##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSIONWashington, D.C. 20549
 FORM 10-K
  þ  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF
    1934
  For the Fiscal Year ended December
    31, 2007
  or
  o  TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF
    1934
  For the transition period from
    
    to
  Commission File
    No. 0-29100
  eResearchTechnology,
    Inc.
    Delaware

22-3264604(State of Incorporation)

(I.R.S. Employer Identification No.)30 South 17th Street Philadelphia, PA

19103(Address of Principal Executive Offices)

(Zip Code)   (215) 972-0420
   Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class

Name of Each Exchange on Which
    RegisteredCommon Stock, $.01 par value

The Nasdaq Stock Market LLC   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þNon-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ




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Class

Outstanding at February 26,
    2008Common Stock, $.01 par value per share

50,623,172 shares   DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



TABLE OF
    CONTENTS
   
 ItemNumberPART I1

Business

3General

3Recent
    Transactions

3Product and Service
    Offerings

4Research and
    Development

7Our Clients

8Sales and
    Marketing

8Partnerships

8Competition

8Government
    Regulation

9Potential Liability
    and Insurance

10Intellectual
    Property

10Employees

11Available
    Information

111A

Risk Factors

111B

Unresolved Staff Comments

192

Properties

193

Legal Proceedings

194

Submission of Matters to a Vote of Security
    Holders

19Special

Executive Officers of Registrant

19PART II5

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

216

Selected Financial Data

237

Managements Discussion and Analysis of
    Financial Condition and Results of Operations

24Cautionary
    Statement for Forward-Looking Information

24Overview

24Results of
    Operations

25Executive
    Overview

25Year
    Ended December 31, 2007 Compared to the Year Ended
    December 31, 2006

27Year
    Ended December 31, 2006 Compared to the Year Ended
    December 31, 2005

30Liquidity and
    Capital Resources

32Inflation

36Recent Accounting
    Pronouncements

36Critical Accounting
    Policies

367A

Quantitative and Qualitative Disclosures About
    Market Risk

39Interest Rate
    Risk

39Foreign Currency
    Risk

398

Financial Statements and Supplementary
    Data

399

Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure

399A

Controls and Procedures

399B

Other Information

40PART III10

Directors, Executive Officers and Corporate
    Governance

4111

Executive Compensation

4112

Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters

4113

Certain Relationships and Related
    Transactions, and Director Independence

4114

Principal Accountant Fees and Services

41PART IV15

Exhibits and Financial Statement
    Schedules

42Signatures

45Index to Consolidated Financial Statements and
    Financial Statement Schedule

F-1Management Employment Agreement - Joel MorganrothManagement Employment Agreement - George TigerConsultant Agreement - Joel MorganrothSubsidiaries of the RegistrantConsent of KPMG, LLPCertification of Chief Executive OfficerCertification of Chief Financial OfficerStatement of CEO pursuant to Section 1350Statement of CFO pursuant to Section 1350   2




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PART I  ITEM 1.
    BUSINESS General  ® ® ®
  set-up, ® ®
   Recent
    Transactions  10-year 10-year
 3




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® tm ® tm
 Product
    and Service Offerings    Year Ended December 31,2005


2006


2007Net revenues:Licenses


7.0
%


3.5
%


2.7
%Services


68.8



64.0



70.5Site support


24.2



32.5



26.8Total net revenues


100.0



100.0



100.0   ® ® tm ® ® ® tm
  Product/Services

DescriptionEXPeRT®
    Cardiac Safety

Diagnostic tests are employed in clinical trials to measure the
    effect of the product on certain body organs and systems in
    order to determine the products safety. Cardiac safety
    testing is a critical component of diagnostic testing. eRT
    provides a highly scalable set of Cardiac Safety products and
    services centered on our regulatory compliant (Title
    21 CFR, Part 11)
    EXPeRT®Cardiac Safety Intelligent Data Management System.
    EXPeRT®provides for workflow enabled cardiac safety data collection,
    interpretation and distribution of ECG data and images.
    EXPeRT®also enables analysis and cardiologist interpretation of ECGs
    performed on research subjects in connection with our
    clients clinical trials.EXPeRT®
    is designed specifically to address global regulatory guidance
    and technical standards for digital ECG processing to include
    digital collection, waveform measurements and annotations,
    review and output to the regulatory standard file format.
    EXPeRT®includes the ability for ECGs to be viewed as side-by-side ECG
    images for comparison, supplemented by the ability to review
    prior patient ECG tracings.EXPeRT®
    further enhances our ECG services by permitting cardiologists,
    with training in our ECG interpretation guidelines and proper
    security access, to perform telecardiology, which is the ability
    to access and evaluate ECGs electronically in remote locations.
    We also establish rules for standardized, 4




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semi-automated and automated workflow management, allowing
    audit trail accounting and generating safety and operational
    metrics reports for sponsors and investigators.We provide the following centralized ECG testing services as
    part of our
    EXPeRT®Cardiac Safety services:   Digital ECG Services. Allows the investigator to
    transmit, via modem, 12-lead ECG data directly to us for
    interpretation and rapid return of results to the investigator
    and the sponsor.  ECGs are measured by our cardiac safety
    specialists utilizing an on screen, high-resolution caliper
    placement system, and are then interpreted by a cardiologist. We
    also offer cardiac safety specialist and cardiologist
    adjudication of software algorithm placed measurements where
    appropriate and as desired by our clients.   Continuous Digital 12-lead ECG Recording. The
    12-lead ECG signals are recorded onto compact flash memory cards
    and submitted to us.  From these recordings, 12-lead ECGs can be
    evaluated at specific time points.  These ECGs are measured by a
    cardiac safety specialist and then interpreted by a
    cardiologist. Continuous digital 12-lead ECG recordings can also
    be used for studies assessing the incidence of arrhythmias,
    cardiac ischemia and/or heart rate variability findings.   Holter Recording. This is a continuous ECG
    recording of the hearts rhythm on a flash card that is
    reviewed by a cardiac safety specialist and then by a
    cardiologist. Holter data reported by us is provided for studies
    assessing the incidence of arrhythmias, cardiac ischemia and/or
    heart rate variability.   Paper ECG Services. Paper ECGs are measured by our
    cardiac safety specialists utilizing a high-resolution
    digitizing system, and are then interpreted by a cardiologist.
    Alternatively, paper ECGs may be scanned to a digital format,
    where appropriate.   FDA XML ECG Service. This service provides our
    clients with electronic versions of each ECG processed by
    EXPeRT®.
    The ECGs processed by
    EXPeRT®are rendered in a format compliant with the United States Food
    and Drug Administrations (FDA) XML standard for digital
    ECGs.   The
    EXPeRT®Direct. This is a hosted solution, which delivers near real
    time cardiac safety feedback at the program, trial, center and
    patient level, along with related metrics, such as trial
    enrollment, as well as the ability to organize and publish a
    variety of study-specific information and the ability to link
    data points in reports direct to digital ECG waveforms.   Cardiac Safety Equipment. We provide ECG equipment
    to clients to perform the ECG and Holter recordings and give
    them the means to send such recordings to eRT.  The service
    comprises equipment rental and sales, along with related
    supplies and freight.Cardiac Safety Consulting

