UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended        March 31, 2000      or
                                     -------------------------

[ ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the transition period from ___________ to ___________


Commission File Number      0-19952
                        ---------------

                                 CHRONIMED Inc.
           ----------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                      Minnesota                             41-1515691
       ----------------------------------------------------------------------
       (State or other jurisdiction of                   (I.R.S. Employer
        incorporation or organization)             Identification Number)

                             10900 Red Circle Drive
                              Minnetonka, MN 55343
                ------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip code)

Registrant's telephone number, including area code  (952) 979-3600
                                                   ----------------



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, and (2) has been subject to such filing requirements
for the past 90 days.

                               Yes __X__  No _____


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

 Common Stock, $.01 par value - 12,143,621 shares outstanding as of May 1, 2000
-------------------------------------------------------------------------------


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                                      INDEX

                         CHRONIMED INC. AND SUBSIDIARIES



PART I. FINANCIAL INFORMATION


Item 1. Financial Statements (Unaudited)

           Consolidated Balance Sheets - March 31, 2000 and July 2, 1999

           Consolidated Statements of Income - Three months ended March 31, 2000
           and April 2, 1999; nine months ended March 31, 2000 and April 2, 1999

           Consolidated Statements of Cash Flows - Nine months ended March 31,
           2000 and April 2, 1999

           Notes to Consolidated Financial Statements - March 31, 2000


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


Item 3. Quantitative and Qualitative Disclosures About Market Risk


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<PAGE>


                                INDEX (CONTINUED)

                         CHRONIMED INC. AND SUBSIDIARIES



PART II. OTHER INFORMATION

Items 1, 2, 3 and 5 required under Part II have been omitted since all items are
not applicable or the answers are negative.

Item 4. Submission of Matters to a Vote of Security Holders ---- Annual Meeting
of Shareholders held on February 23, 2000.

Item 6.  Exhibits and Reports on Form 8-K

         a.)      Exhibits
                  10.1     Employment agreement effective March 1, 2000 between
                           the Company and Gregory H. Keane
                  11.1     Computation of Earnings Per Share
                  27.1     Financial Data Schedule
                  27.2     Restated Financial Data Schedule
                  27.3     Restated Financial Data Schedule
                  27.4     Restated Financial Data Schedule

         b.)      Reports on Form 8-K



SIGNATURES


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<PAGE>


Part I. Financial Information
Item 1. Financial Statements

CHRONIMED INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

                                              Mar 31, 2000     July 2, 1999
                                              ------------     ------------
ASSETS                                         (Unaudited)
Current assets:
  Cash and cash equivalents                      $     533       $   3,312
  Accounts receivable, net                          43,650          32,533
  Income taxes receivable                            2,211              --
  Inventory                                          6,735           5,395
  Other current assets                                 720           1,358
  Deferred taxes                                       929             929
                                                 ---------       ---------
    Total current assets                            54,778          43,527

Property and equipment:
  Property and equipment                            14,674          13,850
  Allowance for depreciation                        (7,781)         (5,993)
                                                 ---------       ---------
                                                     6,893           7,857

Goodwill, net                                        9,315          15,373
Net assets of discontinued operations               11,743          11,624
Other assets, net                                      107             161
                                                 ---------       ---------
  Total assets                                   $  82,836       $  78,542
                                                 =========       =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                               $   9,151       $   9,917
  Accrued expenses                                   2,090           1,952
  Income taxes payable                                  --             186
  Short-term debt                                    4,200              --
                                                 ---------       ---------
    Total current liabilities                       15,441          12,055


Shareholders' equity:
  Preferred Stock                                       --              --
  Common Stock, issued and outstanding
  shares--12,131 and 12,088, respectively              121             121
  Additional paid-in capital                        52,763          52,499
  Retained earnings                                 13,712          13,709
                                                 ---------       ---------
                                                    66,596          66,329
  Accumulated other comprehensive income --
   Unrealized gain on available-for-sale
   securities of discontinued operations               799             158
                                                 ---------       ---------
    Total shareholders' equity                      67,395          66,487

Total liabilities and shareholders' equity       $  82,836       $  78,542
                                                 =========       =========


                 See notes to consolidated financial statements.


