CAPSTONE PHARMACY SERVICES ANNOUNCES THIRD QUARTER RESULTS.

BALTIMORE, Md.--(HealthWire)--Nov. 7, 1996--

- Company Reports Revenue of $90.2 Million and Adjusted Operating Income of $3.7 Million for the Nine Month Period Ended September 30 -

CAPSTONE PHARMACY SERVICES, INC. [Nasdaq NM Symbol: DOSE], a leading provider of institutional pharmacy services to long-term care facilities and correctional institutions throughout the United States, today announced results for the third quarter and nine month period ended September 30, 1996.

The Company reported net sales for the third quarter and nine month period of $44,014,812 and $90,161,893, respectively, as compared to $16,135,791 and $39,275,864 for the same periods last year. Sales for the nine month period include the acquisition of Symphony Pharmacy for two months.

Operating income for the third quarter and nine month period was $2,211,407 and $3,651,752, respectively, when adjusted for the $2,825,000 restructuring charge related to the Symphony acquisition which the Company recorded in the third quarter.

Net loss for the third quarter and nine month period was $3,335,514, or $0.17 per share, and $2,556,590, or $0.16 per share, respectively, compared to a net loss of $284,061, or $0.03 per share, and $3,259,382, or $0.35 per share, respectively, for the same periods last year. Included in the third quarter of 1996 as a component of operating expenses was a restructuring charge of $2,825,000 for issues relating to the Company's Symphony acquisition and a one-time charge of $4,573,530 for acquisition financing fees and expenses related to the same acquisition. Without these charges, net income for the third quarter and nine month period would have been $1,204,906, or $0.06 per share, and $1,758,032 or $0.11 per share, respectively.

R. Dirk Allison, President and CEO, said, "We are extremely pleased with the results of our third quarter. Our adjusted income from operations met the Company's expectations and positions Capstone to continue to achieve our strategic goals." Mr. Allison continued, "1996 has been a very active and successful year for Capstone. Since January 1, we have completed five acquisitions including our recent acquisition of the institutional pharmacy business of Happy Harry's, Inc., adding over $150,000,000 in annualized revenues. The pace and efficiency of integration of these acquisitions, particularly our Symphony acquisition, have exceeded expectations. Through our emphasis on `preferred provider agreements', including the two most recent agreements with Community Care of America and EMI Enterprises, Inc., we have increased our backlog of new business to over 26,000 beds."

Following are highlights for the nine months:

Significant acquisition activity. Since the beginning of 1996, Capstone Pharmacy Services has been among the most active consolidators in the institutional pharmacy industry. It has acquired five institutional pharmacy companies adding over 45,000 beds and annualized revenues of approximately $150,000,000. The largest acquisition was the institutional pharmacy business of Symphony Pharmacy Services, Inc., a subsidiary of Integrated Health Services, Inc. Today, Capstone has 35 pharmacies in 13 states having more than doubled its revenue base and beds served since the beginning of 1996. This includes the most recent acquisition announced last week by the Company - the institutional pharmacy business of Happy Harry's, Inc., based in Newark, Delaware.

Development of preferred provider relationships. Early in 1996, Capstone launched its strategy to establish long-term institutional pharmacy `preferred provider' relationships with nursing home operators throughout the United States. So far this year, the Company has completed five preferred provider agreements covering over 41,000 units/beds of which an estimated 26,000 will be brought on service over the next eighteen months. Included in these totals are the agreements with Community Care of America (5,500 units/beds) and EMI Enterprises, Inc. (2,200 units/beds) that were announced during the third quarter of 1996.

According to Mr. Allison, Capstone is excited by the prospects for further growth and expansion of its institutional pharmacy business. "We believe that our business strategies and financial position provide an excellent opportunity for continued growth by acquisition and through additional preferred provider agreements."

Capstone is one of the nation's largest independent institutional pharmacy services companies providing services to long-term care facilities containing approximately 86,500 beds in 13 states. It is the largest provider of pharmacy services to prisons in the U.S. correctional system, serving approximately 110,000 inmates. Capstone's common stock is traded in the Nasdaq Stock Market (National Market) under the DOSE symbol.