The centralization of electrocardiograms in clinical research
    has become increasingly important to organizations involved in
    the development of new drugs. Global regulators each apply their
    own slightly different interpretation of the International
    Conference on Harmonization E14 guidelines and as a result
    sponsors look to their vendors to provide key scientific input
    into the overall process. Our cardiac safety consulting service
    aids sponsors in the development of protocol synopses, the
    creation and analysis of statistical plans as well as the
    provision of an expert medical report with regard to the cardiac
    findings.  We are 5




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involved in all phases of clinical development from a
    consultancy point of view.  We offer this service both as a
    stand-alone service and integrated with our full suite of
    Cardiac Safety services.EXPeRT®
    eClinical

The process of designing, implementing and managing a clinical
    trial requires a well defined process and set of supporting
    products to effectively handle the variety of tasks and
    information comprising a clinical trial.  We provide a suite of
    products to address the capture, management and dissemination of
    clinical trial data. Our integrated suite is comprised of the
    following:  
    EXPeRT®Portal  is an easy to use portal application
    enabling clinical trial researchers and staff to gain real-time
    access to study dashboards, progress reports, folders and forums
    enabling efficient management and communication of study
    progress.
    EXPeRT®Portal also includes a web-based training environment, eHealth
Educationtm, which enables clinical research professionals to learn
about technology developments, new products, clinical protocols,
and other educational matters.  
    EXPeRT®EDC Now!  uses the latest technology to provide a
    comprehensive electronic data capture (EDC) system which
    provides sponsors with the ability to roll out electronic
    studies in short time frames. This rapid time to start combined
    with a fixed price and scope approach helps sponsors realize the
    benefits of EDC without the risks normally associated with the
    typical EDC process.  
    EXPeRT®Data Management  is a clinical data management
    application for collecting, cleaning and managing clinical trial
    data.  
    EXPeRT®Adverse Event Reporting  is an adverse event
    management system enabling the generation of key regulatory
    reports, including CIOMS and Medwatch.  
    EXPeRT®Trial Management  is a clinical trial management
    technology that can be used to set up clinical trials, establish
    standards, track study activities, plan resources, distribute
    supplies, manage the financial aspects of a trial and
    electronically view clinical trial data.Our
    EXPeRT®
    eClinical solution is available for license over a renewable
    term (subscription license) in addition to a traditional
    perpetual license with annual maintenance.  Our
    EXPeRT®eClinical offerings may be hosted by us or one of our third-
    party hosting partners, or they may be installed on our
    clients computing infrastructure.EXPeRT®
    ePRO

Data is collected during clinical trials allowing sponsors to
    gauge the efficacy of the compounds they are testing. Collecting
    data directly from the patient can be performed in a number of
    different methods, including electronically. We provide an
    electronic patient reported outcome (ePRO) service that performs
    this function for sponsors. Our solution consists of the
    following tools and services:   Data Collection Our
    EXPeRT®ePROsolution is an IVR system that allows subjects in a clinical
    trial to call into the system via a telephone and enter their
    reported data directly into the system.   Data Management Once the data
    has been entered into the
    EXPeRT®ePROsystem there are a number of data management functions that can
    be performed depending on the requirements of the sponsor. This
    includes sending call reports to the sites, sending call reports
    to the sponsor, alerting the sites if data is outside 6




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specifically set boundaries, web access to the data by the
    sponsor, and cleaning of data per the specs provided by the
    sponsor.   Data Delivery At the conclusion
    of the study, the data is compiled and then delivered according
    to the sponsor requirements.  This can include SAS exports,
    ASCII exports, electronic file transfers and data delivery on
    digital media.Project Assurance/ Implementation Assurance

We provide a full  spectrum  of consulting  services  for all
    of our  products  that  augment  the study management and
    implementation efforts of clients in support of their clinical
    research requirements. The methodologies (Project Assurance for
    Cardiac Safety and Implementation Assurance for
    EXPeRT®eClinical and
    EXPeRT®ePRO Applications) provide a consistent framework through which
    we can effectively manage the delivery of all products and
    services. Such methodologies provide the standards, guidelines
    and services that allow us to effectively anticipate our
    clients needs and assure proactive communication and
    implementation in order to meet and exceed our clients
    goals. The services include study initiation, project
    management, education, site qualification, configuration,
    technology and regulatory review, research dashboards and
    electronic reporting, data management, uniform standards and
    standard operating procedures, and migration services. In
    addition, we provide on-site research and technology advisory
    services, support services including online and help desk
    support, and software maintenance.  Research
    and Development  Overview
    Technology
    2007
    Product Initiatives
    ® start-up ® ®
 7




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®
  ®
  ®
 Our
    Clients   Sales and
    Marketing      agreed-upon
 Partnerships   Competition   8




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
    client service;
    a significant base of reference clients;
    breadth and depth of solution, including the ability to
    accommodate both electronic forms and manual, paper-based
    research methods of data collection, management and analysis;
    product quality and performance;
    scientific expertise;
    core technology and product features;
    ability to implement solutions;
    capacity;
    price;
    financial and organizational stability; and
    ability to adapt to changing regulatory guidance.   Government
    Regulation         9




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Potential
    Liability and Insurance   Intellectual
    Property    ®
  ®
 10




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Employees         Available
    Information  www.ert.com. Form 10-K, Form 10-Q, Form 8-K
  ITEM 1A. RISK
    FACTORS
  Form 10-K.
  Our
    future operating results are uncertain and may fluctuate. If we
    fail to meet the expectations of securities analysts and
    investors, our stock price would likely decline.
    
    we generate a significant percentage of our revenues from a
    limited number of clients;
    our sales cycles can be lengthy and variable;
    Thorough QTc studies are typically of large volume and of short
    duration; and
    sponsors and CROs may unexpectedly cancel, postpone or reduce
    the size of clinical trials.   11




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We depend
    entirely on the clinical trial market and a downturn in this
    market could cause our revenues and profitability to
    decrease.
    Extensive
    governmental regulation of the clinical trial process could
    require costly modifications to our products, adversely affect
    prospective clients willingness to use our products and
    services and increase competition and reduce our market
    share.
     12




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The FDA
    may recommend a different approach to measure drug effects on
    the QT interval of an ECG which could make our systems and
    processes obsolete and adversely affect revenue and
    profitability.
  ®
  We have
    several large clients from whom we derive substantial revenue
    and therefore the loss of even a few of our clients could
    significantly reduce our revenues and profitability.
    Consolidation
    among our clients could cause us to lose clients, decrease the
    market for our products and result in a reduction of our
    revenues and profitability.
      Our
    failure to continue to expand our business or manage growth
    successfully could disrupt our business operations, increase our
    costs and delay implementation of our business
    strategies.
   13




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We may
    not be successful in competing against others providing similar
    products and services, which could reduce our revenues,
    profitability and market share.
    Our
    failure to establish and maintain partnerships and other
    strategic alliances may delay the development of our products
    and services, cause us to lose clients and prevent us from
    growing our business, any of which could also cause our stock
    price to decline.
    We may
    incur liability as a result of providing consulting and Cardiac
    Safety analysis and interpretation services.
    The
    cardiac safety equipment that we own and lease could become
    obsolete due to technological advances or we may not be able to
    provide the quantity of equipment needed to service our
    clients.
    Capacity
    constraint or system failures could result in the loss of or
    liability to clients, which could reduce our revenues, increase
    our expenses and reduce profitability.
   14




