, the Company
entered into a distribution agreement with RPR. The agreement provides RPR with
exclusive marketing rights for Synvisc in Canada. In return, the Company
received an up-front non-refundable payment of $3,500,000 and could receive a
milestone payment of $2,000,000 if sales reach a certain level. The Company will
manufacture and supply Synvisc to RPR for a contractual percentage of RPR's
sales price. Additionally, the Company receives a fixed monthly amount for a
period of 30 months for certain selling, general and administrative expenses.
RPR began selling Synvisc in Canada in November 1995.

Collagen Corporation ("Collagen"). In June 1996, the Company entered
into a distribution agreement with Collagen Corporation. The agreement provides
Collagen with exclusive marketing rights for Hylaform in Europe, Japan,
Australia and other select countries. In return, the Company received an
up-front, non-refundable payment of $5,000,000 and will receive a royalty based
upon sales of Collagen's dermal augmentation products as well as an additional
royalty based on the growth of Collagen's total dermal augmentation business.
Additionally, the Company will manufacture and supply Hylaform to Collagen for a
contractual percentage of Collagen's sales price. The Company has also entered
into a distribution agreement with Collagen for Hylaform in the United States.
Under such agreement, Collagen has an option for exclusive distribution rights
for Hylaform in the United States for

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an additional payment of $7,000,000, upon and subject to, FDA approval. Collagen
began selling Hylaform in certain European countries in November 1996.

Boehringer Ingelheim France, S.A. ("Boehringer"). In December 1996, the
Company entered into a distribution agreement with Boehringer Ingelheim France,
S.A. The agreement provides Boehringer with exclusive marketing rights for
Synvisc in France. In return, the Company received an up-front non-refundable
payment of $1,000,000 and could receive milestone payments of up to $7,000,000
if sales reach certain levels. The Company will manufacture and supply Synvisc
to Boehringer for a contractual percentage of Boehringer's sales price.
Additionally, Boehringer will reimburse the Company, up to a fixed amount and
for a certain period of time, for its costs of maintaining a team of specialists
to assist in selling Synvisc in France.

Recordati Industria Chimica e Farmaceutica S.p.A. ("Recordati"). In
March 1995, the Company entered into a distribution agreement with Recordati.
The agreement provides Recordati with exclusive marketing rights for Synvisc in
Italy. The Company will manufacture and supply Synvisc to Recordati for a
contractual percentage of Recordati's sales price. Additionally, the Company
could receive milestone payments related to the product's launch and
reimbursement in Italy. In 1995, Recordati purchased 250,000 shares of the
Company's stock.

I-MED Pharma Inc. ("I-MED") In October 1995, the Company entered into a
distribution agreement in Canada with I-MED for two ophthalmic viscoprotection
products. The Company will manufacture and supply the two ophthalmic products
and receive a percentage of I-MED's gross profits.

Farmila Farmaceutici Milano S.r.1. ("Farmila"). In December 1995, the
Company entered into a distribution agreement in Italy with Farmila for two
ophthalmic viscoprotection products. The Company received a non-refundable
up-front payment and will manufacture and supply the two products for an
agreed-upon percentage of Farmila's sales price.

Union Carbide. Amerchol, a subsidiary of Union Carbide, distributes the
Company's line of specialty intermediates for the skin care industry on a
worldwide basis except Japan.

Equinord KB ("Equinord"). The Company has entered into a distribution
agreement with Equinord for the distribution of Gelvisc(R)Vet in the veterinary
market in Sweden, France and Italy. Under the agreement, Equinord will obtain
the necessary regulatory approvals and advertise and promote the product in
these countries. The Company will manufacture and supply the product for a
contractual percentage of Equinord's sales price. Equinord currently sells
Gelvisc itself in Sweden and through Boehringer Ingelheim in France.

GOVERNMENT LOAN

Societe de Development Industrial du QuEbec ("SDI"). In 1993, BMC
obtained a $950,069 construction and manufacturing equipment loan from SDI.
Interest accrues at a variable rate which is currently approximately 7%. In
January 1996, the repayment terms of the agreement were amended, whereby the
Company will make quarterly principal payments. The principal payments shall
correspond to 30% of the Canadian subsidiary's quarterly net profit (excluding
depreciation), with an annual maximum of $175,900 and an annual minimum of
$102,600. The loan agreement contains covenants which require the maintenance of
certain financial ratios by BMC.

MANUFACTURING

At its New Jersey facility, the Company operates a pilot plant for the
manufacture of hylan biopolymers and medical devices made from these polymers.
The Company also has a facility at this location for the manufacturing of its
skin care products. In 1991, BMC acquired a manufacturing facility in Canada.
BMC began commercial manufacturing of medical devices made from hylan
biopolymers in the second half of 1992. During 1993, the Canadian facility was
inspected by representatives of the Health Protection Branch ("HPB") of the
Canadian Ministry of Health and was certified as meeting good manufacturing
practices ("GMPs") for the manufacturing of small volume injectable products.
All of the Company's products for clinical trials and for sale in Canada and
Europe are currently manufactured at the Canadian facility. The Company is
presently working to

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scale-up the production capacity of this facility in order to support the
expected demand for Synvisc and Hylaform in Europe.

In 1995, the Company received certification (ISO 9001 and EN 46001) of
the quality system for the design and manufacturing of its hylan viscoelastic
devices. These approvals documented that the Company meets the European Union's
("EU") harmonized device standards for both the design and manufacturing
processes of Synvisc and Hylaform. The Company expects the certification to
enhance its ability to design and manufacture any future hylan medical devices
in accordance with currently established procedures and to facilitate approval
of any future viscoelastic products.

In September 1996, the Company entered into a lease of a 93,000 square
foot building in New Jersey in which the Company intends to locate its U.S.
manufacturing facility. The Company plans to modify this building to accommodate
additional manufacturing capacity for medical and skin care products.

HUMAN RESOURCES

The Company, including its subsidiaries, currently employees 105
full-time and 2 part-time employees. Of such employees, 8 hold doctoral degrees
(M.D., Ph.D.), 18 hold other advanced degrees and 69 hold bachelor's degrees.
Thirty-nine (39) of the Company's full-time employees are engaged in research
and development, 31 are engaged in manufacturing and quality control and 35 are
engaged in sales, marketing, finance and administration.
The Company considers its employee relations to be good.

RESEARCH AND DEVELOPMENT EXPENDITURES

For the years ended December 31, 1994, 1995 and 1996, the Company
expended $5,059,660, $5,136,957 and $5,484,655, respectively, on research and
development relating primarily to personnel expenditures, preclinical and
clinical studies and regulatory expenses in the United States, Europe and
Canada.

RISK FACTORS

Certain statements contained in this Annual Report on Form
10-K are forward-looking and involve risk and uncertainty. Such statements
should be read in conjunction with the Company's Securities and Exchange
Commission filings and are also subject to important factors that could cause
actual results to differ materially, including but not limited to the following
risk factors:

Product Liability. The testing, marketing and sale of human health care
products entail an inherent risk of allegations of product liability, and there
can be no assurance that product liability claims will not be asserted against
the Company. Although the Company maintains a limited amount of product
liability insurance, there can be no assurance that the Company has or will be
able to maintain sufficient insurance coverage or will have sufficient resources
to satisfy any liability resulting from these claims.

Patents and Proprietary Technology. In an effort to protect its core
technology, the Company has obtained patent protection in key countries on hylan
technology and certain products and their use. The Company currently has 22
issued or allowed patents in the United States, and 84 issued or allowed patents
and over 81 patents pending in foreign countries relating to its products and
technology. There can be no assurance, however, that the Company's patents will
afford protection against competitors with similar inventions, and there can be
no assurance that the Company's patents will not be infringed upon, designed
around by others or held invalid. The Company also relies on proprietary
know-how and continuing technological development to maintain its competitive
position.

Governmental Regulation. The commercial distribution of the Company's
medical products is subject to regulation by the FDA and foreign regulatory
agencies. The FDA regulates medical products as either medical devices or
drugs/biologicals. Currently, the Company's medical products are regulated as
medical devices by the FDA and by the regulatory agencies of Canada and the
European Union. The process of obtaining approvals from such agencies for the
Company's products can be costly, complicated and time-consuming, and there can
be no assurance that such approvals will be granted on a timely basis, if ever.
The regulatory process may delay the marketing of

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any new products for lengthy periods and could impose substantial additional
costs. In addition, the extent of potentially adverse governmental regulations
which might arise from future legislation, administrative or judicial action
cannot be determined. The Company cannot predict at this time what effect
regulatory actions may have on the approval processes to which the Company's
products are subject. Although an advisory panel of the FDA has recommended the
approval of Synvisc, final FDA approval is given or withheld solely at the
discretion of the FDA itself.

The Company's skin care products are not subject to pre-market approval
requirements or FDA mandated performance standards. However, they are subject to
provisions of law prohibiting the commercial marketing of misbranded or
adulterated products.

Competition. The Company believes that competition in the market for its
products will be based primarily on scientific and technological superiority and
patent protection. Competition will also depend on product acceptance by doctors
and other customers, the ability to interact directly with customers in
developing new medical procedures and applications, advances in the commercial
applicability of hylan-based technology and greater availability of capital for
investment in these fields. Product cost and third-party reimbursement policies
will also be important factors. The Company believes its patent position with
respect to chemically modified, cross-linked hyaluronan polymers (hylans) makes
it more difficult for others to commercialize chemically modified hyaluronan
materials. However, chemically modified hyaluronan materials are known to be
under development by a number of potential competitors. Other substances or
technologies may be, now or in the future, the basis of competitive products
that could render the Company's technology obsolete or non competitive.

Reimbursement. Sales of the Company's products will be dependent in part
on the availability of reimbursement from third-party payors, such as
governmental health administration authorities, private health insurers and
other organizations. Limitations on such reimbursement may have a material
adverse impact on the Company. Synvisc is on the list of government reimbursable
products in Sweden. Currently, Synvisc has not been approved for reimbursement
by the Canadian provincial governments; however, several Canadian private
insurance companies do provide reimbursement for Synvisc therapy. Hylaform is
not expected to be reimbursed by third-party payors.

Manufacturing. The Company's manufacturing capacity to date has been
sufficient to meet the demands for the Company's medical products. However,
the Company has recently entered into several distribution agreements which
potentially could significantly increase the Company's required supply of
medical products. The Company is in the process of increasinhg its
manufacturing capacity. If the Company fails to meet the supply obligations of
these agreements it may be in breach.

ITEM 2. PROPERTIES

The Company's executive, administrative, research and development and
production facilities are located in Ridgefield, New Jersey in leased premises
of approximately 57,000 square feet. In September 1996, the Company entered into
a lease for a building of approximately 93,000 square feet in Ridgefield, New
Jersey. The Company plans to modify this building to accommodate manufacturing
capability and the relocation of executive and administrative offices and
research and development laboratories upon the expiration in 1999 of the
Company's lease on its current location. BMC is the owner of a 28,000 square
foot manufacturing facility in Pointe-Claire, Quebec, Canada.

ITEM 3. LEGAL PROCEEDINGS

8
<PAGE> 11
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 has 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; therefore, the reserve at December 31, 1995, represented $700,610.
The steering committee for the PRPs is presently preparing a buy-out proposal
pursuant to a consent order with the DER. This buy-out proposal will identify
what the steering committee believes to be the total clean-up costs and each
PRP's assigned portion of the total clean-up costs. The Company plans to 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 has moved for a partial reconsideration of the
decision and the Company has opposed that request. 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 in the accompanying consolidated
financial statements for any liability that might result.

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

Not applicable.

9
<PAGE> 12
EXECUTIVE OFFICERS

Information with respect to the Executive Officers of the Company
furnished by them is set forth below:

<TABLE>
<CAPTION>
Name Age Position(s) with the Company
---- --- ----------------------------

<S> <C> <C>
Endre A. Balazs, M.D.,,,,,,......................77 Chief Executive Officer and Chief Scientific Officer; Director
Rory B. Riggs................................... 43 President, Acting Chief Financial Officer, Director
Janet L. Denlinger, Ph.D. ......................51 Executive Vice President; Director
Wesley M. Domareki.............................. 47 President, ORLO Division
Beatrice Morales.................................47 Vice President, Quality Assurance and Quality Control
Richard S. Romasz................................47 Vice President, Clinical Affairs
Donald E. Woodhouse..............................50 Vice President, Manufacturing
</TABLE>

ENDRE A. BALAZS, M.D., CHIEF EXECUTIVE OFFICER, CHIEF SCIENTIFIC
OFFICER AND DIRECTOR. Dr. Balazs, a co-founder of the Company, became Chief
Executive Officer and Chief Scientific Officer of the Company in February 1987,
having served as President from inception of the Company until that time. He has
also served as a director from the inception of the Company to the present. He
is the Malcolm P. Aldrich Research Professor Emeritus of Ophthalmology at the
College of Physicians and Surgeons, Columbia University, where he also served as
Research Director of the Department. Prior to joining Columbia in 1975, he
taught at Harvard Medical School for 25 years, during which time he was also
co-founder, research director and president of The Retina Foundation and the
Boston Biomedical Research Institute. From 1968 to 1978, Dr. Balazs was
president and owner of Biotrics, Inc., which developed and manufactured the
first hyaluronan therapeutic product used in medicine. He is the author of more
than 300 scientific articles and patents. Dr. Balazs received an M.D. degree
from the University of Budapest, Hungary. He is married to Dr. Denlinger.

RORY B. RIGGS, PRESIDENT, ACTING CHIEF FINANCIAL OFFICER AND DIRECTOR.
Mr. Riggs was elected President on April 1, 1996 and Acting Chief Financial
Officer in September 1996. He has served as a Director of the Company since
October 1990. Since 1990, he has been affiliated with ITIM Corp., an investment
advisory and venture capital firm specializing in pharmaceutical and
biotechnology investments. From 1991 to 1994, he was acting President and Chief
Executive Officer of RF&P Corporation, a company wholly-owned by the Virginia
Retirement System. Until 1990, Mr. Riggs was a Managing Director in the Mergers
and Acquisitions Department at Paine Webber Incorporated, where he was employed
for more than nine years. He is a graduate of Middlebury College and Columbia
University's Graduate School of Business.

JANET L. DENLINGER, PH.D., EXECUTIVE VICE PRESIDENT AND DIRECTOR. Dr.
Denlinger, a co-founder of the Company, has been a Vice President and Director
of the Company since its inception. She was a research associate of Dr. Balazs
for 20 years at the Boston Biomedical Research Institute and then at the
Department of Ophthalmology, College of Physicians and Surgeons, Columbia
University. She is the author of numerous publications in physiology,
biochemistry and biological activity and metabolism of hyaluronan. Dr. Denlinger
received a Ph.D. degree in biochemistry from the University of Lille, France.
She is married to Dr. Balazs.

WESLEY M. DOMAREKI, PRESIDENT, ORLO DIVISION. Mr. Domareki joined the
Company in January 1991 as Vice President, International Marketing and Business
Development. In 1994, he was appointed President of the Company's
Otorhinolaryngology and Ophthalmology Division. Prior to joining the Company,
Mr. Domareki was employed by Pharmacia for 17 years. By 1989, as Vice President,
International Marketing and Business Development for Pharmacia Ophthalmics, he
had been involved in the successful commercialization and marketing of Healon(R)
in the United States, Japan, Australia and various European countries. Mr.
Domareki received a B.S. degree in business administration from Villanova
University and holds an M.B.A. degree in pharmaceutical marketing and economics
from Fairleigh Dickinson University.

10
<PAGE> 13
BEATRICE MORALES, VICE PRESIDENT, QUALITY ASSURANCE AND QUALITY
CONTROL. Ms. Morales joined the Company in 1981, as Assistant Scientist and
became Director of Quality Control/Associate Scientist in 1986. In 1991, she was
promoted to her present position. Prior to joining the Company, Ms. Morales
served on Dr. Balazs' research staff at the Department of Ophthalmology of
Columbia University. Ms. Morales received a B.S. degree in Biology from the City
College of New York.

RICHARD S. ROMASZ, PH.D., VICE PRESIDENT, CLINICAL AFFAIRS. Dr. Romasz
joined the Company in November 1995 as Vice President, Clinical Affairs. Prior
to joining the Company, Dr. Romasz was employed for over 19 years with Pharmacia
Inc. in their Clinical Research Department. His last position was as Vice
President-Clinical Research, Pharmacia Inc., Ophthalmics. Dr. Romasz received a
Ph.D. in nutrition from Rutgers University.

DONALD E. WOODHOUSE, VICE PRESIDENT, MANUFACTURING. Mr. Woodhouse
joined the Company in May 1991. Prior to joining the Company, Mr. Woodhouse was
employed for seven years with Sterling Drug, Inc. in a variety of manufacturing
and engineering positions, most recently as Director of Pharmaceutical
Engineering. Prior experience includes positions with Bausch & Lomb, American
Hospital Supply (Critical Care Division) and Merck, Sharp & Dohme in
manufacturing, engineering and general management over a 15-year period. Mr.
Woodhouse received a B.S. degree in biology from Hampden-Sydney College and has
completed graduate business courses at Temple University.

11
<PAGE> 14
PART II

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

MARKET INFORMATION

The Common Stock is traded on the NASDAQ National Market tier of the
NASDAQ Stock Market under the symbol "BIOX." The following table sets forth, for
the periods indicated, the range of high and low last sale prices for the Common
Stock on the NASDAQ National Market System since January 1, 1995, as reported by
NASDAQ.

Year Ended December 31, 1995
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fourth Quarter........................................................... $16.75 $ 8.63
Third Quarter............................................................ 8.38 5.75
Second Quarter........................................................... 6.00 3.88
First Quarter............................................................ 5.63 3.00
</TABLE>

Year Ended December 31, 1996

<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fourth Quarter........................................................... $16.75 $13.25
Third Quarter............................................................ 16.75 11.25
Second Quarter........................................................... 17.50 12.25
First Quarter............................................................ 19.50 11.13
</TABLE>

HOLDERS

As of March 1, 1997, there were approximately 192 shareholders of
record. This does not reflect beneficial shareholders who hold their stock in
nominee or "street" name through various brokerage firms.

DIVIDENDS

No cash dividends have been paid on the Common Stock to date, and the
Company does not anticipate any cash dividends in the foreseeable future.

RECENT SALE OF UNREGISTERED SECURITIES

On April 2, 1996, the Company sold 200,000 shares of the Company's
Common Stock to an Officer of the Company at a purchase price of $12.25 per
share (a price determined by the Company's Board of Directors to be the fair
market value of the Common Stock on such date). The consideration for the shares
consisted of a promissory note due April 2, 2000 in the amount of $2,450,000,
which incurs simple interest at an annual rate of 6% and is secured by the
shares purchased. The Company believes that the offer and sale of these shares
was exempt from the registration requirements of the Securities Act of 1933 (the
"Act"), as amended under Section 4(2) of the Act, on the ground that it did not
involve any public offering.

12
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA

The following is a summary of selected historical financial data for
the Company. The data for each of the three years in the period ended December
31, 1996, have been derived from, and all data should be read in conjunction
with the audited consolidated financial statements of the Company, included in
Item 8 of this Report.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING DATA:
Total Revenues ............................. $ 3,136,430 $ 3,505,613 $ 8,906,075 $11,070,865 $15,578,912
Cost and Expenses:
Cost of Good Sold......................... 889,196 1,729,214 1,597,369 1,911,426 2,563,060
Research and Development,................. 5,438,026 5,504,594 5,059,660 5,136,957 5,484,655
Selling, General and Administrative....... 4,496,918 5,267,472 7,106,517 4,942,946 5,320,162
Provision for Environmental
Expense ........................ - 363,000 - - -
----------- ----------- ----------- ---------- -----------
Total Cost and Expenses..................... 10,824,140 12,864,280 13,763,546 11,991,329 13,367,877
----------- ----------- ----------- ---------- -----------
(Loss) Income from Operations............... (7,687,710) (9,358,667) (4,857,471) (920,464) 2,211,035
Interest and Miscellaneous
Income (Expense), net.............. 974,015 462,204 340,526 701,183 694,102
Minority Interest........................... 75,200 - - - -
Benefit from (Provision for ) Income
Taxes.............................. - - 137,638 - (135,000)
----------- ----------- ----------- ---------- -----------
Net (Loss) Income........................... ($6,638,495) ($8,896,463) ($4,379,307) ($219,281) $2,770,137
=========== =========== =========== ========== ===========
Net (Loss) Income per Common Share.......... ($0.74) ($1.00) ($0.48) ($0.02) $0.25
Shares used in computing Net
(Loss) Income Per Share................... 8,911,745 8,931,734 9,217,704 9,838,126 10,895,026
=========== =========== =========== ========== ===========
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working Capital.......................... $16,715,558 $8,879,724 $ 7,792,087 $10,078,132 $13,834,393
Total Assets............................. 24,830,468 16,907,890 15,554,641 17,381,576 25,994,027
Long-Term Debt and Capital Lease.........
Obligations (Excluding Current........
Portions)............................ 629,196 1,399,359 1,515,465 728,525 5,798,522
Total Shareholders' Equity............... 20,011,913 10,986,666 10,184,469 14,115,809 17,703,935
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW
The Company has been principally engaged in the research and
development, manufacturing and commercialization 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 up-front
payments from new potential corporate agreements and milestone payments from
existing agreements 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 this Form 10-K. As a significant
amount of the Company's future revenues may be based on payments from corporate
license and distribution agreements, the Company's total revenues and profit and
losses will 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 December 31, 1996, the Company's accumulated deficit was
$35,564,348.

