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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

Commission file number 1-9741

INAMED CORPORATION

5540 Ekwill Street
Santa Barbara, California 93111-2936

Telephone Number: (805) 683-6761

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        On August 16, 2002, there were 20,901,928 shares of the Registrant's common stock outstanding.

INAMED CORPORATION AND SUBSIDIARIES

Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2002

TABLE OF CONTENTS

This report contains trademarks and trade names that are the property of Inamed Corporation and its subsidiaries, and of other companies, as indicated.

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PART I—FINANCIAL INFORMATION

ITEM 1. Financial Statements

INAMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(millions, except par value)

See accompanying notes to unaudited consolidated financial statements.

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INAMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share data)

See accompanying notes to unaudited consolidated financial statements.

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INAMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share data)

See accompanying notes to unaudited consolidated financial statements.

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INAMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE (LOSS)
(Unaudited)
(millions)

See accompanying notes to unaudited consolidated financial statements.

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INAMED CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)

See accompanying notes to unaudited consolidated financial statements.

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INAMED CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(millions)

NOTE 1—INTERIM FINANCIAL STATEMENTS

        The accompanying unaudited consolidated financial statements include all adjustments which are, in our opinion, necessary for the fair presentation of the results of operations for the periods presented. Interim results are not necessarily indicative of the results to be expected for a full year.

        Certain information and note disclosures normally included in financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted as allowed by Form 10-Q. Certain reclassifications have been made to the prior year's financial statements to conform to the current year presentation. The accompanying unaudited consolidated financial statements should be read in conjunction with our consolidated financial statements for the year ended December 31, 2001 as filed with the Securities and Exchange Commission on Form 10-K.

Critical Accounting Policies and Estimates

        The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires Inamed to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates and judgments, including those related to revenue recognition, adequacy of allowances for doubtful accounts, valuation of intangible assets and investments, income taxes, and litigation. Inamed bases its estimates on historical and anticipated results and trends and on various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from those estimates.

Revenue Recognition

        Inamed recognizes product revenue, net of sales discounts, returns and allowances, in accordance with Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements" and SFAS No. 48 "Revenue Recognition When Right of Return Exists." These statements establish that revenue can be recognized when persuasive evidence of an arrangement exists, delivery has occurred and all significant contractual obligations have been satisfied, the fee is fixed or determinable and collection is considered probable. Appropriate reserves are established for anticipated returns and allowances based on product return history.

Inventories

        Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) method. Inamed capitalizes inventory costs associated with certain product candidates prior to regulatory approval, based on management's judgment of probable future commercialization. Inamed could be required to expense previously capitalized costs related to pre-approval inventory upon a change in such judgment, due to, among other factors, a decision denying approval of the product candidate by the necessary regulatory bodies.

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Allowance for Doubtful Accounts

        Inamed maintains an allowance for doubtful accounts for estimated losses resulting from the inability of some of its customers to make required payments. The allowance for doubtful accounts are based on the analysis of historical bad debts, customer credit-worthiness, past transaction history with the customer, current economic trends and changes in customer payment terms. If the financial condition of Inamed's customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required.

Litigation

        Inamed is involved in various litigation matters as a claimant and as a defendant. The Company records any amounts recovered in these matters when collection is certain. The Company records liabilities for claims against it when the losses are probable and estimable. Amounts recorded are based on reviews by outside counsel, in-house counsel, and management.

Product Warranties

        The provision for product warranty primarily relates to Inamed's "Confidence Plus" program. The amount of the provision is calculated and recorded based on actuarial amounts. Expected future obligations are determined based on the history of product shipments and claims and are discounted to a current value.

NOTE 2—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

THE COMPANY

        Inamed Corporation, a Delaware Corporation, and its subsidiaries, or Inamed, is a global medical device company that develops, manufactures, and markets a diverse line of products that enhance the quality of people's lives. Inamed has three principal product lines (which, for financial reporting purposes, are considered to be one segment): breast aesthetics (consisting primarily of breast implants and tissue expanders sold largely for use in plastic and reconstructive surgery), facial aesthetics (consisting primarily of collagen and other dermal fillers sold largely to dermatologists and plastic surgeons), and health (consisting of products for use in treating severe and morbid obesity). Inamed's manufacturing locations are in California, Costa Rica, and Ireland; and its administrative support functions are in California and Ireland. Inamed sells through distributors and, in certain countries including the U.S., through its own staff of sales representatives.

PRESENTATION

        The consolidated financial statements include the accounts of Inamed and its subsidiaries after elimination of all significant intercompany accounts and transactions.

RECENT PRONOUNCEMENTS

        In April 2002, the Financial Accounting Standards Board, ("FASB"), issued Statement of Financial Accounting Standards No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," which among other things provides guidance in reporting gains and losses from extinguishments of debt and accounting for leases. Inamed will adopt this statement in 2003 and is currently reviewing this statement to determine its impact. However, Inamed does not expect the adoption of this standard to have a material impact on its financial position or its results of operations.

        On August 16, 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". The statement requires entities to record the fair value of a liability for legal obligations

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associated with the retirement obligations of tangible long-lived assets in the period in which it is incurred. When the liability is initially recorded, the entity increases the carrying amount of the related long-lived asset. Over time, accretion of the liability is recognized each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002, with earlier application encouraged. The Company does not expect that the adoption of SFAS No. 143 will have a material impact on the Company's financial position or results from operations.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment and Disposal of Long Lived Assets," which supercedes SFAS No. 121 and certain sections of APB Opinion No. 30. SFAS No. 144 classifies long-lived assets as either (1) to be held and used, (2) to be disposed of by other than sale, or (3) to be disposed of by sale. This standard introduces a probability-weighted cash flow estimation approach to deal with situations in which alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or a range is estimated for the amount of possible future cash flows. Inamed has adopted this statement, which has not had a material impact on its financial position or results of operations.

        On July 30, 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." It requires that a liability be recognized for those costs only when the liability is incurred, that is, when it meets the definition of a liability in the FASB's conceptual framework. SFAS No. 146 also establishes fair value as the objective for initial measurement of liabilities related to exit or disposal activities. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier adoption encouraged. The Company does not expect that the adoption of SFAS 146 will have a material impact on its financial position or results from operations.

NOTE 3—RESTRUCTURING COSTS

        Inamed recorded $12.0 of restructuring costs in 2001. This restructuring was a series of events to change senior management and consolidate facilities. At December 31, 2001, the accrual was $4.6. During the current quarter, Inamed paid $0.5 in restructuring costs. As of June 30, 2002, the remaining accrual for restructuring charges was $2.8 comprised of $2.5 for severance-related expenditures and $0.3 for expenditures to exit leased facilities. We expect $1.9 of payments under the restructuring to be made in the next year.

NOTE 4—SPECIAL CHARGES

        In 2000, Inamed entered into an agreement with Reconstructive Technologies, Inc. (RTI) under which the Company acquired exclusive rights to develop a novel method of tissue expansion for breast reconstruction. RTI performed research and development work for the Company in the areas of autologous tissue generation. In conjunction with the agreement, Inamed invested $3.0 in the capital stock of RTI. During the three-month period ended June 30, 2002, Inamed decided not to pursue this research any further and determined that the investment was completely impaired. As a result, a writeoff of approximately $3.0 was booked in the period ended June 30, 2002. The impairment of this investment to zero was based on a review of RTI's financial conditions, cash flow projections, and operating performances.