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
    software or hardware malfunctions that interrupt operation of
    our applications or cause loss of data integrity;
    power loss or telecommunications failures;
    overloaded systems;
    human error; and
    natural disasters.    Our
    software products are complex and may contain undetected
    software errors, which could lead to an increase in our costs or
    a reduction in our revenues and profitability.
    
    cause sales of our solutions to decrease and our revenues and
    profitability to decline;
    cause us to incur significant warranty and repair costs;
    divert the attention of our technical personnel away from
    product development efforts; and
    cause significant client relations problems.    Rapidly
    changing technology may impair our ability to develop and market
    our solutions and cause us to become less competitive.
      
    rapid technological change;
    changing client needs;
    frequent new product introductions; and
    evolving industry standards.   15




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If
    clinical trial sponsors and CROs do not shift from their
    existing paper-based methods of collecting and managing clinical
    trial data at investigator sites to an electronic system with
    centralization, we may not achieve the market penetration
    necessary to grow the business at expected levels.
    If
    general economic conditions worsen, potential clients may be
    unwilling to make large capital software purchases or
    commitments, which could affect our ability to maintain and/or
    increase license revenues and overall profitability.
    We depend
    on certain key executives. If we lose the services of any of
    these executives, our operations could be disrupted, we could
    incur additional expenses and our ability to expand our
    operations could be impeded, particularly if we are not able to
    recruit a suitable replacement in a timely manner.
    If we are
    unable to protect our proprietary technology or maintain our
    technological advantages, we may lose our intellectual property
    rights and become less competitive.
  ® continuation-in-part ® ®
 16




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If we are
    not able to effectively integrate our recent transactions with
    our historic operations, we will not achieve the improvements in
    revenues and profitability that we anticipate.
    
    inability to achieve anticipated synergies;
    unwillingness of the market to use newly-licensed technology;
    difficulties in the integration of the operations, technologies,
    products and personnel of the acquired company;
    failure of a party to perform ancillary contractual obligations
    related to the acquisition;
    diversion of managements attention from other business
    concerns;
    potential untimely loss of key employees of the acquired company
    or of us; and
    risk of assuming unforeseen liabilities or becoming subject to
    litigation.      Goodwill
    is subject to impairment which could result in a significant
    expense.
    Third
    parties may claim that we infringe upon their intellectual
    property rights, which could result in the loss of our rights,
    subject us to liability and divert management
    attention.
      
    stop using the challenged intellectual property or selling our
    products or services that incorporate it;
    obtain a license to use the challenged intellectual property or
    to sell products or services that incorporate it, which could be
    costly or unavailable; and 17




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
    redesign those products or services that are based on or
    incorporate the challenged intellectual property, which could be
    costly and time consuming or could adversely affect the
    functionality and market acceptance of our products.    Third
    parties have made claims for damages against the Company and may
    continue to do so, which could result in an unfavorable
    settlement or judgment against us.
    Our
    international operations expose us to additional
    risks.
    
    government regulations;
    trade restrictions;
    burdensome foreign taxes;
    exchange rate controls and currency exchange rate fluctuations;
    political and economic instability;
    varying technology standards; and
    difficulties in staffing and managing foreign operations.        In the
    event we are unable to satisfy regulatory requirements relating
    to internal control over financial reporting, or if these
    internal controls are not effective, our business and financial
    results may suffer.
   18




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ITEM 1B.  UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES    ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   SPECIAL
    ITEM. EXECUTIVE OFFICERS OF REGISTRANT    Name

Age

PositionMichael J. McKelvey, Ph.D.


55


President, Chief Executive Officer and DirectorJoel Morganroth, MD


62


Chairman of the Board of Directors and Chief Scientific OfficerRichard A. Baron


52


Executive Vice President, Chief Financial Officer and SecretaryThomas P. Devine


55


Executive Vice President and Chief Development OfficerAmy Furlong


35


Executive Vice President, Cardiac SafetyJeffrey S. Litwin, MD


50


Executive Vice President and Chief Medical OfficerJohn M. Blakeley


40


Executive Vice President, Global Sales and MarketingRobert S. Brown


52


Senior Vice President, Strategic Marketing, Planning &
    PartnershipsDavid Laky


43


Senior Vice President, eClinicalGregory Sadowski


35


Senior Vice President, ePROGeorge Tiger


48


Senior Vice President, Americas Sales  19




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20




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    Calendar Period

High


Low2006First Quarter

$
18.54


$
13.59Second Quarter


14.99



8.11Third Quarter


9.46



6.83Fourth Quarter


8.67



5.882007First Quarter

$
8.21


$
6.12Second Quarter


9.72



7.66Third Quarter


12.00



9.36Fourth Quarter


12.34



8.53      21




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Stockholder
    Return Performance Graph
    Form 10-K
  
 22




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ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K.
  Consolidated
    Statements of Operations Data (in thousands, except per share
    data)
  Year Ended December 31,2003


2004


2005


2006


2007Net revenues:Licenses

$
5,738


$
9,803


$
6,063


$
3,017


$
2,700Services


46,791



76,340



59,712



55,309



69,547Site support


14,313



23,250



21,072



28,042



26,451Total net revenues


66,842



109,393



86,847



86,368



98,698Costs of revenues:Cost of licenses


658



664



436



286



304Cost of services


17,473



24,124



24,337



25,431



30,522Cost of site support


6,610



11,486



13,965



18,821



17,808Total costs of revenues


24,741



36,274



38,738



44,538



48,634Gross margin


42,101



73,119



48,109



41,830



50,064Operating expenses:Selling and marketing


7,763



9,391



9,122



11,051



11,222General and administrative


6,804



10,276



11,458



14,668



12,258Research and development


4,564



4,090



4,093



4,146



4,333Total operating expenses


19,131



23,757



24,673



29,865



27,813Operating income


22,970



49,362



23,436



11,965



22,251Other income, net


310



863



936



1,250



2,206Income before income taxes


23,280



50,225



24,372



13,215



24,457Income tax provision


8,817



20,501



9,007



4,905



9,205Net income

$
14,463


$
29,724


$
15,365


$
8,310


$
15,252Basic net income per share

$
0.29


$
0.58


$
0.31


$
0.17


$
0.30Diluted net income per share

$
0.27


$
0.54


$
0.29


$
0.16


$
0.29   Consolidated
    Balance Sheet Data (in thousands)
  December 31,2003


2004


2005


2006


2007Cash, cash equivalents and short-term investments

$
51,922


$
64,964


$
52,001


$
56,913


$
46,879Working capital


45,777



53,492



45,795



61,320



45,366Total assets


91,978



116,895



104,766



115,064



147,696Treasury stock


(3,390
)


(31,555
)


(56,387
)


(62,190
)


(62,190
)Total stockholders equity


69,259



86,854



79,973



93,622



113,512  23




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS Cautionary
    Statement for Forward-Looking Information  Form 10-K. Form 10-K.
 Overview  ® ® ®
  set-up, ® ®
     24




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Results
    of Operations Executive
    Overview  ®
    10-year
 25




