DIANON Systems, Inc. reports third quarter sales and earnings.

STRATFORD, Conn.--(BUSINESS WIRE)--Nov. 5, 1996--DIANON Systems, Inc. (NASDAQ:DIAN) today reported that sales for the third quarter ended September 30, 1996 were $13.9 million, a 22% increase over the third quarter of 1995. Net income was $657,000, up $413,000 or 170% from the third quarter of 1995. Earnings per share were $0.10 during the third quarter of 1996 compared to $0.05 per share in the third quarter of 1995.

Sales for the first nine months of 1996 were $40 million, up 20% over the first nine months of 1995. Net income was $1,459,000 compared to $46,000 for the first nine months of 1995. Earnings per share were $0.23 during the first nine months of 1996 compared to $0.01 for the first nine months of 1995. -0-

                        THIRD QUARTER          9 MONTHS YEAR-TO-DATE
                        1996     1995            1996     1995
                        (000)    (000)     %     (000)    (000)      %

Net Sales              $13,863  $11,329   22%   $39,957  $33,195    20%

Gross Profit             7,064    6,379   11%    20,537   18,608    10%

Income From Operations   1,119      380           2,342        7
Net Interest Income         33       49             218       74
Provision For Taxes        495      186           1,101       35
Net Income             $   657  $   243         $ 1,459  $    46

Earnings Per Share     $  0.10  $  0.05         $  0.23  $  0.01

The Company also announced that on October 29, its largest investor exercised his warrants to purchase another 800,000 shares of common stock. The total consideration for the purchased shares was $5.2 million or $6.50 per share, representing the receipt last fall of $1.50 for the purchase of each warrant plus an additional $5.00 received upon the exercise of each warrant.

Kevin Johnson, President, said, "Third quarter sales were the highest quarterly sales in Company history. Increases in our pathology testing services, which include genetic and molecular testing as well as traditional anatomic pathology testing, again more than offset a modest but continuing decline in our Oncosite tumor marker sales.

"We are pleased with the progress made this year to expand our anatomic pathology testing services. The new services introduced in the last two years have been major contributors to this year's sales growth and are expected to continue to be the fastest growing services in 1997. We believe the favorable long term outlook for the Company is a principal reason why our largest investor exercised all his outstanding warrants.

"Our earnings recovery and growth have resulted in consistent improvement in earnings per share each quarter this year. We expect that our earnings per share for 1996 will be in the range of $0.33 to $0.35 per share.

"The management team of the Company is committed to achieving 20% - 30% annual increases in earnings per share for the next few years. We expect to meet our earnings per share goals in 1997 based on current trends in our business including, but not limited to, current trends in pricing, continued growth of new customer segments, and decreasing SG&A expenses as a percentage of revenue. However, shareholders should be advised that we have not completed our business plan for 1997 which must be approved by the Board of Directors."

Richard A. Sandberg, Chairman of the Board, added, "Although we expect continued annual growth in earnings per share, shareholders should be aware that in the future we do not expect each quarter's earnings per share to exceed the prior quarter's level. In the past, the second and fourth quarters of each year have been our strongest quarters. Based on our historical sales and earnings patterns, shareholders should anticipate that first quarter 1997 earnings per share are likely to be less than fourth quarter 1996 earnings per share and that third quarter 1997 earnings per share may be less than second quarter levels.

"Through the end of September 1996, we have purchased more than 400,000 shares of common stock in the open market. We expect to continue purchases of our common stock from time to time."

The statements in this press release relating to management's expectations and beliefs ("forward looking statements") are based on preliminary information and management assumptions. Such forward looking statements are subject to a wide range of risks and uncertainties, including those relating to reimbursement rates and coverage, state and national regulatory compliance, maintaining above average quality, as well as those from competitive pressures. Further information regarding factors that could affect the Company s results is included in the Company s SEC filings, including its Form 10-K for the year ended December 31, 1995.

DIANON Systems, Inc. provides a full line of anatomic pathology testing services and a number of specialized clinical pathology testing services to patients, physicians and managed care organizations in the United States.

CONTACT: Richard A. Sandberg

Chairman

203/381-4022

or

Kevin C. Johnson

President

203/381-4905