Half Yearly Report

1 December 2015

Collagen Solutions Plc

(the "Company" or the "Group")

Half Yearly Report

Interim Results for the six months ended 30 September 2015

Collagen Solutions plc (AIM: COS), the developer and manufacturer of medical grade collagen components for use in regenerative medicine, medical devices and in-vitro diagnostics, announces results for the six months ended 30 September 2015.

Financial Highlights

· Revenue and other income increased to £1,460,218 (H1 2014: £143,213)

· LBITDA- £(79,376) (H1 2014: £(522,144)

· Pre-tax loss - £(356,537) (H1 2014: £(560,831)

· Basic loss per share - (0.26)p (H1 2014: (0.88)p)

· Net cash balances of £3,104,230 at 30 September 2015 (31 March 2015 : £3,391,356)

Operational Highlights

· Acquisition of assets and exclusive world licence for ChondroMimetic, a collagen based implant for treatment of small osteochondral (cartilage and underlying bone) defects, together with related IP for use in other clinical applications.

· Management team strengthened by appointment of Chief Operating Officer

· Supply agreement signed with Histogenics Corporation

· New US patent granted for processing of new biomaterial for heart patients

· Partnership with UCL and Oxford MEStar in grant award from Arthritis Research UK

· Joined €4 million Horizon 2020 grant funded research project to develop novel treatments for Parkinson's disease

Post Period End

· R&D headcount increased in San Jose to further develop new high value collagen products

· Management team strengthened by appointment of Chief Business Officer in USA

Dr Stewart White, Chief Executive Officer of Collagen Solutions, commented: "I am pleased to report that trading for the period demonstrated a significant increase in revenue with reduction in LBITDA compared with the same period in 2014, whilst maintaining a healthy cash position. The Collagen Solutions value proposition received further external validation within the period via supply agreements signed with new customers, additional FDA approval of customers' products and our participation in cutting edge research programmes in new clinical areas such as the treatment for Parkinson's disease. These achievements have been possible through the hard work of our colleagues across the globe."

Chairman's Statement

I am pleased to present Collagen Solutions' interim results for the six month period ended 30 September 2015. During the period, we have made further progress in increasing revenue from new and existing customers and products across the Group.

The strategic objective is to build a significant global biomaterials business by assisting customers in expediting the transition of their products from development through to manufacture by the provision of cost effective, functional medical grade collagen materials and devices across a range of clinical indications, for the ultimate benefit of patients by providing effective and affordable treatments.

Overview

During this six month period, revenue has increased by 141% over the full year revenue for 2014/15. Revenue growth has come from both our material supply and contract manufacturing activities with the acquisition of Southern Lights Biomaterials making a significant contribution. We have continued to invest in our R&D teams, senior management team, internally generated IP; such as the new US patent granted in May, and our manufacturing facilities in the UK and New Zealand. We have also taken the opportunity to acquire the assets and exclusive worldwide IP licence to the ChondroMimetic product, a collagen based implant for treatment of cartilage and underlying bone defects. This IP family and platform technology also gives opportunities to develop a pipeline of additional products from the platform technologies for further clinical indications which we believe have the potential to create long-term shareholder value.

The senior management teams in Glasgow, San Jose and New Zealand have been successfully integrated and are working effectively as a cohesive unit to execute our strategic plan.

We have set ourselves a target by 2020 to create a biomaterials business with a value of £100 million, through a combination of organic growth, exploitation of licensed IP and appropriate acquisitions. In order to achieve this we have been putting in place the necessary resources to make this happen.

Results

The Group's results for the six months ended 30 September 2015 are set out in the Consolidated Statement of Comprehensive Income. Revenue (including other income) for the first six months was up significantly to £1,460,218 (2014: £143,213). Administrative expenses were £898,284 (2014: £467,672), selling and marketing costs were £266,300 (2014: £161,171), LBITDA for the first six months was (£79,376) (2014: (£522,144)), and the loss per share reduced to (0.26)p (2014: (0.88)p).

Net cash generated from operations during the period was £35,444. The Group's cash balances at 30 September 2015 were £3,104,230 (31 March 2015: £3,391,356).

Board and management

The team is working together well as a cohesive unit under Stewart's leadership, with the Scientific Advisory Board providing important input into our product development strategies through the stage gate process. At the start of the period, we appointed Tom Hyland as Chief Operating Officer. Tom has a wealth of knowledge and experience in collagen chemistry and GMP manufacturing. More recently we are delighted to welcome Jamal Rushdy as Chief Business Officer. He has over 20 years' experience in the medical device arena, specifically within two mid-size high growth public companies and three successful start-ups. Jamal has an impressive track record of building businesses with successful exits and transforming organisations through integration and performance improvement.