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®
        Year Ended December 31,2005


2006


2007Net revenues:Licenses


7.0
%


3.5
%


2.7
%Services


68.8



64.0



70.5Site support


24.2



32.5



26.8Total net revenues


100.0



100.0



100.0Costs of revenues:Cost of licenses


0.5



0.3



0.3Cost of services


28.0



29.5



30.9Cost of site support


16.1



21.8



18.1Total costs of revenues


44.6



51.6



49.3Gross margin


55.4



48.4



50.7Operating expenses:Selling and marketing


10.5



12.7



11.4General and administrative


13.2



17.0



12.4Research and development


4.7



4.8



4.4Total operating expenses


28.4



34.5



28.2Operating income


27.0



13.9



22.5Other income, net


1.1



1.4



2.3Income before income taxes


28.1



15.3



24.8Income tax provision


10.4



5.7



9.3Net income


17.7
%


9.6
%


15.5
%  26




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Year
    Ended December 31, 2007 Compared to the Year Ended
    December 31, 2006    Year Ended December 31,2006


2007


Increase (Decrease)Licenses:Net revenues

$
3,017


$
2,700


$
(317
)


(10.5
%)Costs of revenues


286



304



18



6.3
%Gross margin

$
2,731


$
2,396


$
(335
)


(12.3
%)Services:Cardiac SafetyNet revenues

$
48,139


$
63,507


$
15,368



31.9
%Costs of revenues


22,478



27,929



5,451



24.3
%Gross margin

$
25,661


$
35,578


$
9,917



38.6
%Technology consulting and trainingNet revenues

$
3,184


$
2,630


$
(554
)


(17.4
%)Costs of revenues


1,939



1,753



(186
)


(9.6
%)Gross margin

$
1,245


$
877


$
(368
)


(29.6
%)Software maintenanceNet revenues

$
3,986


$
3,409


$
(577
)


(14.5
%)Costs of revenues


1,014



840



(174
)


(17.2
%)Gross margin

$
2,972


$
2,569


$
(403
)


(13.6
%)Total servicesNet revenues

$
55,309


$
69,547


$
14,238



25.7
%Costs of revenues


25,431



30,522



5,091



20.0
%Gross margin

$
29,878


$
39,025


$
9,147



30.6
%Site support:Net revenues

$
28,042


$
26,451


$
(1,591
)


(5.7
%)Costs of revenues


18,821



17,808



(1,013
)


(5.4
%)Gross margin

$
9,221


$
8,643


$
(578
)


(6.3
%)TotalNet revenues

$
86,368


$
98,698


$
12,330



14.3
%Costs of revenues


44,538



48,634



4,096



9.2
%Gross margin


41,830



50,064



8,234



19.7
%Operating expenses:Selling and marketing


11,051



11,222



171



1.5
%General and administrative


14,668



12,258



(2,410
)


(16.4
%)Research and development


4,146



4,333



187



4.5
%Total operating expenses


29,865



27,813



(2,052
)


(6.9
%)Operating income


11,965



22,251



10,286



86.0
%Other income, net


1,250



2,206



956



76.5
%Income before income taxes


13,215



24,457



11,242



85.1
%Income tax provision


4,905



9,205



4,300



87.7
%Net income

$
8,310


$
15,252


$
6,942



83.5
%  27




---



##### Table of Contents



Year Ended December 31,


Increase2006


2007


(Decrease)Cost of licenses


9.5
%


11.3
%


1.8
%Cost of services:Cardiac Safety


46.7
%


44.0
%


(2.7
%)Technology consulting and training


60.9
%


66.7
%


5.8
%Software maintenance


25.4
%


24.6
%


(0.8
%)Total cost of services


46.0
%


43.9
%


(2.1
%)Cost of site support


67.1
%


67.3
%


0.2
%Total costs of revenues


51.6
%


49.3
%


(2.3
%)Operating expenses:Selling and marketing


12.7
%


11.4
%


(1.3
%)General and administrative


17.0
%


12.4
%


(4.6
%)Research and development


4.8
%


4.4
%


(0.4
%)       ® set-up
      ®
 28




---



##### Table of Contents



®
               29




---



##### Table of Contents



Year
    Ended December 31, 2006 Compared to the Year Ended
    December 31, 2005    Year Ended December 31,2005


2006


Increase (Decrease)Licenses:Net revenues

$
6,063


$
3,017


$
(3,046
)


(50.2
%)Costs of revenues


436



286



(150
)


(34.4
%)Gross margin

$
5,627


$
2,731


$
(2,896
)


(51.5
%)Services:Cardiac SafetyNet revenues

$
52,533


$
48,139


$
(4,394
)


(8.4
%)Costs of revenues


21,420



22,478



1,058



4.9
%Gross margin

$
31,113


$
25,661


$
(5,452
)


(17.5
%)Technology consulting and trainingNet revenues

$
2,429


$
3,184


$
755



31.1
%Costs of revenues


1,874



1,939



65



3.5
%Gross margin

$
555


$
1,245


$
690



124.3
%Software maintenanceNet revenues

$
4,750


$
3,986


$
(764
)


(16.1
%)Costs of revenues


1,043



1,014



(29
)


(2.8
%)Gross margin

$
3,707


$
2,972


$
(735
)


(19.8
%)Total servicesNet revenues

$
59,712


$
55,309


$
(4,403
)


(7.4
%)Costs of revenues


24,337



25,431



1,094



4.5
%Gross margin

$
35,375


$
29,878


$
(5,497
)


(15.5
%)Site support:Net revenues

$
21,072


$
28,042


$
6,970



33.1
%Costs of revenues


13,965



18,821



4,856



34.8
%Gross margin

$
7,107


$
9,221


$
2,114



29.7
%TotalNet revenues

$
86,847


$
86,368


$
(479
)


(0.6
%)Costs of revenues


38,738



44,538



5,800



15.0
%Gross margin


48,109



41,830



(6,279
)


(13.1
%)Operating expenses:Selling and marketing


9,122



11,051



1,929



21.1
%General and administrative


11,458



14,668



3,210



28.0
%Research and development


4,093



4,146



53



1.3
%Total operating expenses


24,673



29,865



5,192



21.0
%Operating income


23,436



11,965



(11,471
)


(48.9
%)Other income, net


936



1,250



314



33.5
%Income before income taxes


24,372



13,215



(11,157
)


(45.8
%)Income tax provision


9,007



4,905



(4,102
)


(45.5
%)Net income

$
15,365


$
8,310


$
(7,055
)