13
<PAGE> 16
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

REVENUES. Total revenues for the year ended December 31, 1996 were
$15,578,912, representing an increase of $4,508,047 or 40.7% from the same
period of 1995. Product sales for the year ended December 31, 1996 were
$4,950,652, representing an increase of $1,336,883 or 37.0% over the same period
in 1995. This increase was due primarily to higher sales of Synvisc in Canada
and Sweden and from new sales of Hylaform in certain European countries.
Additionally, skin care product sales increased $243,831 or 13.9% primarily
resulting from the timing of orders. Sales of skin care products to the
Company's distributor, Amerchol, represented 99.4% of total skin care sales.
Revenues from licenses, royalties, research contracts and grants were
$10,628,260 in 1996, an increase of $3,171,164 or 42.5% from 1995 and
represented 68.2% of 1996 total revenues. This increase was due primarily to the
receipt of non-refundable fees, which amounted to $9,375,000 for the year ended
December 31, 1996, representing an increase of $2,548,412 over the same period
of 1995. Included in license fees for the year ended December 31, 1996, were
up-front payments from Collagen Corporation and Boehringer of $5,000,000 and
$1,000,000, respectively. Included in license fees for the year ended December
31, 1995 was an up-front payment from RPR of $3,500,000.

COSTS AND EXPENSES. Total costs and expenses were $13,367,877 for the
year ended December 31, 1996, representing an increase of $1,376,548 or 11.5%
over the same period of 1995. Cost of goods sold for the years ended December
31, 1996 and 1995 were $2,563,060 and $1,911,426, respectively, which
represented 51.8% and 52.9% of sales for the years ended December 31, 1996 and
1995, respectively. Research and development expenses were $5,484,655 for the
year ended December 31, 1996 representing an increase of $347,698 or 6.8% over
the prior year, due primarily to higher consulting costs. Selling, general and
administrative expenses for the year ended December 31, 1996 were $5,320,162,
representing an increase of $377,216 or 7.6% over the prior year due primarily
to higher legal costs associated with patents and trademarks.

INTEREST AND MISCELLANEOUS INCOME. Interest expense was $117,465 for
the year ended December 31, 1996, which represented an increase of $10,394 over
the prior year. Interest and miscellaneous income for the year ended December
31, 1996 was $811,567, representing an increase of $3,313 over the prior year,
due to higher average cash and investment balances. Additionally, the increase
in interest income was offset by a nonrecurring payment of $200,000 included in
miscellaneous income during 1995 relating to the reimbursement for promotional
materials.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994

REVENUES. Total revenues for the year ended December 31, 1995, were
$11,070,865, an increase of $2,164,790, or 24.3%, from the same period in 1994.
Product sales for the year ended December 31, 1995, were $3,613,769, an increase
of $1,100,542, or 43.8%, from the comparable period in 1994, and represented
32.6% of total 1995 revenues. New product sales from the introduction of Synvisc
in Sweden and an increase in the volume of Synvisc sales in Canada were the
major factors which contributed to the product sales increase. Partially
offsetting the increase in medical product sales was a decrease of $58,160, or
3.2%, in sales of skin care products due primarily to the timing of orders.
Sales of skin care products to the Company's distributor, Amerchol, represented
99.7% of total skin care sales in 1995. Revenues from licenses, royalties,
research contracts and grants were $7,457,096 in 1995, an increase of
$1,064,248, or 16.6%, from 1994 and represented 67.4% of total 1995 revenues.
This favorable change was primarily attributed to an increase in non-refundable
payments associated with strategic corporate license agreements in 1995.
Payments from RPR and from Roche were major contributors to the increase in
license revenues.

COSTS AND EXPENSES. Total costs and expenses, for the year ended
December 31, 1995, were $11,991,329, a decrease of $1,772,217, or 12.9%, from
the same period in 1994. Selling, general and administrative expenses in 1995
were $4,942,946, a decrease of $2,163,571, or 30.4%, from 1994. The decrease in
selling, general and administrative expenses was principally due to certain
non-cash charges recorded in 1994 related to the extension of expiring stock
options and a severance payment to a former officer. This decrease was partially
offset by an increase in cost of sales of $314,057 to $1,911,426 due to the
higher sales volumes. Cost of sales as a percentage of sales was 52.9% in 1995
versus 63.6% in 1994. This change was primarily due to an increase in production
volumes at the Company's manufacturing facility in Canada to support the demand
for medical products in Sweden

14
<PAGE> 17
and Canada. Research and development expenses in 1995 were $5,136,957,
representing an increase of $77,297, or 1.5% over 1994.

INTEREST AND MISCELLANEOUS INCOME. Interest expense was $107,071 for
the year ended December 31, 1995, an increase of $43,720, from the prior year.
This increase was attributed to a construction and equipment loan from the
Quebec government. Interest and miscellaneous income was $808,254 for the year
ended December 31, 1995, representing an increase of $404,377 over 1995, due to
higher average cash and investment balances and to an increase in miscellaneous
income due to a nonrecurring payment for promotional materials received in
conjunction with the distribution agreement with RPR.

INCOME TAXES

Provisions for federal or state income taxes were not necessary for the
years ended December 31, 1994 and 1995. In 1996, the Company recorded a federal
tax provision of $135,000 for alternative minimum tax owed. All net operating
losses have been carried forward into future years. In 1994, the Company's
Canadian subsidiary, in accordance with provincial tax law, converted its
provincial tax loss into a refundable cash credit of $137,638.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $3,034,764 and
held-to-maturity investments, invested in U.S. government securities, of
$10,603,358 at December 31, 1996. Overall, the Company's cash and
held-to-maturity investments position increased by $3,150,856 for the year ended
December 31, 1996. The Company invests its excess cash in U.S. government
securities, and accordingly, any security purchased with a maturity of less than
three months 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 license
fee payments from corporate partners. Over the past three years, the Company has
received funding of $5,827,775 from the private placement of equity securities
and $19,533,000 from license fee payments.

For the year ended December 31, 1996 the Company had positive cash flow
from operations of $3,236,203 which was primarily due to non-recurring fees
received during the year of $9,375,000. In 1996 the Company invested $765,599 in
property, plant and equipment, primarily associated with the capitalization of
costs related to a lease the Company entered into for a building. This lease
represents a 93,000 square foot building in New Jersey in which the Company
intends to locate its U.S. manufacturing facility. The lease term is
approximately 10 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 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 $919,216 in 1996
from the exercise of Company stock options.

In February 1997, the Company entered into a marketing and distribution
agreement with Wyeth 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.

The planned increase in manufacturing capacity and commercialization of
medical products will increase costs and expenses for 1997. The Company's
capital spending associated with developing its additional capacity is expected
to approximate $7,000,000 during 1997. The Company plans to seek lease financing
which, if obtained, could fund a portion of these capital costs. The Company
also expects to incur higher expenses in 1997 associated

15
<PAGE> 18
with developing its internal infrastructure to support the administration of its
sales force for its distribution agreements with Boehringer and Wyeth as well as
the establishment of a sales and marketing function for the Company's direct
sales in certain European countries. The Company believes that its capital
needs and higher operating expenses will be supported by its current working
capital position, up-front license fee payments from the potential completion
of additional distribution agreements and potential milestone payments from
existing corporate partners.

During 1996, 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 changing the
disclosures associated with this change. The Company is required to adopt this
standard in 1998 and is currently evaluating the impact of this standard.

CONTINGENT LIABILITY

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 PRP's 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 has 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; there
fore, the reserve at December 31, 1995 represented $700,610. The steering
committee for the PRPs is presently preparing a buy-out proposal pursuant to a
consent order with the DER. This buy-out proposal will identify what the
steering committee believes to be the total clean-up costs and each PRP's
assigned portion of the total clean-up costs. The Company plans to 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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See page F-1 of this Report, which includes an index to the
consolidated financial statements.

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

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors. The information with respect to directors required by
this item is incorporated herein by reference to the Company's Proxy Statement
relating to the Company's Annual Meeting of Shareholders to be held on May 29,
1997 (the "Proxy Statement").

(b) Executive Officers. The information with respect to executive
officers required by this item is set forth in Part I of the Report.

16
<PAGE> 19
(c) Reports of Beneficial Ownership. The information with respect to
reports of beneficial ownership required by this item is incorporated herein by
reference to the Company's Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

Information required under this Item is incorporated herein by
reference to the Company's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required under this Item is incorporated herein by
reference to the Company's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required under this Item in incorporated herein by
reference to the Company's Proxy Statement.

PART IV

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

LIST OF FINANCIAL STATEMENTS

See page F-1 of this Report, which includes an index to consolidated
financial statements.

LIST OF FINANCIAL STATEMENT SCHEDULES

None.

LIST OF EXHIBITS (numbered in accordance with Item 601 of Regulations S-K)

3.1 Amended and Restated Certificate of Incorporation of Biomatrix,
Inc. as filed as an Exhibit to Registration No. 33-41424, and
incorporated herein by reference thereto.

3.2 Amended and Restated Bylaws of the Company as filed as an Exhibit
to Registration No. 33-41424, and incorporated herein by reference
thereto.

4 Specimen Stock Certificate as filed as an Exhibit to Registration
No. 33-41424, and incorporated herein by reference thereto.

10.1 Distributor Agreement dated April 1, 1986 between Biomatrix, Inc.
and Union Carbide Chemicals and Plastics Corporation, Specialty
Chemicals Division, assigned to Amerchol Corporation on October 1,
1986, as amended as of April 1, 1991, as filed as an Exhibit to
Registration No. 33-41424, and incorporated herein by reference
thereto.

10.2 Stock Purchase Agreement dated June 21, 1991 by and among
Biomatrix, Inc., Biomatrix Medical Canada Inc. and Investment Fund
in Biotechnology Biocapital Limited Partnership, as filed as an
Exhibit to Registration No. 33-41424, and incorporated herein by
reference thereto.

17
<PAGE> 20
10.3 Shareholders Agreement dated June 21, 1991 between Biomatrix,
Inc., Biomatrix Medical Canada Inc. and Investment Fund in
Biotechnology Biocapital Limited Partnership, as filed as an
Exhibit to Registration No. 33-41424, and incorporated herein by
reference thereto.

10.4 Technology License Agreement dated as of June 21, 1991 between
Biomatrix, Inc. and Biomatrix Medical Canada Inc. as filed as an
Exhibit to Registration No. 33-41424, and incorporated herein by
reference thereto.

10.5 Management Services Agreement dated as of June 21, 1991 between
Biomatrix, Inc. and Biomatrix Medical Canada Inc. as filed as an
Exhibit to Registration No. 33-41424, and incorporated herein by
reference thereto.

10.6 Consulting Agreement dated March 10, 1988 between Biomatrix, Inc.,
and Charles Weiss, M.D. as filed as an Exhibit to Registration No.
33-41424, and incorporated herein by reference thereto.

10.7 Employment Agreement dated December 30, 1988 between Biomatrix,
Inc. and Endre A. Balazs, M.D. As filed as an Exhibit to
Registration No. 33-41424, and incorporated herein by reference
thereto. Management contract or compensatory plan required to be
filed as an exhibit to this form pursuant to Item 14(c) of this
report.

10.8 Development Agreement by and among Biomatrix, Inc., Biomatrix
Svenska AB and OA Investor KB (Up-Will) dated February, 1990 as
filed as an Exhibit to Registration No. 33-41424, and incorporated
herein by reference thereto.

10.9 1984 Stock Option Plan (as amended), and forms of Incentive and
Non-Statutory Stock Option Agreements. As filed as an Exhibit to
Registration No. 33-41424, and incorporated herein by reference
thereto. Management contract or compensatory plan required to be
filed as an exhibit to this form pursuant to Item 14(c) of this
report.

10.10 Forms of Employment and Confidentiality Agreements, as filed as an
Exhibit to Registration No. 33-41424, and incorporated herein by
reference thereto.

10.11 Distributorship Agreement dated January 1, 1991 between Biomatrix,
Inc. and Equinord KB, as filed as an Exhibit to Registration No.
33-41424, and incorporated herein by reference thereto.

10.12 Lease dated June 1, 1992 between Biomatrix, Inc. and Safer
Development & Management Corp. for lease of premises located at 65
Railroad Avenue, Ridgefield, New Jersey, as filed as an Exhibit to
the 1992 annual report on Form 10-K, and incorporated herein by
reference thereto.

10.13 Technology and License Agreement dated June 26, 1991 between
Biomatrix, Inc. and Union Carbide Corporation, as amended as of
October 3, 1986, as filed as an Exhibit to Registration No.
33-41424, and incorported herein by reference thereto.

10.14 License Agreements dated as of May 21, 1982 by and between
Biomatrix, Inc. and each of Drs. Endre A. Balazs, Janet L.
Denlinger and Gerald S. Lazarus, as filed as an Exhibit to
Registration No. 33-41424, and incorporated herein by reference
thereto.

10.15 Amendment to Employment Agreement dated December 30, 1988 between
Biomatrix, Inc. and Endre A. Balazs, M.D., as filed as an Exhibit
to the 1992 annual reports on Form 10-K, and incorporated herein
by reference thereto. Management contract or compensatory plan
required to be filed as an exhibit to this form pursuant to Item
14(c) of this report.

10.16 Retirement Plan Agreement dated July 1, 1992 between Biomatrix,
Inc. and the trustees of the Company, as filed as an Exhibit to
the 1992 annual reports on Form 10-K, and incorporated herein by

18
<PAGE> 21
reference thereto. Management contract or compensatory plan
required to be filed as an exhibit to this form pursuant to Item
14(c) of this report.

10.17 Distribution agreement dated November 9, 1993 between Biomatrix,
Inc. and Syntex Pharmaceuticals International Limited, as filed as
an Exhibit to the 1993 annual reports on Form 10-K, and
incorporated herein by reference thereto. (Confidential portions
have been filed separately with the Commission.)

10.18 Loan Agreement between Biomatrix Medical Canada Inc. and Society
de Development Industrial du Quebec, as filed as an Exhibit to the
1993 annual reports on Form 10-K, and incorporated herein by
reference thereto.

10.19 Consulting Agreement dated June 1, 1993 between Biomatrix, Inc.
and Julius A. Vida, Ph.D., as filed as an Exhibit to the quarterly
report on Form 10-Q for the quarter ended June 30, 1993, and
incorporated herein by reference thereto. Management contract or
compensatory plan required to be filed as an exhibit to this form
pursuant to Item 14(c) of this report.

10.20 Stock Purchase Agreement dated June 23, 1994 between Biomatrix,
Inc. and Syntex Pharmaceuticals International Limited, as filed as
an Exhibit to the quarterly report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference thereto.

10.21 Second Distribution Agreement dated June 23, 1994 between
Biomatrix, Inc. and Syntex Pharmaceuticals International Limited,
as filed as an Exhibit to the quarterly report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference thereto. (Confidential portions have been filed
separately with the Commission.)

10.22 Distribution Agreement dated March 17, 1995, between Biomatrix,
Inc. and Recordati Chimica e. Farmaceutica S.p.A., as filed as an
Exhibit to the quarterly report on Form 10-Q for the quarter ended
March 31, 1995, and incorporated herein by reference thereto.
(Confidential portions have been filed separately with the
Commission.)

10.23 Stock Purchase Agreement dated March 17, 1995, between Biomatrix,
Inc. and Recordati Chimica e. Farmaceutica S.p.A., as filed as an
Exhibit to the quarterly report on Form 10-Q for the quarter ended
March 31, 1995, and incorporated herein by reference therto.

10.24 Distribution Agreement dated September 8, 1995, between Biomatrix
Medical Canada Inc. and RhUne-Poulenc Rorer Canada Inc., as filed
as an Exhibit to the quarterly report on Form 10-Q for the quarter
ended September 30, 1995, and incorporated herein by reference
thereto. (Confidential portions have been filed separately with
the Commission.)

10.25 Agreement dated August 29, 1995, between Biomatrix, Inc. and Rory
B. Riggs, as filed as an Exhibit to the quarterly report on Form
10-Q for the quarter ended September 30, 1995, and incorporated
herein by reference thereto.

10.26 Stock Purchase Agreement dated July 11, 1995, between Biomatrix,
Inc. and Rory B. Riggs, as filed as an Exhibit to the quarterly
report on Form 10-Q for the quarter ended September 30, 1995, and
incorporated herein by reference thereto.

10.27 Promissory Note from Rory B. Riggs to Biomatrix, Inc., as filed as
an Exhibit to the quarterly report on Form 10-Q for the quarter
ended September 30, 1995, and incorporated herein by reference
thereto.

10.28 Amendment dated July 10, 1995, to the Consulting Agreement dated
June 1, 1993 between Biomatrix, Inc. and Julius A. Vida, as filed
as an Exhibit to the quarterly report on Form 10-Q for the quarter
ended September 30, 1995 , and incorporated herein by reference
therto. Management contract or compensatory plan required to be
filed as an exhibit to this form pursuant to Item 14(c) of this
report.

19
<PAGE> 22
10.29 1994 Stock Option Plan. Filed as an exhibit to the Company's proxy
statement filed pursuant to Rule 14a-6 dated June 7, 1994, as
filed as an Exhibit to the 1995 Annual Reports on Form 10-K, and
incorporated herein by reference thereto.

10.30 Non-employee director stock option plan. Filed as an exhibit to
the Company's proxy statement filed pursuant to Rule 14a-6 dated
May 23, 1995, as filed as an Exhibit to the 1995 Annual Reports on
Form 10-K, and incorported herein by reference thereto.

10.31 United States Distribution Agreement dated June 14, 1996 between
Biomatrix, Inc. and Collagen Corporation, as filed as an Exhibit
to the quarterly report on Form 10-Q for the quarter ended June
30, 1996 and incorporated herein by reference thereto.
(Confidential treatment requested. Confidential portions have been
omitted and filed separately with the Commission.)

10.32 Restated Distribution Agreement between Biomatrix, Inc. and Syntex
Pharmaceuticals International Limited dated April 9, 1996, as
filed as an Exhibit to the quarterly report on Form 10-Q for the
quarter ended June 30, 1996, and incorported herein by reference
thereto. (Confidential treatment requested. Confidential portions
have been omitted and filed separately with the Commission.)

10.33 First Amendment to Stock Purchase Agreement, date April 7, 1996,
between Biomatrix, Inc. and Syntex Pharmaceuticals International
Limited, as filed as an Exhibit to the quarterly report on Form
10-Q for the quarter ended June 30, 1996, and incorporated herein
by reference thereto. (Confidential treatment requested.
Confidential portions have been omitted and filed separately with
the Commission.)

10.34 Agreement of Lease, dated April 18, 1996, between Ridgefield
Associates and Biomatrix, Inc., as filed as an Exhibit to the
quarterly report on Form 10-Q for te quarter ended June 30, 1996,
and incorporated herein by reference thereto. (Confidential
treatment requested. Confidential portions have been omitted and
filed separately with the Commission.)

10.35 International Distribution Agreement, dated June 14, 1996, between
Biomatrix, Inc. and Collagen Corporation, as filed as an Exhibit
to the quarterly report on Form 10-Q for the quarter ended June
30, 1996, and incorporated herein by reference thereto.
(Confidential treatment requested. Confidential portions have been
omitted and filed separately with the Commission.)