        In 1999 the Company entered into an agreement with ArthroCare Corporation to distribute ArthroCare's Coblation products in the cosmetic surgery field. During the three-month period ended

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June 30, 2002, the Company recorded a charge of approximately $0.3 pursuant to a settlement agreement between the Company and ArthroCare Corporation.

        During the period ended June 30, 2002, Inamed conducted an intensive analysis of its potential sales tax liabilities. Based on the results of this analysis, the Company accrued an additional liability of $1.3 during the quarter.

NOTE 5 — EARNINGS PER SHARE RECONCILIATION (Per share data shown as actual, not millions)

        Basic net income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing income available to common stockholders by the weighted-average number of common and dilutive common equivalent shares outstanding during the period. Computations of per share earnings for the three and six months ended June 30, 2002 and 2001 are as follows:

(1)

The calculation excludes 0.6 and 1.2 options that are anti-dilutive for the three months ended June 30, 2002 and 2001, respectively and excludes 0.6 and 1.5 options that are anti-dilutive for the six months ended June 30, 2002 and 2001, respectively.

NOTE 6—INVENTORIES

        Inventories are summarized as follows:

        Inamed includes inventory costs associated with product candidates prior to regulatory approval, based on its judgment of probable future commercialization. At June 30, 2002 and December 31, 2001, Inamed had $5.5 and $4.8, respectively, of such product—comprised entirely of bioengineered human-derived collagen in support of the planned launches of CosmoDerm™ and CosmoPlast™ in 2002.

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NOTE 7—SALES BY PRODUCT LINE

        Sales by product line for the three and six months ended June 30 were as follows:

*

Excluding discontinued products, facial aesthetics sales were $19.6 and $36.1 for the three and six months ended June 30 2002, respectively, and $16.5 and $31.2 for the three and six months ended June 30 2001, respectively.

**

Other products consist of collagen sales to other medical manufacturers.

NOTE 8—INTEREST RATE SWAPS

        At June 30, 2002, Inamed had an interest rate swap agreement with a financial institution. The purpose of this agreement is to establish a hedge against interest rate fluctuations due to variable rate debt. Inamed has designated this derivative as a cash flow hedge and recorded the existing liability and unrecognized losses. The swap agreement compares the one-month London Interbank Offered Rate, or LIBOR, to a fixed rate at 9.8% on a notional value of $52.5. This swap requires monthly interest payments to settle the differences in its fixed rate compared to one month LIBOR plus 3.0%. Inamed includes these payments in interest expense. All of the change in value of the derivative is recorded in other comprehensive income in accordance with hedge accounting. At June 30, 2002 and December 31, 2001, the fair value of the swaps represented a liability of approximately $4.4 and $4.2 respectively, which is included in other long-term liabilities in the accompanying consolidated balance sheets.

NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS

        During the first quarter of 2002 Inamed adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," or SFAS 142. In accordance with SFAS 142, Inamed discontinued amortizing goodwill and other intangible assets with indefinite lives. Inamed completed the transitional goodwill impairment test during the second quarter of 2002 and determined that there was no transitional impairment of goodwill. Inamed will continue to test goodwill and other intangible assets not subject to amortization for impairment at least annually.

        Goodwill was $149.8 as of June 30, 2002 and $149.4 as of December 31, 2001. Other intangible assets not subject to amortization were $4.0 as of June 30, 2002 and 4.2 as of December 31, 2001. The changes since December 31, 2001 represents the effect of foreign exchange translation on goodwill and other intangibles carried in subsidiaries with functional currencies other than the U.S. dollar.

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        Intangible assets subject to amortization were $37.8 and $39.8 as of June 30, 2002 and December 31, 2001, respectively. These assets will continue to be amortized over their expected useful lives, which range from three to seventeen years. These assets are as follows:

        Aggregate amortization expense for intangible assets was $1.1 and $2.2 for the three and six months ended June 30, 2002, respectively. There was no impairment loss recorded during the quarter. For the years 2002 through 2006, amortization expense is expected to be between $3.9 and $4.1 annually.

        The following table presents net income on a comparable basis, after adjustment for amortization of goodwill and other intangible assets no longer subject to amortization (per share amounts shown as actual, not millions), for the three and six months ended June 30:

NOTE 10—COMMITMENTS AND CONTINGENCIES

        The Company is involved in various litigation matters as a claimant and as a defendant. Inamed record any amounts recovered in these matters when collection is certain. Inamed records liabilities for claims against the Company when the losses are probable and can be reasonably estimated. Amounts recorded are based on reviews by outside counsel, in-house counsel, and management. Actual results

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could differ from estimates. Management believes that the resolution of these matters will not have a material adverse effect on the Company's business, results of operations, financial condition, or cash flows.

        During the period ended June 30, 2002, Inamed renewed its product liability insurance. Due to significant increases in insurance premiums the Company has reduced its product liability insurance from $25 million with a $5 million deductible to $7 million with a $2 million deductible. Inamed believes the increase in premiums was due to an overall decrease in the insurance market capacity. The Company is in the process of seeking additional coverage at commercially reasonable rates.

NOTE 11—SUBSEQUENT EVENTS

        Arthur Andersen LLP was previously the principal independent accountants for the Company. On July 19, 2002, that firm's appointment as principal accountants was terminated and KPMG LLP was engaged as principal accountants. The decision to change accountants was approved by the Audit Committee of the Board of Directors.

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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

        We are providing this information as of the filing date of this Quarterly Report, do not plan to update this information, and expressly disclaim any duty to update the information contained in this Quarterly Report, except as required by law.

        This Quarterly Report contains projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the report on Form 10-K for the year ended December 31, 2001 and other documents as filed by Inamed Corporation with the Securities and Exchange Commission, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements, including but not limited to those risk factors described in "Risks and Uncertainties" below. The information contained in this Quarterly Report is a statement of our present intention, belief, or expectation and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general, and our assumptions. We may change our intention, belief, or expectation at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise. We undertake no obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

        By including any information in this Quarterly Report, we do not necessarily acknowledge that disclosure of such information is required by applicable law or that the information is material.

Liquidity And Capital Resources

        We had cash and equivalents of $46.7 million at June 30, 2002, of which $25.8 million was outside of the U.S. Our current plan is not to repatriate funds from foreign operations, which preserves the current tax treatment on foreign profits. Cash provided by operations was $13.8 million in the first half of 2002 compared to $15.2 million for the same period of 2001. Cash provided by operating activities has been, and is expected to continue to be, our primary source of funds.

        Capital expenditures, primarily for manufacturing equipment and facilities improvements, totaled $6.4 million for the six months ending June 30, 2002 compared with $11.5 million in the same period of 2001. We anticipate spending approximately $15 million to $18 million in 2002 on capital projects, with the largest project being the first phase of an integrated business information system (enterprise resource planning, or ERP) implementation.