(45.9
%)  30




---



##### Table of Contents



Year Ended December 31,


Increase2005


2006


(Decrease)Cost of licenses


7.2
%


9.5
%


2.3
%Cost of services:Cardiac Safety


40.8
%


46.7
%


5.9
%Technology consulting and training


77.2
%


60.9
%


(16.3
%)Software maintenance


22.0
%


25.4
%


3.4
%Total cost of services


40.8
%


46.0
%


5.2
%Cost of site support


66.3
%


67.1
%


0.8
%Total costs of revenues


44.6
%


51.6
%


7.0
%Operating expenses:Selling and marketing


10.5
%


12.7
%


2.2
%General and administrative


13.2
%


17.0
%


3.8
%Research and development


4.7
%


4.8
%


0.1
%       ® set-up
         31




---



##### Table of Contents



®
             Liquidity
    and Capital Resources     32




---



##### Table of Contents



®
    ® 98-1, ® ® ® ® ® ®
  ® ® ®
    ® ®
 33




---



##### Table of Contents



Related


TotalLabor and


Direct Costs


Capitalized


Monthly


AccumulatedAmortization Period

Consulting


of Materials


Costs


Amortization


AmortizationEXPeRT®
    enhancements

October 2005-September 2007

$
463


$



$
463


$
20


$
463Semi-automated ECG processing softwareInitial costs

February 2004-January 2008


449



361



810



17



793Enhancements

October 2004-September 2008


380







380



8



309Additional enhancements

April 2005-March 2009


376







376



8



259EXPeRT®
    2Initial costs

January 2007-December 2011


9,412



1,139



10,551



176



2,109Enhancements

To be determined


1,724







1,724







Data warehouse

January 2007-December 2011


722







722



12



145ePROtm

December 2007-November 2012


163



1,658



1,821



29



29Total



$
13,689


$
3,158


$
16,847


$
270


$
4,107          34




---



##### Table of Contents



No. 95-3,
    Payments due by periodLess than


1-3


3-5


More thanContractual Obligations

Total


1 year


years


years


5 yearsCapital lease obligations

$
1,178


$
1,129


$
49


$



$
Operating leases*


10,582



2,862



4,438



2,368



914Purchase obligations


3,642



3,642Total

$
15,402


$
7,633


$
4,487


$
2,368


$
914     *
    
    Includes the estimated lease costs for the Reno location for the
    period where it will not be used for operations.   35




---



##### Table of Contents



Inflation   Recent
    Accounting Pronouncements      No. 157-2,
     Critical
    Accounting Policies     36




---



##### Table of Contents



Revenue
    Recognition
    SOP 97-2, SOP 98-9, SOP 97-2,
        Business
    Combinations
       37




---



##### Table of Contents



Goodwill
      Accounting
    for Income Taxes
      Depreciation
    and Amortization of Long-lived Assets
        Stock-Based
    Compensation
     38




---



##### Table of Contents



page F-1 Form 10-K,
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Interest
    Rate Risk   Foreign
    Currency Risk      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Conclusions
    regarding disclosure controls and procedures
  Rule 13a-15
 39




---



##### Table of Contents



Managements
    annual report on internal control over financial
    reporting
  page F-2.
  Report of
    the independent registered public accounting firm
  page F-3.
  Changes
    in internal control over financial reporting
  Rule 13a-15
  ITEM 9B.
    OTHER
    INFORMATION   40




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Form 10-K.
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   41




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  Form 10-K:
  1.
    The consolidated financial statements of eResearchTechnology,
    Inc. (the Company) filed as a part of this
    Form 10-K
    are listed on the attached Index to Consolidated Financial
    Statements and Financial Statement Schedule at F-1.2.
    The financial statement schedule of the Company filed as a part
    of this
    Form 10-K
    is listed in the attached Index to Consolidated Financial
    Statements and Financial Statement Schedule at F-1.    3
.1

Restated Certificate of Incorporation, as amended.(1)3
.2

Bylaws.(2)3
.3

Amendment to Bylaws.(3)3
.4

Certificate of Merger between the Company and eRT Operating
    Company.(4)4
.1

Form of Stock Certificate.(4)10
.1

Registration Rights Agreement dated August 27, 1999.(5)10
.2

Share Purchase Agreement dated November 27, 2007 by and
    among the Company, Covance Central Laboratory Services Limited
    Partnership, Covance Cardiac Safety Services Inc. and Covance
    Inc.(6)10
.4

Exclusive Marketing Agreement dated November 27, 2007 by
    and between the Company and Covance Inc.(7)10
.7

1996 Stock Option Plan, as amended.(4)*10
.11

2006 Bonus Plan.(8)*10
.12

2007 Bonus Plan.(9)*10
.23

Sublease Agreement between the Company and Raytheon
    Engineers & Constructors, Inc.(3)10
.25

Amendment to the Sublease Agreement between the Company and 17th
    Ludlow Property, L.L.C.(10)10
.26

Amendment to the Sublease Agreement between the Company and 17th
    Ludlow Property, L.L.C.(11)10
.31

Amended and Restated 2003 Equity Incentive Plan, as amended.(12)*10
.40

Management Employment Agreement effective February 7, 2006
    between Joseph Esposito and the Company.(8)*10
.41

Amendment to Management Employment Agreement effective
    August 16, 2004 between Dr. Joel Morganroth and
    the Company.(1)*10
.42

Management Employment Agreement effective January 1, 2008
    between Dr. Joel Morganroth and the Company.* 42




---



##### Table of Contents



10
.43

Consultant Agreement effective January 1, 2007 between
    Dr. Joel Morganroth and the Company.(12)*10
.44

Management Employment Agreement effective August 20, 2004
    between Dr. Jeffrey Litwin and the Company.(1)*10
.45

Management Employment Agreement effective August 20, 2004
    between George Tiger and the Company.*10
.46

Consultant Agreement effective January 1, 2008 between
    Dr. Joel Morganroth and the Company.*10
.48

Management Employment Agreement effective June 23, 2006
    between Michael J. McKelvey and the Company.(13)*10
.49

Management Employment Agreement effective May 17, 2006
    between Richard A. Baron and the Company.(13)*10
.50

Amendment to Management Employment Agreement effective
    June 12, 2006 between Richard A. Baron and the Company.(13)*10
.52

Lease Agreement dated August 18, 2000 between Advance/GLD 2
    L.L.C. and the Company.(14)10
.54

Lease Agreement dated September 28, 2004 between Royal and
    Sun Alliance Insurance PLC and the Companys subsidiary,
    eResearchTechnology Limited.(15)10
.56

Management Employment Agreement effective May 21, 2001
    between Dr. Joel Morganroth and the Company.(16)*10
.59

Attornment Agreement between
    17th
    Ludlow Property, L.L.C. and the Company.(4)21
.1

Subsidiaries of the Registrant.23
.1

Consent of KPMG LLP.31
.1

Certification of Chief Executive Officer.31
.2

Certification of Chief Financial Officer.32
.1

Statement of Chief Executive Officer Pursuant to
    Section 1350 of Title 18 of the United States Code.32
.2

Statement of Chief Financial Officer Pursuant to
    Section 1350 of Title 18 of the United States Code.   *
    
    Management contract or compensatory plan or arrangement.(1)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 4, 2004.(2)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys Registration
    Statement on
    Form S-1,
    File
    No. 333-17001,
    declared effective by the Securities and Exchange Commission on
    February 3, 1997.(3)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 31, 1999.(4)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 12, 2002. 43




---



##### Table of Contents



(5)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 8-K
    on September 9, 1999.(6)
    
    Incorporated by reference to Exhibit 2.1, filed with the
    Companys
    Form 8-K
    on December 4, 2007.(7)
    