10.36 Employment Agreement, dated April 2, 1996, between Biomatrix, Inc.
and Rory B. Riggs, as filed as an Exhibit to the quarterly report
on Form 10-Q for the quarter ended June 30, 1996, and incorporated
herein by reference thereto.

10.37 Amendment dated March 31, 1996 to the Consulting Agreement, dated
June 1, 1993, between Biomatrix Inc. and Julius A. Vida, as filed
as and Exhibit to the quarterly report on Form 10-Q for the
quarted ended June 30, 1996, and incorporated herein by reference
thereto.

10.38 Restricted Stock Purchase Agreement, date April 2, 1996, between
Biomatrix, Inc. and Rory B. Riggs, as filed as an Exhibit to the
Schedule 13D of Rory B. Riggs filed with the Commission on June
24, 1996 and incorporated herein by reference thereto.

10.39 Secured Promissory Note, dated April 2, 1996, by Rory B. Riggs and
Biomatrix Inc., as filed as an Exhibit to the Schedule 13D of Rory
B. Riggs filed with the Commission on June 24, 1996 and
incorporated herein by reference thereto.

10.40 Stock Pledge Agreement, dated April 2, 1996, between Rory B. Riggs
and Biomatrix Inc., as filed as an Exhibit to the Schedule 13D of
Rory B. Riggs filed with the Commission on June 24, 1996 and
incorporated herein by reference thereto.

20
<PAGE> 23
10.41 Distribution Agreement dated December 17, 1996, between Biomatrix,
Inc. and Boehringer Ingelheim France, S.A. (Confidential treatment
requested. Confidential portions have been omitted and filed
separately with the Commission.)

11 Computation of Earnings per Share.

21 List of Subsidiaries, as filed as an Exhibit to Registration No.
33-41424, and incorporated herein by reference thereto.

23.1 Consent of Coopers & Lybrand L.L.P., independent auditors of the
Company.

27.1 Financial Data Schedule.

------------------

REPORT ON FORM 8-K
None.

21
<PAGE> 24
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

BIOMATRIX, INC.

/s/ ENDRE A. BALAZS
By:. . . . . . . . . .

(Endre A. Balazs)
Chief Executive Officer,
Chief Scientific Officer, Director

Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ ENDRE A BALAZS
- ------------------------ Chief Executive Officer, Chief March 28, 1997
(Endre A Balazs) Scientific Officer, Director
(Principal Executive Officer)

/s/ RORY B RIGGS
- ------------------------ President, Acting Chief Financial March 28, 1997
(Rory B Riggs) Officer, Director
(Principal Financial and Accounting
Officer)

/s/ JANET L DENLINGER
- ------------------------ Executive Vice President, March 28, 1997
(Janet L Denlinger) Director

/s/ H STUART CAMPBELL
- ------------------------ Chairman of the Board of March 28, 1997
(H Stuart Campbell) Directors

/s/ KURT MARK
- ------------------------ Director March 28, 1997
(Kurt Mark)

/s/ JULIUS A VIDA
- ------------------------ Director March 28, 1997
(Julius A Vida)

</TABLE>

22
<PAGE> 25

BIOMATRIX, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements:
<TABLE>
<CAPTION>
Page
----

<S> <C>
Report of Independent Accountants..................................................... F-2

Consolidated Balance Sheets as of December 31, 1995 and 1996.......................... F-3

Consolidated Statements of Operations for the years ended December 31,
1994, 1995 and 1996................................................................. F-4

Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1994, 1995 and 1996.................................... F-5

Consolidated Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996................................................................. F-6

Notes to Financial Statements......................................................... F-7 to F-19
</TABLE>

Financial statement schedules are omitted for the reason that they are not
applicable or the required information is included in the consolidated financial
statements or notes thereto.

F-1
<PAGE> 26
REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and
Board of Directors of
Biomatrix, Inc.

We have audited the accompanying consolidated balance sheets of Biomatrix,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. 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 consolidated financial position of Biomatrix, Inc.
and subsidiaries as of December 31, 1996 and 1995 and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND L.L.P.

Parsippany, New Jersey
March 7, 1997

F-2
<PAGE> 27
BIOMATRIX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31,
------------

1995 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,888,869 $ 3,034,764
Held-to-maturity investments 1,598,397 10,603,358
Accounts receivable, less allowance for doubtful accounts
of $25,500 in 1995 and 1996 1,035,699 1,230,456
Inventory, at lower of cost (average) or market 660,607 727,083
Prepaid expenses and other current assets 431,802 730,302
------------ ------------

Total current assets 12,615,374 16,325,963
Property, plant and equipment, net 4,635,656 9,506,005
Other assets 130,546 162,059
------------ ------------
Total assets $ 17,381,576 $ 25,994,027
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable and capital lease obligation $ 792,615 $ 167,408
Accounts payable 435,329 724,743
Accrued expenses 1,309,298 1,599,419
------------ ------------

Total current liabilities 2,537,242 2,491,570
Notes payable and capital lease obligations less current maturities 728,525 5,798,522
------------ ------------
Total liabilities 3,265,767 8,290,092
------------ ------------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, $.0001 par value: 20,000,000
shares authorized; 10,125,949 and 10,587,615 issued
and 10,123,135 and 10,584,801 outstanding in
1995 and 1996, respectively 1,013 1,059
Preferred stock, 3,000 shares authorized; none issued
Additional paid-in capital 53,286,223 56,682,755
Note receivable - related party -- (2,450,000)
Accumulated deficit (38,334,485) (35,564,348)
Equity adjustment from foreign currency translation (824,982) (953,571)
Treasury stock, 2,814 shares of common stock at cost (11,960) (11,960)
------------ ------------

Total shareholders' equity 14,115,809 17,703,935
------------ ------------
Total liabilities and shareholders' equity $ 17,381,576 $ 25,994,027
============ ============

</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 28
BIOMATRIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years ended December 31,
------------------------

1994 1995 1996
---- ---- ----

<S> <C> <C> <C>
Net sales $ 2,513,227 $ 3,613,769 $ 4,950,652
Income from licenses, royalties, research
contracts, and grants 6,392,848 7,457,096 10,628,260
------------ ------------ ------------
Total revenues 8,906,075 11,070,865 15,578,912
------------ ------------ ------------

Costs and expenses:
Cost of sales 1,597,369 1,911,426 2,563,060
Research and development expenses 5,059,660 5,136,957 5,484,655
Selling, general and administrative expenses 7,106,517 4,942,946 5,320,162
------------ ------------ ------------
Total costs and expenses 13,763,546 11,991,329 13,367,877
------------ ------------ ------------

(Loss) income from operations (4,857,471) (920,464) 2,211,035
Interest expense (63,351) (107,071) (117,465)
Interest and miscellaneous income 403,877 808,254 811,567
------------ ------------ ------------
(Loss) income before taxes (4,516,945) (219,281) 2,905,137
------------ ------------ ------------

Benefit from (provision for) income taxes 137,638 -- (135,000)
------------ ------------
Net (loss) income ($ 4,379,307) ($ 219,281) $ 2,770,137
============ ============ ============

Net (loss) income per common and common
equivalent share:
Net (loss) income ($ 0.48) ($ 0.02) $ 0.25
============ ============ ============
Weighted average common and common
equivalent shares outstanding 9,217,704 9,838,126 10,895,026
============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE> 29
BIOMATRIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Equity
Capital stock $.0001 Par Value Adjustment Treasury
------------------------------ Note From Stock
Common-voting Additional Receivable- Foreign -----
Shares Par Paid-in Related Accumulated Currency Shares
Issued Value Capital Party Deficit Translation Held Cost
========== ====== ============ ============ ============= ========= ====== ========
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 8,946,918 $ 894 $45,300,606 ($33,735,897 ($566,977) (2,814) ($11,960)

Sale of Common Stock 355,000 36 1,996,840
Compensatory stock options,
net of forfeitures 1,502,304
Options exercised 170,865 17 347,075
Adjustments resulting from
translation adjustments ( 269,162)
Net loss - 1994 ( 4,379,307)
---------- ------ ------------ ------------ ------------- --------- ------ --------
Balance at December 31, 1994 9,472,783 947 49,146,825 ( 38,115,204) ( 836,139) (2,814) ( 11,960)

Sale of Common Stock 550,000 55 3,830,845
Amortization of compensatory
stock options, net of
forfeitures 44,000
Options exercised 103,166 11 264,553
Adjustments resulting from
translation adjustments 11,157
Net loss - 1995 ( 219,281)
---------- ------ ------------ ------------ ------------- --------- ------ --------
Balance at December 31, 1995 10,125,949 1,013 53,286,223 ( 38,334,485) ( 824,982) (2,814) ( 11,960)

Sale of Common Stock 200,000 20 2,449,980
Compensatory stock options 27,362
Options exercised 261,666 26 919,190
Adjustments resulting from
translation adjustments (128,589)
Note receivable-related party ($2,450,000

Net income - 1996 2,770,137
---------- ------ ------------ ------------ ------------- --------- ------ --------
Balance at December 31, 1996 10,587,615 $1,059 $56,682,755 ($2,450,000) ($35,564,348 ($953,571) (2,814) ($11,960)
========== ====== ============ ============ ============= ========= ====== ========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 30
BIOMATRIX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

December 31,
------------

1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income........................................ ($4,379,307) ($ 219,281) $ 2,770,137
----------- ------------ -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 531,693 534,128 562,534
Amortization of deferred income...................... ( 919,791) (1,943,050) -
.............................Stock option compensation 1,502,304 44,000 27,499
Change in assets and liabilities:
Accounts receivable..................................... ( 48,534) ( 604,711) ( 196,177)
Inventory............................................... ( 252,474) ( 56,304) ( 68,971)
Prepaid expenses and other current assets............... ( 86,830) ( 48,629) ( 284,629)
Other assets............................................ ( 34,014) ( 54,992) ( 49,892)
Accounts payable, accrued expenses and deferred income. 52,764 ( 169,862) 475,702
----------- ------------ -----------
Total adjustments..................................... 745,118 ( 2,299,420) 466,066
----------- ------------ -----------
Net cash(used in) provided by operating activities............ ( 3,634,189) ( 2,518,701) 3,236,203
----------- ------------ -----------

Cash flows from investing activities:
Capital expenditures..................................... ( 179,962) ( 263,592) ( 765,599)
Purchases of held-to-maturity investments................ (17,247,950) ( 6,506,796) (18,563,530)
Maturity of held-to-maturity investments................. 13,910,594 13,646,583 9,558,569
----------- ------------ -----------
Net cash (used in) provided by investing activities........... ( 3,517,318) 6,876,195 ( 9,770,560)
----------- ------------ -----------

Cash flows from financing activities:
Loan proceeds............................................ 297,341 - -
Payments of notes payable and capital leases............. ( 21,549) ( 132,958) ( 230,949)
Stock options exercised.................................. 347,092 264,563 919,216
Sale of common stock ................................... 1,996,875 3,830,900 -
----------- ------------ -----------
Net cash provided by financing activities..................... 2,619,759 3,962,505 688,267
----------- ------------ -----------

Effect of exchange rate changes on cash....................... ( 3,775) 87,542 ( 8,015)
----------- ------------ -----------
Net (decrease) increase in cash and cash equivalents.. ( 4,535,523) 8,407,541 (5,854,105)
Cash and cash equivalents at beginning of period.............. 5,016,851 481,328 8,888,869
----------- ------------ -----------
Cash and cash equivalents at end of period.................... $ 481,328 $ 8,888,869 $ 3,034,764
----------- ------------ -----------

Supplemental cash flow data:
Interest paid, net of capitalized interest............... $ 63,279 $ 107,071 $ 117,465
Taxes paid............................................... - - $ 135,000
Non-cash investing and financing:
Capital expenditures financed by capital lease obligations - - $ 4,681,350
Sale of common stock financed with note receivable....... - - $ 2,450,000
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 31
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS

Biomatrix, Inc. (the "Company") was founded in 1981 to develop,
manufacture and commercialize proprietary viscoelastic biological polymers,
called hylans, for use in therapeutic medical applications and skin care. The
Company's hylans are derived from the intercellular matrix, which is the highly
organized structure separating cells and integrating them into functional
tissues. Viscoelastic products are used in medicine by introducing them into the
intercellular matrix during, after or instead of surgical procedures to
supplement, augment, regulate and manipulate the healing and regenerative
process of the body and to regulate the homeostasis of the intercellular matrix.
The Company's operations consist of therapeutic medical products, skin care
intermediate products and toxicity testing. The Company's business is subject to
certain risks, including but not limited to obtaining and enforcing patents, the
uncertainties associated with the regulatory approval process and successful
commercialization of its products.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Biomatrix Svenska AB, and its majority-owned
subsidiary, Biomatrix Medical Canada Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.

Reclassification
Certain amounts in the 1994 and 1995 consolidated statements of operations
have been reclassified in order to conform to the 1996 presentation.

Property, Plant and Equipment
Property, plant and equipment is recorded at cost.

Depreciation and Amortization
Laboratory, plant, computer and office equipment and motor vehicles are
depreciated on the straight-line method over their estimated useful lives.
Capital leases and leasehold improvements are amortized on the straight-line
method over the estimated useful life of the property or the terms of the
related lease, whichever is shorter. Expenditures for additions, major renewals
and improvements are capitalized and expenditures for maintenance and repairs
are charged to expense as incurred. When assets are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts
and the resulting gain or loss is recognized in income for the period.

Cash and Cash Equivalents
Cash and cash equivalents include highly liquid short-term investments in
money market funds, at cost, and U.S. Government or Government Agency
securities, at amortized cost, purchased with a maturity of less than three
months.

Fair Value of Financial Instruments
Cash, accounts receivable, accounts payable and accrued liabilities are
reflected in the financial statement at fair value because of the short-term
maturity of those instruments. The fair value of the Company's notes payable
(including current installments) is estimated based on the current rate offered
to the Company for debt of the same remaining maturities. The estimated fair
value of the Company's notes payable approximates the carrying value at December
31, 1995 and 1996.

F-7
<PAGE> 32
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments
Investments, which consist of U.S. Government and Government Agency
Securities, are classified as held-to-maturity and are reported at amortized
cost, which approximates market.

Revenue Recognition
The Company's product revenue is recognized at the time the products are
shipped. Research contract revenue is recognized at the time the service is
performed. Revenue from license payments is recognized in the period earned,
which is when all related commitments have been satisfied.

Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Income Taxes
Deferred taxes are provided on a liability method, in accordance with SFAS
No. 109, whereby deferred tax assets are recognized for deductible temporary
differences, and operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.

Deferred tax assets are reduced by a valuation allowance, when, in the
opinion of management, it is more likely than not that some portions or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

Impact of the Adoption of Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
changes the reporting requirements for earnings per share ("EPS") for publicly
traded companies by replacing primary EPS with basic EPS and changing the
disclosures associated with this change. The Company is required to adopt this
standard in 1998 and is currently evaluating the impact of this standard.

Foreign Currency Translation
The assets and liabilities of the Company's subsidiaries are translated
into U.S. dollars at year-end exchange rates and revenue and expense items are
translated at average rates of exchange prevailing during the year. Resulting
translation adjustments are accumulated in a separate component of shareholders'
equity. Gains and losses resulting from foreign currency transactions
(transactions denominated in a currency other than the Company's functional
currency) are included in the net (loss) income.

Net (Loss) Income Per Common Share
Net (loss) income per share is based upon the weighted-average common
shares outstanding during the fiscal year. Common share equivalents have not
been included in the calculations in the years when the Company generated a loss
because their effect would be antidilutive.

F-8
<PAGE> 33
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3. INVENTORIES
Inventories at December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Finished goods................................................... $ 120,057 $ 148,925
Work-in-process.................................................. 427,193 300,704
Raw materials.................................................... 113,357 277,454
---------- ----------
$ 660,607 $ 727,083
========= =========
</TABLE>

4. NOTE RECEIVABLE - RELATED PARTY
The note receivable - related party relates to the acquisition of the
common stock of the Company by an officer of the Company at fair market value.
The note is with recourse and payable with interest on April 2, 2000.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 1995 and 1996 consisted of:
<TABLE>
<CAPTION>
Estimated
1995 1996 Useful Life
---- ---- -----------
<S> <C> <C> <C>
Land and buildings.......................................... $2,481,799 $7,487,842 25 years*
Research laboratory equipment............................... 1,531,819 1,682,086 5-10 years
Manufacturing equipment..................................... 1,838,917 1,956,946 7-10 years
Office equipment............................................ 739,099 883,630 5-10 years
Leasehold improvements...................................... 1,069,082 1,075,688 3-7 years
Motor vehicles.............................................. 2,325 2,257 5 years
---------- ----------
7,663,041 13,088,449
Less accumulated depreciation and amortization.............. (3,027,385) (3,582,444)
---------- ----------
$4,635,656 $9,506,005
========== ==========
</TABLE>

* Buildings only

Repairs and maintenance expenses for the three years ended December 31,
1994, 1995 and 1996 were, $98,359, $87,882 and $125,715 respectively.
Capitalized interest for the year ended December 31, 1996 was $94,940.

Assets recorded under capital leases as of December 31, 1996 are included
in property, plant and equipment as land and building and office equipment in
the amounts of $5,017,089 and $90,205 respectively. Accumulated amortization
related to these leases was $9,020 as of December 31, 1996.

6. ACCRUED EXPENSES
Accrued expenses at December 31, 1995 and 1996 consisted of:

<TABLE>
<CAPTION>
Accrued Expenses: 1995 1996
---- ----
<S> <C> <C>
Environmental expenses...................................... $ 700,610 $ 700,610
Accrued personnel expenses.................................. 449,642 546,031
Other accrued expenses...................................... 159,046 352,778
----------- -----------
$1,309,298 $1,599,419
</TABLE>

F-9
<PAGE> 34
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

<TABLE>
<CAPTION>
Notes Payable: 1995 1996
---- ----
<S> <C> <C>
Mortgage note, payable in monthly installments through
July 2001................................................ $ 539,756 $ 501,901
Construction and equipment loan............................ 981,384 780,008
Capital lease obligations...................................... - 4,684,021
----------- -----------
Total ............................................ 1,521,140 5,965,930
Less current maturities..................................... (792,615) (167,408)
----------- -----------
$ 728,525 $ 5,798,522
=========== ===========
</TABLE>

In connection with its acquisition of a manufacturing facility, the
Company's majority-owned Canadian subsidiary obtained a $668,870 mortgage with
an annual interest rate of 11.25% and final payment of $525,053 due in June
1996. In July 1996, the Company refinanced the final payment with another
mortgage which accrues interest at an annual rate of 9.5% and has a final
payment of $323,785 due in June 2001.

The Company's majority-owned Canadian subsidiary obtained a $950,069
construction and manufacturing equipment loan from the Canadian government of
which $840,064 and $110,005 was funded in 1993 and 1994, respectively. Interest
on the loan accrues at the prevailing annual variable rate which was
approximately 9% at December 31, 1995 and 7% at December 31, 1996. In January
1996, the Company amended the repayment terms of the agreement, whereby the
Company will make quarterly principal payments and a final payment in 2001. The
principal payments shall correspond to 30% of the Canadian subsidiary's
quarterly net profit (excluding depreciation), with an annual maximum of
$175,900 and an annual minimum of $102,600. The loan agreement contains
covenants which require the maintenance of certain financial ratios by the
Canadian subsidiary.

In September 1996, the Company entered into a capital lease of a building
in which the Company intends to locate its U.S. manufacturing facility. This
lease has been accounted for as a capital lease and has an imputed interest rate
of approximately 9%. Within the first three years of this 10 year 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 purchase by the Company of
this building for approximately the same price.

Future minimum payments due under notes payable, mortgage and capital
lease obligations are as follows at December 31, 1996:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1997....................................... $ 584,384
1998....................................... 578,160
1999....................................... 5,143,288
2000....................................... 172,594
2001....................................... 710,613
-------------
Total minimum payments..................... 7,189,039
Less - amount representing interest........ ( 1,223,109)
------------
Principal obligations...................... 5,965,930
Less - current portion..................... ( 167,408)
-------------
$ 5,798,522
=============
</TABLE>

F-10
<PAGE> 35
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)

Line of Credit
The Company has a $387,777 credit agreement with a Canadian bank with an
interest rate at prime + -1/2 %. There were no borrowings outstanding at
December 31, 1996.