        As of June 30, 2002, we had $114.4 million outstanding under a term loan credit facility. Minimal quarterly principal payments of $0.3 million are due through March 2004 and additional quarterly payments of $26.0 million are due from January 2004 through January 2005. We also have a $25.0 million revolving credit facility, which is currently unutilized. The term loan and any advances under the revolving credit facility bear interest at a floating rate equal to one, two, three, or six-month LIBOR plus 4.0%. We have an interest rate swap of $52.5 which locked in a fixed interest rate of 9.8 % until January, 2005.

        In the first half of 2001, we spent $16.3 million to repurchase our stock. We have not repurchased stock in 2002 and we are restricted from doing so under the current terms of our credit agreement.

        The primary objectives for our cash investments are liquidity and safety of principal. Investments are generally of short duration and high credit quality.

        We believe that existing funds, cash generated from operations, and existing sources of debt financing are adequate to satisfy our working capital and capital expenditure requirements for the

15

foreseeable future. Further, we believe that we will be able to obtain sufficient replacement financing to repay the existing term loan. However, we may raise additional debt or equitycapital from time to time.

Results of Operations

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001.

Sales

        Net sales (net of returns, discounts, and allowances), or sales, for the three and six months ended June 30, 2002 were $71.7 million and $134.9 million, respectively, an increase of $9.1 million, or 15%, and $14.5 million, or 12%, from the same periods in 2001. We expect total sales to grow at a low to mid double digit rate in 2002.

        Breast Aesthetics.    Breast aesthetics sales increased to $41.5 million and $78.6 million, for the three and six months ended June 30, 2002, respectively up 9.8% and 7.0% from the same periods in 2001. We expect sales in this market area to grow at a mid to high single digit rate in 2002. Sales in the U.S. were up approximately 6.3% and 4.9% from the three and six months ended June 30, 2001 respectively, led by growth in breast augmentation. Internationally, sales of breast aesthetics were up 17.7% and 11.5% from the three and six months ended June 30, 2001 respectively, with solid performance in both the reconstruction and augmentation areas.

        Facial Aesthetics.    Facial aesthetics sales were $19.6 million and $36.1 million for the three and six months ended June 30, 2002, respectively, an increase of 18.8% and 15.7% from the same periods in 2001, excluding discontinued products. In the U.S. and Canada, for the three and six months ended June 30, 2002, respectively, sales grew approximately 34.6% and 26.4%, led by Zyderm® and Zyplast®, which continued to demonstrate strong performance. These increases were driven by increased average selling price and increase awareness around facial rejuvenation. In international markets, sales were down 9.7% and 5.9% from the three and six months ended June 30, 2001, respectively. We expect facial aesthetics sales to grow at a high single to low double digit rate in 2002.

        Health.    Health sales for the three and six months ended June 30, 2002 were $9.5 million and $17.4 million, respectively, up 66.3% and 56.9% from the same periods of 2001, respectively. In the U.S., sales grew to $3.9 million and $6.5 million, for the three and six months ended June 30, 2002, respectively, an increase of $3.5 million and $5.8 million from the same periods of 2001—driven primarily by sales of the Lap-Band® System, which was approved by the FDA for sale in the U.S. in June 2001. Internationally, sales grew by 5.7% and 5.1% from the three and six months ended June 30, 2001, respectively. International sales have been affected by competitive pressures, but we believe our universal gastric band patent, which has been issued in the U.S. and was approved by the European technical board for issuance in Europe, should provide the Company with a significant competitive advantage. We expect to register the patent across Europe later this year. Worldwide, we expect 2002 sales to increase 50% to 60% over sales in 2001, with growth rates increasing during the year as the Lap-Band® U.S. product launch gains momentum.

Gross Profit

        Gross profit as a percentage of sales were 72.8% and 71.8% for the three and six months ended June 30, 2002, respectively, compared to 73.6% and 73.7% for the same periods of 2001. This decrease arose outside of the U.S. and was primarily due to lower average selling prices in breast aesthetics due to a change in product mix and increased sales of Hylaform®. For 2002, we expect the gross profit margin to be 71% to 72% of sales.

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Selling, General, and Administrative (SG&A)

        Selling, general, and administrative expenses were $32.00 million and $59.4 million, for the three and six months ended June 30, 2002, respectively, an increase of $7.1 million and $10.2 million over the same periods in 2001. The increases are primarily due to the launches of our LAP-BAND System in the U.S. and our Cohesive Gel Matrix products internationally. Also, we have incurred unanticipated legal expenses associated with various litigation matters and business development agreements; and additional consulting resources and expenses to support various core business functions. Included in the six months ended June 30, 2002 was a $1.1 million charge relating to a legal settlement with a former officer. Due to the product launches, higher legal expenses and the legal settlement, we now expect SG&A expenses for the year to be 42% to 44% of sales.

Research and Development (R&D)

        Research and development expenses of $3.9 million and $6.8 million for the three and six months ended June 30, 2002, respectively, increased by $1.0 million and $1.1 million from the same periods in 2001. In 2002, we expect R&D expenses to be within a range of $14 to $15 million as we incur milestone payments and increased clinical development expenses for our botulinum toxin and Hylaform products.

Restructuring

        There was no restructuring charge in either of the first two quarters of 2002. However, in the first quarter of 2001, we announced the resignation of our President and Co-CEO, the planned closing of our New York City office, and a reduction in workforce at our McGhan Medical subsidiary in Santa Barbara, California. As a result, in the first quarter of 2001, we recognized a restructuring charge of $8.4 million—primarily consisting of severance costs. There was no restructuring charge in the second quarter of 2001.

Special Charges

        In 2000, we entered into an agreement with Reconstructive Technologies, Inc. or RTI under which we acquired exclusive rights to develop a novel method of tissue expansion for breast reconstruction. In conjunction with this agreement, we invested $3 million in the capital stock of RTI. We have made a decision not to pursue this research any further. During the three months ended June 30, 2002, we determined that the value of this investment was completely impaired and wrote it off.

        In 1999 the Company entered into an agreement with ArthroCare Corporation to distribute ArthroCare's Coblation products in the cosmetic surgery field. During the three-month period ended June 30, 2002, the Company recorded a charge of approximately $0.3 million pursuant to a settlement agreement between the Company and ArthroCare Corporation.

        During the period ended June 30, 2002, Inamed conducted an intensive analysis of its potential sales tax liabilities. Based on the results of this analysis, the Company accrued an additional liability of $1.3 million during the quarter.

Amortization and Non-Cash Compensation

        Amortization of intangibles and non-cash compensation was $1.3 million and $2.7 million for the three and six months ended June 30, 2002, respectively, compared to $2.6 million and $5.2 million for the same periods of 2001. The reduction resulted from the implementation of SFAS 142, which eliminated the amortization of goodwill and other intangible assets of indefinite lives.

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Interest Expense

        Net interest expense and debt costs were $2.1 million and $4.9 million for the three and six months ended June 30, 2002, respectively, and $2.8 million and $5.5 million for the same periods in 2001. The decrease is largely due to reduction of our debt and overall reduction of interest rates.

Foreign Currency

        Foreign currency transactions resulted in gains of $0.4 million and $0.9 million in the three and six months ended June 30, 2002, respectively, compared to gains of $0.6 and $0.4 million for the same periods of 2001.