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<PAGE>


CHRONIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

<TABLE>
<CAPTION>
                                                       Third Quarter Ended                Nine Months Ended
                                                       -------------------                -----------------
                                                  Mar 31, 2000      Apr 2, 1999     Mar 31, 2000      Apr 2, 1999
                                                  ------------      -----------     ------------      -----------
<S>                                                  <C>              <C>              <C>              <C>
REVENUES
  Mail Order - Specialty Pharmacy Services           $  29,386        $  26,303        $  88,369        $  76,826
  Retail - Disease Management                           28,210           17,742           78,451           43,610
                                                     ---------        ---------        ---------        ---------
    Total revenue                                       57,596           44,045          166,820          120,436
                YR TO YR GROWTH                             31%                               39%

COSTS AND EXPENSES
  Cost of revenues                                      47,463           36,699          136,452           97,410
    Gross profit                                        10,133            7,346           30,368           23,026
                 % OF REVENUE                             17.6%            16.7%            18.2%            19.1%

  Selling and marketing                                  1,127            1,091            3,380            3,607
  General and administrative                             7,604            6,640           24,174           18,200
  Other expense - Clinical Partners write-off            5,500               --            5,500               --
                                                     ---------        ---------        ---------        ---------
    Total operating expenses                            14,231            7,731           33,054           21,807
                 % OF REVENUE                             24.7%            17.6%            19.8%            18.1%

INCOME (LOSS) FROM OPERATIONS                           (4,098)            (385)          (2,686)           1,219
                 % OF REVENUE                            -7.1%            -0.9%            -1.6%              1.0%

  Interest (expense) income                                (43)              28             (125)             402
  Other income - Publishing sale                            --               --               --              503

INCOME (LOSS) BEFORE INCOME TAXES                       (4,141)            (357)          (2,811)           2,124
  Income taxes                                           1,615              139            1,096             (828)

INCOME (LOSS) FROM CONTINUING OPERATIONS                (2,526)            (218)          (1,715)           1,296
                 % OF REVENUE                            -4.4%            -0.5%            -1.0%              1.1%

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX            635              684            1,718            3,119

NET INCOME (LOSS)                                    ($  1,891)       $     466        $       3        $   4,415
                 % OF REVENUE                            -3.3%              1.1%             0.0%             3.7%

BASIC EARNINGS (LOSS) PER SHARE:
  Income (Loss) from Continuing Operations           ($   0.21)       ($   0.02)       ($   0.14)       $    0.11
  Income from Discontinued Operations                $    0.05        $    0.06        $    0.14        $    0.25
  Net Income (Loss) per Share                        ($   0.16)       $    0.04        $    0.00        $    0.36

DILUTED EARNINGS (LOSS) PER SHARE:
  Income (Loss) from Continuing Operations           ($   0.21)       ($   0.02)       ($   0.14)       $    0.11
  Income from Discontinued Operations                $    0.05        $    0.06        $    0.14        $    0.25
  Net Income (Loss) per Share                        ($   0.16)       $    0.04        $    0.00        $    0.36

AVERAGE SHARES OUTSTANDING--BASIC                       12,133           12,109           12,106           12,108
AVERAGE SHARES OUTSTANDING--DILUTED                     12,133           12,109           12,106           12,263
</TABLE>

                 See notes to consolidated financial statements.


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<PAGE>


CHRONIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                        -----------------
                                                                   Mar 31, 2000     Apr 2, 1999
                                                                   ------------     -----------
<S>                                                                   <C>             <C>
OPERATING ACTIVITIES
  Net income                                                          $       3       $   4,415
  Less income from discontinued operations                                1,718           3,119

    Income (loss) from continuing operations                             (1,715)          1,296

  Adjustments to reconcile income from continuing operations
  to net cash provided by (used in) operating activities:
      Depreciation and amortization                                       3,229           2,831
      Write-off of Clinical Partners contract management line             5,500              --
      Changes in operating assets and liabilities, net of effect
      of Clinical Partners write-off:
        Accounts receivable                                             (11,117)        (10,502)
        Income taxes                                                     (2,397)          1,011
        Inventory                                                        (1,340)            642
        Accounts payable and accrued expenses                            (1,297)          2,825
        Other assets                                                        656            (382)
                                                                      ---------       ---------

      Net cash used in operating activities                              (8,481)         (2,279)

INVESTING ACTIVITIES
  Purchases of property and equipment                                    (1,002)         (2,825)
  Sales and maturities of available-for-sale securities                      --           6,537
                                                                      ---------       ---------