8. CAPITAL STOCK

On June 23, 1994, the Company completed a private sale of 355,000 shares
of common stock to F. Hoffmann-La Roche Ltd. ("Roche"). Net proceeds to the
Company related to this sale were $1,996,875.

On March 2, 1995, the Company completed a private sale of 250,000 shares
of common stock to Recordati Industria Chimica e Farmaceutica S.p.A.
("Recordati"). Net proceeds to the Company related to this sale were $2,000,000.

On July 19, 1995, the Company completed a private sale of 300,000 shares
of common stock to a member of the Company's Board of Directors. Net proceeds to
the Company related to this sale were $1,830,900.

On April 2, 1996, the Company completed a private sale of 200,000 shares
of common stock to an officer of the Company. The aggregate purchase price of
$2,450,000 was financed in full with a full recourse promissory note issued from
the Company.

The 3,000 shares of authorized preferred stock are issuable by the Board
of Directors. The terms, designations and other criteria are determinable by the
Board of Directors upon issuance.

9. INCOME TAXES

<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
(Loss) income before income taxes:
Domestic................................... ($2,506,000) ($1,185,000) $3,881,000
Foreign.................................... ( 2,011,000) 966,000 ( 976,000)
----------- ----------- -----------
($4,517,000) ($ 219,000) $2,905,000
=========== =========== ===========
Income tax (benefit) expense:
Domestic................................... - - $ 135,000
Foreign.................................... ($ 138,000) - -
----------- ----------- -----------
($ 138,000) - $ 135,000
=========== =========== ===========
</TABLE>

In 1994, the Company's Canadian subsidiary, in accordance with provincial tax
law, converted its provincial tax loss into a refundable cash credit of
$137,638.

F-11
<PAGE> 36
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. INCOME TAXES (CONTINUED)

A reconciliation of the United States federal statutory rate to the Company's
effective tax rate for the years ended December 31, 1994, 1995, and 1996 is as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----

<S> <C> <C> <C>
(Loss) income before income taxes................ ( 4,517,000) ($ 219,000) $2,905,000
Statutory federal corporate rate (34%)........... ( 1,536,000) ( 75,000) 988,000
Effect of:
Foreign taxes.............................. ( 138,000) 367,000 -
Alternative minimum tax.................... - - 135,000
Losses without a current year benefit...... 1,536,000 75,000 332,000
Change in valuation allowance.............. - ( 367,000) (1,320,000)
---------- ------------ ----------
Income tax (benefit) provision ($ 138,000) - $ 135,000
========== ============ ==========
</TABLE>

Temporary differences and carryforwards which give rise to deferred tax
assets are as follows:

<TABLE>
<CAPTION>
Deferred Tax Assets
-------------------
1995 1996
---- ----

<S> <C> <C>
Net operating losses........................................ $10,427,000 $ 8,729,000
Research credits............................................ 2,304,000 2,490,000
Environmental reserve....................................... 280,000 280,000
Depreciation................................................ 147,000 160,000
Other....................................................... 1,342,000 1,341,000
----------- -----------
14,500,000 13,000,000
Valuation allowance...................................... (14,500,000) (13,000,000)
----------- -----------
Total deferred taxes $ - $ -
=========== ===========
</TABLE>

The Company's valuation allowance of $13,000,000 was provided on the
deferred tax assets due to the uncertainty of realization.

The Company has available U.S. federal net operating loss carryforwards at
December 31, 1996 of approximately $18,900,000 which expire at various times
from December 31, 2002 through December 31, 2010 and state net operating loss
carryforwards of approximately $12,500,000 which expire at various times from
December 31, 1997 through December 31, 2002. The Company has foreign federal net
operating loss carryforwards of approximately $4,700,000 which expire at various
times from December 31, 2000 through December 31, 2003 and foreign provincial
net operating loss carryforwards of approximately $2,300,000 which expire at
various times from December 31, 2001 through December 31, 2003. In addition, the
Company has U.S. and foreign tax credits carryovers at December 31, 1996 of
approximately $2,400,000 and $220,000 respectively. The U.S. tax credits expire
at various times beginning December 31, 1998 through December 31, 2011 while the
foreign tax credits carryover indefinitely.

F-12
<PAGE> 37
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. COMMITMENTS

Operating Lease
The Company occupies office, laboratory and manufacturing space under a
lease expiring in July 1999. Rent expense for operating leases charged to
operations for the years ended December 31, 1994, 1995 and 1996 approximated
$467,619, $419,693, and $440,441 respectively. Future minimum payment
obligations under operating leases at December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997............................................ $ 414,400
1998............................................ 435,775
1999............................................ 211,758
----------
Total minimum obligations....................... $1,061,933
==========
</TABLE>

License Agreements

In November 1993 and June 1994, the Company entered into license and
distribution agreements with Syntex Pharmaceuticals International Limited
("Syntex") to market Synvisc in selected European countries and South Africa. In
return, for the exclusive marketing rights, Syntex paid up-front payments in
1993 and 1994 of $1,230,000, and $5,003,125, respectively, of which $1,030,000
may have been refundable and accordingly, was included in deferred income at
December 31, 1994. Subsequent to these agreements, Syntex was acquired by
Roche AB, ("Roche"), a subsidiary of F. Hoffmann-LaRoche Ltd. In 1995, the
Companyreceived approval to market Synvisc in the European Economic Area
("EEA") and as a result, the amount of revenue previously included in deferred
income, $1,030,000, was earned, and accordingly is included in income from
licenses in 1995. Subsequent to the acquisition of Syntex by Roche, in the
fourth quarter of 1995 the Company signed an agreement with Roche reacquiring
the marketing rights to Synvisc for all countries identified in the previous
agreements, except for Sweden and South Africa. The Company received a non-
refundable initial payment in 1995 and a non-refundable final payment in 1996
in connection with the finalization of this agreement, whose amounts have been
included in income from licenses in the respective years.

In March 1995, the Company entered into a distribution agreement with
Recordati. The agreement provides Recordati with exclusive marketing rights for
Synvisc in Italy. The Company will manufacture and supply Synvisc to Recordati
for a contractual percentage of Recordati's sales price.

In September 1995, the Company entered into a distribution agreement with
Rhone-Poulenc Rorer Canada Inc. ("RPR"). The agreement provides RPR with
exclusive marketing rights for Synvisc in Canada. In return, in 1995, the
Company received an up-front non-refundable license fee payment of $3,500,000,
which amount has been included in income from licenses, and could receive a
one-time milestone payment of $2,000,000 if sales reach a certain level. RPR
will reimburse the Company a fixed monthly amount, for a period of 30 months,
for certain selling, general and administrative expenses. Additionally, the
Company will manufacture and supply Synvisc for a contractual percentage of
RPR's sales price.

F-13
<PAGE> 38

BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. COMMITMENTS (CONTINUED)

In June 1996, the Company entered into a distribution agreement with
Collagen Corporation ("Collagen"). The agreement provides Collagen with
exclusive marketing rights for Hylaform in Europe, Japan, Australia and other
select countries. In return, the Company received an up-front, non-refundable
payment of $5,000,000 in consideration of the costs and expenses that have been
incurred by the Company related to the research and development of Hylaform. The
Company will also receive a royalty based upon sales of Collagen's dermal
augmentation products as well as an additional royalty on the potential growth
of Collagen's total dermal augmentation business. Additionally, the Company will
manufacture and supply Hylaform to Collagen for a contractual percentage of
Collagen's sales price. The Company has also entered into a distribution
agreement with Collagen for the United States. Under such agreement, Collagen
has an option for exclusive distribution rights to Hylaform in the United States
for an additional payment of $7,000,000, upon and subject, to FDA approval.

In December 1996, the Company entered into a distribution agreement with
Boehringer Ingelheim France, S.A. ("Boehringer"). The agreement provides
Boehringer with exclusive marketing rights for Synvisc in France. In return, the
Company received an up-front non-refundable payment of $1,000,000, which has
been included in income from licenses in 1996 and could receive milestone
payments of up to $7,000,000 if sales reach certain levels. The Company will
manufacture and supply Synvisc to Boehringer for a contractual percentage of
Boehringer's sales price. Additionally, Boehringer will reimburse the Company,
up to a fixed amount and for a certain period of time, for its costs of
maintaining a team of specialists to assist in selling Synvisc in France.

Under the terms of separate agreements with each of three shareholders,
the Company is required to pay a 5% royalty on sales of three hylan products
used in skin care applications. These royalties aggregated approximately
$51,600, $43,500, and $49,081 for the years ended December 31, 1994, 1995 and
1996, respectively.

Letter of Credit
The Company has an outstanding letter of credit, not reflected in the
accompanying financial statements, in the amount of $52,000 at December 31, 1995
and 1996. Included in other assets at December 31, 1995 and 1996, is a
certificate of deposit in the amount of $54,000 which is being maintained as
collateral for this letter of credit.

Research and Development Agreements
The Company entered into agreements with Pharmacia & Upjohn, Inc.
("Pharmacia") in 1992, and granted Pharmacia an exclusive worldwide license to
use, manufacture, market and sell its hylan fluid for use in human ophthalmic
viscosurgery. Under the terms of the agreements, the Company recorded royalty
revenue of $917,160, $915,681 and $500,000 in 1994, 1995 and 1996, respectively.
In July 1996, under the terms of the aggreement, Pharmacia exercised its right
to terminate this agreement effective March 1996 and in connection with the
termination paid the company $1,000,000 which has been included in income from
royalties for the year ended December 31, 1996.

In July 1991, the Company entered into an agreement with Pharmacia to
perform certain toxicity testing. The Company received $311,400, $494,400, and
$542,520 of research and development revenues relating to this testing for the
years ended December 31, 1994, 1995, and 1996, respectively.

F-14
<PAGE> 39
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. COMMITMENTS (CONTINUED)

During February 1990, the Company and its wholly-owned subsidiary,
Biomatrix Svenska AB, entered into an agreement with a Swedish Limited
Partnership, Up-Will Investor KB ("Up-Will"). Up-Will invested money in
Biomatrix Svenska AB in order that the Company could pursue the obtainment of
regulatory approvals to manufacture and market Synvisc in Germany, France, Spain
and the United Kingdom. Up-Will provided the Company Svenska AB with a total of
approximately $1.5 million. In return, Up-Will shall receive a royalty from the
Company equal to 6% of all net sales of Synvisc in the countries referred to
above, for a period of 10 years from the date of first commercial sale in each
country, regardless of whether the sales are made by the Company, Biomatrix
Svenska AB or another party. The Company has the option to acquire all
partnership interests of Up-Will at any time on three months' prior notice for
cash equal to the investment plus an amount sufficient to provide Up-Will with a
46% rate of return, compounded annually, exclusive of royalties or any other
payments. At December 31, 1996, no sales of Synvisc had been made in the
agreement territories and therefore, no royalties had been earned or paid.

11. STOCK OPTIONS

The Company has two fixed option plans which reserve shares of common
stock for issuance to executives, employees and directors. The Company applies
the provisions of Accounting Principles Board Opinion ("APB") No. 25 and related
interpretations in accounting for its stock based compensation plans.
Accordingly, compensation expense has been recognized to the extent applicable
in the financial statements in respect to the two plans in accordance with APB
25. Had compensation cost for the Company's two stock option plans been
determined based on the fair value at the grant date for awards in 1995 and 1996
consistent with the provisions of Statement of Financial Accounting Standards
No. 123 "Accounting For Stock Based Compensation," the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net (loss) income - as reported................. ( $ 219,281) $ 2,770,137
Net (loss) income - pro forma.................. ( 379,126) 2,155,492
Net (Loss) income per share - as reported....... (0.02) 0.25
Net (Loss) income per share - pro forma......... (0.04) 0.20
</TABLE>

Since option grants awarded during 1995 and 1996 vest over several years
and additional awards are expected to be issued in the future, the pro forma
results shown above are not likely to be representative of the effects on future
years of the application of the fair value based method.

The fair market 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 1995 and 1996: dividend yield of
0%; expected volatility of 80%; risk-free interest rate of 5.43 to 6.66%; and
expected lives of 6.5 years.

Under the plan approved by the shareholders in May 1996, the total number
of shares of common stock that may be granted is 2,000,000. In May 1995, the
shareholders approved a Stock Option Plan for Non-Emplyee Directors of the
Company. This plan authorizes the granting of options on 100,000 shares of
common stock to directors who are not employees of the Company, who will
automatically receive an option to acquire 6,000 shares upon election or
re-election to the Board.

These plans provide that shares granted come from the Company's authorized
but unissued or reacquired common stock. The price of the options granted
pursuant to these plans is generally equal to 100 percent of the fair market of
the shares on the date of grant. The options are generally exercisable over four
to five years. The options expire ten years from the grant date.

F-15
<PAGE> 40
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11. STOCK OPTIONS (CONTINUED)

Information regarding these option plans for 1994, 1995 and 1996 is as
follows:

<TABLE>
<CAPTION>
1994 1995 1996
--------------------- ---------------------- ------------------------

Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year........ 943,347 $ 3.61 1,023,764 $ 3.35 924,647 $ 3.69

Options exercised............. ( 166,533) 2.03 ( 103,166) 2.56 (261,666) 3.10

Options granted............... 255,450 4.75 71,700 7.50 175,300 15.32

Options canceled.............. ( 8,500) 5.88 ( 67,651) 4.27 ( 46,203) 5.29
-------- --------- --

Options outstanding,
end of year.............. 1,023,764 $ 3.35 924,647 $ 3.69 792,078 $ 6.20

Options exercisable
end of year.............. 649,703 $ 2.62 648,844 $ 2.93 493,122 $ 3.24
Option price range at
end of year.............. $2.00 to $ 2.00 to $ 2.00 to
$7.50 $ 12.00 $ 17.25

Option price range for
exercised shares......... $ 2.00 to $ 2.00 to $ 2.00 to
$ 7.50 $ 4.75 $ 7.50

Options available for grant
at end of year........... 276,879 372,830 743,733

Weighted-average fair value
of options granted during
the year................. $ 5.62 $ 11.67
</TABLE>

The following table summarizes information about stock options at
December 31, 1996:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Life Price at 12/31/96 Price
- --------------- --------------- --------------- --------------- --------------- -----------------

Compensation expense of $1,502,304, $44,000, and $27,499 was recorded for
the years ended December 31, 1994, 1995 and 1996, respectively, in accordance
with APB 25, for the vesting of the excess of the fair value of the underlying
stock over the exercise price at the date of grant or the date at which the
expiration date of the options was extended, net of forfeitures. The cumulative
amount of net compensation expense through December 31, 1996, has been included
in additional paid-in capital.

F-16
<PAGE> 41
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

12. RELATED PARTY TRANSACTIONS

Included in accrued expenses at December 31, 1996 and 1995 is an amount of
$49,081 and $43,500, respectively, relating to unpaid royalties to shareholders.
Royalty expenses for the three years ended December 31, 1994, 1995 and 1996 were
$51,572, $43,500, and $49,081 respectively.

In July 1995, the Company received $1,800,000 related to the private sale
of equity securities to a member of the Company's Board of Directors. In April
1996, the Company entered into a private sale of equity securities with an
officer of the Company for $2,450,000.

For additional related party transactions refer to Note 10.

13. CONTINGENCY

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 PRP's 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 has 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
therefore the reserve at December 31, 1995 represented $700,610. The steering
committee for the PRPs is presently preparing a buy-out proposal pursuant to a
consent order with the DER. This buy-out proposal will identify what the
steering committee believes to be the total clean-up costs and each PRP's
assigned portion of the total clean-up costs. The Company plans to 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.

Litigation

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 has moved for a partial reconsideration of the
decision and the Company has opposed that request. 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 a provision in the accompanying consolidated
financial statements for any liability that might result.

F-17
<PAGE> 42
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

14. EMPLOYEE BENEFIT PLAN

The Company adopted a defined contribution retirement savings plan
effective January 1, 1992. Pursuant to Section 401k of the Internal Revenue
Code, if a participant decides to contribute, a portion of the contribution is
matched by the Company. Company contributions for the year ended December 31,
1994, 1995, and 1996 amounted to $26,748, $14,281, and $22,370 respectively.

Presently, the Company does not offer its employees postretirement or
postemployment benefits. Therefore, the Company is not impacted by the Statement
of Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits other than Pensions" or No. 112 "Employers' Accounting
for Postemployment Benefits."

15. CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments,
investments and trade receivables. The Company's temporary cash investments and
investments consist primarily of U.S. Government and Government Agency
securities with an average maturity of less than one year. Concentration of
credit risk with respect to trade receivables exists due to the Company's
dependence on a few customers. However, the Company has not sustained any losses
related to these customers.

16. GEOGRAPHIC FINANCIAL INFORMATION

Geographic information regarding the Company's operations for the years
ended December 31, 1996, 1995 and 1994 is shown below. Revenues from customers
represent total net sales from the respective geographic area after elimination
of intercompany transactions which were not material. Operating (loss) income is
net revenues less operating costs after elimination of intercompany transactions
which were not material. Identifiable assets are those assets used in the
geographic area and are reflected after the elimination of intercompany
balances.

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Sales to Customers
United States......................... $ 1,841,345 $ 2,541,636 $ 3,697,493
Canada................................ 664,597 1,072,133 1,253,159
Sweden................................ 7,285 - -
------------ ------------ ------------
$ 2,513,227 $ 3,613,769 $ 4,950,652
============ ============ ============
Operating (Loss) Income
United States......................... ($ 2,814,704) ($ 2,891,611) $ 2,808,262
Canada................................ ( 1,603,196) 2,170,348 ( 575,163)
Sweden................................ ( 439,571) ( 199,201 ( 22,064)
------------ ------------ ------------
($ 4,857,471) ($ 920,464) $ 2,211,035
============ ============ ============
Identifiable Assets
United States......................... $ 11,401,573 $ 9,740,669 $ 20,513,384
Canada................................ 4,087,165 7,606,230 5,458,341
Sweden................................ 65,904 34,677 22,302
------------ ------------ ------------
$ 15,554,642 $ 17,381,576 $ 25,994,027
============ ============ ============
</TABLE>

The Company had foreign export sales, primarily to Sweden, for the
years ended December 31, 1995 and 1996 of $742,032 and $1,585,089, respectively.
There were no foreign export sales in 1994.

F-18
<PAGE> 43
BIOMATRIX, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. MAJOR CUSTOMER AND LICENSE FEE DATA

A significant portion of the Company's products are sold to customers
under the terms of multiple-year marketing and distribution agreements. In many
cases, a customer has paid license fees to the Company for the exclusive rights
in the respective territory. Of the reported product sales for the years ended
December 31, 1996, 1995 and 1994 three customers accounted for 90% (Customer A
40%, Customer B 25% and Customer C 25%), two customers accounted for 68%
(Customer A 48% and Customer C 20%), and Customer A accounted for
72%, respectively. Of the reported income from licenses, royalties, research
contracts, and grants for the years ended December 31, 1996, 1995 and 1994
three corporate partners accounted for 81% (Partner A 49%, Partner B 18% and
Parner C 14%) two corporate partners accounted for 76% (Partner D 47% and
Partner B 29%) and Partner B accounted for 78%, respectively.

18. SUBSEQUENT EVENT

In February 1997, the Company entered into a distribution agreement
with Wyeth-Ayerst ("Wyeth") a division of American Home Products. The agreement
provides Wyeth with exclusive marketing rights to Synvisc in the United States,
Germany, Austria, Spain, Portugal, Greece and certain countries in the Middle
East and Central Europe. In return, the Company received an up-front
non-refundable payment of $4,000,000 and could receive milestone payments of up
to $19,000,000 related to the launch of Synvisc in Europe, U.S. FDA approval and
the launch of Synvisc in the United States. The Company will manufacture and
supply Synvisc to Wyeth for a contractual percentage of Wyeth's sales price.
Additionally, Wyeth will reimburse the Company, up to a fixed amount and for a
certain period of time, for its costs of maintaining a team of specialists to
assist in selling Synvisc in Europe and the United States.

F-19
<PAGE> 44

BIOMATRIX, INC. AND SUBSIDIARIES

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
No. Description Page
--- ----------- ----

<S> <C> <C>
10.41 Distribution Agreement dated December 17, 1996 between Biomatrix, Inc. and
Boehringer Ingelheim France, S.A.