Royalty and Other Income

        Royalty and other income for the three and six months ended June 30, 2002 was $1.3 million and $2.6 million respectively, slightly down from the $1.8 million and $3.0 million recognized in the same periods of 2001. The slight decrease is due to the expiration of one of our royalty contracts.

Income Tax Expense

        Income tax expense was $1.8 million and $5.4 million for the three and six months ended June 30, 2002, respectively, compared to $5.4 million and $6.8 million for of the same periods of 2001. The decrease in our tax expense is largely due to our increased production in international facilities of Costa Rica and Ireland, which have lower tax rates, and our proactive management of foreign tax benefits which reduces our effective tax rate. In 2002, we expect the tax rate to be in a range of 23% to 25%.

Critical Accounting Policies and Estimates

        The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, adequacy of allowances for doubtful accounts, valuation of intangible assets and investments, income taxes, and litigation. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from those estimates.

        In connection with the preparation of our unaudited interim financial statements for the quarter ended June 30, 2002, we identified certain accounting matters from prior periods. The Company disclosed these risks, including a potential income tax effect of up to $5.0 million related to certain debt transactions and up to $1.5 million of potential liability for under-accrued warranty obligations, concurrent with the public announcement of our preliminary operating results on August 12, 2002.

        During the period 1996 to 1999, Inamed had long term notes whose payment was collateralised by the stock or guarantee of foreign subsidiaries. Upon review of this transaction structure, current management believes that it is likely that a tax liability for a deemed dividend over the four-year period from 1996 to 1999 during which the notes were outstanding will result and that the Company failed to provide for this liability when it arose.

        Inamed currently has a reserve for the Confidence Plus warranty program for its breast implants in the United States. The Company forecasts the amount of potential future claims from this warranty

18

based on actuarial analyses. The Company has evaluated its discounting of its Confidence Plus warranty liability, and has determined that discounting is appropriate. The Company will continue to monitor the discount rate used in determining, the warranty liability on an ongoing basis and adjust such rate if necessary.

        We have evaluated the financial accounting treatment for the debt and warranty transactions, and have determined that the effects of these prior period issues are immaterial to the financial position of the Company. Accordingly, no adjustment has been made in the financial statements included in this quarterly report on Form 10-Q as a result of either the income tax or product warranty issue. While we believe that the basis for our determinations is reasonable, future events could cause our judgments with respect to our determination of materiality to be inaccurate.

        Revenue Recognition.    We recognize product revenue, net of sales discounts, returns and allowances, in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," and Statement of Financial Accounting Standards No. 48, "Revenue Recognition When Right of Return Exists." These statements establish that revenue can be recognized when persuasive evidence of an arrangement exists, delivery has occurred and all significant contractual obligations have been satisfied, the fee is fixed or determinable, and collection is considered probable. Appropriate reserves are established for anticipated returns and allowances based on product history.

        Inventories.    Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) convention. We capitalize inventory costs associated with product candidates prior to regulatory approval, based on our judgment of probable future commercialization. We could be required to expense previously capitalized costs related to pre-approval inventory upon a change in such judgment due to, among other factors, a decision denying approval of the product candidate by the necessary regulatory bodies.

        Allowance for Doubtful Accounts.    We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of some of our customers to make required payments. The allowance for doubtful accounts is based on the analysis of historical bad debts, customer credit-worthiness, past transaction history with the customer, current economic trends and changes in customer payment terms. If the financial condition of our customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required.

        Litigation.    We are involved in various litigation matters as a claimant and as a defendant. We record any amounts recovered in these matters when collection is certain. We record liabilities for claims against us when the losses are probable and estimable. Amounts recorded are based on reviews by outside counsel, in-house counsel, and management.

        Product Warranties.    The provision for product warranty primarily relates to our "Confidence Plus" program. The amount of the provision is calculated and recorded based on actuarial amounts. Expected future obligations are determined based on the history of product shipments and claims and are discounted to a current value.

Risks and Uncertainties

        Certain statements contained in this Quarterly Report on Form 10-Q, and other written and oral statements made from time to time by us, do not relate strictly to historical facts. These statements are considered "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "may," "plan," "possible," "project," and "should," or similar words or expressions, are intended to identify forward looking statements. This forward looking information involves important risks and uncertainties that could materially alter results in the future from those expressed in any forward looking statements made by, or on behalf of, us. We

19

caution you that such forward-looking statements are only predictions and that actual events or results may differ materially. In evaluating such statements, you should specifically consider the various factors that could cause actual events or results to differ materially, including those factors described below. It is not possible to foresee or identify all factors affecting our forward-looking statements and you should not consider any list of such factors to be exhaustive. We are under no duty to update any forward-looking statements.

        IF WE ARE UNABLE TO AVOID SIGNIFICANT PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS, WE MAY BE FORCED TO PAY SUBSTANTIAL DAMAGE AWARDS AND OTHER EXPENSES THAT COULD EXCEED OUR RESERVES AND INSURANCE COVERAGE.

        We have in the past been, and may in the future be, subject to product liability claims alleging that the use of our technology or products has resulted in adverse health effects. These claims may be brought even with respect to products that have received, or in the future may receive regulatory approval for commercial sale. In particular, the manufacture and sale of breast implant products entails significant risk of product liability claims due to potential allegations of possible disease transmission and other health factors, rupture or other product failure. Other breast implant manufacturers that suffered such claims in the past have been forced to declare bankruptcy or even cease operations. We also face a substantial risk of product liability claims from our obesity intervention products and our facial aesthetics products. In addition to product liability claims, we may in the future need to recall or issue field corrections related to our products due to manufacturing deficiencies, labeling errors, or other safety or regulatory reasons.

        We have liability insurance to protect us from the costs of claims for damages due to the use or recall of our products under certain circumstances. However, one or more product liability claims or recall orders could exceed our insurance coverage. If our insurance does not provide sufficient coverage, product liability claims or recalls could result in material losses in excess of our reserves.

        During the period ended June 30, 2002, we renewed our product liability insurance. Due to significant increases in insurance premiums we reduced our product liability insurance from $25 million with a $5 million deductible to $7 million with a $2 million deductible. We believe the increase in premiums was due to an overall decrease in the insurance market capacity. We are in the process of seeking additional coverage at commercially reasonable rates but we cannot assure you that adequate product liability insurance will continue to be available, either at existing or increased levels of coverage, or on commercially reasonable terms.

        In addition, we continue to incur substantial expenses for our explantation program, regulatory compliance, bodily injury claims, and related matters arising from the discontinued Trilucent breast implants. While we have insurance for some of these expenses, and have also established reserves for them in excess of our insurance program, it is possible that the combined amount of our insurance and reserves may be insufficient to cover all our future Trilucent-related liabilities. In the United Kingdom and Spain, while we have succeeded in negotiating a claims settlement protocol, women are free to "opt out" of this program and to bring individual actions for personal injuries and financial loss. In addition, under U.K. and Spanish law, the release granted to us under our settlement protocol is necessarily provisional, and each participating claimant reserves the right to pursue a future claim should she develop cancer or reproductive abnormalities. Under agreements with the United Kingdom Medical Devices Agency, we are also continuing to fund Trilucent-related scientific research. The scientific research now being conducted by the Trilucent Advisory Panel, or future research performed by this or another panel, could reveal that the risk to human health of the Trilucent implant is greater than is currently believed. In addition to claims in the U.S., U.K., and Spain, we face Trilucent-related liability in other jurisdictions, including in other countries in the European Community, Argentina, and elsewhere. Although we had reserves at June 30, 2002 of $12.3 million and unapplied insurance

20

coverage in excess of $6 to $26 million depending on the ultimate outcome of the pending coverage litigation between the Company and one of its carriers, to cover bodily injury claims, these reserves and insurance policies may be inadequate to cover all future Trilucent-related contingent liabilities.