    Incorporated by reference to Exhibit 10.1, filed with the
    Companys
    Form 8-K
    on December 4, 2007. Confidential treatment has been
    requested with respect to certain portions of this exhibit.
    Omitted portions have been filed separately with the SEC.(8)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 10, 2006.(9)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on May 4, 2007.(10)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 7, 2003.(11)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on May 3, 2004.(12)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on May 4, 2007.(13)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on August 4, 2006.(14)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on November 13, 2000.(15)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-K
    on March 11, 2005.(16)
    
    Incorporated by reference to the exhibit with the same number,
    filed in connection with the Companys
    Form 10-Q
    on August 10, 2001. 44




---



##### Table of Contents



SIGNATURES    eResearchTechnology, Inc.
  By:
    Michael J.
    McKelvey   President and Chief Executive Officer, Director
    Signature

Title

DateMichael
    J. McKelveyMichael
    J. McKelvey

President and Chief Executive Officer, Director (Principal
    executive officer)

March 7, 2008Joel
    Morganroth, MDJoel
    Morganroth, MD

Chairman of the Board of Directors

March 7, 2008Richard
    A. BaronRichard
    A. Baron

Executive Vice President, Chief Financial Officer and Secretary
    (Principal financial and accounting officer)

March 7, 2008Sheldon
    M. BonovitzSheldon
    M. Bonovitz

Director

March 7, 2008Gerald
    A. Faich, MD, MPHGerald
    A. Faich, MD, MPH

Director

March 7, 2008David
    D. GathmanDavid
    D. Gathman

Director

March 7, 2008Elam
    M. HitchnerElam
    M. Hitchner

Director

March 7, 2008John
    H. ParkJohn
    H. Park

Director

March 7, 2008Stephen
    S. PhillipsStephen
    S. Phillips

Director

March 7, 2008Stephen
    M. ScheppmannStephen
    M. Scheppmann

Director

March 7, 2008  45




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
    SCHEDULE  Report of Management


F-2Reports of Independent Registered Public
    Accounting Firm


F-3Consolidated Balance Sheets


F-5Consolidated Statements of Operations


F-6Consolidated Statements of Stockholders
    Equity and Comprehensive Income


F-7Consolidated Statements of Cash Flows


F-8Notes to Consolidated Financial Statements


F-9Financial Statement Schedule:II. Valuation and Qualifying Accounts


F-32  F-1




---



##### Table of Contents



Report of
    Management  Managements
    Report on Financial Statements
    Managements
    Report on Internal Control Over Financial Reporting
      
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect our transactions and
    dispositions of our assets;
    provide reasonable assurance that our transactions are recorded
    as necessary to permit preparation of our consolidated financial
    statements in accordance with accounting principles generally
    accepted in the United States of America, and that our receipts
    and expenditures are being made only in accordance with
    authorizations of our management and our directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use, or disposition of
    our assets that could have a material effect on the consolidated
    financial statements.    Internal Control  Integrated
    Framework
    Audit
    Committee Oversight
  Form 10-K.
 F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm     Internal Control  Integrated Framework . .
        Internal Control  Integrated
    Framework
      
    F-3




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
             Internal Control 
    Integrated Framework
  
    F-4




---



##### Table of Contents



eResearchTechnology,
    Inc. and SubsidiariesConsolidated Balance Sheets(In thousands, except share and per share amounts)
  December 31,2006


2007AssetsCurrent Assets:Cash and cash equivalents

$
15,497


$
38,082Short-term investments


41,416



8,797Accounts receivable, net


17,866



26,718Prepaid income taxes


2,819



743Prepaid expenses and other


2,761



3,087Deferred income taxes


912



901Total current assets


81,271



78,328Property and equipment, net


31,129



33,347Goodwill


1,212



30,908Long-term investments


928



Intangible assets






3,849Deferred income taxes






1,011Other assets


524



253Total assets

$
115,064


$
147,696Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable

$
4,360


$
3,505Accrued expenses


3,445



12,103Income taxes payable


781



2,352Current portion of capital lease obligations


40



1,097Deferred revenues


11,325



13,905Total current liabilities


19,951



32,962Capital lease obligations, excluding current portion






48Deferred income taxes


1,491



Other liabilities






1,174Total liabilities


21,442



34,184Commitments and contingencies (Note 12)Stockholders Equity:Preferred stock  $10.00 par value,
    500,000 shares authorized, none issued and outstanding






Common stock  $.01 par value,
    175,000,000 shares authorized, 58,356,546 and
    58,870,291 shares issued, respectively


584



589Additional paid-in capital


83,493



87,957Accumulated other comprehensive income


1,510



1,679Retained earnings


70,225



85,477Treasury stock, 8,247,119 shares at cost


(62,190
)


(62,190
)Total stockholders equity


93,622



113,512Total liabilities and stockholders equity

$
115,064


$
147,696    F-5




---



##### Table of Contents



eResearchTechnology,
    Inc. and SubsidiariesConsolidated Statements of Operations(In thousands, except per share amounts)
  Year Ended December 31,2005


2006


2007Net revenues:Licenses

$
6,063


$
3,017


$
2,700Services


59,712



55,309



69,547Site support


21,072



28,042



26,451Total net revenues


86,847



86,368



98,698Costs of revenues:Cost of licenses


436



286



304Cost of services


24,337



25,431



30,522Cost of site support


13,965



18,821



17,808Total costs of revenues


38,738



44,538



48,634Gross margin


48,109



41,830



50,064Operating expenses:Selling and marketing


9,122



11,051



11,222General and administrative


11,458



14,668



12,258Research and development


4,093



4,146



4,333Total operating expenses


24,673



29,865



27,813Operating income


23,436



11,965



22,251Other income, net


936



1,250



2,206Income before income taxes


24,372



13,215



24,457Income tax provision


9,007



4,905



9,205Net income

$
15,365


$
8,310


$
15,252Basic net income per share

$
0.31


$
0.17


$
0.30Diluted net income per share

$
0.29


$
0.16


$
0.29Shares used to calculate basic net income per share


50,114



49,474



50,476Shares used to calculate diluted net income per share


52,905



51,485



51,743    F-6




---



##### Table of Contents



eResearchTechnology,
    Inc. and SubsidiariesConsolidated Statements of Stockholders
    Equity and Comprehensive Income(In thousands, except share amounts)
  AccumulatedAdditional


OtherCommon Stock


Paid-in


Comprehensive


Retained


TreasuryShares


Amount


Capital


Income


Earnings


Stock


TotalBalance, January 1, 2005


56,396,696



564



69,694



1,601



46,550



(31,555
)


86,854Comprehensive incomeNet income


















15,365







15,365Currency translation adjustment, net of tax














(1,015
)










(1,015
)Total comprehensive income


























14,350Purchase of treasury stock






















(24,832
)


(24,832
)Tax benefit from exercise of stock options










2,105















2,105Exercise of stock options


474,314



5



1,491















1,496Balance, December 31, 2005


56,871,010



569



73,290



586



61,915



(56,387
)


79,973Comprehensive incomeNet income


















8,310







8,310Currency translation adjustment, net of tax














924











924Total comprehensive income


























9,234Purchase of treasury stock






















(5,803
)


(5,803
)Share-based compensation










2,970















2,970Tax benefit from exercise of stock options










3,397















3,397Exercise of stock options


1,485,536



15



3,836















3,851Balance, December 31, 2006


58,356,546



584



83,493



1,510



70,225



(62,190
)