11 Computation of earnings per share.

23.1 Consent of Coopers & Lybrand L.L.P., independent auditors of the Company.

27.1 Financial Data Schedule

</TABLE>

<PAGE> 1
DISTRIBUTION AGREEMENT

THIS DISTRIBUTION AGREEMENT (this "Agreement") is made as of the 17th
day of December 1996 by and between BIOMATRIX, INC., a Delaware corporation
having its principal office at 65 Railroad Avenue, Ridgefield, New Jersey 07657,
U.S.A. ("Biomatrix") and BOEHRINGER INGELHEIM FRANCE, S.A., a French corporation
with its registered office at 37-39, Rue Boissiere, 75116 Paris, France (the
"Distributor").

WHEREAS, Biomatrix is engaged in the development and manufacture of the
Agreement Product (as hereinafter defined);

WHEREAS, the Distributor desires to enter into a distribution agreement
and be appointed the distributor of the Agreement Product in the Territory (as
hereinafter defined), and Biomatrix is willing to so appoint the Distributor;
and

WHEREAS, the Distributor desires to purchase from Biomatrix, and
Biomatrix desires to sell to the Distributor, the Distributor's requirements of
the Agreement Product in the Territory on the terms and subject to the
conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, it is hereby agreed as follows:

1. DEFINITIONS

In this Agreement, the following words and expressions shall have the
following meanings:

1.1. "Affiliate" shall mean, with respect to either party, any Person
that, directly or indirectly, is controlled by, controls or is under common
control with such party. For purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with") shall mean, with respect to any Person, the direct or
indirect ownership of more than fifty percent (50%) of the voting or income
<PAGE> 2
interest in such Person or the possession otherwise, directly or indirectly, of
the power to direct the management or policies of such Person.

1.2. "Agreement Product" shall mean hylan gel-fluid 20 (hylan G-F 20)
Synvisc(R) for the intra-articular treatment by viscosupplementation of
osteoarthritis of the knee, to be supplied in Syringes ready for use complying
with the Product Approvals and falling within the scope of the Patents (to the
extent Biomatrix has a Patent in the relevant country in the Territory) all as
further described in the Agreement Product Specifications, together with any
Improvements (as defined below) to the Agreement Product for such treatment.

1.3. "Agreement Product Specifications" shall mean the specifications
for the Agreement Product set forth in Exhibit A, as such specifications may be
modified from time to time to reflect Improvements as notified by Biomatrix to
the Distributor.

1.4. "Agreement Year" shall mean the twelve (12) month period
commencing on the first day of the first month following the Effective Date, and
each separate successive twelve (12) month period thereafter.

1.5. "Annual Effective Exchange Rate" shall mean, with respect to any
Applicable Currency, for the period commencing on the Effective Date and ending
on the last day of the first Agreement Year the daily average of the exchange
rate between such Applicable Currency and the US Dollar for the thirty (30) days
prior to the Effective Date as published in The Wall Street Journal (or, if The
Wall Street Journal shall no longer publish such exchange rates, as determined
by a method that is mutually agreed upon in writing by the parties). For each
Agreement Year thereafter, the Annual Effective Exchange Rate shall equal

The Average Exchange Rate for a twelve month period shall mean the daily average
of the exchange rate between such Applicable Currency and the US Dollar for such
period using the average month-end rates of exchange for the such period as
published in The Wall Street Journal (or if The Wall Street Journal shall no
longer publish such exchange rates, as determined by a method that is mutually
agreed upon in writing by the parties).

1.6. "Applicable Currency" shall mean, with respect to a country in the
Territory, the lawful currency of such country.

*Confidential portions have been omitted and filed separately with the
Commission
<PAGE> 3
1.7. "Committee" shall mean that term as defined in Section 8.9.

1.8. "Confidential Information" shall mean that term as defined in
Section 7.1(a).

1.9. "Contract Month" shall mean the period commencing with the first
day of the first Agreement Year and ending on the last day of the first complete
calendar month thereafter, and each one (1) calendar month period thereafter
throughout the term of this Agreement.

1.10. "Contract Quarter" shall mean the period commencing with the
first day of the first Agreement Year and ending on the last day of the first
complete calendar quarter thereafter, and each one (1) calendar quarter period
thereafter throughout the term of this Agreement.

1.11. "Effective Date" shall mean the date of this Agreement.

1.12. "Employment Costs" shall mean, with respect to any employee of
Biomatrix for any period, all costs related to such employee's hiring and
employment, such as base salary, bonuses earned or awarded, social security
costs, payroll or other taxes, and expense reimbursements, such costs to be
comparable to the costs of other similarly-situated employees employed in
France.

1.13. "Formula Price" shall mean that term as defined in Section
9.2(b).

1.14. "French Franc" and "FF" shall mean the lawful currency of the
Republic of France; provided, if the French Franc is replaced by a European
currency, references to "French Franc" and "FF" shall mean references to such
currency, and the amounts expressed herein in French Francs shall be converted
to such currency at the exchange rate fixed at the time of replacement by such
currency.

1.15. "Improvements" shall mean extensions of the label claims for the
Agreement Product, including new dosage and presentation forms

and packaging improvements for the Agreement Product.

1.16. "Initial Term" shall mean that term as defined in Section 3.1(a).

1.17. "Minimum Price" shall mean that term as defined in Section
9.2(b).

*Confidential portions have been omitted and filed separately with the
Commission
<PAGE> 4
1.18. "Minimum Sale Amount" shall mean that term as defined in Section
9.3(c).

1.19. "Net Revenues" shall mean, for a specified period, an amount
calculated in French Francs and equal to the total gross invoice price from the
sale of all Agreement Product by the Distributor and its Affiliates during such
period in the Territory to non-Affiliated wholesalers, hospitals, retail
pharmacies, patients and other third party purchasers,

For avoidance of doubt, sales of Agreement Product to Affiliates that will be
resold shall not be regarded as sales for the purposes of calculating Net
Revenues. The amounts used in the calculations of Net Revenues shall be
determined from the books and records of the Distributor (or its Affiliates, as
applicable) maintained in accordance with generally accepted accounting
principles consistently applied.

1.20. "Patents" shall mean any Letters Patent or similar statutory
rights relating to the Agreement Product (including any continuation-in-part,
continuation or division thereof or substitute thereof), and patent applications
which are pending as of the Effective Date, in each

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 5
case as set forth on Exhibit B, together with any supplementary or complementary
protection certificates therefor if and when such are granted.

1.21. "Person" or "person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a government or any
agency or political subdivision thereof.

1.22. "Product Approvals" shall mean, for any country in the Territory,
those regulatory approvals required for importation, promotion, pricing,
marketing and sale of the Agreement Product in such country.

1.23. "Reimbursement Approvals" shall mean governmental and other
approvals in any country in the Territory for a buyer to claim reimbursement at
any level for the purchase of the Agreement Product from private or public
health insurance organizations in such country.

1.24. "Supply Forecast" shall mean that term as defined in Section
9.3(b).

1.25. "Syringe" shall mean a pre-packaged 2.0ml syringe of the
Agreement Product.

1.26. "Territory" shall mean the Republic of France, including DOM TOM
(as defined below), Algeria, Morocco and Tunisia. For the purpose of this
Agreement, "DOM TOM" shall mean French Guyana, Martinique, Reunion, Guadeloupe,
St. Pierre and Miquelon ("Departements d'Outre Mer" or "DOM"); and Mayotte,
Wallis and Futuna, New Caledonia and Dependencies and French Polynesia
("Territories d'Outre Mer" or "TOM").

1.27. "Trademarks" shall mean (i) the trademark Synvisc(R) which is
owned by Biomatrix and described on Exhibit B, and (ii) any other trademarks, as
may be agreed upon in writing from time to time by the parties hereto for use by
the Distributor in connection with the promotion, marketing and sale of the
Agreement Product under this Agreement.

1.28. "Treatment Pack" shall mean a quantity of the Agreement Product
sufficient for one treatment, consisting of three (3) Syringes.

1.29. "US Dollars" and "$" shall mean the lawful currency of the United
States of America.
<PAGE> 6
2. APPOINTMENT AND ACCEPTANCE OF DISTRIBUTORSHIP; CERTAIN PAYMENTS

2.1. APPOINTMENT.

(a) Subject to the terms and conditions hereinafter set forth,
Biomatrix hereby appoints the Distributor as its exclusive (except where
Biomatrix has the right to convert this Agreement to non-exclusive, such as in
Section 9.3(e)) distributor within the Territory for the promotion, marketing,
sale and distribution of the Agreement Product supplied by Biomatrix to the
Distributor pursuant to this Agreement.

(b) Except as specifically provided to the contrary herein, the
foregoing appointment shall not be construed (i) to effect any sale of
proprietary Biomatrix technology, (ii) to grant any license relating to
Biomatrix's technology, including its proprietary methods of formulating,
fabricating and manufacturing the Agreement Product, or (iii) to grant the
Distributor any rights in or to any proprietary technology or Patents or
Trademarks of Biomatrix by implication or otherwise. For the avoidance of doubt,
the limitations in this Section 2.1(b) shall not affect the exclusivity of the
appointment in Section 2.1(a) or the exclusivity of the supply obligation in
Section 9.1. Except as specifically authorized under this Agreement, the
Distributor has no authority to appoint any subagent, subdistributor or other
person to promote the sale of the Agreement Product or to otherwise perform any
of Distributor's obligations hereunder and agrees to refrain from using any such
subagents, subdistributors or other persons.

(c) During the term of this Agreement, unless otherwise agreed in
writing by Biomatrix, the Distributor shall neither seek customers for the
Agreement Product outside the Territory, nor establish any branch, subsidiary,
agent, or representative or maintain any distribution facilities outside the
Territory for the promotion, marketing, sale or distribution of the Agreement
Product or any similar product under a different brand.

2.2. ACCEPTANCE OF OBLIGATIONS.

The Distributor hereby accepts the appointment as exclusive (except
where Biomatrix has the right to convert this Agreement to non-exclusive, such
as in Section 9.3(e)) distributor within the Territory for the promotion,
marketing, sale and distribution of the Agreement Product. The Distributor
hereby agrees to commence the marketing and selling of the Agreement Product in
the Territory (other than in Algeria, Morocco and Tunisia) before the end of
1996, subject to
<PAGE> 7
delays caused by regulatory authorities and to adequate supply of Agreement
Product for resale in the Territory ordered in accordance with the terms hereof.

2.3. INITIAL PAYMENTS.

On the Effective Date the Distributor shall pay to Biomatrix the amount
of

as an initial payment in partial consideration for the appointment of the
Distributor as exclusive (except where Biomatrix has the right to convert this
Agreement to non-exclusive, such as in Section 9.3(e)) distributor hereunder.
Such initial payment shall be non-refundable.

2.4. MILESTONE PAYMENTS.

In further consideration for its appointment as exclusive (except where
Biomatrix has the right to convert this Agreement to non-exclusive, such as in
Section 9.3(e)) distributor hereunder, the Distributor hereby agrees to make the
following additional non-refundable milestone payments:

(a) Payments on Decision to Continue Marketing with Reimbursement
Approval. From and after receipt of Reimbursement Approval in France, so long as
the Agreement is not terminated pursuant to Section 3.5, the Distributor shall
make the following payments, reduced by any payments previously made by the
Distributor under Section 2.4(b).

(i) A payment to Biomatrix of

so long as the Distributor has received Reimbursement Approval and has not
terminated the Agreement in accordance with Section 3.5.

(ii) A payment to Biomatrix of

*Confidential portions have been omitted and filed with separately with the
Commission.
<PAGE> 8
showing that the Distributor's cumulative Net Revenues (as defined below) since
the Effective Date exceed * .

(iii) A payment to Biomatrix of

* which the Distributor is required to deliver the
monthly report described in Section 9.2(e) for the last
Contract Month of the

* For the avoidance of doubt, the sales of Agreement
Product resulting in payment required by clause (ii) above
shall count towards the amount triggering the payment in this
clause (iii) if such sales are made during the first * period
* resulting in an aggregate milestone payment of * .

(b) Payments prior to reimbursement approval. Prior to receipt of
Reimbursement Approval in France, so long as the Agreement is not terminated
pursuant to Section 3.5, the Distributor shall make the following payments:

(i) A payment to Biomatrix of * which the Distributor is
required to deliver the monthly report described in Section 9.2(e) for
the last Contract Month of the * .

(ii) A payment to Biomatrix of * which the Distributor is
required to deliver the monthly report described in Section 9.2(e) for
the last Contract Month of the * For the avoidance doubt, the sales of
Agreement Product resulting in the payment required by clause (i) above
shall count towards the amount triggering the payment in this clause
(ii) if such sales are made during the * in which * , resulting in an
aggregate milestone payment of * .

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 9
(iii) A payment to Biomatrix of * which the Distributor is
required to deliver the monthly report described in Section 9.2(e) for
the last Contract Month of the * . For the avoidance of doubt, the
sales of Agreement Product resulting in the payments required by
clauses (i) and/or (ii) above shall count towards the amount triggering
the payment in this clause (iii) if such sales are made during the *
period * resulting in an aggregate milestone payment of *.

(c) Maximum Milestone Payments. For the avoidance of doubt, the maximum
amount payable under Section 2.4(a) shall not exceed * and the maximum amount
payable under Section 2.4(b) shall not exceed *.

2.5. NATURE OF PAYMENTS.

Each of the payments referred to in Sections 2.3 and 2.4 hereof are
independent of each other payment hereunder and shall not be deemed satisfied by
the making of any other payment hereunder (except to the extent payments under
2.4(b) are netted against payments made under 2.4(a)). All payments to be made
pursuant to Sections 2.3 and 2.4 shall be made in US Dollars.

2.6. OPERATIONS AND EXPENSES.

Except as otherwise set forth in this Agreement, the operations of the
Distributor under this Agreement are subject to the sole control and management
of the Distributor. The Distributor shall be responsible for all of its own
expenses and employees. The Distributor agrees that it shall incur no expense
chargeable to Biomatrix, except as may be specifically authorized in advance in
writing in each case by Biomatrix.

2.7. INDEPENDENT PARTIES.

Neither party shall be considered an agent or legal representative of
the other for any purpose (except to the limited extent provided in Section
15.1(a)), and neither party nor any director, officer, agent or employee of
either party shall be, or be considered, an agent or employee of the other
party. Neither party shall have or exercise the right or authority to assume

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 10
or create any obligation or responsibility, including without limitation
contractual obligations and obligations based on warranties or guarantees, on
behalf of or in the name of the other party.

3. TERM AND TERMINATION

3.1. TERM.

(a) Term. Unless this Agreement is sooner terminated in accordance with
the provisions of this Agreement, the term of the appointment hereunder shall
commence on the Effective Date and shall end on the last day of the * Agreement
Year (the "Initial Term"); provided, that the Initial Term shall be * if
Reimbursement Approval in France is obtained prior to the * of the Effective
Date. Following the Initial Term * shall have the right to * duration as to
which the parties may agree; provided that the conditions described in * below
have been satisfied; and provided further that the parties have mutually agreed
on the other terms and conditions for such renewal.

(b)

3.2.

3.3. INSOLVENCY.

This Agreement may be immediately terminated as to the entire Territory
by either party, upon giving written notice to the other party, in the event
that the other party (or any of its Affiliates in the Territory) shall become
insolvent or be declared bankrupt by a court of competent jurisdiction or shall
be the subject of any winding up, receivership or dissolution, bankruptcy,
administration or liquidation proceeding, or creditor's meeting, or any
proceeding or action similar to one or more of the above, in which case
termination shall be effective upon such written notice. The failure of either
party to give notice of termination upon obtaining knowledge of any such event
shall not be interpreted as a waiver of such party's rights under this Section
3.3, and such party reserves the right to exercise any such rights at any time
after the occurrence of any such event.

3.4. BREACH.

This Agreement may be terminated as to the entire Territory by a party
if the other party should breach any of its payment obligations hereunder or
should commit a material breach of

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 11
any of its warranties, covenants, conditions, obligations or agreements
contained herein; provided that in the case of a payment breach such breach
shall continue for a period of ten (10) business days after written notice
thereof and in the case of any other breach such breach shall continue for a
period of thirty (30) days after written notice thereof; and provided further
that such termination shall be immediately effective upon further written notice
to that effect to the breaching party after its failure to cure such breach
within such applicable notice period.

3.5. *

3.6. CERTAIN RIGHTS UPON TERMINATION.

(a) Access to data. Upon any termination of this Agreement for any
reason, to the extent not prohibited by applicable law, Biomatrix shall have the
right to review, access, use and permit others to review, access and use, either
directly or by cross-reference or incorporation or otherwise, all information,
data, investigations, preclinical and clinical protocols (including without
limitation marketing information and information relating to clinical studies),
and related regulatory approvals pertaining to the Agreement Product (the
"Information") which are possessed or controlled by the Distributor or any of
its Affiliates, or to which the Distributor or

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 12
any of its Affiliates has a right to review, access or use. The Distributor
unconditionally agrees promptly to take any action and to execute and deliver to
Biomatrix any documents or instruments reasonably requested by Biomatrix to
permit Biomatrix to make full use of such right.

(b) Ownership of Trademarks. Biomatrix shall have exclusive ownership
rights to the Trademarks and to all other product specific logos, slogans and
other intangibles used by the Distributor (and which are not owned by any third
party) in connection with the Agreement Product (including all registrations
relating thereto). The Distributor shall notify Biomatrix prior to the use of
any product specific logos, slogans and other intangible assets (other than the
Trademarks), and shall cooperate with Biomatrix if Biomatrix determines to
register its rights in such logos, slogans and other intangible assets (to the
extent Biomatrix has rights in such logos, slogans and other intangible assets).
The Distributor shall not apply for the registration of any Trademarks, and no
Trademarks or any trademarks similar to the Trademarks shall be in the name of
or otherwise held or owned by the Distributor.

(c) Termination of Right to Use Trademarks. Subject to the right to
sell out its stock in accordance with Section 3.2(b), the Distributor
unconditionally agrees, upon any termination of this Agreement, (i) immediately
to cease using the Trademarks and any logos and slogans relating to the
Agreement Product and (ii) immediately to execute and deliver to Biomatrix at
the Distributor's own expense any documents or instruments reasonably requested
by Biomatrix to give full effect to the provisions of this Section 3.6.

(d) Transfer of price and reimbursement approvals. Subject to the right
to sell out its stock in accordance with Section 3.2(b), the Distributor
unconditionally agrees that upon any termination of this Agreement it shall,
upon the request of Biomatrix, immediately inform all relevant regulatory
authorities that the Distributor is no longer a distributor of the Agreement
Product and, to the extent not prohibited by applicable law, shall take all
action and execute and deliver all documents and instruments necessary in order
to transfer at the Distributor's own expense all Product Approvals and
Reimbursement Approvals and other relevant documents relating to the Agreement
Product in favor of Biomatrix or any Person designated by Biomatrix; provided,
that if Biomatrix requests the Distributor to take such actions for any reason
other than a breach by the Distributor or a termination by Biomatrix pursuant to
Section 8.13(b), Biomatrix shall reimburse the Distributor for any actual out of
pocket costs incurred at the request of Biomatrix in connection with such
transfers.
<PAGE> 13
3.7. EFFECTS OF TERMINATION.

(a) Upon termination of this Agreement for any reason and after the
sell-out period set forth in Section 3.2(b) has expired, the Distributor shall
immediately discontinue making any representation regarding its status as a
distributor for Biomatrix in the Territory or the applicable portion thereof and
shall immediately cease conducting any activities with respect to the marketing,
promotion, sale or distribution of the Agreement Product in the Territory.

(b) Termination of this Agreement shall not affect obligations of
either party that may have accrued prior to the effective date of termination or
any obligation specifically stated to survive termination. Except to the extent
limited by Section 3.8, termination of this Agreement shall be in addition to,
and shall not be exclusive of or prejudicial to, any other grounds for
termination or rights or remedies at law or in equity which either party may
have on account of any default of the other party.

3.8 WAIVER.

The Distributor and Biomatrix hereby waive, to the extent they are able
to do so under applicable law, any statutory rights they may have or acquire
under the laws of any country in the Territory in respect of the termination of
the relationship established hereby pursuant to the terms hereof, and agree that
the rights available to them hereunder in the event of such termination are
adequate and reflect the agreement of the parties. Neither the Distributor, nor
Biomatrix nor any of their respective Affiliates shall have any right to claim
any indemnity for goodwill or lost profits or any damages arising from the
rightful termination of this Agreement by the other party in accordance with the
terms hereof (including a rightful termination under Section 8.13(b)).