        IF WE SUFFER NEGATIVE PUBLICITY CONCERNING THE SAFETY OF OUR PRODUCTS, OUR SALES MAY BE HARMED AND WE MAY BE FORCED TO WITHDRAW PRODUCTS.

        Physicians and potential patients may have a number of concerns about the safety of our products, including our breast implants, obesity intervention products, and collagen-based facial injections, whether such concerns have a basis in generally accepted science or peer-reviewed scientific research or not. Negative publicity—whether accurate or inaccurate—about our products, based on, for example, news about breast implant litigation or bovine spongiform encephalopathy (BSE) and/or Creutzfeldt-Jacob, or "mad cow", disease, could materially reduce market acceptance of our products and could result in product withdrawals. In addition, significant negative publicity could result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact.

        OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SUBSTANTIAL FLUCTUATIONS AND ANY FAILURE TO MEET FINANCIAL EXPECTATIONS FOR ANY FISCAL QUARTER MAY DISAPPOINT SECURITIES ANALYSTS AND INVESTORS AND COULD CAUSE OUR STOCK PRICE TO DECLINE.

        Our quarterly operating results may vary significantly due to a combination of factors, many of which are beyond our control. These factors include:

•

changes in demand for our products, which historically has been the highest in the second quarter;



•

our ability to meet the demand for our products;



•

increased competition;



•

the number, timing and significance of new products and product introductions and enhancements by us and our competitors;



•

our ability to develop, introduce and market new and enhanced versions of our products on a timely basis;



•

changes in pricing policies by us and our competitors;



•

the timing of significant orders and shipments;



•

regulatory approvals or other regulatory action affecting new or existing products;



•

litigation with respect to product liability claims or product recalls; and



•

general economic factors.

        As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and you should not rely upon these comparisons as indications of future performance. These factors may cause our operating results to be below market analysts' expectations in some future quarters, which could cause the market price of our stock to decline.

        IF CHANGES IN THE ECONOMY AND CONSUMER SPENDING REDUCE CONSUMER DEMAND FOR OUR PRODUCTS, OUR SALES AND PROFITABILITY WILL SUFFER.

        Breast augmentation and reconstruction, obesity intervention, and collagen-based implants and injections and other facial aesthetics procedures are elective procedures. Other than U.S. federally mandated insurance reimbursement for post-mastectomy reconstructive surgery, breast augmentations

21

and other cosmetic procedures are not typically covered by insurance. Adverse changes in the economy may cause consumers to reassess their spending choices and reduce the demand for cosmetic surgery. This shift could have an adverse effect on our sales and profitability.

        IF WE ARE UNABLE TO CONTINUE TO DEVELOP AND MARKET NEW PRODUCTS AND TECHNOLOGIES, WE MAY EXPERIENCE A DECREASE IN DEMAND FOR OUR PRODUCTS OR OUR PRODUCTS COULD BECOME OBSOLETE.

        The medical device industry is highly competitive and is subject to significant and rapid technological change. We believe that our ability to respond quickly to consumer needs or advances in medical technologies, without compromising product quality, is crucial to our success. We are continually engaged in product development and improvement programs to maintain and improve our competitive position. We cannot, however, guarantee that we will be successful in enhancing existing products or developing new products or technologies that will timely achieve regulatory approval or receive market acceptance.

        There is also a risk that our products may not gain market acceptance among physicians, patients and the medical community generally. The degree of market acceptance of any medical device or other product that we develop will depend on a number of factors, including demonstrated clinical efficacy and safety, cost-effectiveness, potential advantages over alternative products, and our marketing and distribution capabilities. Physicians will not recommend our products until clinical data or other factors demonstrate their safety and efficacy compared to other competing products. Even if the clinical safety and efficacy of using our products is established, physicians may elect not to recommend using them for any number of other reasons, including whether our products best meet the particular needs of the individual patient.

        Our products compete with a number of other products manufactured by major medical device companies, and may also compete with new products currently under development by others. If our new products do not achieve significant market acceptance, or if our current products are not able to continue competing successfully in the changing market, our revenue may not grow as much as expected or may even decline.

        IF CLINICAL TRIALS FOR OUR PRODUCTS ARE UNSUCCESSFUL OR DELAYED, WE WILL BE UNABLE TO MEET OUR ANTICIPATED DEVELOPMENT AND COMMERCIALIZATION TIMELINES, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE.

        Before obtaining regulatory approvals for the commercial sale of any products, we must demonstrate through pre-clinical testing and clinical trials that our products are safe and effective for use in humans. Conducting clinical trials is a lengthy, time-consuming and expensive process.

        Completion of clinical trials may take several years or more. Our commencement and rate of completion of clinical trials may be delayed by many factors, including:

•

lack of efficacy during the clinical trials;



•

unforeseen safety issues;



•

slower than expected patient recruitment; and



•

government or regulatory delays.

        The results from pre-clinical testing and early clinical trials are often not predictive of results obtained in later clinical trials. A number of new products have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays or

22

rejections may be encountered as a result of many factors, including perceived defects in the design of the clinical trials and changes in regulatory policy during the period of product development. Any delays in, or termination of, our clinical trials will materially and adversely affect our development and commercialization timelines, which would cause our stock price to decline.

        IF OUR COLLABORATIVE PARTNERS DO NOT PERFORM, WE WILL BE UNABLE TO DEVELOP PRODUCTS AS ANTICIPATED.

        We have entered into collaborative arrangements with third parties to develop certain products. We cannot assure you that these collaborations will produce successful products. If we fail to maintain our existing collaborative arrangements or fail to enter into additional collaborative arrangements, the number of products from which we could receive future revenues would decline.

        Our dependence on collaborative arrangements with third parties subjects us to a number of risks. These collaborative arrangements may not be on terms favorable to us. Agreements with collaborative partners typically allow partners significant discretion in electing whether or not to pursue any of the planned activities. We cannot control the amount and timing of resources our collaborative partners may devote to products based on the collaboration, and our partners may choose to pursue alternative products. Our partners may not perform their obligations as expected. Business combinations or significant changes in a collaborative partner's business strategy may adversely affect a partner's willingness or ability to complete its obligations under the arrangement. Moreover, we could become involved in disputes with our partners, which could lead to delays or termination of the collaborations and time-consuming and expensive litigation or arbitration. Even if we fulfill our obligations under a collaborative agreement, our partner can terminate the agreement under certain circumstances. If any collaborative partner were to terminate or breach our agreement with it, or otherwise fail to complete its obligations in a timely manner, our chances of successfully commercializing products would be materially and adversely affected.