The Board and the employees of Collagen Solutions are deeply saddened by the recent death, after a short illness, of our Non-Executive Director, Dr Kevin Wilson. Kevin was both a close friend and colleague of mine of many years standing and he played a pivotal role in the formation of this Company. His humanity, wit, creativity and enthusiasm will be sadly missed. He never sought the limelight and I often felt he never got the credit he deserved from others outside his close circle of friends. Kevin's passing leaves a gap in our Board that will be enormously difficult to fill and we will update you in due course in this regard.

As a consequence of this, I will be assuming the role of Chairman of the Audit and Risk Committee.

Current Outlook

As I look forward in terms of the rest of this financial year and beyond I am encouraged by our continued progress and the overall direction of travel. As ever my desire for greater momentum and being able to execute the opportunities we have in a timely fashion remains a high priority.

The overall positive background and the ability to secure new contracts gives me comfort that the second half of the year will see further growth in our revenues. Our pipeline of opportunities continues to remain robust but with a degree of uncertainty prevailing regarding the exact timing of contract execution.

We have yet to reach a critical mass of manufactured product and consistent cash flow positivity. We anticipate, excluding investing activities we will be operationally cash positive by the year end, if not for the year as a whole.

There are a number of more significant growth opportunities which may crystallise in 2016;

- The building of a new facility in New Zealand to accommodate a specific customer requirement;

- The establishment of a joint-venture in China in order to work in the Chinese market with the right partner so that our products can service particular market segments cost effectively; and

- The commercialisation of the IP from ChondroMimetic, a treasure trove of value enhancing opportunities. This however will require its own dedicated management team if we are to retain our focus in our core business.

We continue to build our Company and its infrastructure in a relatively low risk manner by adopting a portfolio approach in a multi-product/customer/sector business model which monetises the embedded value in the business whilst enabling us to move up the value chain.

Thank you for your support

David E Evans

Chairman

1 December 2015

Collagen Solutions Plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 September 2015

Collagen Solutions Plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2015

Collagen Solutions Plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 September 2015

Collagen Solutions Plc

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 September 2015

Collagen Solutions Plc

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The unaudited interim statement results for the six month period ending 30 September 2015 were approved by the Board of directors on 30 November 2015. The financial information contained in the interim report does not constitute statutory accounts within the meaning of section 434 (3) of the Companies Act 2006. The financial information for the full preceding year is based on the statutory accounts for the year ended 31 March 2015, upon which the auditors issued an unqualified opinion, did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006. The audited statutory accounts for the period ended 31 March 2015 have been lodged with the Registrar of Companies.

While the financial information included in this interim report has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards, as adopted by the European Union (EU) (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS.

The Company is a limited liability company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange. The consolidated financial information of Collagen Solutions plc is presented in pounds sterling (£), which is also the functional currency of the Group.

2. SEGMENTAL REPORTING

Revenue information by geographical location:

3. LOSS PER SHARE

The calculation of basic loss per ordinary share for the six months ended 30 September 2015 is based on losses of £449,487 and on 171,014,024 ordinary shares being the weighted average number of shares in issue during the period. The calculation of basic loss per ordinary share for the six months ended 30 September 2014 is based on losses of £560,831 and on 63,826,007 ordinary shares being the weighted average number of shares in issue during the period. The calculation of basic loss per ordinary share for the period ended 31 March 2015 is based on losses of £1,123,592 and on 96,409,178 ordinary shares being the weighted average number of shares in issue during the period.

The loss for the period and the weighted average number of ordinary shares for calculating the diluted loss per share for the six months ended 30 September 2015, the six months ended 30 September 2014 and the period ended 31 March 2015 are identical to those for the basic loss per share. This is because the outstanding share options would have the effect of reducing the loss per share and would therefore not be dilutive under the terms of International Accounting Standard ("IAS") No 33.

4. SEPARATELY IDENTIFIABLE ITEMS

Separately identifiable items in the period ended 31 March 2015 of £155,131 which related to the acquisition and integration costs of Southern Lights Ventures 2002 Limited are included within administrative expenses.

5. SHARE CAPITAL

On 11 September 2015, as part of the consideration for the acquisition of the ChondroMimetic assets, 434,950 ordinary shares were issued at a price of 11.658p. In addition, a further 434,950 ordinary shares will be issued over the subsequent two years as deferred consideration.

Options

At 30 September 2015, the Company had the following unissued ordinary shares of 1p each under the Company's share option schemes, details of which are as follows:-

Warrants

On 26 June 2015, the Company entered into a warrant instrument in respect of the subscription for 1,709,688 new ordinary 1p shares in Collagen Solutions Plc. Each warrant confers the right to subscribe for one ordinary share at a subscription price of 30p per ordinary share. The subscription rights under the warrants may be exercised at any time up to 25 June 2018.

6. INTERIM RESULTS

These results were approved by the Board of Directors on 30 November 2015. Copies of the interim report are available to the public from the Group's website, www.collagensolutions.co.uk. If you would like to receive a hard copy of the interim report please contact the Collagen Solutions Plc offices on +44 (0)141 648 9100 to request a copy.