4. PAYMENTS; EXCHANGE RATE

4.1. WIRE TRANSFER.

All payments hereunder shall be made in US Dollars. Payments to
Biomatrix by or on behalf of the Distributor shall be wired to an account in a
bank designated by Biomatrix and the costs of any such remittance shall be borne
by the Distributor.
<PAGE> 14
4.2. CONVERSION OF NON-US CURRENCY.

(a) For purposes of the calculation of the Formula Price, Net Revenues
denominated in an Applicable Currency shall be converted into US Dollars at the
Annual Effective Exchange Rate then in effect.

(b) For any other purpose hereunder, amounts denominated in an
Applicable Currency shall be converted to US Dollars at the average daily
exchange rate between the US Dollar and the Applicable Currency for the Contract
Month or other applicable period, as published in The Wall Street Journal (or
another mutually acceptable publication).

5. WITHHOLDING

All payments to be made by the Distributor under this Agreement shall
be made in full, free and clear of and without any deduction of or withholding
for or on account of any taxes levied in any country of the Territory or
elsewhere; provided that if the Distributor shall be required by law to make any
deduction or withholding from any payment to Biomatrix then:

(i) the Distributor shall ensure that such deduction or withholding
does not exceed the minimum legal liability therefor;

(ii) as soon as possible prior to the first deduction or withholding,
the Distributor shall notify Biomatrix thereof, and the parties shall negotiate
in good faith adjustments to the payments hereunder in order to minimize or
eliminate such deduction or withholding;

(iii) the Distributor shall forward to Biomatrix such documentary
evidence as may be requested by Biomatrix in respect of each deduction,
withholding or payment together with each payment or promptly thereafter; and

(iv) if the parties cannot adjust the payments hereunder to eliminate
all deductions and withholding, the parties shall attempt in good faith to agree
upon revised mutually acceptable pricing and/or payment terms.

6. COMPETING PRODUCTS

6.1. NON-COMPETITION BY THE DISTRIBUTOR.

In recognition of the rights granted by Biomatrix to the Distributor
and the other obligations of Biomatrix hereunder, the Distributor agrees that it
shall not, directly or indirectly (alone
<PAGE> 15
or with others), and it shall ensure that its Affiliates shall not, directly or
indirectly (alone or with others), during the period commencing on the Effective
Date and continuing for the term of this Agreement, promote, manufacture, sell,
market or distribute a Competing Product anywhere in the Territory. "Competing
Product" shall mean any product for the treatment of osteoarthritis or
rheumatoid arthritis using any substances applied intra-articularly for the
alleviation of pain and/or improvement of joint function by
viscosupplementation. The Distributor acknowledges and agrees that in the event
of a breach or threatened breach by the Distributor of its obligations under
this Section 6.1, Biomatrix will have no adequate remedy at law, and accordingly
shall be entitled to injunctive or other appropriate equitable remedies with
respect to such breach or threatened breach in addition to any other remedies
which Biomatrix may have.

6.2. *

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 16
7. CONFIDENTIAL INFORMATION; PUBLIC ANNOUNCEMENTS

7.1. CONFIDENTIAL INFORMATION.

(a) All information acquired by either party (the "Recipient") from the
other party or any of its Affiliates (the "Discloser") during the term of this
Agreement or prior to the Effective Date, relating directly or indirectly to the
present or potential business, operations, corporate, technical or financial
situation of the Discloser, or to manufacturing know-how, patents, data, test
results, techniques, processes, procedures, raw materials, dealer, supplier and
customer lists or the Information described in Section 3.6 (collectively, the
"Confidential Information") is confidential.

(b) Unless otherwise agreed to in writing by the Discloser, the
Recipient shall not at any time, either during or for a period of five (5) years
subsequent to the term of this Agreement, use for itself (other than in
accordance with the terms of this Agreement) or any other Person, or disclose or
divulge to any Person, other than to those of its employees and advisors and
Affiliates who require the same for the purposes hereof and who are bound by the
same obligations of confidentiality, non-disclosure and non-use as set forth
herein, any Confidential Information or any other confidential or proprietary
information of the Discloser of which the Recipient may acquire knowledge;
provided, however, that the confidentiality, non-disclosure and non-use
provisions contained in this Section 7.1 shall not apply to any information or
data to the extent that the Recipient:

(i) shall demonstrate by written evidence that such
information or data is known generally to persons in the trade through no act or
omission of the Recipient or any of its Affiliates;
<PAGE> 17
(ii) is required by any government authority to disclose such
information or data, and/or for the purposes of obtaining and maintaining any
Product Approvals under this Agreement; or

(iii) shall demonstrate by its written records that such
information or data was disclosed to it or its Affiliates on a non-confidential
basis from a source other than the Discloser or its Affiliates and that such
disclosure did not constitute a breach of any applicable confidentiality
obligations.

Upon the reasonable request of the Discloser, the Confidential Information that
has been clearly marked "confidential" and that is specified in any such request
shall be immediately returned to the Discloser upon termination of this
Agreement, along with any copies, reproductions, digests, abstracts or the like
of all or any part thereof in the Recipient's possession or under the
Recipient's control, and upon such return any computer entries or the like
relating thereto shall, to the extent legally permissible, be destroyed. The
Recipient shall then attest to the Discloser in writing as to the return and/or
destruction of the Confidential Information. Such return (and destruction) will
not affect the Recipient's obligations hereunder which shall survive until five
(5) years after termination of this Agreement. Notwithstanding anything herein
to the contrary, the provisions of this Section 7.1 shall be subject to
Biomatrix's rights under Section 3.6.

Each party agrees to ensure that each of its Affiliates takes whatever
corporate action may be required to carry out its obligations under this Section
7.1.

7.2. PUBLIC ANNOUNCEMENT.

Except as is necessary for governmental notification purposes or to
comply with applicable laws and regulations or to enforce their respective
rights under this Agreement, and except as otherwise agreed to by the parties
hereto in writing, (i) the parties agree to keep the material terms of this
Agreement strictly confidential, (ii) the parties shall agree upon the text and
the exact timing of an initial public announcement relating to the transactions
contemplated by this Agreement as soon as possible after the Effective Date and
(iii) the parties shall agree on the text and the exact timing of any subsequent
public announcements regarding this Agreement or the transactions contemplated
herein.
<PAGE> 18
8. TRADEMARKS; AGREEMENT PRODUCT MARKING; PROMOTIONAL INFORMATION

8.1. TRADEMARKS.

Biomatrix hereby licenses to the Distributor the right to use, and
hereby requires the use of, the Trademarks in connection with the promotion,
marketing and sale of the Agreement Product in the Territory during the term of
this Agreement. Such license shall be free of charge, but shall remain in force
only to the extent provided in Section 8.2. The Distributor agrees that it shall
not use any of the Trademarks at any time outside the Territory or use any of
the Trademarks for any products other than the Agreement Product within the
Territory, or for any other purpose except as provided herein. The parties shall
execute a short form Trademark license agreement to the extent that it is
necessary to record the Trademark license hereunder in any country whose laws
require such recordation. Biomatrix shall take such actions as are reasonably
required to maintain the Trademarks in effect, and shall inform the Distributor
of any changes in or additions to the Trademarks.

8.2. TERMINATION OF RIGHT TO USE TRADEMARKS.

Subject to the sell-out right set forth in Section 3.2(b), upon
termination of this Agreement, the license to the Distributor to use the
Trademarks in the Territory shall terminate, and the Distributor unconditionally
agrees promptly to take all necessary action and execute and deliver to
Biomatrix all necessary documents and instruments to remove the Distributor as a
registered user and/or a recorded licensee of the Trademarks.

8.3. NOTICE OF INFRINGEMENT.

Each party hereto agrees to notify the other in writing promptly (but
not later than thirty (30) days) after obtaining knowledge of any infringements
or imitations of the Trademarks by third parties. Further, the Distributor
agrees to notify Biomatrix immediately after it becomes aware that any Agreement
Product sold in the Territory is thereafter sold or transported outside the
Territory.
<PAGE> 19
8.4. MARKETING AND PROMOTIONAL PLANS AND MATERIALS.

(a) Preliminary Promotional Plan and Budget. The parties have attached
as Exhibit E hereto two versions of a preliminary promotional plan and budget,
one showing the amount and timing of planned promotional expenditures for the
Agreement Product in the Territory assuming receipt of Reimbursement Approval in
France, and the other version showing such expenditures assuming no such
Reimbursement Approval. These preliminary promotional plans and budgets
represent the general level of investment that the Distributor will include in
the plan described in paragraph (b) below, and the Distributor will use
commercially reasonable efforts to implement the general level of investment of
such plans and budgets in good faith in connection with the marketing and sale
of the Agreement Product in the Territory.

(b) Marketing and Sales Plan. The Distributor, in good faith and in
cooperation with Biomatrix, shall prepare and provide to Biomatrix, promptly
following the Effective Date but before January 31, 1997, and annually by the
end of the third quarter of each year, a marketing, promotional, sales and field
force deployment plan and budget (including a description of the job
responsibilities for each Product Specialist, a * sales forecast and a * supply
forecast) describing the marketing and sales of the Agreement Product to
relevant customer groups (such as doctors, patients and hospitals) in the
Territory through appropriate means. The Distributor shall provide copies of all
such plans and changes to or updates of such plans and schedules to Biomatrix at
least two weeks prior to the Committee meeting to review such plans. Such
initial plans shall be reviewed by the Committee before February 14, 1997. The
annual plan for each year shall be reviewed by the Committee at the annual
meeting in September. Any major changes to or updates of such plans or schedules
shall be reviewed by the Committee at the request of either party.

8.5. LEGEND.

Subject to applicable laws and regulations in the Territory, all
relevant packaging and promotional material for the Agreement Product used or
sold by the Distributor shall contain (i) all applicable markings needed to keep
the Trademarks enforceable throughout the Territory as specified in writing by
Biomatrix to the Distributor, and (ii) a legend substantially in the form
attached as Exhibit C, which shall be displayed in a reasonably conspicuous
manner on all packaging of such Agreement Product containing the corporate
identification logo of Biomatrix and indicating that such product has been
developed and manufactured by Biomatrix, Inc., and its affiliates, 65 Railroad
Avenue, Ridgefield, New Jersey, 07657 U.S.A. or similar statement

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 20
such as is consistent with Biomatrix's practice in distributing the Agreement
Product in other territories and which shall also contain the information
supplied by the Distributor and set forth on Exhibit C. Biomatrix and the
Distributor shall each have the right to modify the information provided by it
for such legend from time to time, and the other party shall have the right to
consent to each such modification, such consent not to be unreasonably withheld.

8.6. LABELLING AND PROMOTION MATERIALS; APPROVED USE OF PRODUCTS.

(a) The Distributor shall provide Biomatrix with labelling masters,
instructions, specifications and copies of all marketing, labelling and
promotional material it intends to use relating to the Agreement Product and any
Improvements. All such labelling, packaging and promotional material shall be
consistent with the relevant Product Approvals and all labelling, packaging and
promotional materials shall be reviewed by Biomatrix and shall be subject to its
written approval prior to use, such approval not to be unreasonably withheld,
and such approval or disapproval to be communicated to the Distributor within *
after its receipt of such materials; provided, that if such materials impact any
Regulatory Approvals within or outside the Territory, Biomatrix shall not be
obligated to communicate its approval or disapproval until it is satisfied that
all Regulatory Approvals have been obtained and will not be adversely affected
by the use of such materials. Such review shall be limited to scientific,
medical and international product positioning matters. The Distributor shall
provide Biomatrix with all major promotional materials for launches and
subsequent promotions within a reasonable time prior to their use in order to
allow Biomatrix to comment on such materials. The Distributor shall provide
Biomatrix with copies of all other promotional materials at or prior to their
use. This Section 8.6(a) shall not limit Biomatrix's right to control usage of
the Trademarks, as provided in the other provisions of this Agreement.

(b) The Distributor agrees that its promotion, marketing, sale and
distribution of the Agreement Product and any Improvements in the Territory, and
the promotional materials and labelling used in connection therewith, shall be
strictly in accordance with the approved use of the Agreement Product and any
Improvements as specified in the Product Approvals and as further provided in
this Agreement.

8.7. PROMOTIONAL SUPPORT.

(a) Samples. In each of the first three Agreement Years Biomatrix shall
provide the Distributor, upon its request in accordance with the provisions of
Section 9.4(b), with

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 21
promotional support by supplying to the Distributor not more than the number of
Syringes set forth on Exhibit D for each such Agreement Year to be used by the
Distributor in implementation of the marketing and sales plan. The Distributor
hereby agrees to pay Biomatrix * for each such Syringe.

(b) Exchange of information. Biomatrix and the Distributor shall
provide to each other on an ongoing basis and without charge (to the extent not
prevented by law or contract from doing so) all marketing, medical, scientific,
technical and other information relating to the Agreement Product (including
summary data from studies, clinical trials, competitive products and the like as
well as information regarding adverse events associated with the use of the
Agreement Product) that is available to such party upon the reasonable request
of the other party. In addition, Biomatrix and the Distributor shall provide
each other with access to such primary data and information in its possession as
the other may reasonably request regarding the results of the studies contained
in such summary data referred to above.

(c) Reference to viscosupplementation and Biomatrix. Subject to
applicable laws and regulations in the Territory, and without risk of liability
to the Distributor, the Distributor shall ensure that all trade literature,
publications and promotional materials relating to the Agreement Product
produced by or on behalf of the Distributor or any of its Affiliates shall
specify the concept of viscosupplementation as conceived and introduced by
Biomatrix and as defined by Biomatrix in the trade literature.

8.8. [RESERVED].

8.9. JOINT COMMITTEE.

The parties shall establish a joint committee (the "Committee")
comprised of from two (2) to four (4) voting representatives designated by each
of the parties, with an equal number appointed by each of the parties. The
Distributor and Biomatrix shall each appoint one of its voting representatives
to act as a co-chairman of the Committee. The Committee will meet annually (at
the end of September) or more frequently if requested by either party. The
Committee shall have responsibility to review business, marketing, scientific
and medical issues, and such other matters referred to them by the parties'
respective operational teams having internal responsibility for the Agreement
Product, in accordance with the provisions of Section 8.13(a).

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 22
8.10. PRODUCT VIGILANCE SYSTEM.

The Distributor shall be responsible for maintaining medical device
vigilance systems in each country in the Territory, as established for the
Agreement Product by Biomatrix in accordance with local regulations, and shall
promptly provide Biomatrix with notice of all product complaints, including
medical complaints. Biomatrix shall be solely responsible for processing the
final analysis of medical complaints. The Distributor shall provide all
necessary support to Biomatrix for carrying out such activities. If required by
local regulations, the Distributor is responsible for reporting medical
complaints to the local authority; provided that the Distributor shall consult
with Biomatrix in each case prior to making such report and Biomatrix and the
Distributor will cooperate to promptly report the medical complaint to the local
authority. Biomatrix shall promptly provide the Distributor with notice of all
serious foreign product complaints.

8.11. PRODUCT SPECIALISTS.

Promptly following the Effective Date, Biomatrix shall provide
assistance with the marketing and sale of the Agreement Product in the Territory
by making available * Biomatrix employees to work with the Distributor's sales
force. Prior to the end of the * Agreement Year, the parties shall discuss
additional assistance by Biomatrix for the * Agreement Years. Notwithstanding
the foregoing, at any time after the parties have received Reimbursement
Approval Biomatrix shall have the right to provide the assistance through up to
* employees to work with the Distributors sales force. Such Biomatrix employees
(the "Product Specialists") shall be hired, trained and managed by Biomatrix at
the Distributor's expense (subject to the limits provided below), and their job
responsibilities will be included in the marketing plan prepared and approved in
accordance with Section 8.4.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 23

Other than the Employment Costs for which the Distributor is responsible
pursuant to this Section 8.11 and subject to the provisions of Section 10.3,
Biomatrix shall be responsible for the actions and omissions of the Product
Specialists while employed by Biomatrix so long as they are acting within the
scope of their employment.

8.12.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 24
8.13. DISPUTE RESOLUTION PROCESS.

(a) All decisions which by the terms of this Agreement are to be made
mutually by the Distributor and Biomatrix shall be made in accordance with this
Section 8.13. Initially all such decisions are to be made after mutual
consultation by the operational teams at each of the Distributor and Biomatrix
having internal responsibility for the Agreement Product and its distribution in
the Territory. If the parties are unable to make any such decision at the
operational level, then the Committee will review the matter at its next meeting
and attempt to make a mutually acceptable decision. If the Committee is unable
to make such decision, the parties agree to submit the matter to their
respective chief executive officers, who shall attempt to resolve the matter as
soon as possible.

(b) If the chief executive officers cannot resolve the matter within a
reasonable period of time, either party shall have the right, by written notice
to the other party, to terminate this Agreement at any time after the expiration
of six months following such notice or at such other time as the chief executive
officers of the parties may agree.

8.14. QUESTIONABLE PAYMENTS.

Neither the Distributor nor Biomatrix shall, directly or indirectly, in
the name of, on behalf of, or for the benefit of the other party hereto offer,
promise, authorize to pay, or pay any compensation or give anything of value to,
any official, agent or employee of any government or governmental agency or to
any political party or officer, employee or agent thereof.
<PAGE> 25
9. SUPPLY OF AGREEMENT PRODUCT

9.1. GENERAL.

Biomatrix agrees to sell the Agreement Product to the Distributor, on
the terms and subject to the conditions set forth herein, on an exclusive basis
(except where Biomatrix has the right to convert this Agreement to
non-exclusive, such as in Section 9.3(e)) for resale by the Distributor within
the Territory, and the Distributor shall obtain the Agreement Product for resale
in the Territory only from Biomatrix. As used in this Section 9.1, the term
"exclusive" shall mean that, to the extent permitted by applicable law
(including without limitation EU competition law), Biomatrix shall not supply
the Agreement Product into the Territory, or authorize any third party to
solicit orders for the Agreement Product in the Territory, except where
Biomatrix has the right to convert this Agreement to non-exclusive, such as in
Section 9.3(e).

9.2. PRICE AND QUANTITY.

(a) Supply price. During the * Agreement Years, the price payable by
the Distributor to Biomatrix shall be * per Syringe. From the * Agreement Year
to the * of this Agreement, the price payable by the Distributor to Biomatrix
shall be *

(b) Minimum Price and Formula Price.

(i) The "Minimum Price" shall be * per Syringe; provided that
beginning with the * for the immediately preceding calendar year * . In the
event that there shall arise any * then the parties shall *

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 26
(ii) The "Formula Price" for each of the first * Syringes sold
in the Territory during an Agreement Year shall equal * for such Syringes,
divided by the number of Syringes sold up to * , and for each Syringe sold over
* in the Territory during an Agreement Year shall equal * for such Syringes,
divided by the number of Syringes sold in excess of *.

(c) Adjustments based on Formula Price. Beginning with the first
Contract Quarter of the third Agreement Year, and for each succeeding Contract
Quarter, the price initially payable by the Distributor for sales of the
Agreement Product in such quarter shall be * for the immediately preceding
Contract Quarter, and within * of each Contract Quarter, the Formula Price for
sales of the Agreement Product in such Contract Quarter shall be calculated in
accordance with * and, to the extent that such * exceeds the price paid for
sales in such Contract Quarter, an adjustment resulting from the difference
between such prices shall be paid by the Distributor within * following the end
of such Contract Quarter. For the avoidance of doubt, the amount resulting from
each adjustment shall be paid within * referred to above and the aggregate
amount payable by the Distributor for the Agreement Product for any Agreement
Year shall in any event not be lower than the *

(d) Currency and Timing of payments. All purchases of the Agreement
Product hereunder shall be billed to and paid by the Distributor in US Dollars
within * after the later of (i) the date of invoice for such shipment or (ii)
the date of delivery to the port of entry in the Territory. All payments to be
made as a result of the adjustments set forth in this Section 9.2 shall be made
in US Dollars. Net Revenues denominated in an Applicable Currency used for the
calculation of such payments shall be converted to US Dollars at the exchange
rates set forth in Section 4.2(a).