        OUR FAILURE TO ATTRACT AND RETAIN KEY MANAGERIAL, TECHNICAL, SELLING AND MARKETING PERSONNEL COULD ADVERSELY EFFECT OUR BUSINESS

        Our success depends upon our retention of key managerial, technical, selling and marketing personnel. The loss of the services of key personnel might significantly delay or prevent the achievement of our development and strategic objectives. None of our employees is under any obligation to continue providing services to Inamed.

        Our current Chief Executive Officer, Nicholas Teti, was appointed to that position in August 2001. In the months following his appointment, Mr. Teti has installed an entirely new management team and implemented a number of significant operational and strategic changes at Inamed. We believe that our success depends to a significant extent on the ability of our key personnel, including the new management team, to operate effectively, both individually and as a group.

        We must continue to attract, train and retain managerial, technical, selling and marketing personnel. In particular, we are currently seeking to hire additional skilled development engineers who are currently in limited supply. Competition for such highly skilled employees in our industry is high, and we cannot be certain that we will be successful in recruiting or retaining such personnel. We also believe that our success depends to a significant extent on the ability of our key personnel to operate effectively, both individually and as a group. If we are unable to identify, hire and integrate new employees in a timely and cost-effective manner, our operating results may suffer.

        IF OUR INTELLECTUAL PROPERTY RIGHTS DO NOT ADEQUATELY PROTECT OUR PRODUCTS OR TECHNOLOGIES, OTHERS COULD COMPLETE AGAINST US MORE DIRECTLY, WHICH WOULD HURT OUR PROFITABILITY.

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        Our success depends in part on our ability to obtain patents or rights to patents, protect trade secrets, operate without infringing upon the proprietary rights of others, and prevent others from infringing on our patents, trademarks and other intellectual property rights. We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that it is covered by valid and enforceable patents, trademarks and licenses. Patent protection generally involves complex legal and factual questions and, therefore, enforceability of patent rights cannot be predicted with certainty. Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patents that we own or license from others may not provide adequate protection against competitors. In addition, our pending and future patent applications may fail to result in patents being issued. Also, those patents that are issued may not provide us with adequate proprietary protection or competitive advantages against competitors with similar technologies. Moreover, the laws of certain foreign countries do not protect our intellectual property rights to the same extent as do the laws of the United States.

        In addition to patents and trademarks, we rely on trade secrets and proprietary know-how. We seek protection of these rights, in part, through confidentiality and proprietary information agreements. These agreements may not provide meaningful protection or adequate remedies for violation of our rights in the event of unauthorized use or disclosure of confidential and proprietary information. Failure to protect our proprietary rights could seriously impair our competitive position.

        IF THIRD PARTIES CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS, WE COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED FROM MARKETING OUR PRODUCTS.

        Our commercial success depends significantly on our ability to operate without infringing the patents and other proprietary rights of others. However, regardless of our intent, our technologies may infringe the patents or violate other proprietary rights of third parties. In the event of such infringement or violation, we may face litigation and may be prevented from pursuing product development or commercialization. At present, we are a defendant in one such matter. See Part II, Item 1. Legal Proceedings.

        WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS FOR CERTAIN RAW MATERIALS AND SILICONE MOLDED COMPONENTS, AND THE LOSS OF ANY SUPPLIER COULD ADVERSELY AFFECT OUR ABILITY TO MANUFACTURE MANY OF OUR PRODUCTS.

        We currently rely on a single supplier for silicone raw materials used in many of our products. Although we have an agreement with this supplier to transfer the necessary formulations to us in the event that it cannot meet our requirements, we cannot guarantee that we would be able to produce a sufficient amount of quality silicone raw materials in a timely manner. We also depend on third party manufacturers for silicone molded components, Hylaform(r) gel and silicone facial implants. If there is any disruption in the supply of these products, our sales and profitability would be adversely affected.

        OUR ABILITY TO SELL BOVINE COLLAGEN-BASED PRODUCTS COULD BE ADVERSELY AFFECTED IF WE EXPERIENCE PROBLEMS WITH THE CLOSED HERD OF DOMESTIC CATTLE FROM WHICH WE DERIVE THESE PRODUCTS.

        We rely on two closed herds of domestic cattle that are kept apart from all other cattle for the production of our bovine collagen-based products. If these herds suffered a significant reduction or became unavailable to us, we would have a limited ability to access a supply of acceptable bovine collagen from a similarly segregated source. A significant reduction in the supply of bovine collagen could have a material adverse effect on our ability to sell bovine collagen-based products.

        OUR INTERNATIONAL BUSINESS EXPOSES US TO A NUMBER OF RISKS.

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        More than one-third of our sales are derived from international operations. Accordingly, any material decrease in foreign sales would have a material adverse effect on our overall sales and profitability. Most of our international sales are denominated in U.S. dollars, euros or yen. Depreciation or devaluation of the local currencies of countries where we sell our products may result in our products becoming more expensive in local currency terms, thus reducing demand. In addition, we manufacture some of our breast implant products in Ireland and, since late 2000, in Costa Rica. Therefore, some of our operating expenses are denominated in currencies other than the U.S. dollar. We cannot guarantee that we will not experience unfavorable currency fluctuation effects in future periods, which could have an adverse effect on our operating results. Our operations and financial results also may be significantly affected by other international factors, including:

•

foreign government regulation of medical devices;



•

new export license requirements;



•

political or economic instability in our target markets;



•

trade restrictions;



•

changes in tax laws and tariffs;



•

inadequate protection of intellectual property rights in some countries;



•

managing foreign distributors, manufacturers and staffing; and



•

managing foreign branch offices.

        If these risks actually materialize, our sales to international customers, as well as those domestic customers that use products manufactured abroad, may decrease.

        WE ARE SUBJECT TO SUBSTANTIAL GOVERNMENT REGULATION, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

        The production and marketing of our products and our ongoing research and development, pre-clinical testing and clinical trial activities are subject to extensive regulation and review by numerous governmental authorities both in the U.S. and abroad. Most of the medical devices we develop must undergo rigorous pre-clinical and clinical testing and an extensive regulatory approval process before they can be marketed. This process makes it longer, harder and more costly to bring our products to market, and we cannot guarantee that any of our products will be approved. The pre-marketing approval process can be particularly expensive, uncertain and lengthy, and a number of devices for which FDA approval has been sought by other companies have never been approved for marketing. In addition to testing and approval procedures, extensive regulations also govern marketing, manufacturing, distribution, labeling, and record-keeping procedures. If we do not comply with applicable regulatory requirements, such violations could result in warning letters, non-approval, suspensions of regulatory approvals, civil penalties and criminal fines, product seizures and recalls, operating restrictions, injunctions, and criminal prosecution.

        Delays in or rejection of FDA or other government entity approval of our new products may also adversely affect our business. Such delays or rejection may be encountered due to, among other reasons, government or regulatory delays, lack of efficacy during clinical trials, unforeseen safety issues, slower than expected rate of patient recruitment for clinical trials, inability to follow patients after treatment in clinical trials, inconsistencies between early clinical trial results and results obtained in later clinical trials, varying interpretations of data generated by clinical trials, or changes in regulatory policy during the period of product development in the U.S. and abroad. In the U.S., there has been a continuing trend of more stringent FDA oversight in product clearance and enforcement activities, causing medical device manufacturers to experience longer approval cycles, more uncertainty, greater risk, and higher expenses. In Europe, there is a risk that we may not be successful in meeting the

25

European quality standards or other certification requirements. Even if regulatory approval of a product is granted, this approval may entail limitations on uses for which the product may be labeled and promoted. It is possible, for example, that we may not receive FDA approval to market the Company's current products for broader or different applications or to market updated products that represent extensions of our basic technology. In addition, we may not receive FDA export approval to export its products in the future, and countries to which products are to be exported may not approve them for import.