      Net cash (used in) provided by investing activities                (1,002)          3,712

FINANCING ACTIVITIES
  Repurchase of Common Stock                                                 --          (1,842)
  Net proceeds from issuance of Common Stock                                264           1,255
  Net proceeds from borrowings                                            4,200              --
                                                                      ---------       ---------

      Net cash provided by (used in) financing activities                 4,464            (587)

CASH PROVIDED BY DISCONTINUED OPERATIONS                                  2,240           2,659
                                                                      ---------       ---------

(Decrease) Increase in cash and cash equivalents                         (2,779)          3,505
Cash and cash equivalents at beginning of period                          3,312           1,027
                                                                      ---------       ---------
Cash and cash equivalents at end of period                            $     533       $   4,532
                                                                      =========       =========
</TABLE>

                 See notes to consolidated financial statements.


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<PAGE>


                                 CHRONIMED INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE A--BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2000. For further information, refer to the financial statements and
footnotes thereto for the year ended July 2, 1999.

The balance sheet at July 2, 1999, has been derived from the audited financial
statements at that date, but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.

The Company uses a four-week, four-week, five-week (4-4-5) quarterly accounting
cycle with the fiscal year ending on the Friday closest to June 30 and the
fiscal quarters ending on the Friday closest to the last day of the respective
month.

In March 2000, the Board of Directors of the Company approved a plan to spin off
its Diagnostics Products business (the "Spinoff") through a tax-free dividend to
shareholders contingent upon the satisfaction of various conditions. This
transaction will be effected through the distribution of shares in a newly
formed company, to be named MEDgenesis Inc., to Chronimed shareholders. As a
result, the Company has restated its financial statements reflecting the
historical operations of the Diagnostics Products business as discontinued
operations (see Note E). The Company can cancel the Spinoff for any reason at
any time before it is effected.


NOTE B--INVENTORIES

Inventories consist primarily of goods held for resale and are valued at the
lower of cost or market under the average cost method.


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<PAGE>


NOTE C--PER SHARE DATA

Basic net income per share is based on the weighted average number of shares of
common stock outstanding during the year. Diluted net income per share is based
on the weighted average number of shares of common stock and dilutive common
stock equivalents outstanding during the year. Common stock equivalents consist
of options outstanding to purchase shares of the Company's common stock. The
following table sets forth the computation of basic and diluted net income per
share.

<TABLE>
<CAPTION>
                                                         $s and Shares in Thousands
                                                         --------------------------
                                            Third Quarter Ended                Nine Months Ended
                                            -------------------                -----------------
                                      March 31, 2000    April 2, 1999   March 31, 2000    April 2, 1999
                                      --------------    -------------   --------------    -------------
<S>                                         <C>              <C>              <C>              <C>
Numerator - Net income (loss) for
basic and diluted net income per
share:
  Continuing operations                     ($ 2,526)        ($   218)        ($ 1,715)        $  1,296
  Discontinued operations                        635              684            1,718            3,119
                                            --------         --------         --------         --------
  Net Income                                ($ 1,891)        $    466         $      3         $  4,415

Denominator:
Denominator for basic net income
per share--weighted-average shares            12,133           12,109           12,106           12,108

Effect of dilutive securities:
  Employee stock options                          --               --               --              155

Denominator for diluted net income
per share--weighted-average shares
and assumed conversions                       12,133           12,109           12,106           12,263
                                            ========         ========         ========         ========

Basic net income (loss) per share:
  Continuing operations                     ($   .21)        ($   .02)        ($   .14)        $    .11
  Discontinued operations                        .05              .06              .14              .25
                                            --------         --------         --------         --------
Basic net income (loss) per share           ($   .16)        $    .04         $    .00         $    .36
                                            ========         ========         ========         ========

Diluted net income (loss) per share:
  Continuing operations                     ($   .21)        ($   .02)        ($   .14)        $    .11
  Discontinued operations                        .05              .06              .14              .25
                                            --------         --------         --------         --------
Diluted net income (loss) per share         ($   .16)        $    .04         $    .00         $    .36
                                            ========         ========         ========         ========
</TABLE>

Income from continuing operations was negative for the quarters ended March 31,
2000 and April 2, 1999 and for the nine months ended March 31, 2000. Therefore,
options were not included in dilutive securities as the effect would have been
antidilutive.


