Apache Medical Systems reports fourth quarter and year end results.

McLEAN, Va.--(BUSINESS WIRE)--Feb. 11, 1997--APACHE Medical Systems, Inc. (NASDAQ:AMSI), a leading provider of medical cost management products and services, today reported results for the fourth quarter and year ended December 31, 1996. Revenue increased 13% to $2.6 million from $2.3 million for the fourth quarter of 1995. The Company reported a net loss of $3.3 million, or $0.48 per share, compared with a net loss of $340,000 in the prior year's quarter. Included in the loss are previously announced non- recurring charges totaling $2.0 million, or $0.28 per share, of acquired in-process research and development, product development and related costs recorded during the fourth quarter of 1996. The net loss for the fourth quarter, excluding the non-recurring charges, was $1.3 million, or $0.19 per share.

For the twelve months ended December 31, 1996, revenue increased 25% to $8.8 million from $7.0 million in 1995. The Company reported a net loss of $5.7 million, or $0.93 per share, compared with a net loss of $3.8 million, or $0.79 per share, in the prior year. The net loss for the year, excluding the aforementioned non-recurring charges, was $3.7 million, or $0.59 per share.

In December 1996, the Company completed the acquisition of Health Research Network (HRN) for $1.57 million in cash and the assumption of certain liabilities. HRN will provide the Company with medical service capabilities related to HIV/AIDS disease management. The acquisition has been accounted for using the purchase method of accounting and resulted in intangible assets totaling $714,000. These assets are being amortized over 5 to 15 years. No amortization expense was recorded as of December 31, 1996. In connection with the acquisition, the Company recorded a non-recurring charge related to acquired in-process research and development costs of approximately $853,000, or $0.12 per share, during the fourth quarter of 1996. This charge represented 10% of the Company's revenues for 1996.

During the fourth quarter of 1996, APACHE also recorded a $1.1 million, or $0.16 per share, non-recurring charge related to product development and related costs (QIMC licensing and marketing fees) arising from an earlier agreement with QIMC, a healthcare- focused, business-led coalition located in Cleveland. A joint marketing arrangement with this non-profit organization has not been producing the results expected by APACHE.

In January 1997, the Company acquired the assets of CardioMac, a point-of-care data collection and reporting tool for the catheterization laboratory and cardiovascular operating room, for $1.35 million in cash and options to purchase 150,000 shares of APACHE common stock. The acquisition has been accounted for using the purchase method of accounting and resulted in intangible assets of $482,000. These assets are being amortized over 5 to 15 years. In connection with the acquisition, the Company will record a non-recurring charge related to acquired in-process research and development costs of approximately $1.1 million, or $0.16 per share, during the first quarter of 1997.

Gerald E. Bisbee, Jr., Ph.D., Chairman and Chief Executive Officer, stated, "We are extremely pleased with our progress in 1996, despite falling short of analyst revenue projections in the fourth quarter. APACHE sold four times as many Benchmark studies in 1996 as we did in 1995, and in the fourth quarter we reached a historical high for unit sales of Medical Cost Management Programs (MCMP's). We added 85 new customers in this year's fourth quarter versus 15 in the fourth quarter of 1995, and for the year, we added nearly 200 new customers versus 43 for the year 1995. We also are ahead of schedule in rolling out the new relationship with Premier, the nation's largest alliance of hospital and health system organizations, which was established in the second quarter of 1996."

Bisbee added, "During 1996, the Company implemented a wide set of strategic initiatives to increase substantially APACHE's sales and marketing performance. This included making an important investment to put in place an expanded sales and marketing infrastructure and to announce the release of new products focused on cardiovascular disease which are important initiatives to our long-term growth."

Bisbee concluded, "At the time of our IPO in June of 1996, we advised investors that APACHE's short-term objective was to complete the process of putting in place -- the systems, the programs and the people -- to provide the consistent long-term growth in shareholder value that we are committed to achieving. Over the course of 1996 and into early 1997, we have been taking the aggressive steps to meet this objective. In addition to the internal investments we have made, we are pleased with the two recent acquisitions we have made which are important elements of our plan. HRN complements and broadens APACHE's current healthcare provider activities by extending into the physician's office and simultaneously enhances HRN's value to HIV care providers and suppliers by virtue of APACHE's experience with clinical decision-support systems and disease-management projects. Integrating the powerful capabilities of APACHE risk predictions with the highly functional CardioMac foundation software will give healthcare providers the means to measure and improve outcomes of their cardiovascular patients. Clearly, these acquisitions are highly complementary to APACHE's products and services, and, along with the internal improvements made by the Company in 1996, they significantly augment APACHE's capacity to successfully carry out its business plan over the next several years."

APACHE is a leading provider of medical cost management products and services to over 400 customers located in 39 states and internationally. The APACHE Medical Cost Management Program ("MCMP") enables providers, payers and suppliers to lower costs and enhance quality for high-risk, high-cost patients including cardiovascular and critical care patients by providing clinical decision support information to physicians about individual patients concurrently with the patient being treated. The MCMP integrates severity-adjusted outcomes, guidelines, individual patient management, automated data collection, disease management, and a full range of applications consulting. APACHE clinical methodologies have been utilized in connection with more than 600 peer reviewed articles.

Note: In accordance with the "safe harbor" provisions of the Securities Litigation Reform Act of 1995, please see Item 7 to APACHE's Form 10-K for the year ended December 31, 1996, for a discussion of certain important factors as they relate to forward looking statements. -0-

                  APACHE MEDICAL SYSTEMS, INC.
             Consolidated Statements of Operations
                          (unaudited)
            (In thousands, except per share amounts)

                 Three Months Ended         Twelve Months Ended
                    December 31,               December 31,
                  1996      1995            1996        1995
Revenue:
Systems          $ 1,788   $ 1,514        $ 6,323      $ 4,096
Support              427       387          1,486        1,352
Professional services 385      402            975        1,576
Total revenue      2,600     2,303          8,784        7,024
Expenses:
Cost of operations 1,141       732          3,354        2,866
Research and
 development         512       315          1,723        1,919
Selling, general and
 administrative    2,579     1,443          7,754        5,631
Write-off of product
 development
 and related costs 1,100        --          1,100           --
Write-off of acquired
 in-process
 research and development
 costs                853       --            853           --
Total expenses      6,185    2,490         14,784       10,416
Loss from
 operations        (3,585)    (187)        (6,000)      (3,392)
Other income
 (expense):
Interest income       309       33            702           62
Interest expense      (21)    (189)          (363)        (483)
Other, net             --        3             --            5
Total other
 income (expense)     288     (153)           339         (416)
Net loss          $(3,297)   $(340)       $(5,661)      $(3,808)
Net loss per share  $(.48)   $  --        $  (.93)     $   (.79)
Weighted average number
 of common shares    6,896      --          5,762         4,611

                    Condensed Balance Sheets
                         (in thousands)

                                              December 31,
                                       1996                1995
Assets
  Cash and short-term investments    21,664                4,036
  Accounts receivable, net            3,117                1,420
  Other current assets                  825                  286
  Property, plant and equipment, net  1,188                1,391
  Other assets                        1,192                  776
                                   $ 27,986            $   7,909
Liabilities and Stockholders'
 Equity (Deficit)
  Current liabilities                 5,812                4,225
  Long-term debt and capital leases     193                1,079
  Deferred rent                         159                  186
  Redeemable convertible preferred stock --               20,732
  Stockholders' equity (deficit)     21,822              (18,313)
                                   $ 27,986            $   7,909

CONTACT: Brion D. Umidi

Vice President and Chief Financial Officer

703-847-1400