        Our manufacturing facilities also are subject to continual review and inspection. The FDA has stated publicly that compliance with manufacturing regulations will be scrutinized more strictly. A governmental authority may challenge our compliance with applicable federal, state and foreign regulations. In addition, any discovery of previously unknown problems with one of our products or facilities may result in restrictions on the product or the facility, including withdrawal of the product from the market or other enforcement actions.

26

        From time to time, legislative or regulatory proposals are introduced that could alter the review and approval process relating to medical devices. It is possible that the FDA will issue additional regulations further restricting the sale of our present or proposed products. Any change in legislation or regulations that govern the review and approval process relating to our current and future products could make it more difficult and costly to obtain approval for new products, or to produce, market, and distribute existing products.

        HEALTHCARE REFORM LEGISLATION COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

        If any national healthcare reform or other legislation or regulations is passed that imposes limits on the number or type of medical procedures that may be performed or that has the effect of restricting a physician's ability to select specific products for use in patient procedures, such changes could have a material adverse effect on the demand for our products. In the U.S., there have been, and we expect that there will continue to be, a number of federal and state legislative and regulatory proposals to implement greater governmental control over the healthcare industry. These proposals create uncertainty as to the future of our industry and may have a material adverse effect on our ability to raise capital or to form collaborations. In a number of foreign markets, the pricing and profitability of healthcare products are subject to governmental influence or control. In addition, legislation or regulations that impose restrictions on the price that may be charged for healthcare products or medical devices may adversely affect our sales and profitability.

        IF WE MAKE ANY ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER REALIZE THE ANTICIPATED BENEFITS.

        We may attempt to acquire businesses, technologies or products that we believe are a strategic fit with our business. If we undertake any transaction of this sort, the process of integrating a business, technology or product may result in operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of our business. Moreover, we may never realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or other intangibles, and the incurrence of large, immediate write-offs.

        IF OUR USE OF HAZARDOUS MATERIALS RESULTS IN CONTAMINATION OR INJURY, WE COULD SUFFER SIGNIFICANT FINANCIAL LOSS.

        Our manufacturing and research activities involve the controlled use of hazardous materials. We cannot eliminate the risk of accidental contamination or injury from these materials. In the event of an accident or environmental discharge, we may be held liable for any resulting damages, which may exceed our financial resources.

        OUR STOCK PRICE HAS BEEN VOLATILE AND OUR TRADING VOLUME HAS HISTORICALLY BEEN LOW.

        The trading price of our common stock has been, and may be, subject to wide fluctuations in response to a number of factors, many of which are beyond our control. These factors include:

•

quarter-to-quarter variations in our operating results;



•

the results of testing, technological innovations, or new commercial products by us or our competitors;



•

governmental regulations, rules, and orders;



•

general conditions in the healthcare, medical device, or plastic surgery industries;



•

changes in earnings estimates by securities analysts;

27

•

developments concerning patents or other intellectual property rights;



•

litigation or public concern about the safety of our products.; and



•

resignation of senior officers

        Historically, the daily trading volume of our common stock has been relatively low. We cannot guarantee that an active public market for our common stock will be sustained or that the average trading volume will remain at present levels or increase. In addition, the stock market in general, and the NASDAQ National Market in particular, has experienced significant price and volume fluctuations. Volatility in the market price for particular companies has often been unrelated or disproportionate to the operating performance of those companies. Broad market factors may seriously harm the market price of our common stock, regardless of our operating performance. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company's securities. A securities class action suit against us could result in substantial costs, potential liabilities, and the diversion of management's attention and resources.

        FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

        The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of common stock. As of August 16, 2002, there were 20,901,928 shares of our common stock outstanding, with another 2.0 million shares of common stock issuable upon exercise of options issued or available for issuance under our stock option plans. The stock underlying these options has been registered for resale with the SEC, as has the resale of an aggregate of 1.0 million shares of common stock, including approximately 1.0 million shares underlying currently unexercised but in-the-money warrants held by certain investors.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

        We conduct operations and other business activities in various foreign countries throughout the world. Global and regional economic factors and potential changes in laws and regulations affecting our business, including currency exchange rate fluctuations, interest rate fluctuations, changes in monetary policy and tariffs, and federal, state, and international laws, could impact our financial condition or future results of operations.

        Based on our overall interest rate exposure at June 30, 2002, primarily variable rate debt, a hypothetical 10% change in interest rates applied to our outstanding debt as of June 30, 2002, would have no material impact on earnings, cash flows, or fair values of interest rate risk sensitive instruments over a one-year period. We use one interest rate swap agreement to convert approximately $53.0 million of floating rate to fixed rate debt to hedge interest rate exposures. The fixed rate applicable to our hedge is 9.8%. (See NOTE 8 to the consolidated financial statements.)

        Our foreign currency risk exposure results from fluctuating currency exchange rates, primarily the U.S. dollar against the euro and yen. We face transactional currency exposures that arise when our foreign subsidiaries (or Inamed itself) enter into transactions, generally on an intercompany basis, denominated in currencies other than their local currency. We also face currency exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. Generally, we have not used financial derivatives to hedge against fluctuations in currency exchange rates. Based on our overall exposure for foreign currency at June 30, 2002, a hypothetical 10% change in foreign currency rates would not have a material impact on our balance sheet, sales, net income, or cash flows over a one-year period. From time to time, we enter into agreements to hedge certain foreign currency exposures on commitments. There were no significant open positions at this quarter-end or at year-end 2001.

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PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

        Certain of our legal proceedings are reported in our Annual Report on Form 10-K for the year ended December 31, 2001 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, with material developments since those reports described below.

Litigation Relating to Former Officer

        On May 31, 2002, we received a second supplemental ruling in an arbitration brought against us by Mr. Thomas Pilholski, an officer of Inamed from 1997 to 1998. The panel granted the officer's claim for back interest to the extent of $20 thousand and denied all other supplemental claims. Since no appeal was timely noticed or filed by either party, the matter is now closed.

Kuzmak Matter

        In an opinion dated May 28, 2002, the U.S. District Judge assigned to Inamed Corporation, et al. vs. Lubomyr Kuzmak, et al., Case No. CV 99-02160 (MMM), denied our motion for summary judgment on our claims for specific enforcement of the January 24, 2000 letter agreement between Inamed and Kuzmak or, in the alternative, a determination that Kuzmak breached that agreement (the Letter Agreement Claims) and entered summary judgment on these claims for Kuzmak and newly-added defendant Ethicon Endo-Surgery, Inc. (Ethicon). We have appealed the District Court's May 28 rulings to the U.S. Court of Appeals for the Federal Circuit. Kuzmak and Ethicon have moved to dismiss the appeal as premature. The Federal Circuit is expected to rule on the timeliness of the appeal by fall 2002. If the Federal Court dismisses our appeal as premature, we would pursue the appeal following any adverse final judgment in the District Court on the parties' patent claims.