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<PAGE>


NOTE D--BUSINESS SEGMENT INFORMATION

The Company has two reportable segments. The table below presents information by
reportable segment.

<TABLE>
<CAPTION>
                                                              Mail Order -
                                                               Specialty
                                                                Pharmacy      Retail - Disease
                                                                Services          Management         Total
                                                                --------          ----------         -----
<S>                                                              <C>               <C>              <C>
For the Quarter Ended 3/31/00
   Revenues                                                      $29,386           $28,210          $57,596
   Income from Operations                                           (245)           (4,140)          (4,385)
 * Inc. from Ops - excluding Clinical Partners write-off            (245)            1,360            1,115

For the Quarter Ended 4/2/99
   Revenues                                                      $26,303           $17,742          $44,045
   Income from Operations                                           (606)              293             (313)


For the Nine Months Ended 3/31/00
   Revenues                                                      $88,369           $78,451         $166,820
   Income from Operations                                             94            (2,038)          (1,944)
 * Inc. from Ops - excluding Clinical Partners write-off              94             3,462            3,556

For the Nine Months Ended 4/2/99
   Revenues                                                      $76,826           $43,610         $120,436
   Income from Operations                                            581               305              886
</TABLE>


The difference between segment totals and the Company's consolidated totals
consist of over / under allocated corporate general and administrative expenses
and other non-operating items, both of which are not allocated to the segments.
No major changes in segment assets have occurred since July 2, 1999 except for
the $4.7 million pre-tax write-off of goodwill related to the Clinical Partners
contract management line.

* Excludes $5.5 million charge in March 2000, resulting from the Company's
decision to exit the Clinical Partners contract management line.


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<PAGE>


NOTE E--DISCONTINUED OPERATIONS

In March 2000, the Board of Directors of the Company approved a plan to spin off
its Diagnotic Products business, contingent upon the satisfaction of various
conditions. This transaction will be effected through the distribution of shares
in a newly formed company, to be named MEDgenesis Inc., to Chronimed
shareholders. Chronimed believes that the receipt of shares of MEDgenesis common
stock should be tax free for federal income tax purposes to our stockholders and
that the Company should not recognize income, gain or loss as a result of the
Spinoff. However, if audited by the United States Internal Revenue Service,
there is no guarantee that the transaction will be deemed to be tax free to
stockholders and the Company. As a result of the plans to spin off MEDgenesis,
the Company's Consolidated Financial Statements and notes report this business
as "Discontinued Operations." Prior years' consolidated financial statements and
notes have been restated accordingly. The Company can cancel the Spinoff for any
reason at any time before it is effected.


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<PAGE>



Part I.    Financial Information
Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

      Chronimed Inc. ("Chronimed" or the "Company") was founded in 1985 as a
Minnesota corporation and has been publicly traded (Nasdaq: CHMD) since 1992.
During this time, Chronimed has become an integrated healthcare company
specializing in specialty pharmacy services and disease management for people
with chronic health conditions.

      The Company markets and distributes pharmaceuticals and related products
by mail and retail pharmacy. It also provides specialized disease management
services to specific populations of patients with selected chronic conditions.

      The patient populations for which the Company believes its services are
most effective include patients who:

      *   Require a high-cost regimen of maintenance prescription drugs or other
          medical products over the course of their lives (typically long-term
          and life-long therapies);

      *   Require treatment by healthcare specialists; and

      *   Require a significant amount of self-management and ongoing education
          (where patient compliance is critical for improving clinical and
          financial outcomes).

      By focusing on select chronic conditions, the Company believes it is able
to improve the quality of care for people affected by these chronic conditions.
In addition, Chronimed perceives that the expertise it has developed in these
conditions makes it a valuable partner for institutions, foundations and
healthcare providers working with these patients. Also, the Company believes the
insurance companies, health maintenance organizations, preferred provider
organizations, government agencies and other third-party Payors ("Payors") that
pay a large portion of the related healthcare costs do business with Chronimed
as a result of the Company's ability to improve care while minimizing overall
healthcare expenditures. Finally, Chronimed has spent many years establishing
relationships with the developers and manufacturers that produce the
prescription drugs and other products needed to manage chronic conditions. The
Company currently works directly with all of these constituents in a concerted
effort to improve clinical and cost-of-care outcomes -- and enhance the quality
of life for the chronically ill.

      Chronimed provides patients with a convenient, competitively priced source
of prescription drugs, medical products, counseling support, and a variety of
educational materials to help patients achieve maximum control over their
chronic conditions. Often, the greater the effort a patient makes to stabilize
or control his or her chronic condition, the lower the incidence of


12
<PAGE>


complications and the better the patient's quality of life. The Company believes
that by educating patients and increasing patient compliance, as well as
increasing provider support and intervention, clinical outcomes can be favorably
improved, thus decreasing long-term financial costs of care.

      Chronimed obtains patients primarily through referrals from healthcare
providers, direct patient contacts, and contracts with managed care
organizations. The Company seeks to adapt managed care techniques or to develop
new techniques to manage the particular delivery systems, cost structures, and
utilization characteristics of patients with chronic conditions. According to
PriceWaterhouseCoopers, an estimated 87% of privately insured individuals in the
United States were enrolled in some type of managed care program during 1998, up
from 48% in 1992. The specialty managed care industry was developed principally
in response to the demand from employers and Payors for more effective control
of cost increases in certain sectors, such as patients with chronic conditions.
As employers attempt to control their escalating healthcare costs, they seek out
Payors who have adopted various specialized managed care techniques. As a result
of the increasing role of managed care, coupled with the Company's experience in
managing specific patient groups, the increasing majority of patient referrals
come from the Company's Payor programs.

      Chronimed believes that its system is well suited for developers and
manufacturers of pharmaceutical and medical products who are targeting small or
hard-to-identify patient populations. Chronimed provides these companies with
assistance in the design and rapid introduction of their products, a
cost-effective means for distributing these products to specific patient
populations, and a method for monitoring the use of these products.

      On March 13, 2000, Chronimed announced its intention to spin off its
Diagnostic Products business (to be named MEDgenesis Inc.) to shareholders,
contingent upon the satisfaction of various conditions. The Spinoff is intended
to allow Chronimed and MEDgenesis to focus better on growing their respective
businesses to compete in today's highly competitive markets and to allow
investors, customers, lenders and other constituencies to evaluate the
respective businesses of Chronimed and MEDgenesis on a stand-alone basis. In
addition, the Company announced the discontinuance of its engagement with the
investment banking firm of PaineWebber, the purpose of which was to explore
strategic alternatives to enhance shareholder value. Upon completion of the
Spinoff, expected to be in July, Chronimed will no longer be in the medical
diagnostic products business.

REVENUES

      Chronimed is comprised of two operating segments--Mail Order - Specialty
Pharmacy Services and Retail - Disease Management. This view describes the
business and reflects how it is managed and resourced. It also aligns with the
disclosure requirements of Financial Accounting Statement No. 131, Segment
Reporting, which Chronimed implemented at the end of the 1999 fiscal year. The
Mail Order - Specialty Pharmacy Services business includes the Injectables
program, Organ Transplant Pharmacy, and Home Service Medical. The Retail -
Disease Management business, focusing on HIV/AIDS


13
<PAGE>


patients, includes StatScript Pharmacy and the remaining Strategic Services line
of Clinical Partners (the contract/case management line of Clinical Partners was
written off in this current third quarter).

      Total revenue increased 31%, from $44.0 million to $57.6 million, for the
third quarter ended April 2, 1999 and March 31, 2000, respectively; and 39%,
from $120.4 million to $166.8 million for the nine months ended April 2, 1999
and March 31, 2000, respectively. Price increases and inflationary pressures
have not been significant reasons for these revenue increases.

      Mail Order - Specialty Pharmacy Services revenue grew 12% in the third
quarter, from $26.3 million to $29.4 million. Year to date revenue grew 15%,
from $76.8 million to $88.4 million for the nine months ended April 2, 1999 and
March 31, 2000, respectively. Most of the growth came from the Injectables
program - up $3.5 million in the third quarter, and $13.6 million year to date -
which experienced strong patient intake from the managed care plans. Home
Service Medical revenue grew 54% in the third quarter, from $1.6 million to $2.4
million, and 25% year to date, from $8.9 million to $11.2 million. Organ
Transplant Pharmacy revenue was down 4% compared to last year's third quarter,
from $8.9 million to $8.6 million, and down 4% year to date, from $26.8 million
to $25.9 million, due to open sales positions during the strategic initiatives
process. In an effort to better focus on Chronimed's core businesses, the
Company closed two Diabetes Service Centers and chose not to renew a Diabetes
Care System contract. This resulted in a quarter-on-quarter revenue decrease of
$800,000, and a year to date decrease of $2.4 million.

      Retail - Disease Management revenue grew $10.5 million and 59% over last
year's third quarter, from $17.7 million to $28.2 million; and 80%, from $43.6
million to $78.4 million for the nine months ended April 2, 1999 and March 31,
2000, respectively. The majority of this growth came from the StatScript
Pharmacy network, with new pharmacies, new patients in existing stores, and
higher pharmaceutical prices all contributing to the growth. Clinical Partners
revenues were up 42% for the third quarter and up 4% year to date compared to
prior year. The Company has exited its underperforming Clinical Partner's
contract/case management line in this current third quarter, which will result
in reduced revenues in the future of approximately $400,000 per quarter.

      Overall mail order and retail revenue growth for fiscal 2000 is expected
to be about 30% above fiscal 1999 as revenue growth is expected to continue in
both of Chronimed's operating segments. Important to this projection is the
Company's ability to maintain and add contracts in its Mail Order - Specialty
Pharmacy Services business and its ability to maintain and grow its customer
base in the Retail - Disease Management business. The Company believes that its
supplier inputs and pharmacy fulfillment rates are stable and sustainable but
may be subject to unforeseen shortfalls. The Company cautions readers that this
and other paragraphs in the Management's Discussion section include
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and that actual results may differ materially from
projections. Readers should review the Outlook section in this Form 10-Q for
further information.


14
<PAGE>


GROSS PROFIT

      Gross profit dollars for the third quarter increased 37.9% from $7.3
million last year to $10.1 million this year; and year to date increased 31.9%
from $23.0 million last year to $30.4 million this year. Gross profit percentage
for the third quarter was 17.6% against 16.7% last year; and year to date gross
profit percentage was 18.2% against 19.1% last year. The gross profit percentage
is favorable for the quarter due primarily to the increased mix in the higher
margin Retail - Disease Management segment. The year to date decrease in gross
profit percentage was due primarily to reduced margins in the mail order
business caused by managed care pricing pressure within the injectables and
diabetes supply lines.

SELLING AND MARKETING EXPENSES

      Overall selling and marketing expenses in the third quarter were up
approximately $40,000 and 3% compared to last year's third quarter, on overall
revenue growth of 31%. Year to date selling and marketing expenses were down
$230,000 and 6% compared to last year's first nine months, on overall revenue
growth of 39%. This is the result of cost containment efforts, most notably in
the Mail Order - Specialty Pharmacy Services segment. As a percentage of
revenue, selling and marketing expenses dropped from 2.5% in last year's third
quarter to 2.0% in this year's third quarter, and from 3.0% in last year's first
nine months to 2.0% in this year's first nine months. The Company expects to
increase its spending into fiscal 2001 to support revenue goals.

GENERAL AND ADMINISTRATIVE EXPENSES

      General and administrative (G&A) expenses for the third quarter totaled
$7.6 million, up from $6.6 million last year. As a percentage of revenue, G&A
expenses decreased from 15.1% last year to 13.2% this year. Year to date
expenses totaled $24.2 million, up from $18.2 million last year. As a percentage
of revenue, G&A expenses decreased from 15.1% last year to 14.5% this year. Much
of the absolute dollar increase in spending is due to variable expenses that
have grown with revenue (StatScript pharmacies, customer service, billing, and
fulfillment) and increased bad debt expense as a result of revenue growth. Also
included here are the expenses of approximately $931,000 in the first nine
months related to the Company's efforts in seeking strategic alternatives. This
project is now complete. In addition, the Company incurred a $5.5 million dollar
charge (classified as other expense within operating expenses) in the third
quarter as a result of its decision to exit the underperforming Clinical
Partner's contract management line. This charge included a writedown of goodwill
of $4.7 million and other restructuring charges of $800,000. Looking to fourth
quarter ending June 30, 2000, the company will incur certain spin off costs that
are not yet estimable but will be disclosed in earnings releases and Form 10-K
filings.


15
<PAGE>


INTEREST INCOME / EXPENSE

      Interest income decreased from $28,000 in last year's third quarter to an
interest expense of $43,000 this quarter. Interest income decreased from
$402,000 in last year's first nine months to an interest expense of $125,000 in
this year's first nine months. There are two major reasons for the decline.
First, last year's year to date interest income included $295,000 from the
Orphan Medical receivable arising from the Orphan Medical rights sale. This year
to date, with the receivable balance paid in full, the Company did not recognize
any interest income from Orphan Medical. Second, in financing Chronimed's
significant growth, the Company has incurred short-term borrowings throughout
the current year compared with average investable funds of about $4 million last
year.

INCOME TAXES

      The Company's income tax rate was approximately 39% in each of the
quarters ended March 31, 2000 and April 2, 1999. The current third quarter rate
of 39% is expected to continue through fiscal 2000 year end.

LIQUIDITY AND CAPITAL RESOURCES

      As of March 31, 2000, the Company had working capital of $39.3 million
with no long-term debt.

      The Company believes that its current working capital, together with its
bank line of credit and cash generated by operations, will satisfy its working
capital requirements through at least fiscal 2000. To support its growth plans
through fiscal 2001, the Company may need to expand its line of credit and seek
additional debt or equity financing.

      The Company's accounts receivable are generally with Payors for which the
collection periods vary depending on the practices of the individual Payor and
whether or not Chronimed has a contract with the Payor. Electronic billing and
on-line adjudication of claims are positive trends that shorten cash collection
periods and improve cash flow. Two of Chronimed's largest Payors have recently
reverted to a significant mix of paper-based claims processing, which is a
negative trend that lengthens cash collection periods but at slightly higher
pricing and gross margins. The Company expects working capital requirements to
increase as revenues increase.

      The days sales outstanding (DSO) of the Company's accounts receivable
increased from 61 at April 2, 1999, to 69 at March 31, 2000. This negative trend
is caused mostly by the Retail - Disease Management segment. A combination of
59% revenue growth from prior year's third quarter and the recent conversion to
a fully automated billing system at StatScript's headquarters has caused this
segment's DSO to rise. In addition, the Mail Order - Specialty Pharmacy Services
business continues to be impacted by slower-than-expected collections from the
two large, low risk Payors noted above. With planned headcount additions and
improved systems performance, the Company believes that DSOs will return to the
60 days sales outstanding range that has been achieved in earlier quarters.


16
<PAGE>


      Inventory levels increased from $5.4 million in June 1999 to $6.7 million
in March 2000, mostly due to the growth of the StatScript pharmacy business. The
Company believes that it is properly reserved for excess and obsolete inventory.

      The Company has a discretionary line of credit of $15 million. There was a
$4.2 million balance outstanding under the line of credit at March 31, 2000. The
Company believes that it will need to continue using the line of credit during
fiscal year 2000 to fund certain investments and business growth. Also, the
company will need to renegotiate its line of credit given the intended spin off
of the Diagnostic Products business.

THE YEAR 2000 READINESS DISCLOSURE STATEMENT

      The Company did not encounter any significant system issues related to
Year 2000. The Company will continue to monitor all systems for potential Year
2000 related issues.

HEALTH REFORM/GOVERNMENT REGULATION

      Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. A variety of new
approaches have been proposed, including mandated basic health care benefits,
controls on health care spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, and the creation
of large purchasing groups and other fundamental changes to the health care
delivery system. In addition, some of the states in which the Company operates
have adopted or are considering various health care reform proposals. The
Company anticipates that both the public and private sectors will continue to
review and assess alternative health care delivery systems and payment methods
and that debate of these issues will likely continue in the future. Because of
uncertainty regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of such
reform proposals will be adopted, when they may be adopted, or what impact they
may have on the Company.

      The Company's business is subject to substantial governmental regulation,
including laws governing the dispensing of prescription drugs and laws
prohibiting the payment of remuneration for patient referrals. Management
believes that the Company is in substantial compliance with all existing
statutes and regulations materially affecting the conduct of its business.

SEASONALITY

      The Company has experienced a significant seasonal pattern in its
operating results. Historically, the Company has had higher revenues and
earnings in its second fiscal quarter (ending December) than in its third fiscal
quarter (ending March). The Company believes the seasonality of its revenues and
earnings comes from the acceleration of purchases of prescription drugs and
medical products by individuals with non-contracted indemnity insurance prior to
the beginning of a new calendar year (which is generally when Payors impose new
deductible calculations). As the overall business grows, the Company expects
this seasonal pattern will


17
<PAGE>


soften and that third quarter revenues may be the same as or higher than second
quarter revenues. However, because of the high profit content of the accelerated
indemnity business from third quarter to second quarter, the Company expects the
earnings seasonality to continue into fiscal 2001. In the third quarter of this
year, revenues were only slightly less than in second quarter, or $57.6 million
in third quarter compared to $58.2 million in second quarter. Core operating
income, excluding the Clinical Partners write-off and strategic initiative
effect, dropped from $2.0 million in second quarter to $1.4 million in third
quarter.

OUTLOOK

      Information contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations", other than historical
information, should be considered forward looking and reflects management's
current views of future events and financial performance that involve a number
of risks and uncertainties. The factors that could cause actual results to
differ include, but are not limited to, the following: changes in economic
conditions; general competition and pricing pressures; difficulties or delays in
the development and marketing of the Company's products; pressures on gross
profit margins; the Company's ability to execute its sales and marketing plans;
termination of key Payor contracts; failure to collect key accounts receivable;
termination of key supplier contracts; changes in or unknown violations of
various federal, state, and local regulations governing the business, including
FDA compliance and regulations; loss or retirement of key executives; a change
in the status of the Company's loan guarantee with a key executive; material
litigation; changes in the status of managed care contracts; changes in
ownership; failure to complete the intended Spinoff; and management of growth.
Please see Exhibit 99 filed with the Company's Form 10-K on September 28, 1999,
for additional circumstances that could cause actual results to differ from
forecasts.


18
<PAGE>


PART II. OTHER INFORMATION


Items 1, 2, 3 and 5 required under Part II have been omitted since they are not
applicable or the answers are negative.

Item 4. Submission of Matters to a Vote of Security Holders - Annual Meeting of
Shareholders, held on February 23, 2000.

      At the meeting, the director nominees described in the Company's Proxy
Statement were elected as follows:

<TABLE>
<CAPTION>
                                                           FOR       WITHHOLD AUTHORITY
                                                         - - - -     - - - - - - - - - -
<S>                       <C>                           <C>               <C>
Henry F. Blissenbach      Class II, three year term     10,261,746        387,866
Charles V. Owens, Jr.     Class II, three year term     10,257,645        391,967
</TABLE>

      The terms for directors John H. Bullion and Maurice R. Taylor, II expire
at the Annual Meeting to be held in 2000; the term for director John H. Flittie
expires at the Annual Meeting to be held in 2001.

      In addition, the following proposal was approved by shareholders:

<TABLE>
<CAPTION>
                                                   FOR        AGAINST     ABSTAIN     BROKER NON-VOTES
                                                  - - -       - - - -     - - - -     - - - - - - - - -
<S>                                             <C>           <C>           <C>             <C>
RATIFY APPOINTMENT OF ERNST AND YOUNG LLP
AS INDEPENDENT AUDITORS FOR 2000 FISCAL YEAR    10,512,430    130,482       6,700           0
</TABLE>

Item 6. Exhibits and Reports on Form 8-K

         (a)      Exhibits
                  10.1     Employment agreement effective March 1, 2000 between
                           the Company and Gregory H. Keane
                  11.1     Computation of Earnings Per Share
                  27.1     Financial Data Schedule
                  27.2     Restated Financial Data Schedule
                  27.3     Restated Financial Data Schedule
                  27.4     Restated Financial Data Schedule

         (b)      Reports on Form 8-K

                  The Company filed a report on Form 8-K dated March 13, 2000.
                  The report covered the Company's announcement of its intention
                  to spin off its Diagnostic Products business to shareholders
                  as well as the discontinuance of its engagement with
                  PaineWebber, the purpose of which was to explore strategic
                  alternatives for the Company.


19
<PAGE>


                                   SIGNATURES


Pursuant to the requirements 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.


                                                      CHRONIMED INC.
                                                      --------------
                                                       (REGISTRANT)



   May 4, 2000                                  /s/ Maurice R. Taylor, II
--------------------                     ---------------------------------------
       Date                                       Maurice R. Taylor, II
                                                Chairman of the Board and
                                                 Chief Executive Officer



   May 4, 2000                                   /s/ Gregory H. Keane
--------------------                     ---------------------------------------
       Date                                          Gregory H. Keane
                                         Vice President, Chief Financial Officer


20