93,622Comprehensive incomeNet income


















15,252







15,252Currency translation adjustment, net of tax














169











169Total comprehensive income


























15,421Share-based compensation










2,015















2,015Capitalized share-based compensation










40















40Tax benefit from exercise of stock options










759















759Exercise of stock options


513,745



5



1,650















1,655Balance, December 31, 2007


58,870,291


$
589


$
87,957


$
1,679


$
85,477


$
(62,190
)

$
113,512    F-7




---



##### Table of Contents



eResearchTechnology,
    Inc. and SubsidiariesConsolidated Statements of Cash Flows(In thousands)
  Year Ended December 31,2005


2006


2007Operating activities:Net income

$
15,365


$
8,310


$
15,252Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


10,741



11,253



15,129Cost of sales of equipment


1,018



3,722



1,143Provision for uncollectible accounts


87



111



30Share-based compensation






2,975



2,004Stock option income tax benefit


2,107







Investment impairment charge


284



226



Changes in operating assets and liabilities exclusive of CCSS
    acquisition:Accounts receivable


(696
)


(2,567
)


(4,192
)Prepaid expenses and other


671



132



352Accounts payable


(72
)


950



(2,147
)Accrued expenses


806



(1,779
)


2,806Income taxes


(10
)


(2,104
)


3,137Deferred revenues


(4,109
)


(4,897
)


2,487Net cash provided by operating activities


26,192



16,332



36,001Investing activities:Purchases of property and equipment


(16,145
)


(15,181
)


(11,073
)Purchases of investments


(38,193
)


(46,425
)


(58,008
)Proceeds from sales of investments


24,558



40,658



91,555Payments for acquisition










(35,800
)Net cash used in investing activities


(29,780
)


(20,948
)


(13,326
)Financing activities:Repayment of capital lease obligations


(233
)


(153
)


(2,504
)Proceeds from exercise of stock options


1,495



3,851



1,655Stock option income tax benefit






3,400



760Repurchase of common stock for treasury


(24,832
)


(5,803
)


Net cash (used in) provided by financing activities


(23,570
)


1,295



(89
)Effect of exchange rate changes on cash


(216
)


386



(1
)Net increase (decrease) in cash and cash equivalents


(27,374
)


(2,935
)


22,585Cash and cash equivalents, beginning of period


45,806



18,432



15,497Cash and cash equivalents, end of period

$
18,432


$
15,497


$
38,082    F-8




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial Statements  1.
    Background
    and Summary of Significant Accounting Policies:  Background
  ® ®
  set-up, ® ®
  10-year 10-year
  Principles
    of Consolidation
    Use of
    Estimates
   F-9




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    Revenues
    97-2, SOP 98-9, SOP 97-2,
  No. 00-21,
  out-of-pocket No. 01-14,
    Business
    Combinations
     F-10




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
      Cash and
    Cash Equivalents
    Short-term
    and Long-term Investments
    available-for-sale available-for-sale.
  Property
    and Equipment
  SOP 98-1, and/or
 F-11




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
          Goodwill
        Business
    Combinations and Valuation of Intangible Assets
   F-12




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    Long-lived
    Assets
  Long-Lived
  Software
    Development Costs
    Advertising
    Costs
    Stock-Based
    Compensation
  Accounting
    for Stock-Based Compensation
     F-13




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    Fair
    Value Disclosures  Prior to SFAS No. 123R
    Adoption
    Year EndedDecember 31,2005Net income, as reported

$
15,365Deduct:Net stock-based employee compensation expense determined under
    fair value based method, net of related tax effects


(2,817
)Net stock-based employee compensation expense related to
    acceleration of certain unvested stock options, net of related
    tax effects


(876
)Pro forma net income

$
11,672Earnings per share:Basic  as reported

$
0.31Basic  pro forma

$
0.23Diluted  as reported

$
0.29Diluted  pro forma

$
0.22     2005Risk-free interest rate


3.55
%Expected dividend yield


0.00
%Expected life


3.5 yearsExpected volatility


62.92
%     Valuation
    Assumptions for Options Granted during Fiscal 2006 and
    2007
   F-14




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    2006


2007Risk-free interest rate


4.82
%


4.68
%Expected dividend yield


0.00
%


0.00
%Expected life


3.5 years



3.5 yearsExpected volatility


59.68
%


55.89
%     Income
    Taxes
    Other
    Income, Net
  long-term
  Supplemental
    Cash Flow Information
      Concentration
    of Credit Risk and Significant Clients
   F-15




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  Translation
    of Foreign Financial Statements
    Net
    Income per Common Share
      Net





Per ShareYear Ended December 31,

Income


Shares


Amount2005Basic net income

$
15,365



50,114


$
0.31Effect of dilutive shares






2,791



(0.02
)Diluted net income

$
15,365



52,905


$
0.292006Basic net income

$
8,310



49,474


$
0.17Effect of dilutive shares






2,011



(0.01
)Diluted net income

$
8,310



51,485


$
0.162007Basic net income

$
15,252



50,476


$
0.30Effect of dilutive shares






1,267



(0.01
)Diluted net income

$
15,252



51,743


$
0.29     Comprehensive
    Income
  paid-in-capital
 F-16




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  Recent
    Accounting Pronouncements
            2.
    Business
    Combination   F-17




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
      Property and equipment

$
2,447Backlog


1,900Customer relationships


1,700Technology


400Deferred tax assets


2,126Goodwill, including workforce


26,686Accrued liabilities relating to severance and lease costs)


(2,065
)Other net assets acquired


2,606Purchase price

$
35,800       Pro Forma
    Results
    Year Ended December 31,2006


2007(In thousands)(Unaudited)Revenue

$
117,243


$
120,163Operating income


14,455



21,176Net income


8,785



13,439Basic net income per share

$
0.18


$
0.27Diluted net income per share

$
0.17


$
0.26  F-18




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  3.
    Intangible
    Assets    Estimated








EstimatedFair


Accumulated


Net Book


Useful LifeDescription

Value


Amortization


Value


(In Years)Backlog

$
1,900


$
104


$
1,796
*


3Customer Relationships


1,700



14



1,686



10Technology


400



33



367



1Total

$
4,000


$
151


$
3,849     *
    
    The backlog will be amortized over three years on an accelerated
    basis.      Amortizationof IntangibleYears Ending December 31,

Assets2008

$
1,7002009


5422010


4312011


1702012


170Therafter


836Total

$
3,849   4.
    Accounts
    Receivable, Net    December 31,2006


2007Billed

$
17,710


$
24,996Unbilled


709



2,275Allowance for doubtful accounts


(553
)


(553
)$
17,866


$
26,718  F-19




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  5.
    Property
    and Equipment, Net    December 31,2006


2007Computer and other equipment

$
10,708


$
13,380Cardiac safety rental equipment


29,214



36,797Furniture and fixtures


3,121



3,171Leasehold improvements


4,007



4,052System development costs


18,386



21,93165,436



79,331Less-Accumulated depreciation


(34,307
)


(45,984
)$
31,129


$
33,347   6.
    Line of
    Credit    7.
    Income
    Taxes    Year Ended December 31,2005


2006


2007Current provision:Federal

$
5,934


$
3,023


$
7,038State and local


607



102



1,212Foreign


1,060



835



1,4737,601



3,960



9,723Deferred provision (benefit):Federal


909



847



(403
)State and local


428



500



378Foreign


69



(402
)


(493
)1,406



945



(518
)$
9,007


$
4,905


$
9,205    F-20




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    Year Ended December 31,2005


2006


2007Tax at federal statutory rate

$
8,530


$
4,625


$
8,560Increase in valuation allowance


122



47



State and local taxes, net of federal


672



391



1,033Federal tax credits


(200
)


(115
)


(175
)Tax-free interest income


(77
)


(425
)


(551
)Share-based compensation expense






483



361Other


(40
)


(101
)


(23
)$
9,007


$
4,905


$
9,205       December 31,2006


2007Goodwill amortization

$
1,197


$
902Capitalized R&D expenses


1,799



1,522Tax credit carryforwards


290



147Net operating loss carryforwards


429



311Investment impairment


2,431



1,029Reserves and accruals


883



1,941Share-based compensation expense


411



698Gross deferred tax assets


7,440



6,550Repatriation of UK earnings


(1,433
)


(1,301
)Depreciation


(4,155
)


(761
)Amortization of intangibles






(1,547
)Gross deferred tax liabilities


(5,588
)


(3,609
)Deferred tax assets valuation allowance


(2,431
)


(1,029
)Net deferred tax assets (liabilities)

$
(579
)

$
1,912    F-21




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
              December 31,2007Unrecognized tax benefits at January 1, 2007

$
781Increase in unrecognized tax benefits for tax positions taken in
    a prior year


54Increase in unrecognized tax benefits for tax positions taken in
    the current year


156Settlements


Expiration of statutes of limitations


Unrecognized tax benefits at December 31, 2007

$
991    F-22




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  8.
    Accrued
    Expenses    2006


2007Accrued compensation

$
1,425


$
5,886Accrued CCSS contingent purchase price payment






3,010Accrued outside services


750



688Deferred rent


710



591Other accrued liabilities


560



1,928Total accrued expenses

$
3,445


$
12,103   9.
    Employee
    Retirement Plan    10.
    Related
    Party Transactions      11.
    Stock
    Option Plans     F-23




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
          Weighted


RemainingAverage


Contractual


IntrinsicShares


Exercise Price


Term


Value(In thousands)Outstanding as of January 1, 2007


4,387,033


$
8.56Granted


599,900



7.54Exercised


(513,745
)


3.22Cancelled/forfeited


(363,577
)


16.22Outstanding as of December 31, 2007


4,109,611



8.44



4.8


$
21,057Options exercisable or expected to vest at December 31, 2007


3,942,050



8.35



4.8


$
20,640Options exercisable at December 31, 2007


2,992,536



7.66



4.5


$
18,277    F-24




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
      Tax
    Effect Related to Share-Based Compensation Expense
    12.
    Commitments
    and Contingencies  Leases
     F-25




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    GrossCapital


Operating


SubleaseLeases


Leases


Income2008

$
1,129


$
2,862


$
262009


49



2,257



3082010






2,181



3232011






1,226



3232012






1,142



2952013 and thereafter






914



$
1,178


$
10,582


$
1,275Less imputed interest


(33
)Net present value of capital lease obligations


1,145Less current installments


(1,097
)Long-term capital lease obligations, excluding current
    installments

$
48   ® tm
  No. 95-3,
 F-26




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  Indemnification
    Agreements
    with the Companys Management
     F-27




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
      his/her
    Contingencies
   F-28




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  Potential
    Liability and Insurance
    13.
    Fair
    Value of Financial Instruments    14.
    Operating
    Segments and Geographic Information      Year Ended December 31, 2005NorthAmerica


Europe


TotalLicense revenues

$
6,063


$



$
6,063Service revenues


47,612



12,100



59,712Site support revenues


15,790



5,282



21,072Net revenues from external customers

$
69,465


$
17,382


$
86,847Operating income

$
20,523


$
2,913


$
23,436Long-lived assets

$
19,225


$
9,445


$
28,670Identifiable assets

$
90,531


$
14,235


$
104,766   F-29




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
  Year Ended December 31, 2006NorthAmerica


Europe


TotalLicense revenues

$
3,017


$



$
3,017Service revenues


44,377



10,932



55,309Site support revenues


20,438



7,604



28,042Net revenues from external customers

$
67,832


$
18,536


$
86,368Operating income

$
10,497


$
1,468


$
11,965Long-lived assets

$
22,340


$
8,789


$
31,129Identifiable assets

$
97,716


$
17,348


$
115,064   Year Ended December 31, 2007NorthAmerica


Europe


TotalLicense revenues

$
2,700


$



$
2,700Service revenues


55,567



13,980



69,547Site support revenues


17,430



9,021



26,451Net revenues from external customers

$
75,697


$
23,001


$
98,698Operating income

$
18,305


$
3,946


$
22,251Long-lived assets

$
25,919


$
7,428


$
33,347Identifiable assets

$
129,876


$
14,810


$
147,696   15.
    Quarterly
    Financial Data (Unaudited)    March 31,


June 30,


September 30,


December 31,2006


2007


2006


2007


2006


2007


2006


2007Net revenues:Licenses

$
638


$
782


$
1,096


$
580


$
602


$
651


$
681


$
687Services


14,725



13,968



12,822



17,561



14,493



16,453



13,269



21,565Site support


6,036



6,334



8,900



6,593



7,131



6,867



5,975



6,657Total net revenues


21,399



21,084



22,818



24,734



22,226



23,971



19,925



28,909Costs of revenues:Cost of licenses


76



66



77



63



75



70



58



105Cost of services


6,156



6,790



6,300



7,233



6,674



7,567



6,301



8,932Cost of site support


4,153



4,195



5,791



4,117



4,548



4,831



4,329



4,665Total costs of revenues


10,385



11,051



12,168



11,413



11,297



12,468



10,688



13,702Gross margin


11,014



10,033



10,650



13,321



10,929



11,503



9,237



15,207Operating income


2,823



3,101



2,464



6,246



3,533



5,361



3,145



7,543Net income


1,924



2,248



1,677



4,139



2,465



3,706



2,244



5,159Basic net income per share

$
0.04


$
0.04


$
0.03


$
0.08


$
0.05


$
0.07


$
0.04


$
0.10Diluted net income per share

$
0.04


$
0.04


$
0.03


$
0.08


$
0.05


$
0.07


$
0.04


$
0.10  F-30




---



##### Table of Contents



eResearchTechnology,
    Inc. and Subsidiaries
    Notes To Consolidated Financial
    Statements  (Continued)
    16.
    Subsequent
    Event   F-31




---



##### Table of Contents



SCHEDULE II
   eResearchTechnology,
    Inc. and Subsidiaries
 VALUATION AND QUALIFYING ACCOUNTS
    Balance








BalanceBeginning of


Charges to


Deductions


EndPeriod


Expense


from Reserve


of PeriodDecember 31, 2005

$
412


$
88


$
34
(a)

$
466December 31, 2006

$
466


$
111


$
24
(a)

$
553December 31, 2007

$
553


$
30


$
30
(a)

$
553     (a)
    
    Write-off of individual accounts receivable. F-32