(e) Monthly reports. Within * following the end of each Contract Month
(or such other period as may be agreed by the parties) in each Agreement Year
for each country in the Territory, the Distributor shall submit to Biomatrix
written reports detailing the units and value of the Distributor's and its
Affiliates' sales of the Agreement Product in each country during the
immediately preceding calendar month (or such other agreed period).

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 27
(f) Yearly reports. Within * following the end of each Agreement Year
for each country in the Territory, the Distributor shall submit to Biomatrix
written reports detailing the Distributor's and its Affiliates' sales of the
Agreement Product in each country during the immediately preceding Agreement
Year, which reports shall contain the Net Revenues of the Agreement Product for
each country in the Territory from sales during the applicable year to third
party purchasers who are not Affiliates of the Distributor, and the aggregate
number of units of the Agreement Product sold in each country in the Territory
during the applicable Agreement Year.

(g) Obligation to supply. Biomatrix and its Affiliates shall use
commercially reasonable efforts to sell the Agreement Product to the Distributor
in such quantities and at such times as the Distributor may, pursuant to the
provisions hereof, order from time to time; provided that Biomatrix and its
Affiliates shall not be in breach of this Agreement if (i) they fail to supply
the Distributor with quantities of the Agreement Product in any Contract Quarter
in excess of * of the amount in the Supply Forecast for such Contract Quarter
delivered to Biomatrix * prior to such Contract Quarter or (ii) they shall be
subject to a force majeure event, as defined in Section 20.

(h) *

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 28
9.3. SALES AND SUPPLY FORECASTS; MINIMUM SALES.

(a) Sales Forecasts. Exhibit D attached hereto sets forth sales
forecasts for sales of units of the Agreement Product in the Territory for each
of the * Agreement Years. Within * after the expiration of the * Agreement Year
and within * after the expiration of * Agreement Year thereafter, the
Distributor shall provide to Biomatrix a sales forecast of units of the
Agreement Product for the * period (including a year-by-year breakdown)
beginning with the Agreement Year following such expired Agreement Year. Each
such sales forecast described above is referred to herein as a "Sales Forecast."

(b) Supply Forecasts and Minimum Purchases. Within * after the
expiration of each Contract Quarter, commencing with the first Contract Quarter
of the * Agreement Year, the Distributor shall provide to Biomatrix an updated *
supply forecast (the "Supply Forecast") for each country in the Territory. The
Distributor shall be obligated to purchase the quantity of Agreement Product
included for the * quarter of each Supply Forecast. Commencing with the updated
Supply Forecast to be delivered at the beginning of the * Agreement Year, the
Distributor shall not decrease an updated Supply Forecast in any quarter by more
than * from the preceding quarter's forecast.

(c) Minimum Sales. The Distributor hereby agrees that during each
Agreement Year commencing with the * Agreement Year it shall make aggregate
sales of not less than the Minimum Sale Amount for such Agreement Year. The
"Minimum Sale Amount" for any period shall be the minimum number of Treatment
Packs required to be sold during such period pursuant to this Section 9.3(c).
The Minimum Sale Amount for the * Agreement Year shall be determined by the
parties no later than * prior to the commencement of the * Agreement Year,
taking into account reimbursement levels, product price and market and economic
factors. The parties shall determine in good faith the Minimum Sale Amounts for
the * Agreement Year in accordance with the process set forth in Section
8.13(a). Prior to the commencement of each * thereafter during the Initial Term
(and including any extensions thereof in accordance with this Agreement), the
parties shall determine the Minimum Sale Amounts to apply for each year in such
* , and such determination shall be made in good faith in accordance with
Section 8.13(a).

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 29
(d) Firm Orders. The Distributor shall submit a firm purchase order
setting forth the quantities, delivery date and shipping instructions with
respect to each shipment of the Agreement Product, such purchase orders to be
received by Biomatrix at least * prior to the stipulated delivery date * . Each
such firm purchase order shall obligate the Distributor to purchase the full
amount of Agreement Product included on such order, and such order shall be
irrevocable. The Distributor shall not submit any purchase order for fewer than
* Syringes.

(e) Consequences of failure to make Minimum Sales. If the Distributor
fails to sell the Minimum Sale Amount in any "Applicable Period" (in each case
other than if prevented by force majeure (as defined in Section 20) or as a
result of a failure by Biomatrix to supply the Agreement Product in accordance
with Section 9.2(g) or as a result of the violation of the patent or trademark
rights of third parties caused by the marketing and sale of the Agreement
Product or as a result of termination of Reimbursement Approval in France by the
regulatory authorities), then Biomatrix may * For avoidance of doubt, any such *
by the Distributor. *

For purposes of this paragraph (e), "Applicable Period" shall mean *
Agreement Year and * Agreement Year period thereafter, and the Minimum Sale
Amount for a * Agreement Year period shall be the aggregate of the Minimum Sale
Amounts for each year of such * Agreement Year period.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 30
(f) Records and audits. The Distributor shall maintain books of account
with respect to its sales of the Agreement Product in the Territory. Biomatrix
shall have the right, not more than once during each calendar year, to have an
independent firm of accountants that is reasonably acceptable to the Distributor
(any "big six" firm being deemed acceptable to the Distributor for this
purpose), selected and retained by Biomatrix to inspect and examine such books
of the Distributor during regular business hours for the purpose of verifying
the Distributor's statements of the aggregate Net Revenues of the Agreement
Product in the Territory and determining the correctness of the Formula Prices.
The cost of each such audit shall be borne by the Distributor; provided, that
Biomatrix shall pay the cost of such audit if as a result of such audit the
Distributor is not required to make any additional payments to Biomatrix. Any
additional payments required as a result of such inspection and examination
shall be immediately paid to Biomatrix and shall bear interest from the date
such amount should otherwise have been paid until the date of actual payment at
the rate per annum set forth in Section 21 hereof.

9.4. SHIPMENT AND DELIVERY; PACKAGING.

Biomatrix shall arrange for shipment and invoicing to the Distributor
of the Agreement Product ordered by the Distributor or any of its Affiliates
acting on its behalf via common carrier, * The Distributor shall pay all
customs, duties, sales taxes and other governmental charges relating to the
importation and sale of the Agreement Product (other than US taxes, if any,
related to importation and sale of the Agreement Product in the Territory), and
shall have all responsibility for storing and clearing the Agreement Product
through all customs and importation requirements. The Distributor shall not
agree to a customs or duty classification or value added or other sales tax
classification for the Agreement Product in the Territory without the consent of
Biomatrix; provided that this provision shall not prohibit the Distributor from
using any such classification if required by a government authority.

9.5. RISK OF LOSS.

Biomatrix shall retain title to, and bear all risk of loss of, or
damage to, all units of the Agreement Product until the Agreement Product has
been delivered to the port of entry within the Territory. The Distributor shall
bear all risk of loss of, or damage to, all units of the Agreement Product after
delivery by Biomatrix to the port of entry in accordance with Section 9.4.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 31
9.6. ACCEPTANCE.

(a) Notification of Non-Conformity. Each shipment of Agreement Product
from Biomatrix to the Distributor or its Affiliates shall contain such
laboratory and quality control certificates as are necessary to show that the
Agreement Product is in conformity with the Agreement Product Specifications and
Product Approvals. The Distributor shall notify Biomatrix within * of the
receipt of a shipment of the Agreement Product of any apparent non-conformity of
the Agreement Product. If the Distributor fails to so notify Biomatrix, it will
be deemed to have accepted the product; provided that the warranty provided in
Section 9.8 shall survive acceptance of the Agreement Product by the
Distributor.

(b) Consultation and determination of defects. Biomatrix and the
Distributor agree to consult with each other in accordance with the provisions
of Section 8.13(a) in order to resolve the discrepancy between each other's
determinations regarding any possible defect in the Agreement Product. If such
consultation does not resolve the discrepancy, the parties agree to nominate a
reputable independent laboratory, or another independent third party, in each
case acceptable to both parties, that shall carry out tests on representative
samples taken from such shipment, and the results of such tests shall be binding
on the parties. If the results of such tests demonstrate that the Agreement
Product does not meet the Agreement Product Specifications, then Biomatrix shall
pay the cost of such tests; otherwise, the Distributor shall pay the cost of
such tests. In the case of a recall of any Agreement Product required by a
governmental authority, the process described in this paragraph (b) shall not
apply, and the parties shall carry out the requirements of the governmental
authority in accordance with Section 8.12.

(c) Replacement of defective Agreement Products. Biomatrix shall at its
expense and at no further cost to the Distributor replace any such shipment to
the extent that, in accordance with this Section 9.6, it is determined that it
does not conform to the Agreement Product Specifications. All defective units of
the Agreement Product shall be returned to Biomatrix at the address set forth
above, accompanied or preceded by a reasonably detailed statement of the claimed
defect or non-conformity and proof of date of purchase (if available), and
packed and shipped according to instructions provided by Biomatrix. The
shipping, handling and packaging costs of any such returned units of the
Agreement Product shall be borne by Biomatrix.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 32
9.7. PURCHASE ORDERS.

The provisions of this Agreement shall control over any inconsistent
statement or provisions contained in any document related to this Agreement
passing between the parties hereto including, but not limited to, any purchase
order, acknowledgement, confirmation or notice and shall be incorporated, as
applicable, in the individual sales contracts made by the Distributor.

9.8. LIMITED WARRANTY; LIMITATION ON LIABILITY.

Biomatrix represents and warrants that the Agreement Product supplied
to the Distributor hereunder shall:

(a) conform to the Agreement Product Specifications; and

(b) be manufactured, labelled, packaged and tested (while in
the possession or control of Biomatrix) in accordance with the applicable
Product Approvals therefor and the applicable laws and regulations in the
Territory relating to the manufacture, labelling, packaging and testing of the
Agreement Product.

THE FOREGOING WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY GIVEN BY
BIOMATRIX WITH RESPECT TO THE AGREEMENT PRODUCT, AND BIOMATRIX GIVES AND MAKES
NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OTHER THAN THE
FOREGOING. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NO IMPLIED WARRANTY
OF MERCHANTABILITY, NO IMPLIED WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE,
AND NO IMPLIED WARRANTY ARISING BY USAGE OF TRADE, COURSE OF DEALING OR COURSE
OF PERFORMANCE IS GIVEN OR MADE BY BIOMATRIX OR SHALL ARISE BY OR IN CONNECTION
WITH ANY SALE OR PROVISION OF THE AGREEMENT PRODUCT BY BIOMATRIX, OR THE
DISTRIBUTOR'S USE OR SALE OF THE AGREEMENT PRODUCT, OR BIOMATRIX'S AND/OR THE
DISTRIBUTOR'S CONDUCT IN RELATION THERETO OR TO EACH OTHER. NO REPRESENTATIVE OF
BIOMATRIX IS AUTHORIZED TO GIVE OR MAKE ANY OTHER REPRESENTATION OR WARRANTY OR
TO MODIFY THE FOREGOING WARRANTY IN ANY WAY.

The limited warranty set forth in this Section 9.8 does not apply to any
non-conformity of the Agreement Product resulting from (i) repair, alteration,
misuse, negligence, abuse, accident, mishandling or storage in an improper
environment in each case by any party other than
<PAGE> 33
Biomatrix or its Affiliates or agents or (ii) use, handling, storage or
maintenance other than in accordance with the Agreement Product Specifications.

Biomatrix's sole obligation with respect to units of the Agreement
Product which do not meet the warranty contained herein is limited to
replacement of such units of the Agreement Product, provided that the procedure
set forth in Section 9.6 has been complied with.

BIOMATRIX'S LIABILITY, AND THE EXCLUSIVE REMEDY, IN CONNECTION WITH THE
SALE OR USE OF THE AGREEMENT PRODUCT (WHETHER BASED ON CONTRACT, NEGLIGENCE,
BREACH OF WARRANTY, STRICT LIABILITY OR ANY OTHER LEGAL THEORY), SHALL BE
STRICTLY LIMITED TO BIOMATRIX'S OBLIGATIONS AS SPECIFICALLY AND EXPRESSLY
PROVIDED IN SECTIONS 9.6 AND 9.8 AND IN SECTION 10 BELOW. EXCEPT AS SPECIFICALLY
PROVIDED IN SECTIONS 9.6 AND 9.8 AND IN SECTION 10 BELOW, BIOMATRIX SHALL HAVE
NO LIABILITY, OBLIGATION OR RESPONSIBILITY OF ANY KIND, IN ANY WAY OR TO ANY
EXTENT, FOR ANY DAMAGES, LOSSES, COSTS, EXPENSES OR LIABILITIES FOR ANY
REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE AGREEMENT PRODUCT OR
THE PERFORMANCE THEREOF, OR ARISING IN ANY WAY IN CONNECTION WITH THE PURCHASE
OR USE OR INABILITY TO USE THE AGREEMENT PRODUCT, EVEN IF BIOMATRIX HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SUBJECT TO SECTION 10 BELOW, IN NO
EVENT WHATSOEVER SHALL BIOMATRIX HAVE ANY LIABILITY, OBLIGATION OR
RESPONSIBILITY TO THE DISTRIBUTOR OR ANY OTHER PERSON FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES ARISING IN ANY
WAY IN CONNECTION WITH THE AGREEMENT PRODUCT OR ITS SALE OR USE.

10. INDEMNIFICATION; LIMITATION ON LIABILITY

10.1. INDEMNIFICATION FROM THE DISTRIBUTOR.

Subject to the provisions of Section 10.3, the Distributor shall
defend, indemnify and hold Biomatrix and its Affiliates and their respective
directors, officers, agents and employees harmless from and against any and all
liabilities, claims, damages and expenses (including without limitation actual
court costs and reasonable attorneys' fees regardless of outcome) resulting from
or arising out of or in connection with:

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 34
*

10.2. INDEMNIFICATION FROM BIOMATRIX.

Subject to the provisions of Section 10.3, Biomatrix shall defend,
indemnify and hold the Distributor and its Affiliates and their respective
directors, officers, agents and employees harmless from and against any and all
liabilities, claims, damages and expenses (including without limitation actual
court costs and reasonable attorneys' fees regardless of outcome) resulting from
or arising out of or in connection with:

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 35
10.3. LIMITATION ON LIABILITY.

NOTWITHSTANDING ANY PROVISION TO THE CONTRARY IN SECTIONS 10.1 AND 10.2
ABOVE, OR ANY OTHER PROVISION OF THIS AGREEMENT, IN NO EVENT (INCLUDING THE
FAULT, NEGLIGENCE OR STRICT LIABILITY OF EITHER PARTY) SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL,
PUNITIVE OR EXEMPLARY DAMAGES; PROVIDED, NOTHING IN THIS SECTION 10.3 SHALL
LIMIT THE OBLIGATION OF A PARTY UNDER THIS SECTION 10 RELATING TO A THIRD PARTY
CLAIM.

10.4 INDEMNIFICATION PROCEDURE.

The party claiming indemnification ("Indemnitee"), after being advised
of any assertions of any such third party claims or suits or upon the bringing
or filing of such claims or suits by any third party against the Indemnitee,
shall promptly notify the party from which indemnification is sought
("Indemnitor") thereof; provided, that the failure to promptly notify shall not
affect the Indemnitor's obligations hereunder except to the extent the
Indemnitor is prejudiced by the delay in notification. The Indemnitee shall
permit the Indemnitor's attorneys to control the defense of such claims or suits
at the Indemnitor's cost. The Indemnitee shall co-operate with the Indemnitor in
the defense of such claims or suits. The parties agree that there shall be no
settlements, whether agreed to in court or out of court, without the prior
written consent of the Indemnitor.

11. REPRESENTATIONS OF BIOMATRIX

Biomatrix represents, warrants and covenants as follows:

11.1. AUTHORITY.

Biomatrix is a corporation duly organized and validly existing under
the laws of the State of Delaware with the full power to conduct its affairs as
currently conducted and contemplated hereunder. All necessary action has been
taken to enable it to execute and deliver this Agreement and perform its
obligations hereunder.
<PAGE> 36
11.2. ENFORCEABILITY.

This Agreement is a valid and binding obligation of Biomatrix
enforceable in accordance with its terms. Biomatrix has the unencumbered right
to enter into this Agreement and to fulfill its duties hereunder. It is not and
will not become a party to any agreement in conflict herewith. Accordingly,
Biomatrix has the right to appoint the Distributor as the exclusive distributor
of the Agreement Product in the Territory in accordance with the terms of this
Agreement and such appointment will not constitute a breach of any existing
contractual or other arrangements between Biomatrix and any Affiliated or
non-Affiliated third party, nor shall it infringe the rights of any Affiliated
or non-Affiliated third party.

11.3. NO CONSENTS.

No approval, consent, order, authorization or license by, giving notice
to or taking any other action with respect to, any governmental or regulatory
authority is required in connection with the execution and delivery of this
Agreement by Biomatrix and the performance by Biomatrix of its obligations
hereunder, other than the Product and Reimbursement Approvals contemplated
herein.

11.4. INFORMATION.

The data and other information provided in writing by Biomatrix to the
Distributor pursuant to Section 15.1(b) does not contain any untrue statement of
a material fact.

11.5. INTELLECTUAL PROPERTY.

To its knowledge, the Patents and the Trademarks in the Territory do
not infringe the rights of third parties.

11.6. CE MARK.

The Agreement Product has received a Certificate (EC Design-Examination
Certificate Annex II-4) approving the Agreement Product as a device with a CE
mark. Biomatrix will use commercially reasonable efforts at its cost to maintain
and renew the approval represented by such Certificate.
<PAGE> 37
12. REPRESENTATIONS OF THE DISTRIBUTOR

The Distributor represents, warrants and covenants as follows:

12.1. AUTHORITY.

The Distributor is a company duly organized and validly existing under
the laws of the Republic of France, with full power to conduct its affairs as
currently conducted and contemplated hereunder. All necessary action has been
taken to enable it to execute and deliver this Agreement and perform its
obligations hereunder.

12.2. ENFORCEABILITY.

This Agreement is the Distributor's valid and binding obligation
enforceable in accordance with its terms. The Distributor has the unencumbered
right to enter into this Agreement and to fulfill its obligations hereunder. It
is not and will not become a party to any agreement in conflict herewith.
Accordingly, the Distributor has the right to act as the exclusive distributor
of the Agreement Product in the Territory in accordance with the terms of this
Agreement and the performance of its obligations hereunder will not constitute a
breach of any existing contractual or other arrangements between the Distributor
and any Affiliated or non-Affiliated third party, nor shall it infringe the
rights of any Affiliated or non-Affiliated third party.

12.3. NO CONSENTS.

No approval, consent, order, authorization or license by, giving notice
to or taking any other action with respect to any governmental or regulatory
authority is required in connection with the execution and delivery of this
Agreement by the Distributor and the performance by the Distributor of its
obligations hereunder, other than the Product and Reimbursement Approvals
contemplated herein.

12.4. LOCAL LAWS.

The Distributor shall carry out its responsibilities and obligations
hereunder in accordance with all applicable laws and regulations in the
Territory.
<PAGE> 38
13. INSURANCE

Each party hereto shall (i) obtain and maintain such insurance
policies, including product liability insurance, as are adequate to cover its
respective obligations hereunder and which are consistent with normal business
practices of prudent companies similarly situated and (ii) provide the other
party, upon request, with certificates of insurance confirming the existence of
such insurance policies.

14. INFRINGEMENT OF PATENTS AND TRADEMARKS.

14.1 NOTIFICATION.

Each of the Distributor and Biomatrix will notify the other party in
writing of any infringement of a Patent or Trademark or unauthorized disclosure
or use of any Confidential Information in the Territory within * after it
becomes aware of such infringement or unauthorized disclosure.