This release involves forward looking statements with respect to acquisition prospects, development of preferred provider relationships and other plans and expectations on the part of the Company. The accuracy of these statements involve a number of risks and uncertainties, including but not limited to, the availability of acquisition prospects and financing for such prospects, changing economic and market conditions that would impact such prospects or financing related thereto, changes in governmental reimbursement regulations and laws which could impair or hinder the entering into of strategic alliances or preferred provider agreements, as well as other risk factors detailed in the Company's Securities and Exchange Commission filings, to which recipients of this release are referred for additional information concerning the Company and its prospects.

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            CAPSTONE PHARMACY SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

                       Three Months Ended          Nine Months Ended
                    9/30/96         9/30/95      9/30/96       9/30/95

Net sales         $44,014,812      $16,135,791 $90,161,893   $39,275,864
Cost of sales      25,523,972        9,960,394  54,369,560    24,807,119
Gross profit       18,490,840        6,175,397  35,792,333    14,468,745
Operating expenses:
 Selling, general and
  administrative
  expenses         14,790,475        5,898,826  29,243,472    14,549,624
  Depreciation and
   amortization     1,488,958          391,020   2,650,663       954,486
  Costs relating to
   pharmacy closure        --               --     246,446            --
Restructuring
 charges            2,825,000               --   2,825,000     2,063,630
 Total operating
  expenses        19,104,433         6,289,846  34,965,581    17,567,740

Operating income (loss)
 from continuing
 operations before income
 taxes, discontinued
 operations and extraordinary
 item               (613,593)         (114,449)    826,752    (3,098,995)

Non-operating expense (income):
 Interest expense,
  net                 508,807          246,393   1,193,422       711,422
  Acquisition financing
   fees and expenses 4,573,530             --    4,573,530           --
 Other income, net    (151,102)       (76,781)   (246,334)     (446,981)
 Total non-operating
  expense (income),
  net                4,931,235        169,612   5,520,618       264,441

 Income (loss) from
  continuing operations
  before income taxes,
  discontinued operations
  and extraordinary
  item              (5,544,828)      (284,061) (4,693,866)   (3,363,436)
Provision (benefit)
 for income taxes   (2,209,314)          --    (2,137,276)     (118,545)

 (Loss) from continuing operations
  before discontinued
  operations and
  extraordinary
  item              (3,335,514)      (284,061) (2,556,590)   (3,244,891)

Discontinued operations:
  Loss from operations of
  discontinued business
  segments               --                --        --        (272,628)
  (Loss) on disposal of
    business segments,
    net                  --                --        --         (25,227)

Net (loss) before
 extraordinary
 item               (3,335,514)      (284,061) (2,556,590)   (3,542,746)

Extraordinary item:
 Discount on repayment of
  vendor debt            --              --        --           283,364
  Net (Loss)      $(3,335,514)      $(284,061) $(2,556,590) $(3,259,382)


Earnings per share data:
 Primary
  Continuing
   operations          $(0.17)         $(0.03)      $(0.16)      $(0.35)
  Discontinued
   operations            --               --           --         (0.03)
  Extraordinary
   item                  --               --           --          0.03

Net (Loss)           $(0.17)          $(0.03)      $(0.16)       $(0.35)

Fully Diluted
 Continuing
  operations         $(0.17)          $(0.03)      $(0.16)       $(0.35)
 Discontinued
  operations            --                --           --         (0.03)
 Extraordinary item     --                --           --          0.03
  Net (Loss)        $(0.17)           $(0.03)      $(0.16)       $(0.35)
Weighted average number of
 common shares
 outstanding:

Primary         19,397,386        11,037,527   16,298,376     9,359,019
Fully Diluted   19,397,386        11,037,527   16,298,376     9,359,019

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CONTACT: Dirk Allison

President and Chief Executive Officer

[phone]

OR

Donald W. Hughes

Chief Financial Officer

[phone]

OR

Morris Perlis

Vice-Chairman

[phone]

OR

John W. Heilshorn

LIPPERT/HEILSHORN & ASSOC., INC.

[phone] x104

[e-mail]