Collagen Corp. said Thursday that it filed a registration statementrelating to the offering of $45 million in bonds that can be exchangedfor shares of Target Therapeutics Inc. owned by Collagen.

Collagen, of Palo Alto, Calif., has about 2.1 million shares, or a stakeof about 30 percent, in Fremont, Calif.-based Target(NASDAQ:TGET). Those buying the debentures, due in 2002, canexchange the bonds for Target stock priced at a premium.

Collagen helped found Target in 1985, and took it public in 1992.Target is a device company focused mainly on disposable catheters,guidewires and micro-coils used in procedures to treat vasculardiseases of the brain associated with stroke. It is expected to reportrevenues of about $46 million for the years that ends March 31.

"We have engaged in a program of systematically selling our position[in Target]," Howard Palefsky, Collagen's chairman and CEO, toldBioWorld. "We've announced a plan to sell some every quarter, andwe'll do that very slowly. The intention is to liquidate our position inan orderly manner. The goal is to redeploy this money into newventures and ideas. We've developed a pattern of setting up affiliatecompanies that utilize our technology in other markets."

Target won't realize any money from the transaction. But it stillcould benefit.

"It's mutually beneficial," A. Larry Tannenbaum, Target's chieffinancial officer, told BioWorld. "In our case it allows for a smooth,orderly transition of additional Target stock into the marketplace.There's been talk that we need to increase our float. Having moreshares out there would be viewed positively."

Collagen, which reported $9.6 million in cash and equivalents onDec. 31 and a net profit of 2.2 million for the quarter, does not needthe money, Palefsky said. Collagen will be able to take a portion ofTarget's income on its income statement, and also will realize tax andother benefits from structuring the deal this way.

Collagen, which sells injectable collagen for tissue repair andreplacement indications, expects to report more than $70 million inrevenues for the year ending in June. In addition to supportingaffiliated companies and other alliances, Collagen plans to use theproceeds for additions to working capital, research and development,capital equipment investments and the repurchase of its stock.

Target's stock closed at $35.75 Thursday, down 25 cents. Collagen(NASDAQ:CGEN) was up 13 cents at $26.63.n

-- Jim Shrine

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