QMed, Inc. Reports Third Quarter Results

EATONTOWN, N.J., Oct. 10  /PRNewswire-FirstCall/ -- QMed, Inc. (NASDAQ: QMED) today announced financial results for the third quarter ending August 31, 2006.  Revenue for the three-month period decreased to $2,202,270 from $5,504,634 in the prior year's quarter.  Net loss for the quarter was $(3,317,401) or ($.20) per share, compared to net income of $992,237 or $.05 per share on a diluted basis, for the same period a year ago.

The Company has been notified by HealthSuite Partners, a joint venture with Alere Medical, AirLogix and the Company that the HealthSuite Partners contract with HealthPartners, a Minnesota managed care organization, would not be extended beyond April 5, 2007. In the third quarter, the joint venture contributed $841,000 in revenue. This development does not affect the Company's previously announced revenue guidance of $38 - $44.5 million for its QMedCare Medicare Special Needs Plan subsidiary.

Michael W. Cox, QMed president and CEO said, "Third quarter results reflect continued investments in our Medicare Special Needs Plans (SNPs) for New Jersey and South Dakota. We expect that such investments will increase in the fourth quarter as we complete our infrastructure and begin our SNP marketing program, but we are pleased to report that our strategic transition into a Medicare SNP insurer is now nearly complete."

"As the year has unfolded, we have become increasingly encouraged about prospects for 2007 Medicare Special Needs Plan business for several reasons and, consequently, we are comfortable once more to reiterate our revenue guidance for SNPs. Among the reasons for this encouragement are:

  * Enrollment in South Dakota has continued to grow since the non-SNP
    Medicare plan marketing periods ended in May, and as more and more
    Medicare beneficiaries with chronic illnesses hit the prescription drug
    Part D coverage gap, or "doughnut hole"

  * The response to our test marketing campaign in New Jersey has been very
    positive

  * Our new benefit design and pricing has been well received by brokers of
    the independent senior products community

  * Successful contracting with two of the largest hospital/health systems
    in New Jersey

  * The New Jersey market includes gated communities that have a significant
    concentration of Medicare beneficiaries, a marketing feature not
    available in South Dakota."



"Medicare Advantage Special Needs Plans are new and exciting and we are convinced that our strategic focus on them represents a superior approach to the Medicare market. Our systems fully integrate improved medical management for physicians, coupled with patient directed disease management, robust reporting and other tools designed to achieve overall medical best practices that in turn produce improved health for patients and positive financial outcomes for our SNPs. We believe that Medicare SNPs are a meaningful part of Medicare Reform and expect that our successful future in that arena is now," Cox concluded.

About QMed, Inc.

QMed provides evidence-based clinical information management systems around the country to its health plan customers. The system incorporates Disease Management services to patients and decision support to physicians. The Company's QMedCare subsidiary specializes in serving high-risk populations of Medicare beneficiaries with its first project commencing in South Dakota in January 2006. Forward Health is QMed's subsidiary offering weight, obesity and health promotion programs. The Company has been selected in Demonstrations in the vast Medicare fee-for-service program. More information on QMed, Inc. can be obtained at http://www.qmedinc.com/, by calling [phone] or by emailing .

                       QMED, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED BALANCE SHEET

                                         August 31, 2006   November 30, 2005
  ASSETS                                   (unaudited)
  Current assets
  Cash and cash equivalents                 $2,726,196         $4,051,046
  Investments                               14,481,052         19,348,503
  Accounts receivable, net of
   allowances of $44,844 and $76,518,
   respectively                              1,878,714          3,377,495

  Inventory, net of reserve                     30,230             30,887
  Prepaid expenses and other current assets    416,310            411,608
                                            19,532,502         27,219,539

  Property and equipment, net of
   accumulated depreciation                  1,055,563          1,058,295
  Product software development costs, net    1,896,162          1,161,083
  Restricted cash and cash equivalents,
   non-current                                 705,881                 --
  Accounts receivable, non-current             337,239            271,809
  Acquired intangibles, net                    663,036            795,848
  Other assets                                 127,760            128,794
  Investment in joint ventures                  27,193             37,998
                                           $24,345,336        $30,673,366

  LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities
  Accounts payable and accrued expenses     $2,071,247         $1,577,385
  Medical claims reserve                       165,755                 --
  Leases payable, current portion               93,106            146,483
  Accrued salaries and commissions             413,700            721,792
  Fees reimbursable to health plans            126,560             39,000
  Contract billings in excess of revenue     1,448,361            744,743
  Deferred warranty revenue                      9,600             12,253
  Income taxes payable                              --             62,610
                                             4,328,329          3,304,266

  Leases payable - long term                    20,141             76,005
  Contract billings in excess of revenue,
   long term                                   337,239            271,809
                                             4,685,709          3,652,080

  Commitments and Contingencies                     --                 --
  Stockholders' equity
   Common stock $.001 par value;
   40,000,000 shares authorized;
   16,851,265 and 16,804,846 shares issued
   and 16,829,265 and 16,782,846 outstanding,
   respectively                                 16,851             16,805

  Paid-in capital                           52,766,121         51,219,617
  Accumulated deficit                      (33,043,418)       (24,118,472)
  Accumulated other comprehensive loss
   Unrealized loss on securities
   available for sale                           (4,302)           (21,039)
                                            19,735,252         27,096,911

  Less treasury stock at cost,
   22,000 common shares                        (75,625)           (75,625)
  Total stockholders' equity                19,659,627         27,021,286
                                           $24,345,336        $30,673,366

                       QMED, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               (Unaudited)

                    For the Three  For the Three  For the Nine  For the Nine
                    Months Ended   Months Ended   Months Ended  Months Ended
                    August 31,     August 31,     August 31,    August 31,
                    2006           2005           2006          2005

  Revenue          $2,202,270      $5,504,634     $7,306,588    $15,723,017

  Cost of revenue   1,371,709       1,827,313      4,951,164      5,499,320

  Gross profit        830,561       3,677,321      2,355,424     10,223,697

  Selling, general
   and administrative
   expenses         4,025,951       2,062,529     11,099,815      5,853,627
  Research and
   development
   expenses           298,836         347,434      1,180,866        924,286

  (Loss) income
   from operations (3,494,226)      1,267,358     (9,925,257)     3,445,784

  Interest expense     (4,337)         (6,967)       (15,146)       (21,052)
  Interest income     201,833         140,371        577,152        261,653
  Loss in operations
   of joint ventures  (18,927)       (334,825)       (57,365)      (792,103)
  Other income             --              --        450,000          2,849
  (Loss) income
   before income tax
   provision       (3,315,657)      1,065,937     (8,970,616)     2,897,131

  (Provision) benefit
   for income taxes    (1,744)        (73,000)        45,670       (158,400)

  Net (loss)
   income         $(3,317,401)       $992,937    $(8,924,946)    $2,738,731

  Basic (loss)
   earnings per share
   Weighted average
   shares
   outstanding     16,823,885      16,687,769     16,804,457     16,370,175
  Basic (loss)
   earnings per
   share                $(.20)           $.06          $(.53)          $.17
  Diluted (loss)
   earnings income
   per share
   Weighted average
    shares
    outstanding    16,823,885      18,559,698     16,804,457     18,343,191
  Diluted (loss)
   earnings per share   $(.20)           $.05          $(.53)          $.15



Except for historical information contained herein, matters discussed in this news release are forward-looking statements that involve risks and uncertainties. They include but are not limited to those relating to the timely implementation of programs, the impact of competitive product introductions, acceptance and pricing, and those risks detailed in the Company's filings with the Securities and Exchange Commission (SEC).  Actual results may differ materially from any forward-looking statements due to these risks and uncertainties. 

DATASOURCE: QMed, Inc.



CONTACT:  Robert Mosby, QMed, Inc., [phone] x1107



Web site:  http://www.qmedinc.com/ 

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