        Following a July 22, 2002 status conference, the District Court entered a pre-trial scheduling order under which discovery in this matter is to be completed by January 24, 2003, a hearing on claim construction is be held on March 10, 2003, and a trial is to be held beginning August 26, 2003.

        Irrespective of the outcome of our recently filed appeal on our Letter Agreement Claims, we believe that we have strong claims that the Kuzmak patents (which are now held by Ethicon) are either invalid, unenforceable, or have not been infringed by our products, and we intend to prosecute our claims and defend against Kuzmak and Ethicon's counterclaims vigorously.

U.S. Trilucent Matters

        On July 15, 2002, the Company reached an agreement in principle to settle three Trilucent-related matters in the U.S., the Vaernes lawsuit, the Bell lawsuit and a claim by a Ms. Lori Weltz. The settlements, which are each subject to definitive documentation, would not have a material adverse effect upon the Company or its financial position or on the amount of the remaining Trilucent reserve.

Sager Litigation

        In late June, 2002, we filed our opposition papers on plaintiffs' motion for class certification. The Court has rescheduled oral argument on this motion for August 26, 2002. No trial date has been set and we intend to defend this action vigorously.

Dispute with ArthroCare Corporation

        In August, 2002, the Company settled our dispute with ArthroCare Corporation. Pursuant to the settlement the Company and ArthroCare have dismissed the pending arbitration at the American Arbitration Association with prejudice and exchanged general releases.

29

Wedbush Matter

        In Ahr v. Medical Device Alliance, Inc., on July 5, 2002, the court entered a judgment in the Company's favor for $2.5 million plus costs. On July 29, 2002, Wedbush filed an appeal on this judgment and related orders, including the court's order dismissing Wedbush's cross-claims against the Company. On July 29, 2002, Wedbush posted a bond in the amount of $3 million to secure the Company's judgment pending appeal.

ITEM 2. Changes in Securities and Use of Proceeds

        Not Applicable

ITEM 3. Defaults Upon Senior Securities

        Not Applicable

ITEM 4. Submission of Matters to a Vote of Security Holders

        On June 14, 2002, the Company held its annual stockholders' meeting (the "Meeting"), whereby the stockholders (i) elected seven (7) directors; and (ii) amended the Company's 2000 Employee Stock Option Plan to increase the number of shares of Common Stock authorized for issuance under the Plan from 775,000 to 1,525,000 and to increase the limit on the number of shares subject to options that may be granted to any individual during any fiscal year from 18,000 to 300,000 shares. The vote on such matters was as follows:

1.

ELECTION OF DIRECTORS

2.

AMENDMENT TO COMPANY'S 2000 EMPLOYEE STOCK OPTION PLAN

ITEM 5. Other Information

        On May 3, 2002, Appaloosa Management LP, or Appaloosa, and an affiliate filed an amendment to their Schedule 13D with the Securities and Exchange Commission disclosing that Appaloosa intended to distribute some of its holdings of our Common Stock to its limited partners and other fund investors. Prior to the distribution, Appaloosa and an affiliate beneficially owned approximately 31% of our outstanding Common Stock, or approximately 6.5 million shares. After the distribution (which, according to a subsequent amendment, occurred on or about May 7, 2002), Appaloosa and an affiliate beneficially own approximately 4.062 million shares in the aggregate, or approximately 18.7%, of our

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outstanding Common Stock, and thus Appaloosa remains our largest stockholder. Appaloosa's recent amendments to its 13D filing state that it has no current plans to dispose of its remaining Inamed common stock, while reserving the right to change its plans and intentions at any time.

        The Company currently has four outstanding warrants held by three affiliates of Appaloosa. Two of the warrants expire as of September 1, 2002 (the "September Warrants"), and two of the warrants expire as of October 1, 2002 (the "October Warrants").

        The September Warrants can each be exercised for 289,755 shares of the Company's Common Stock (a total of 579,510 shares) at an exercise price of $6.50 per share. Principals of Appaloosa have informally notified the Company that each warrant holder intends to exercise its warrant prior to the warrant's expiration date. If the September Warrants are exercised in full and without triggering the net issuance provisions in the warrants, the Company would receive approximately $3.8 million in proceeds upon exercise.

        The October Warrants can each be exercised for 181,143 shares of the Company's Common Stock (a total of 362,286 shares) at an exercise price of $7.50. The Company has not received any notice regarding intended exercise of the October Warrants. If the October Warrant holders are exercised in full and without triggering the net issuance provisions in the warrants, the Company would receive approximately $2.7 million in proceeds upon exercise.

        If the holders of the September Warrants and the October Warrants elect to exercise the warrants pursuant to the net issuance provisions of the warrants, the number of shares to be issued and the proceeds to be received by the Company would be reduced in accordance with a formula set forth in the warrants.

        Effective July 2, 2002, the Company and its then Chairman, Richard G. Babbitt entered into a Transition and Advisory Agreement (the "Transition Agreement") under which Mr. Babbitt resigned as Chairman of the Board, agreed to continue to serve as a director of the Company through December 31, 2002, and agreed to render certain advisory and consulting services to the Board, personally or through a newly-formed corporation, through December 31, 2004. The Transition Agreement, which has been filed as an exhibit hereto, supersedes the Employment Agreement dated as of January 23, 1998 between the Company and Mr. Babbitt, which is of no further force and effect. Under the Transition Agreement, the Company will pay $400,000 per year to Mr. Babbitt in compensation for his services through December 31, 2004, and will provide or pay for medical benefits through July 31, 2005. Mr. Babbitt also remains eligible for bonus compensation through December 31, 2002.

        Upon the effectiveness of Mr. Babbitt's resignation, Nicholas L. Teti, Jr., President, Chief Executive Officer and a Director of the Corporation, was elected Chairman of the Board of Directors of the Company. In July, 2002, the Board also established a Management Oversight Committee, consisting of the five non-employee directors of the Company and chaired by Malcolm Currie, Ph.D., Chairman of the Board's Audit Committee.

        Effective June 28, 2002, Kathryn E. Falberg resigned as Executive Vice President and Chief Financial Officer of the Company. As a result, the options on 175,000 shares of the Company's Common Stock granted to her on April 8, 2002, have been cancelled. Furthermore, 25,000 options granted in November 2001, to Ms. Falberg as a consultant have also been cancelled.

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ITEM 6. Exhibits and Reports on Form 8-K

        (a)  Exhibits

        The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

        (b)  Current Reports on Form 8-K

        No reports were filed on Form 8-K during the quarter ended June 30, 2002.

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SIGNATURES

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

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QuickLinks

NOTE 1—INTERIM FINANCIAL STATEMENTS
NOTE 2—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
NOTE 3—RESTRUCTURING COSTS
NOTE 4—SPECIAL CHARGES
NOTE 5 — EARNINGS PER SHARE RECONCILIATION (Per share data shown as actual, not millions)
NOTE 6—INVENTORIES
NOTE 7—SALES BY PRODUCT LINE
NOTE 8—INTEREST RATE SWAPS
NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS
NOTE 10—COMMITMENTS AND CONTINGENCIES
NOTE 11—SUBSEQUENT EVENTS

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations