<PAGE>
                                  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 DECEMBER 26, 2003

[ ]      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, MINNESOTA 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 (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 [X] No [ ].

         Indicate by checkmark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

         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 - 12,700,878 shares outstanding
                             as of January 30, 2004.

================================================================================

<PAGE>

                                 CHRONIMED INC.

                          QUARTERLY REPORT ON FORM 10-Q

                     FOR THE QUARTER ENDED DECEMBER 26, 2003

                                      INDEX

<Table>
<S>                                                                                                         <C>
PART I.  FINANCIAL INFORMATION                                                                              PAGE
                                                                                                            ----

Item 1.  Financial Statements

                  Consolidated Balance Sheets - December 26, 2003 (unaudited) and June 27, 2003               2

                  Consolidated Statements of Income (unaudited) - Three and six months ended
                  December 26, 2003, and December 27, 2002                                                    3

                  Consolidated Statements of Cash Flows (unaudited) - Three months and six
                  months ended December 26, 2003, and December 27, 2002                                       4

                  Notes to Consolidated Financial Statements - December 26, 2003                             5 - 9

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations              10 - 15

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                           15

Item 4.  Controls and Procedures                                                                              15


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                    16

Items 2, 3, and 5 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                                                  16

Item 6.  Exhibits and Reports on Form 8-K

         a.)      Exhibits                                                                                    16

         b.)      Reports on Form 8-K                                                                         17


SIGNATURES                                                                                                    18
</Table>



                                       1
<PAGE>
                          PART I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS

                                 CHRONIMED INC.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)


<Table>
<Caption>
                                                                       DECEMBER 26,
                                                                           2003           JUNE 27,
                                                                       (UNAUDITED)          2003
                                                                       ------------     ------------
<S>                                                                    <C>              <C>

ASSETS
Current assets
    Cash and cash equivalents                                          $     12,246     $     22,854
    Short-term investments                                                    1,525               --
    Accounts receivable (net of allowances of $6,662 and $5,940              42,175           40,001
       at December 26, 2003, and  June 27, 2003, respectively)
    Inventory                                                                12,129            8,614
    Prepaid expenses                                                          2,361            1,071
    Deferred taxes                                                            2,607            2,607
                                                                       ------------     ------------
        Total current assets                                                 73,043           75,147

Property and equipment, net                                                   4,419            4,487

Goodwill                                                                     34,434           30,233
Other assets, net                                                               141              133
                                                                       ------------     ------------
    Total assets                                                       $    112,037     $    110,000
                                                                       ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                                   $     17,457     $     19,085
    Accrued expenses                                                          2,898            2,136
    Accrued bonus                                                               791            1,420
    Income taxes payable                                                         49              821
                                                                       ------------     ------------
        Total current liabilities                                            21,195           23,462

Deferred taxes                                                                1,025            1,025

Shareholders' equity
    Preferred stock                                                              --               --
    Common stock, issued and outstanding shares--
          12,681 and 12,541, respectively                                       127              125
    Additional paid-in capital                                               57,086           56,248
    Retained earnings                                                        32,604           29,140
                                                                       ------------     ------------
        Total shareholders' equity                                           89,817           85,513
                                                                       ------------     ------------
        Total liabilities and shareholders' equity                     $    112,037     $    110,000
                                                                       ============     ============
</Table>


                 See notes to consolidated financial statements


                                       2
<PAGE>

                                 CHRONIMED INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

<Table>
<Caption>
                                            THREE MONTHS ENDED                  SIX MONTHS ENDED
                                      ------------------------------      ------------------------------
                                      DECEMBER 26,      DECEMBER 27,      DECEMBER 26,      DECEMBER 27,
                                          2003              2002              2003              2002
                                      ------------      ------------      ------------      ------------
<S>                                   <C>               <C>               <C>               <C>

Revenue                               $    131,361      $    108,636      $    259,963      $    208,529

Cost of revenue                            115,764            94,976           229,191           182,893
                                      ------------      ------------      ------------      ------------
        Gross profit                        15,597            13,660            30,772            25,636

Operating expenses
    Selling and marketing                    1,430             1,002             2,752             1,925
    General and administrative              11,016             9,549            21,719            18,569
    Bad debt                                   920               953             1,854             1,464
                                      ------------      ------------      ------------      ------------
        Total operating expenses            13,366            11,504            26,325            21,958

Income from operations                       2,231             2,156             4,447             3,678

Interest income                                 48                81               100               144
Interest expense                                (3)               --                (4)               --
Other income                                    75                --                75                --
                                      ------------      ------------      ------------      ------------

Income before income taxes                   2,351             2,237             4,618             3,822
Income tax expense                            (890)             (850)           (1,154)           (1,460)
                                      ------------      ------------      ------------      ------------
Net income                            $      1,461      $      1,387      $      3,464      $      2,362
                                      ============      ============      ============      ============

Basic net income per share            $       0.12      $       0.11      $       0.27      $       0.19
Diluted net income per share          $       0.11      $       0.11      $       0.27      $       0.19
                                      ============      ============      ============      ============

Basic weighted-average shares               12,663            12,353            12,623            12,353
Diluted weighted-average shares             12,990            12,444            13,042            12,400
</Table>


                 See notes to consolidated financial statements


                                       3
<PAGE>

                                 CHRONIMED INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                                                            SIX MONTHS ENDED
                                                                                     ------------------------------
                                                                                     DECEMBER 26,      DECEMBER 27,
                                                                                         2003              2002
                                                                                     ------------      ------------
<S>                                                                                  <C>               <C>

Operating activities
        Net income                                                                   $      3,464      $      2,362

    Adjustments to reconcile income to net cash (used in)
        provided by operating activities:
            Depreciation and amortization                                                   1,135             1,171
            Amortization of restricted stock                                                   --                65
            Deferred income taxes                                                              --               (18)
            Changes in operating assets and liabilities:
                Accounts receivable                                                        (2,174)            5,573
                Income taxes                                                                 (772)              622
                Inventory                                                                  (3,515)           (2,584)
                Accounts payable                                                           (1,628)            2,842
                Accrued expenses                                                              133              (526)
                Other assets                                                               (1,298)             (853)
                                                                                     ------------      ------------
        Net cash (used in) provided by operating activities                                (4,655)            8,654

Investing activities
    Purchases of property and equipment                                                    (1,067)             (537)
    Purchases of short-term investments                                                    (1,525)               --
    Acquisition of Accent Rx                                                               (4,201)               --
                                                                                     ------------      ------------
        Net cash used in investing activities                                              (6,793)             (537)

Financing activities
    Net proceeds from issuance of common stock                                                840                --
                                                                                     ------------      ------------
        Net cash provided by financing activities                                             840                --

(Decrease) increase in cash and cash equivalents                                          (10,608)            8,117
Cash and cash equivalents at beginning of year                                             22,854             6,306
                                                                                     ------------      ------------
Cash and cash equivalents at end of period                                           $     12,246      $     14,423
                                                                                     ------------      ------------
</Table>


                 See notes to consolidated financial statements


                                       4
<PAGE>

                                 CHRONIMED INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS

         Chronimed Inc. ("Chronimed" or the "Company"), a specialty pharmacy,
distributes prescription drugs and provides specialized therapy management
services for people with certain health conditions, including HIV/AIDS, organ
transplants, and diseases treated with biotech injectable medications. We work
with patients, physicians and other health care providers, pharmaceutical
manufacturers, health plans and insurers, and government agencies to improve
clinical and economic outcomes.

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 three and six
months ended December 26, 2003, are not necessarily indicative of the results
that may be expected for the fiscal year ending July 2, 2004. The balance sheet
at June 27, 2003, 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. For
further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-K for the fiscal year
ended June 27, 2003.

FISCAL YEAR

         We use 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. Fiscal 2004 will include 53 weeks with the year ending July 2, 2004.
Fiscal 2004 fourth quarter will include 14 weeks with the quarter ending July 2,
2004.

REVENUE RECOGNITION

         Revenue is recognized at the time prescriptions are shipped to or
picked up by the patient. We participate in various third-party provider
networks and state Medicaid programs. Under a majority of these networks, the
amount to be paid for our products is determined (or "adjudicated") through
electronic connections with these networks at the time of sale. However, for
certain third-party providers and state Medicaid programs for which there is no
electronic adjudication process available at the time of sale nor established
contracted price, we bill a standard list price and then simultaneously
determine an appropriate estimate for expected payor discount based on our
reimbursement history for each payor class. This reimbursement history is
updated quarterly. Revenue is then reported net of the estimated payor discounts
and adjusted in future periods as final settlements are determined.

STOCK-BASED COMPENSATION

         We have adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (Statement No. 123), "Accounting for
Stock-Based Compensation," as amended by Statement of Financial Accounting
Standards No. 148 but apply Accounting Principles Board Opinion No. 25 (APB 25)
and related interpretations in accounting for our stock plans. Under APB 25,
when the exercise price of an employee stock option equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized. The following table illustrates the effect on net income and
earnings per share if we had applied the fair value recognition provisions of
Statement No. 123 to stock-based employee compensation.


                                       5
<PAGE>

<Table>
<Caption>
                                                       THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                 ------------------------------      ------------------------------
(IN THOUSANDS,                                   DECEMBER 26,      DECEMBER 27,      DECEMBER 26,      DECEMBER 27,
    EXCEPT PER SHARE DATA)                           2003              2002              2003              2002
--------------------------                       ------------      ------------      ------------      ------------
<S>                                              <C>               <C>               <C>               <C>

Net income - as reported                         $      1,461      $      1,387      $      3,464      $      2,362
Plus reported stock-based
    employee compensation cost,
    net of related tax effects                             --                22                --                40
Deduct pro forma stock-based
    employee compensation cost,
    net of related tax effects                           (428)             (289)             (795)             (546)
                                                 ------------      ------------      ------------      ------------
Net income - pro forma                           $      1,033      $      1,120      $      2,669      $      1,856
                                                 ============      ============      ============      ============

Earnings per share - basic as reported           $       0.12      $       0.11      $       0.27      $       0.19
Earnings per share - basic pro forma             $       0.08      $       0.09      $       0.21      $       0.15
Earnings per share - diluted as reported         $       0.11      $       0.11      $       0.27      $       0.19
Earnings per share - diluted pro forma           $       0.08      $       0.09      $       0.21      $       0.15
</Table>

ACCOUNTS RECEIVABLE ALLOWANCES

Allowance for Doubtful Accounts

         We determine an allowance for doubtful accounts amount based upon an
analysis of the aging of the accounts receivable and historical write-off
experience. Bad debt expense is recorded as an operating expense in our
Consolidated Statements of Income.

Allowance for Payor Discounts

         We determine an allowance for payor discounts based on an analysis of
historical payment experience. Payor discount allowances are recorded as offsets
to revenue in our Consolidated Statements of Income.

INVENTORIES

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

SHORT-TERM INVESTMENTS

         We classify our short-term investments with maturities of over ninety
days when purchased as available-for-sale. We record these investments at fair
value and recognize interest when earned. As of December 26, 2003, our $1.5
million short-term investments have remaining maturities of less than twelve
months.

PER SHARE DATA

         Net income per share is calculated in accordance with Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share." Potential
common shares are included in the diluted net income per share calculation when
dilutive. Potential common shares consisting of common stock issuable upon
exercise of outstanding common stock options are computed using the treasury
stock method. Our basic net income per share is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted net income per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period, increased to
include restricted stock awards and dilutive potential



                                       6
<PAGE>

common shares issuable upon the exercise of stock options that were outstanding
during the period. The table below is a reconciliation of the numerator and
denominator in the basic and diluted net income per share calculation.

<Table>
<Caption>
                                                   THREE MONTHS ENDED                SIX MONTHS ENDED
                                             -----------------------------     -----------------------------
(IN THOUSANDS,                               DECEMBER 26,     DECEMBER 27,     DECEMBER 26,     DECEMBER 27,
    EXCEPT PER SHARE DATA)                       2003             2002             2003             2002
--------------------------                   ------------     ------------     ------------     ------------
<S>                                          <C>              <C>              <C>              <C>

Numerator
    Net income                               $      1,461     $      1,387     $      3,464     $      2,362

Denominator
    Denominator for basic net
       income per share - weighted
       average shares outstanding                  12,663           12,353           12,623           12,353
    Effect of dilutive stock options                  327               91              419               47
                                             ------------     ------------     ------------     ------------
    Denominator for diluted net
       income per share - weighted
       average shares outstanding                  12,990           12,444           13,042           12,400
                                             ============     ============     ============     ============

Basic net income per share                   $       0.12     $       0.11     $       0.27     $       0.19
Diluted net income per share                 $       0.11     $       0.11     $       0.27     $       0.19
                                             ============     ============     ============     ============
</Table>

         Employee stock options of 1,112,021 and 1,009,185 for the second
quarter and six months ended December 26, 2003, respectively, have been excluded
from the diluted net income per share calculation because their effect would be
antidilutive. For the second quarter and six months ended December 27, 2002,
employee options of 1,150,245 and 1,476,345, respectively, have been excluded
from the diluted net income per share calculation because their effect would be
antidilutive.

2. SIGNIFICANT CONCENTRATIONS

         Payor reimbursements from Aetna, Inc. represented 20.0% of our revenue
in the second quarter of fiscal 2004 and 21.0% in the six months ended December
26, 2003. This compares to 25.0% in the second quarter of fiscal 2003 and in the
six months ended December 27, 2002. No other private payor or single government
agency represented more than 10% of our revenues.

         We signed a contract with Roche Laboratories Inc. in March 2003 to be
the exclusive U.S. distributor of Fuzeon(R), its new HIV medication, during the
initial twelve month progressive distribution phase. Fuzeon(R) sales contributed
12.6% and 11.3% of our revenue in the second quarter of fiscal 2004 and six
months ended December 26, 2003, or $16.5 million and $29.3 million,
respectively.

         We signed a three-year wholesaler agreement with Cardinal Health, a
large national distributor, for the majority of our pharmaceutical purchases
effective August 2003. We used McKesson Corporation, another large national
distributor, for the majority of our pharmaceutical purchases in fiscal 2003 and
until August 2003. Cardinal Health made up 76.9% of our inventory purchases for
the second quarter of fiscal 2004. Cardinal Health and McKesson together made up
80.2% in the six months ended December 26, 2003. McKesson Corporation made up
90.6% of our inventory purchases in the second quarter of fiscal 2003 and 91.8%
in the six months ended December 27, 2002. In the event that we are unable to
purchase pharmaceuticals through Cardinal Health, we believe we would be able to
purchase the same inventory through other national pharmaceutical distributors
under similar terms and conditions.



                                       7
<PAGE>

         Our primary concentration of credit risk is third party payor accounts
receivable, which consist of amounts owed by various governmental agencies and
insurance companies. We manage our receivables by regularly reviewing accounts
and contracts and by providing appropriate allowances for uncollectible amounts.
Aetna, Inc. represented 12.3% and 16.0% of our gross accounts receivable balance
at December 26, 2003, and June 27, 2003, respectively. No other private payor or
single government agency represented more than 10% of our accounts receivable
balances. Concentration of credit risk relating to accounts receivable is
limited to some extent by the diversity and number of patients and payors and
the geographic dispersion of our operations.

3. SEGMENT REPORTING

         Effective June 28, 2003, we are operating and reporting in one segment.
Previously, we had identified two reportable operating segments, Mail Service
and Retail, based on separate management, emphasis on different diseases, and a
different distribution method for each segment. Three primary factors have
diminished the distinction between Mail Service and Retail. First, we
consolidated critical elements. In fiscal 2002, we transferred our Kansas City
retail headquarters to Minneapolis and consolidated our accounts receivable and
collections, accounting, and information service functions into a single
location. In addition, we changed our management structure from a vice president
for each of our then-defined operating segments to one vice president for all
operations.

         Second, over the past year we have begun to serve persons living with
HIV/AIDS and persons with organ transplants at both our Retail and Mail Service
pharmacies. In the past, our Retail pharmacies had predominantly served persons
living with HIV/AIDS, and our Mail Service pharmacies had served persons with
organ transplants and others needing biotech injectable medications. In fiscal
2003 we began to serve many more persons with organ transplants through our
Retail pharmacies. We also entered into an agreement with Roche Laboratories
Inc. in fiscal 2003 to distribute Fuzeon(R) to persons with HIV/AIDS. We
distribute this drug through both our Mail Service and Retail pharmacies.

         Third, we have added mail service capabilities to our retail pharmacies
as an enhancement to the local "walk-in" business model. In summary, although we
continue to apply two primary distribution methods, the distribution method no
longer drives the decisions made by our chief decision makers regarding resource
allocation. The chief decision makers regularly review financial information
related to, and make operating decisions based on, a number of factors including
disease state, drugs, payors, and dispensing location in order to efficiently
distribute prescription drugs and provide specialized therapy management
services.

4. COMPREHENSIVE INCOME

         Net income equaled comprehensive income for the respective periods.

5. INCOME TAXES

         Our income tax rate was 37.9% and 25.0% for the three and six months
ended December 26, 2003, respectively. Income tax expense for the first quarter
of fiscal 2004 was $0.3 million, net of a $0.6 million benefit resulting from a
reduction in income tax liabilities associated with prior tax years that are now
audited and closed. Without this reduction, our income tax rate was 37.9% for
the three and six months ended December 26, 2003.

6. ACQUISITION

         On December 9, 2003, we purchased certain assets of Accent Rx for $4.2
million in cash. Accent Rx is a specialty mail service pharmacy focusing
primarily on the distribution of pharmaceutical products to individuals living
with HIV/AIDS and post-organ transplants. Accent Rx has been integrated into our
existing mail service operations. The sale was completed in accordance with the
Asset Purchase Agreement dated December 9, 2003, entered into by and between
Accent Rx, Inc., its parent Accentia Inc., and Chronimed. We paid cash for




                                       8
<PAGE>

customer prescription records and allocated the $4.2 million purchase price as
goodwill. The acquisition was disclosed in our Form 8-K with a report date of
December 9, 2003, filed with the SEC on December 16, 2003.

         Beginning December 10, 2003, through December 26, 2003, customers of
Accent Rx were served through Chronimed's mail service operations, resulting in
approximately $0.3 million in revenue during the period.

         The following unaudited pro forma combined financial information is in
accordance with Statement of Financial Accounting Standards No. 141, Business
Combinations, and is based on the respective historical financial results of
Chronimed and Accent Rx, Inc. as though the business combination had been
completed as of the beginning of the periods presented.

<Table>
<Caption>
                                            THREE MONTHS ENDED                SIX MONTHS ENDED
                                      -----------------------------     -----------------------------
(IN THOUSANDS,                        DECEMBER 26,     DECEMBER 27,     DECEMBER 26,     DECEMBER 27,
    EXCEPT PER SHARE DATA)                2003             2002             2003             2002
                                      ------------     ------------     ------------     ------------
<S>                                   <C>              <C>              <C>              <C>

Revenue                               $    134,829     $    113,497     $    268,801     $    218,020
Income from operations                       1,689            1,830            3,505            2,729
Net income                                   1,157            1,025            2,572            1,502

Earnings per share - basic            $       0.09     $       0.08     $       0.20     $       0.12
Earnings per share - diluted          $       0.09     $       0.08     $       0.20     $       0.12
</Table>




                                       9
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

         The following management's discussion and analysis of financial
condition and results of operations ("MD&A") should be read in conjunction with
the MD&A included in our Annual Report on Form 10-K for the fiscal year ended
June 27, 2003.

         The following table represents income and expense items as a percentage
of revenue.

INCOME AND EXPENSE ITEMS AS A PERCENTAGE OF REVENUE

<Table>
<Caption>
                                            THREE MONTHS ENDED                     SIX MONTHS ENDED
                                      -------------------------------       -------------------------------
FISCAL YEAR                           DECEMBER 26,       DECEMBER 27,       DECEMBER 26,       DECEMBER 27,
                                          2003               2002               2003               2002
                                      ------------       ------------       ------------       ------------
<S>                                   <C>                <C>                <C>                <C>
Revenue                                      100.0%             100.0%             100.0%             100.0%
Cost of revenue                               88.1               87.4               88.2               87.7
                                      ------------       ------------       ------------       ------------
Gross profit                                  11.9               12.6               11.8               12.3
Operating expenses
    Selling and marketing                      1.1                0.9                1.1                0.9
    General and administrative                 8.4                8.8                8.3                8.9
    Bad debt                                   0.7                0.9                0.7                0.7
                                      ------------       ------------       ------------       ------------
Total operating expenses                      10.2               10.6               10.1               10.5
Income from operations                         1.7                2.0                1.7                1.8
Interest income, net                            --                0.1                 --                 --
Other income                                   0.1                 --                 --                 --
Income tax expense                            (0.7)              (0.8)              (0.4)              (0.7)
                                      ------------       ------------       ------------       ------------
Net income                                     1.1%               1.3%               1.3%               1.1%
                                      ============       ============       ============       ============
</Table>

Revenue

         Revenue increased $22.8 million, or 20.9%, to $131.4 million in the
second quarter of fiscal 2004 from $108.6 million in the second quarter of
fiscal 2003. For the six months ended December 26, 2003, total revenue increased
$51.5 million, or 24.7%, to $260.0 million from $208.5 million for the same
period last year.

         The increase in revenue for the quarter was due to several factors.
First, sales of Fuzeon(R), a new HIV medication, contributed $16.5 million and
$29.3 million in revenue in the second quarter of fiscal 2004 and six months
ended December 26, 2003, respectively. Second, we increased the number of
patients served, particularly patients with HIV, organ transplants, rheumatoid
arthritis, and multiple sclerosis. Third, we had higher revenue due to
inflationary price increases.

         On December 9, 2003, we completed the acquisition of Accent Rx, a
specialty mail service pharmacy focusing primarily on HIV/AIDS and post-organ
transplant disease states. Accent Rx has been integrated into our existing mail
service operations and contributed approximately $0.3 million in revenue during
the second quarter ended December 26, 2003. Subject to the successful retention
of Accent Rx customers, we expect this acquisition to add approximately $7.0
million in revenue in the second half of fiscal 2004.

         The table below shows disease state revenue for the three and six
months ended December 26, 2003, and December 27, 2002, as a percentage of total
revenue.



                                       10
<PAGE>

<Table>
<Caption>
                                         THREE MONTHS ENDED                   SIX MONTHS ENDED
                                   ------------------------------      ------------------------------
                                   DECEMBER 26,      DECEMBER 27,      DECEMBER 26,      DECEMBER 27,
(% OF TOTAL REVENUE)                   2003              2002              2003              2002
--------------------               ------------      ------------      ------------      ------------
<S>                                <C>               <C>               <C>               <C>
HIV/AIDS                                     54%               44%               53%               46%
Transplant                                   18%               19%               18%               19%
Other disease states                         28%               37%               29%               35%
                                   ------------      ------------      ------------      ------------
Total                                       100%              100%              100%              100%
                                   ============      ============      ============      ============
</Table>

         For the three months ended December 26, 2003, our HIV patient revenue
grew approximately $22.5 million, or 47.0%, from the same period in fiscal 2003.
Revenue from Fuzeon(R) patients contributed $16.5 million to this growth.
Transplant patient revenue grew approximately $3.5 million, or 17.0%. The
remainder of our patient revenue decreased approximately $3.3 million, or 8.0%.
Revenue from rheumatoid arthritis and multiple sclerosis patients grew
significantly over the year ago quarter, offset by declines in oncology and
hepatitis C. The decrease is also partly attributed to the fiscal 2003 revenue
contribution from our arrangement to manage three District of Columbia
Department of Mental Health pharmacies from November 2002 through February 2003
which was not renewed in fiscal 2004. For the six months ended December 26,
2003, our HIV patient revenue grew approximately $41.9 million, or 44.0%, from
the same period in fiscal 2003. Revenue from Fuzeon(R) patients contributed
$29.3 million to this growth. Transplant patient revenue grew approximately $8.3
million, or 21.0%. The remainder of our patient revenue grew approximately $1.2
million, or 2.0%. Revenue from rheumatoid arthritis and multiple sclerosis
patients grew significantly over the year ago period, offset by declines in
oncology, hepatitis C, and mental health. We plan to continue to expand the
types of specialty pharmaceutical medications that we distribute at all of our
pharmacies beyond our HIV/AIDS and post-transplant focus to include hepatitis C,
rheumatoid arthritis, multiple sclerosis, and other disease states.

         Our business consists of four major payor categories. Aetna, a single
large contracted payor, represented approximately 20.0% and 25.0% of revenues in
the second quarters of fiscal 2004 and 2003, respectively. Aetna represented
approximately 21.0% and 25.0% of revenues for the six months ended December 26,
2003, and December 27, 2002, respectively. Aetna decided to transfer the
oncology portion of our specialty pharmacy contract to another provider.
However, Aetna did award us exclusive distribution of bone marrow transplant
medications. The loss of Aetna's oncology business represented approximately
$3.0 million of lost revenue for the three months ended December 26, 2003.
Except for Aetna, no other private payor accounted for 10% or more of our
revenues in the three and six month periods ended December 26, 2003, and
December 27, 2002. The approximate mix of our second quarter fiscal 2004 and six
months ended December 26, 2003 total revenue across the remaining three payor
categories is as follows: Medicaid and other state programs including State of
Indiana programs, 32.0% and 33.0%, respectively; Medicare, the federal program
which covers many organ transplant recipients, 7.0% and 7.0%, respectively; and
all other payors, 41.0% and 39.0%, respectively. A State of Indiana
government-sponsored payment program for HIV positive and other high-cost
individuals represented approximately 3.0% of our revenues in the second quarter
of fiscal 2004 and 2003, respectively. Beginning October 1, 2003, this Indiana
payor reduced its reimbursement rate which impacted our revenue and gross margin
by approximately $0.6 million during the quarter.

         For the three months ended December 26, 2003, our retail distribution
channel accounted for approximately 57.0%, or $74.2 million, of our revenue. Our
retail pharmacies had same-store-growth of 19.6% or $12.1 million in the second
quarter of fiscal 2004 compared to the same quarter last year. For the three
months ended December 26, 2003, our mail service distribution channel accounted
for approximately 43.0%, or $57.0 million, of our revenue. Mail service revenue
grew 26.6%, or $12.0 million, due to HIV and Fuzeon(R).

         We currently have a one-year exclusive contract with Roche Laboratories
Inc. to distribute Fuzeon(R). Roche Laboratories Inc. has publicly indicated
their intentions to open Fuzeon(R) distribution to more than one provider
beginning in April 2004, the fourth quarter of fiscal 2004.



                                       11
<PAGE>

Cost of Revenue and Gross Profit

         Total gross profit dollars increased $1.9 million, or 14.2%, to $15.6
million in the second quarter of fiscal 2004 from $13.7 million in the second
quarter of fiscal 2003 due to the increase in revenue. For the six months ended
December 26, 2003, total gross profit dollars increased 20.0% to $30.8 million
from $25.6 million for the same period last year. The dollar increase in gross
profit was due to revenue growth from Fuzeon(R) and new HIV and transplant
patients. Second quarter gross margins as a percentage of revenue decreased to
11.9% in fiscal year 2004 from 12.6% in fiscal year 2003. Gross margins
decreased to 11.8% for the six months ended December 26, 2003, from 12.3% for
the same period last year. The expected decline in gross margin rate was due
primarily to the addition of Fuzeon(R) to our revenue mix, now 11.3% of our
revenue, at a lower-than-average gross margin rate. Also, the reduction in the
reimbursement rate from a State of Indiana government-sponsored HIV program
reduced gross margin approximately $0.6 million or the gross margin rate by 0.4%
for the quarter and 0.2% for the six months ended December 26, 2003.

         Aetna represented approximately 13.0% and 17.0% of our gross profit for
the three months ended December 26, 2003, and December 27, 2002, respectively.
Year-to-date, Aetna represented approximately 14.0% and 16.0% of our gross
profit for the six months ended December 26, 2003, and December 27, 2002,
respectively. Due to Aetna carving oncology out of our specialty pharmacy
contract, we experienced the loss of approximately $0.3 million in gross margin
during the three months ended December 26, 2003. The October 2003 reduction in
the State of Indiana government-sponsored program's reimbursement rate lowered
our revenue and gross margin by approximately $0.6 million during the three
months ended December 26, 2003. The effect of this reimbursement rate reduction
lowered this payor's percentage of our margins to approximately 1.0% for the
three months ended December 26, 2003, from 5.0% in the year-ago period.

         As Fuzeon(R) continues to be a significant piece of our revenue mix at
a lower-than-average gross margin rate, we expect our overall gross margin rate
to be less than our historical 12.0 percent. We also expect continuing downward
pressure on our gross margins from Medicare and our state Medicaid business. The
Medicare Prescription Drug Improvement and Modernization Act, signed in December
2003, contains a reduction in reimbursement for transplant medications provided
to patients covered under Medicare Part B. Effective January 1, 2004, the result
will be a reimbursement reduction of approximately 10% on all Medicare-covered
transplant medications. The negative impact of this Medicare reimbursement
reduction to us will be partly offset by generic drug substitution and changes
in our transplant service offering to Medicare Part B participants. For the rest
of this fiscal year, we believe the net impact on operating income will be in
the range of $1.0 to $1.5 million.

Operating Expenses

         Our operating expenses include selling and marketing, general and
administrative (G&A), and bad debt expenses. Our G&A expenses include both
corporate G&A expenses (corporate management, information systems, accounting,
human resources) and direct G&A expenses (division management, customer service,
billing, pharmacy fulfillment).

Selling and Marketing Expenses

         Our selling and marketing expenses in the second quarter of fiscal 2004
increased $0.4 million, or 42.7%, to $1.4 million from $1.0 million in the
second quarter of fiscal 2003. Selling and marketing expenses as a percentage of
revenue increased to 1.1% in the second quarter of fiscal 2004 compared to 0.9%
in the second quarter of fiscal 2003. For the six months ended December 26,
2003, our selling and marketing expenses increased $0.9 million, or 43.0%, to
$2.7 million from $1.9 million for the same period last year. As a percentage of
revenue, selling and marketing expenses increased to 1.1% for the six months
ended December 26, 2003 from 0.9% for the same period last year. In fiscal 2003,
we redefined our sales and marketing strategy to focus more on specific
diseases. We increased our sales force in the fourth quarter of fiscal 2003
resulting in higher payroll expenses in fiscal 2004 compared to the comparable
periods of fiscal 2003. In addition, we had higher travel and promotional
expenses in the current fiscal periods compared to the same periods last year.



                                       12
<PAGE>

General and Administrative Expenses

         Our general and administrative expenses increased $1.5 million, or
15.4%, to $11.0 million in the second quarter of fiscal 2004 from $9.5 million
in the second quarter of fiscal 2003. As a percentage of revenue, general and
administrative costs decreased to 8.4% from 8.8%. For the six months ended
December 26, 2003, our general and administrative expenses increased $3.2
million, or 17.0%, to $21.7 million from $18.6 million for the same period last
year. As a percentage of revenue, general and administrative expenses decreased
to 8.3% for the six months ended December 26, 2003 from 8.9% for the same period
last year. The dollar increase was due to expense growth in customer service and
the pharmacies related to patient and revenue growth, higher insurance premiums,
the investment required to launch Fuzeon(R), consulting fees incurred in
preparation for compliance with Section 404 of the Sarbanes-Oxley Act, and an
additional $0.2 million charge as part of a legal settlement related to certain
reimbursement claims submitted to the District of Columbia Medicaid between
January and April 2000. Refer to Part II, Item 1. Legal Proceedings for further
discussion.

Bad Debt

         Our bad debt expense remained relatively constant at approximately $0.9
million in the second quarter of fiscal 2004 and fiscal 2003. Bad debt as a
percentage of revenue decreased to 0.7% for the second quarter of fiscal 2004
from 0.9% for the second quarter of fiscal 2003. For the six months ended
December 26, 2003, our bad debt expense increased $0.4 million, or 26.6%, to
$1.9 million from $1.5 million for the same period last year. Bad debt expense
as a percentage of revenue for the six months ended December 26, 2003, is
consistent with the average bad debt expense of 0.7% of revenue for fiscal 2003.
The allowance for bad debt expense increased slightly to $4.7 million as of
December 26, 2003, from $4.5 million as of June 27, 2003. The bad debt reserve
decreased to 9.9% of trade receivables as of December 26, 2003, from 10.1% of
trade receivables as of June 27, 2003, due to improved agings and lower
write-off experience. We expect our future bad debt expense to continue at or
below 1.0% of revenue.

Interest Income

         Interest income, net of interest expense, remained consistent between
the first two quarters of fiscal 2004 and fiscal 2003 totaling approximately
$0.1 million for each of the six months ended December 26, 2003, and December
27, 2002. Interest income resulted from current cash balances while having no
outstanding borrowings on our line of credit.

Other Income

         We recorded approximately $0.1 million other income for payment on a
fully reserved note receivable in the second quarter of fiscal 2004.

Income Taxes

         Our income tax rate was 37.9% and 25.0% for the three and six months
ended December 26, 2003, respectively. Income tax expense for the first quarter
of fiscal 2004 was $0.3 million, net of a $0.6 million benefit resulting from a
reduction in income tax liabilities associated with prior tax years that are now
audited and closed. Without this reduction, our income tax rate was 37.9% for
the three and six months ended December 26, 2003. Looking forward to the
remainder of fiscal 2004, we expect our combined Federal and State tax rate to
approximate 38.0%.



                                       13
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         As of December 26, 2003, we had $51.9 million of working capital
compared to $51.7 million as of June 27, 2003. During the six-month period ended
December 26, 2003, we used $4.7 million of cash for operating activities
primarily due to an increase in accounts receivable and inventory and a decrease
in accounts payable. Our accounts receivable increased $2.2 million due to an
increasing sequential-quarter revenue growth, net of an improving days sales
outstanding (DSO) rate. Our DSO improved to 32 days at December 26, 2003, from
34 days at June 27, 2003. We continue to experience a delay in the final $2.1
million payment from the District of Columbia Department of Mental Health that
we do not expect to result in bad debt. We expect our DSO to remain at or near
to the current DSO level for the remainder of fiscal 2004. We used a net $1.6
million in cash to decrease accounts payable, due primarily to shorter payment
terms with our new pharmaceutical wholesaler. The average days of inventory on
hand increased 1 day to 9 days on hand at December 26, 2003, compared to June
27, 2003. We used $3.5 million to finance inventory required to support our
business growth. We expect our inventory to perform at or near to the current
days on hand for the remainder of fiscal 2004.

         We used approximately $6.8 million of cash in investing activities
during the six-month period ended December 26, 2003, consisting of $4.2 million
for the purchase of Accent Rx, $1.5 million in purchases of short-term
investments, and $1.1 million for leasehold improvements, furniture, equipment,
and computer hardware and software.

         We had no outstanding borrowings as of December 26, 2003 and June 27,
2003. Shareholders' equity as of December 26, 2003, and June 27, 2003, was $89.8
million and $85.5 million, respectively. Net tangible assets, an indicator of
borrowing capacity, as of December 26, 2003, and June 27, 2003, were $55.4
million and $55.3 million, respectively. As of December 26, 2003, we have a
secured line of credit totaling $30 million. We had no borrowings under our line
of credit during the three and six months ended December 26, 2003. We are in
compliance with the debt covenants of the line of credit. Under the terms of the
agreement, the debt is secured by receivables and inventory and bears interest
at the Eurodollar rate plus an applicable margin depending on our covenant
calculation (approximately 2.92% at December 26, 2003). The line of credit
expires in April 2006.

         We believe that our cash and cash equivalents, investments, line of
credit, and cash provided by operating activities should allow us to meet
foreseeable cash requirements and provide the flexibility to fund future working
capital growth. However, we would need to seek additional debt or equity
financing beyond our current $30 million line of credit to fund any major
business acquisitions. We expect our capital project requirements to be between
$2 and $3 million in fiscal 2004.

         Our future contractual commitments consist entirely of payments due
under operating leases. See Note 5, Notes to Consolidated Financial Statements,
included in our Annual Report on Form 10-K for the fiscal year ended June 27,
2003.

IMPACT OF INFLATION

         Changes in prices charged by biopharmaceutical manufacturers for the
drugs we dispense, along with increasing labor costs, freight and supply costs,
and other overhead expenses affect our cost of revenue and operating expenses.
Historically, we have been able to pass a portion of the effect of such
increases to the payor and patient pursuant to automatic price adjustments under
our payor contracts. As a result, changes due to inflation have not had
significant adverse effects on our operations.

FORWARD-LOOKING STATEMENTS

         Information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, other than historical or current
facts, should be considered forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. These statements reflect management's
current views of future events and financial performance that involve a number
of risks and uncertainties. These factors include, but are not limited to, the
following: our ability to maintain satisfactory on-going arrangements with
biopharmaceutical manufacturers and wholesalers and their ability to satisfy



                                       14
<PAGE>

our volume, pricing, and product requirements; decrease in demand for drugs we
handle; changes in Medicare or Medicaid, including reimbursement rates and
covered drugs; loss of relationships with payors (including Aetna or other
material contracts); loss of the Fuzeon(R) distribution contract and related
business volume; negative cost containment trends or financial difficulties by
our payors; changes in or unknown violations of various federal, state, and
local regulations; costs and other effects of legal or administrative
proceedings; the adoption of new or changes to existing accounting policies and
practices and the application of such policies and practices; the amount and
rate of growth in our selling, general and administrative and bad debt
expenses; the impairment of a significant amount of our goodwill; the effects
of and changes in, trade, monetary and fiscal policies, laws and regulations;
increased competition; our ability to obtain competitive financing to fund
operations and growth; loss or retirement of key executives; developments in
medical research affecting the treatment or cure of conditions for which we
distribute medications; the ability of management and accounting controls to
assure accurate and timely recognition of revenue and earnings; and adverse
publicity, news coverage, and reporting by independent analysts. We urge you to
read the cautionary statement filed as Exhibit 99.1 to our Annual Report on
Form 10-K for the fiscal year ended June 27, 2003. This cautionary statement
discusses specific factors which could affect our operations and
forward-looking statements contained in this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to interest rate risk primarily through our short-term
investments and our borrowing activities under our line of credit discussed in
Item 2 of this report. A 10% change in interest rates would not have a
significant effect on our interest income based our short-term investments
balance as of December 26, 2003.

         Our short-term borrowings would bear interest at variable rates based
on the Eurodollar rate plus an applicable margin depending on our covenant
calculation. A 10% increase in interest rates would not have a significant
effect on our interest expense based on the fact that we have had no borrowings
in fiscal 2004. We do not use financial instruments for trading or other
speculative purposes and are not a party to any leveraged financial instruments.

ITEM 4. CONTROLS AND PROCEDURES

         Our management, including the Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report. Based on
such evaluation, the Chief Executive Officer and the Chief Financial Officer
have concluded that, as of the end of such period, our disclosure controls and
procedures are effective.

         There have not been any changes in our internal controls over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during our most recent quarter that have materially affected, or
are reasonably likely to materially affect, our internal controls over financial
reporting.



                                       15
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         There have been no material developments in legal proceedings involving
Chronimed Inc. or its subsidiaries since those reported in our Annual Report on
Form 10-K for the fiscal year ended June 27, 2003. However, during the three
months ended December 26, 2003, we increased by $0.2 million our reserve in
response to a tentative settlement of claims related to District of Columbia
Medicaid reimbursements for the period between January and April 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Two matters were submitted to a vote at the Annual Meeting of
Shareholders held November 19, 2003. The voting results on the two matters
considered at the meeting are stated below.

Matter 1: Election of Directors

         The director nominees described in the Company's Proxy Statement were
elected as follows:

<Table>
<Caption>
                                                                                           For                       Withhold
                                                                                           ---                       --------
<S>                                 <C>                                                 <C>                          <C>
         Thomas A. Cusick           Class III, three year term                          11,534,772                     80,147
         Myron Z. Holubiak          Class III, three year term                          11,463,806                    151,113
         David R. Hubers            Class III, three year term                          11,535,522                     79,397
</Table>

         The terms for directors Karen Gilles Larson and Stuart A. Samuels
expire at the Annual Meeting of shareholders to be held in 2004. The terms for
directors Henry F. Blissenbach, Thomas F. Heaney, and Charles V. Owens, Jr.
expire at the Annual Meeting of shareholders to be held in 2005.

Matter 2: Appointment of Independent Auditors

         The appointment of Ernst & Young LLP as Independent Auditors for the
2004 fiscal year was ratified as follows:

<Table>
<Caption>
                  For               Against          Abstain           Broker Non-vote
                  ---               -------          -------           ---------------
<S>                               <C>                <C>               <C>

               11,452,315           153,194            9,410                  0
</Table>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         a)       Exhibits

                  31.1     Certification Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002 (Chief Executive Officer).

                  31.2     Certification Pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002 (Chief Financial Officer).

                  32.1     Certification Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002 (Chief Executive Officer).

                  32.2     Certification Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002 (Chief Financial Officer).



                                       16
<PAGE>

         b)       Reports on Form 8-K

                           A Current Report on Form 8-K with a report date of
                  October 29, 2003, was filed during the second quarter of
                  fiscal 2004 to provide the full text of the first quarter
                  financial results press release dated October 29, 2003.

                           A Current Report on Form 8-K with a report date of
                  December 9, 2003, was filed during the second quarter of
                  fiscal 2004 to report the Accent Rx acquisition.




                                       17
<PAGE>

         SIGNATURES

         Pursuant to the requirements of Section 13 of 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.

                                           CHRONIMED INC.

Dated: February 5, 2004                    By /s/ HENRY F. BLISSENBACH
                                              ----------------------------------
                                              Henry F. Blissenbach
                                              Chief Executive Officer and
                                              Chairman of the Board of Directors

Dated: February 5, 2004                       /s/ GREGORY H. KEANE
                                              ----------------------------------
                                              Gregory H. Keane
                                              Vice President, Chief Financial
                                              Officer and Treasurer (Principal
                                              Financial and Accounting Officer)



                                       18