* Collagen Corp., of Palo Alto, Calif., said it will proceed with separating its Aesthetics Technologies business and its Collagen Technologies business into two independent, publicly traded companies. All shares will be distributed to Collagen stockholders at a date yet to be determined. Pending a ruling from the Internal Revenue Service, the transaction will be tax-free to stockholders.

* Cubist Pharmaceuticals Inc., of Cambridge, Mass., and Merck & Co. Inc., of Whitehouse Station, N.J., have expanded their pact to discover and develop novel antibacterial drugs. The original deal, signed in June 1996, called for up to $20.5 million in payments to Cubist. So far, the company has received $3 million from Merck in license fees, research support and milestone payments.

* Procept Inc., of Cambridge, Mass., said it will effect a one-for-seven reverse stock split, leaving the company with about 2 million shares outstanding. Procept develops small molecule therapeutics for immune system disorders.

* Amylin Pharmaceuticals Inc., of San Diego, and Ortho-McNeil Pharmaceuticals, of Raritan, N.J., committed $500,000 as donor-directed contributors to the American Diabetes Research Foundation. The two companies are the first to partner with the foundation to pay for research in a specific area — in this case, the metabolism and physiology of amylin and its role in diabetes. By making the contribution, the companies have an opportunity to work with the foundation to create a request for grant applications in a field of their choosing.

* CytoTherapeutics Inc., of Lincoln, R.I., was awarded two grants of $2 million each by the Advanced Technology Program at the National Institute of Standards and Technology. The funds will pay for research on treatments for degenerative diseases of the central nervous system. Two of the company's products use encapsulated cell implants to deliver growth factors and neural stem cells, replacing neural tissue damaged by disease or injury.

* CytRx Corp., of Atlanta, received a grant from the FDA's division of orphan drug development to support the company's upcoming study of Flocor, used to treat sickle-cell patients undergoing acute vaso-occlusive crises. The grant will provide $400,000 over two years for the pivotal Phase III trial, which is expected to begin late this year or early next.

* Ergo Science Corp., of Boston, said the FDA accepted its new drug application for filing. The company's drug, Ergoset, is a treatment for Type II diabetes. The contents of the filing will be presented to members of an FDA advisory panel in the first half of next year.

* Scios Inc., of Mountain View, Calif., and its partner American Home Products Corp., of Madison, N.J., began two Phase II/III trials of the former's Fiblast trafermin for stroke. The drug, a Scios formulation of fibroblast growth factor, has demonstrated in laboratory studies the ability to protect brain cells from oxygen and glucose deprivation caused by stroke.

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