14.2 INFRINGEMENT ACTIONS.

Biomatrix shall have the exclusive right (after consultation with the
Distributor) at its own cost to take all legal action in the Territory it deems
necessary or advisable to eliminate or minimize the consequences of any
infringement of a Patent or Trademark in the Territory. For the purpose of
taking any such legal action, Biomatrix shall have the right, subject to the
Distributor's prior written consent (which consent shall not be unreasonably
withheld or delayed) to use the name of the Distributor and/or any local
Affiliate of the Distributor as plaintiff, either solely or jointly in
accordance with the applicable rules of procedure. The Distributor shall
promptly furnish Biomatrix with whatever written authority may be required in
order to enable Biomatrix to use the Distributor's name or that of its Affiliate
in connection with any such legal action, and shall otherwise cooperate fully
and promptly with Biomatrix in connection with any such action, and shall cause
its local Affiliate to cooperate and assist Biomatrix in taking any such legal
action. Biomatrix shall permit the Distributor to participate at its own cost in
any legal action in the Territory brought by Biomatrix to eliminate or minimize
the consequences of any infringement of a Patent or Trademark in the Territory;
provided that Biomatrix shall maintain the right to control the prosecution of
such action. All proceeds realized upon any judgement or settlement regarding
such action (net of direct out-of-pocket expenses relating thereto) shall be *

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 39
* Notwithstanding the foregoing, if Biomatrix (i) notifies the
Distributor in writing that it does not intend to exercise its rights to take
legal action in the Territory to eliminate or minimize the consequences of an
infringement of a Patent or Trademark in the Territory, and (ii) authorizes the
Distributor to pursue such legal action, then the Distributor shall be entitled,
at its own cost and expense, to take such legal action, and Biomatrix shall
cooperate with the Distributor in connection therewith to the same extent and
upon the same terms as the Distributor is required to cooperate with Biomatrix
when Biomatrix exercises its rights under this Section 14.2; provided, however,
that Biomatrix shall be entitled to an amount equal to * of the amount (net of
the Distributor's direct out-of-pocket expenses in prosecuting such action) of
any judgement or settlement payable to the Distributor.

15. REGULATORY ACTIVITIES AND REIMBURSEMENT APPROVALS

15.1. GENERAL.

(a) Approvals. The Distributor shall use commercially reasonable
efforts at its cost in cooperation with Biomatrix and (to the extent required by
law but solely for purposes of obtaining Reimbursement Approval) as Biomatrix's
agent (i) to obtain Reimbursement Approvals in France as soon as possible after
the Effective Date, (ii) to obtain all necessary Product Approvals and all other
Reimbursement Approvals in the Territory (other than the approval referred to in
Section 11.6), and (ii) thereafter to maintain all Product Approvals and
Reimbursement Approvals in effect (other than the approval referred to in
Section 11.6) throughout the term of this Agreement and to obtain, if possible,
increases in the level of reimbursement allowed in the Reimbursement Approvals
from time to time. All Reimbursement Approvals shall result in prices to third
parties for the Agreement Product and in levels of patient reimbursement that
are as optimal as possible. The Distributor agrees not to sell the Agreement
Product in a country in the Territory until such time as all necessary Product
Approvals with respect to such country have been obtained.

(b)

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 40
(c) Review and Assistance by Biomatrix. Biomatrix shall be entitled
generally to oversee the strategy and content of all applications for Product
and Reimbursement Approvals and the content of all such applications shall be
subject to Biomatrix's written approval prior to submission to any regulatory
authority or to any other third party, * . All Product Approvals and
Reimbursement Approvals shall be the exclusive property of and held in the name
of Biomatrix except to the extent that applicable law requires that such
approvals be held in the name of the Distributor, or unless otherwise agreed in
writing by the parties.

(d) Mutual support. The Distributor and Biomatrix shall promptly
provide reasonable advice and assistance to each other as may be necessary to
obtain and maintain Product Approvals and, if applicable, satisfactory
Reimbursement Approvals for the Agreement Product.

(e) Transfer of approvals. Except to the extent necessary to give
effect to the provision of the first sentence of Section 3.2(b), in the event
that the Product Approvals and the Reimbursement Approvals (if any) relating to
the Agreement Product in any country in the Territory is in the name of the
Distributor or any of its Affiliates, it shall be transferred to Biomatrix
immediately upon termination of the Agreement.

(f) Reporting on Agreement Product. During the term of this Agreement,
each party shall immediately notify the other in writing in the event that such
party becomes aware of any failure of the Agreement Product to comply with any
of the requirements therefor specified in any Product Approval.

(g) Ongoing information exchange. Each party shall keep the other
advised of regulatory interactions, activities and correspondence and the
registration status of the Agreement Product on a quarterly basis, except that
matters requiring more immediate attention shall be communicated as soon as
practicable.

15.2. CLINICAL TRIALS; PUBLICATION OF RESULTS.

(a) The Distributor shall be responsible at its own cost for conducting
and managing a clinical program to be conducted in France pursuant to a plan and
schedule to be prepared by the Distributor promptly after the Effective Date in
cooperation with Biomatrix, such plan to include

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 41
an expenditure by the Distributor during the * Agreement Years in the range of
*, and during the * Agreement Years in the range of an additional * . The final
version of such plan and schedule shall be approved by the parties in accordance
with the provisions of Section 8.13(a), and shall include any clinical trials
which the Distributor may be required to undertake in order to obtain Product
Approval and Reimbursement Approval in the Territory; provided that the
protocols for all such clinical trials shall be subject to Biomatrix's prior
written approval and Biomatrix shall have the right to review the performance of
any such clinical studies.

(b) The Distributor shall provide the completed data resulting from all
clinical trials conducted in accordance with this Section 15.2 to Biomatrix for
analysis, and Biomatrix shall prepare the final reports relating to such
clinical trial data in an agreed format. Biomatrix and its Affiliates shall be
free to use the results of any or all such clinical trials in the promotion,
marketing and product licensing of the Agreement Product outside the Territory.
The results of any such studies will not be published or publicized in any way
without the prior written consent of Biomatrix, such consent not to be
unreasonably withheld. If Biomatrix has consented to publication, Biomatrix and
the Distributors shall jointly prepare the manuscript and select the journal for
publication.

15.3. WITHDRAWAL OF PRODUCT FOR SAFETY REASONS.

If a regulatory authority in a country in the Territory withdraws the
approval to sell the Agreement Product in such country for product safety
reasons, the Distributor shall not be obligated to sell the Agreement Product in
such country from the date of such withdrawal and until the Distributor is again
authorized to sell Agreement Product in such country, and Biomatrix shall not be
obligated to supply the Agreement Product to the Distributor in such country for
such period. If such a withdrawal decision is final and not appealable, this
Agreement shall terminate with respect to such country.

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 42
16. FURTHER ASSURANCES

The parties hereto agree to execute such further or other documents and
assurances as are necessary from time to time in order to give effect to the
provisions of this Agreement.

17. ASSIGNMENT

17.1. GENERAL.

The rights and obligations of the parties hereto shall inure to the
benefit of and shall be binding upon the authorized successors and permitted
assigns of each party. Except to the extent permitted by Section 17.2, neither
party may take any of the following actions (collectively referred to herein as
an "Assignment"): (i) assign a material part of its rights or obligations under
this Agreement, (ii) subcontract, sublicense or otherwise delegate a material
part of its rights or obligations under this Agreement, or (iii) designate
another person to perform all or a material part of its obligations under this
Agreement (except in the ordinary course of business), without the prior written
consent of the other party, except to a successor of the entire business of the
Distributor, by merger, amalgamation or otherwise.

17.2. PARTICIPATION BY AFFILIATES.

It is acknowledged and understood that each of the parties hereto may
from time to time perform some or all of its obligations hereunder through one
or more of its Affiliates. In that regard, each of the parties agrees (i) not to
permit a person that is not an Affiliate to perform any of its obligations
hereunder (except to the extent not prohibited by Section 17.1), (ii) if the
participation of the Affiliate is not in the ordinary course of business, to
notify the other party in writing prior to the participation of the Affiliate in
this Agreement, describing the Affiliate and its expected involvement hereunder,
(iii) to ensure that its Affiliates comply with all of the provisions hereof,
(iv) that the other party hereto will not be in a direct contractual
relationship with such Affiliate and (v) that the party involving such Affiliate
shall be responsible to the other party hereto, both as primary obligor and as
guarantor, for the performance of all of its obligations hereunder, and for the
conduct of its Affiliates.
<PAGE> 43
18. GOVERNING LAW; ARBITRATION; INJUNCTIVE RELIEF

18.1. GOVERNING LAW.

This Agreement and the legal relations between the parties in
connection herewith shall be governed by and construed in accordance with the
internal and substantive laws of the State of New Jersey, United States of
America. The parties hereby agree that the United Nations Convention on
Contracts for the International Sale of Goods shall not apply to this Agreement
or any other document contemplated hereby.

18.2. ARBITRATION.

In the event of any dispute touching or concerning this Agreement
(other than a matter required by the terms hereof to be referred to the process
set forth in Section 8.13 (a) and (b)), the parties hereby agree that they shall
submit the dispute for arbitration in Paris, France under the Rules for
Conciliation and Arbitration of the International Chamber of Commerce in effect
on the Effective Date (the "Rules") by no more than three (3) arbitrators
appointed in accordance with said Rules. Any decision of such arbitrators shall
be final and binding upon the parties. The arbitrators shall apply the governing
law set forth in this Section and such arbitration shall be conducted in the
English language. Judgment upon an award rendered by the arbitrators may be
entered in any court having jurisdiction thereof.

18.3. INJUNCTIVE RELIEF.

Each of the parties hereto acknowledges and agrees that damages will
not be an adequate remedy for any material breach or violation of Sections 6 or
7.1 of this Agreement if such material breach or violation would cause immediate
and irreparable harm (an "Irreparable Breach"). Accordingly, notwithstanding the
provisions of Section 18.2 hereof to the contrary, in the event of a threatened
or ongoing Irreparable Breach, each party hereto shall be entitled to seek, in
any state or federal court in the State of New Jersey or in any court in the
Republic of France, equitable relief of a kind appropriate in light of the
nature of the ongoing threatened Irreparable Breach, which relief may include,
without limitation, specific performance or injunctive relief; provided,
however, that if the party bringing such action is unsuccessful in obtaining the
relief sought, the moving party shall pay the non-moving party's reasonable
costs, including attorney's fees, incurred in connection with defending such
action. Such remedies shall
<PAGE> 44
not be the parties' exclusive remedies, but shall be in addition to all other
remedies provided in this Agreement.

19. SEVERABILITY

In the event that any provision of this Agreement shall be held by a
court of competent jurisdiction or by any governmental body to be invalid or
unenforceable, such provision shall be deemed severable and the remaining parts
and provisions of this Agreement shall remain in full force and effect.

20. FORCE MAJEURE

Each of the parties shall be excused from the performance of its
obligations hereunder in the event such performance is prevented by force
majeure, and such excuse shall continue as long as the condition constituting
such force majeure continues. For the purpose of this Agreement, force majeure
is defined as contingencies beyond the reasonable control of either party and
not anticipated at the time of this Agreement, including, without limitation,
acts of God, judicial or regulatory action, war, civil commotion, destruction of
production facilities or materials by fire, earthquake or storm and labor
disturbances or strikes (whether or not any such labor disturbance or strike is
within the power of the affected party to settle). The party affected by force
majeure shall provide the other party with full particulars thereof as soon as
it becomes aware of the same (including its best estimate of the likely extent
and duration of the interference with its activities), and will use its best
endeavors to overcome the difficulties created thereby and to resume
performance of its obligations as soon as practicable.

21. INTEREST

Any overdue amounts payable by either party hereunder shall bear
interest compounded monthly at the prime lending rate for US Dollars published
from time to time in The Wall Street Journal plus *
per annum, or, if lower, the highest rate permissible by applicable law, from
the due date until the date of payment.

22. NO PARTNERSHIP OR AGENCY; NO THIRD PARTY BENEFICIARIES

This Agreement and the relations hereby established by and between
Biomatrix and the Distributor do not constitute a partnership, joint venture,
agency (except to the limited extent

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 45
provided in Section 15.1(a)) or contract of employment between them. This
Agreement is a bilateral agreement between the Distributor and Biomatrix, and no
third parties (including Affiliates of the parties hereto) shall have any rights
hereunder.

23. NOTICES

All communications in connection with this Agreement shall be in
writing and sent by postage prepaid first class mail, courier, or telefax, and
if relating to default, late payment or termination, by certified mail, return
receipt requested, telefax or courier, addressed to each party at the address
above, in the case of Biomatrix, Attn: Chief Executive Officer, with a copy to:
Justin P. Morreale, Esq., Bingham, Dana & Gould, 150 Federal Street, Boston,
Massachusetts 02110, U.S.A., and in the case of the Distributor Attn: Chief
Executive Officer, or to such other address as the addressee shall last have
designated by notice to the communicating party. The date of giving any notice
shall be the date of its actual receipt.

24. EU REGULATIONS

It is the intention of the parties hereto that this Agreement shall at
all times qualify for the exemption from the provisions of Article 85(1) of the
Treaty of Rome dated 25 March, 1957, as amended, which either (a) is available
under EEC Regulation Number 1983/83, or (b) may subsequently be available under
any successor regulation or regulations thereto. In the event that any provision
of this Agreement is deemed to violate the conditions for qualifying for the
exemption, set out in whichever of those regulations may be in effect at the
relevant time, or if any such regulation is amended after the date of this
Agreement so as to cause this Agreement to fail to qualify for the exemption,
the parties hereto agree that they will, as soon as it is practicable to do so,
enter into good faith negotiations to amend this Agreement as necessary in order
to re-qualify for the exemption. If those negotiations are not successfully
concluded within a reasonable time (not to exceed ninety (90) days, or such
other period as is agreed upon in writing by the parties hereto, after the
relevant regulation is amended), either party may terminate this Agreement upon
thirty (30) days' prior written notice to the other party.

25. SURVIVAL

The provisions of Sections 3.2, 3.6, 3.7, 3.8, 7.1, 7.2, 8.2, 9.5, 9.8,
10.1, 10.2, 10.3, 10.4 and 15.1(e) of this Agreement shall survive the
termination or expiration of this Agreement (as the case may be) and shall
thereafter remain in full force and effect. The provisions of this Agreement
that do not survive termination or expiration hereof (as the case may be) shall,
<PAGE> 46
nonetheless, be controlling on, and shall be used in construing and interpreting
the rights and obligations of the parties hereto with regard to, any dispute,
controversy or claim which may arise under, out of, or in connection with this
Agreement.

26. MISCELLANEOUS

26.1. ENTIRE AGREEMENT.

This Agreement sets forth the entire agreement between the parties with
respect to the transactions and arrangements contemplated hereby and supersedes
all prior oral or written arrangements, including without limitation the letter
of intent dated 1 August 1996 by and between the parties and the term sheet
attached thereto.

26.2. AMENDMENTS.

This Agreement may be modified or amended only by a written instrument
executed and delivered by both parties.

26.3. NO WAIVER.

None of the provisions of this Agreement shall be deemed to have been
waived by any act or acquiescence on the part of either party except by an
instrument in writing signed and delivered by the party executing the waiver.

26.4. COUNTERPARTS.

This Agreement may be executed in several identical counterparts, each
of which shall be an original, but all of which constitute one instrument, and
in making proof of this Agreement it shall not be necessary to produce or
account for more than one such counterpart.

26.5. HEADINGS.

The title of this Agreement and the section headings contained herein
are for convenience of reference only and shall not define or limit the
provisions hereof.
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

BOEHRINGER INGELHEIM FRANCE, S.A.

By: /s/ Paul Bonnabel
-----------------------------
Name: Paul Bonnabel
Title: Director

By: /s/ D. Mangeot
-----------------------------
Name: D. Mangeot
Title: Gerant (Manager)

BIOMATRIX, INC.

By: /s/ Endre A. Balazs
-----------------------------
Name: Endre A. Balazs
Title: Chief Executive Officer
<PAGE> 48
EXHIBITS
--------

Exhibit A - Agreement Product Specifications

Exhibit B - Patents and Trademarks

Exhibit C - Legends

Exhibit D - Sales Forecasts and Sample Volumes

Exhibit E - Promotional Plan and Budget
<PAGE> 49
EXHIBIT A
---------

Agreement Product Specifications

Specification of Synvisc(R)
(hylan G-F 20)

Tests Procedures Specifications
- ----- ---------- --------------

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 50
EXHIBIT B
---------

I. SYNVISC RELATED FRENCH PATENTS

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 51
EXHIBIT C
---------

Legends
<PAGE> 52
EXHIBIT D
---------

Sales Forecasts and Sample Volumes*

Non Reimbursement Scenario

Year 1 Year 2 Year 3
------ ------ ------

Sales (#Treatments) * * *

Samples * * *

Reimbursement

Year 1 Year 2 Year 3
------ ------ ------

Sales (#Treatments) * * *

* see Section 9.3(a).

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 53
EXHIBIT E

Preliminary Promotion Budget and Schedule

(INVESTMENT PLAN FOR SYNVISC)

Hypothesis: Non reimbursed; * per treatment
(All Amounts in FF000)

- --------------------------------------------------------------------------------
1997 1998 1999 2000

Awareness Program * * * *
Congresses
Symposium

Physician Training * * * *
Training Sessions
Training Tools
GPs Information

Phase IV * * * *
TIPS
Scientific studies

PMS (Patient database) * * * *

Biomatrix Synvisc Specialists * * * *

Patient Services * * * *
Patient Activities
Patient Refund Plan

Marketing/Ad Agencies * * * *

Press/Advertising * * * *

Samples * * * *
- --------------------------------------------------------------------------------
Total Costs per year * * * *
Cumulative Costs
- --------------------------------------------------------------------------------

*Confidential portions have been omitted and filed separately with the
Commission.
<PAGE> 54
Preliminary Promotion Budget and Schedule

(INVESTMENT PLAN FOR SYNVISC)

Hypothesis Reimbursed; * per treatment
(All Amounts in FF000)

- --------------------------------------------------------------------------------
1997 1998 1999 2000

Awareness Program * * * *
Congresses
Symposium

Physician Training * * * *
Training Sessions
Training Tools
GPs Information

Phase IV * * * *
TIPS
Scientific studies

PMS (Patient database) * * * *

Biomatrix Synvisc Specialists * * * *

Patient Services * * * *
Patient Activities
Patient Refund Plan

Marketing/Ad Agencies * * * *

Press/Advertising * * * *

Sampling * * * *
- --------------------------------------------------------------------------------
Total Costs per Year * * * *
Cumulative Costs
- --------------------------------------------------------------------------------

*Confidential portions have been omitted and filed separately with the
Commission.

<PAGE> 1
BIOMATRIX, INC. AND SUBSIDIARIES

EXHIBIT 11

COMPUTATION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
Year ended
December 31,
1996
-----------

<S> <C>
Income applicable to common shares.......................... $ 2,770,137

Weighted-average number of common shares
and common share equivalents outstanding
during the year
Common stock......................................... 10,395,769
Stock options........................................ 499,257
------------
Shares outstanding - primary......................... 10,895,026

Primary earnings
per common share $0.25
=====

Additional stock options............................. 17,118
------------
Shares outstanding - fully diluted................... 10,912,144

Fully diluted earnings
per common share................................... $0.25
=====
</TABLE>

<PAGE> 1
COOPERS & LYBRAND LETTERHEAD

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Biomatrix, Inc. on Forms S-8 (File Nos. 33-91066 and 33-91064) and Form S-3
(File No. 33-99856) of our report dated March 7, 1997 on our audits of the
consolidated financial statements of Biomatrix, Inc. as of December 31, 1996
and 1995, and for the years ended December 31, 1996, 1995 and 1994, which
report is included in this Annual Report on Form 10-K.

/s/ Coopers & Lybrand
Coopers & Lybrand

Parsippany, New Jersey
March 28, 1997

<ARTICLE> 5
<CIK> 0000747952
<NAME> BIOMATRIX, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,034,764
<SECURITIES> 10,603,358
<RECEIVABLES> 1,230,456
<ALLOWANCES> 25,500
<INVENTORY> 727,083
<CURRENT-ASSETS> 16,325,963
<PP&E> 13,088,449
<DEPRECIATION> (3,582,414)
<TOTAL-ASSETS> 25,994,027
<CURRENT-LIABILITIES> 2,491,570
<BONDS> 5,965,930
0
0
<COMMON> 56,683,814
<OTHER-SE> (3,415,531)
<TOTAL-LIABILITY-AND-EQUITY> 25,994,027
<SALES> 4,950,652
<TOTAL-REVENUES> 15,578,912
<CGS> 2,563,060
<TOTAL-COSTS> 13,367,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,465
<INCOME-PRETAX> 2,905,137
<INCOME-TAX> 135,000
<INCOME-CONTINUING> 2,770,137
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,770,137
<EPS-PRIMARY> .25
<EPS-DILUTED> .25

</TABLE>