<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(MARK ONE)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

                For the quarterly period ended SEPTEMBER 30, 2003

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from          to

                        COMMISSION FILE NUMBER: 000-49765

                          INVERESK RESEARCH GROUP, INC.
             (Exact name of registrant as specified in its charter)

               DELAWARE                                  43-1955097
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

11000 WESTON PARKWAY, SUITE 100, CARY, NC                  27513
(Address of principal executive offices)                 (Zip Code)

                                  919 460-9005
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [ ]

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

         Common stock, par value $0.01 per share .................36,698,974 as
of October 31, 2003

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                   PAGE
                                                                                                                   ----
<S>                                                                                                                <C>
PART I            FINANCIAL INFORMATION.........................................................................     1

ITEM 1.           FINANCIAL STATEMENTS (UNAUDITED)..............................................................     1

Condensed Consolidated Statements of Operations.................................................................     1

Condensed Consolidated Balance Sheets...........................................................................     2

Condensed Consolidated Statements of Cash Flows.................................................................     3

Condensed Consolidated Statements of Comprehensive Income (Loss) and Shareholders' Equity.......................     4

Notes to Unaudited Condensed Consolidated Financial Statements..................................................     5

ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........    19

ITEM 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................    32

ITEM 4.           CONTROLS AND PROCEDURES.......................................................................    34

PART II           OTHER INFORMATION.............................................................................    36
</TABLE>

Statements contained in this Form 10-Q that are forward-looking are based on
current expectations that are subject to a number of uncertainties and risks and
actual results may differ materially. Factors that might cause such a difference
include but are not limited to risks associated with: the reduction in research
and development activities by pharmaceutical and biotechnology clients, changes
in government regulations, the effect of interest rate and foreign exchange rate
fluctuations, our ability to attract and retain employees, the loss or delay of
contracts due to economic uncertainty or other factors, our ability to
efficiently manage backlog, our ability to expand our business through strategic
acquisitions, competition within the industry and the potential adverse impact
of healthcare reform.

<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

                          INVERESK RESEARCH GROUP, INC.

           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                 (IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>
                                                               QUARTER             QUARTER           NINE MONTHS       NINE MONTHS
                                                                ENDED               ENDED              ENDED              ENDED
                                                            SEPTEMBER 30,       SEPTEMBER 30,       SEPTEMBER 30,      SEPTEMBER 30,
                                                                2003                2002                2003               2002
                                                            -------------       -------------       -------------      -------------
<S>                                                         <C>                 <C>                 <C>                <C>
Net service revenue .....................................   $     70,571        $     55,923        $    195,290       $    164,635
   Direct costs excluding depreciation ..................        (37,372)            (27,780)           (100,729)           (81,977)
                                                            ------------        ------------        ------------       ------------
                                                                  33,199              28,143              94,561             82,658
   Selling, general and administrative expenses:
     Compensation expense in respect of stock
       options and management equity incentives .........              -                   -                   -            (53,020)
     Stamp duty arising on change of ultimate
       parent company ...................................              -                   -                   -             (1,545)
     Share offering expenses ............................              -                   -                (658)                 -
     Restructuring and integration costs
       arising from business acquisitions ...............           (798)                  -                (798)                 -
     Other selling, general and
       administrative expenses ..........................        (17,260)            (13,759)            (50,414)           (41,533)
                                                            ------------        ------------        ------------       ------------
   Total selling, general and administrative
     expenses ...........................................        (18,058)            (13,759)            (51,870)           (96,098)
   Depreciation .........................................         (3,045)             (2,689)             (9,083)            (7,510)
   Amortization of intangibles ..........................           (232)                  -                (232)                 -
                                                            ------------        ------------        ------------       ------------
Income (loss) from operations ...........................         11,864              11,695              33,376            (20,950)
   Interest income ......................................            126                  83                 292                283
   Write off of deferred debt issue and other
       costs related to former bank facilities ..........           (671)             (2,031)               (671)            (2,031)
   Interest expense .....................................           (528)               (989)             (2,509)           (10,206)
                                                            ------------        ------------        ------------       ------------
Income (loss) before income taxes .......................         10,791               8,758              30,488            (32,904)
Provision for income taxes ..............................         (1,227)             (1,419)             (3,388)            (4,508)
                                                            ------------        ------------        ------------       ------------
Net income (loss) .......................................   $      9,564        $      7,339        $     27,100       $    (37,412)
                                                            ============        ============        ============       ============

Earnings (loss) per share:
   Basic ................................................   $       0.26        $       0.21        $       0.75       $      (1.30)
   Diluted ..............................................   $       0.25        $       0.20        $       0.72       $      (1.30)
Weighted average number of common shares outstanding:
   Basic ................................................     36,505,169          35,570,449          36,314,648         27,637,956
   Diluted ..............................................     37,720,565          37,385,219          37,530,044         27,637,956
</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>

                          INVERESK RESEARCH GROUP, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,
                                                                                           2003         DECEMBER 31,
                                                                                        (UNAUDITED)         2002
                                                                                       -------------    ------------
<S>                                                                                    <C>              <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents........................................................     $  22,698       $  19,909
   Accounts receivable, net.........................................................        45,012          39,266
   Unbilled receivables, net........................................................        26,144          20,706
   Income taxes receivable..........................................................         8,956           2,979
   Inventories......................................................................         1,622           1,167
   Other current assets.............................................................         8,380           4,300
                                                                                         ---------       ---------
Total current assets................................................................       112,812          88,327
Property, plant and equipment, net..................................................       127,694         108,570
Goodwill and intangible assets......................................................       179,281         135,043
Deferred income taxes...............................................................           475               -
Deferred debt issue costs...........................................................         1,672             527
                                                                                         ---------       ---------
                                                                                         $ 421,934       $ 332,467
                                                                                         =========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:................................................................
   Accounts payable.................................................................     $  13,559       $  10,792
   Advance billings.................................................................        48,266          41,415
   Accrued expenses.................................................................        29,675          21,399
   Income taxes payable.............................................................         4,383           2,871
   Deferred income taxes............................................................           234             204
   Current portion of long term debt................................................         7,684             217
                                                                                         ---------       ---------
Total current liabilities...........................................................       103,801          76,898
Deferred income taxes...............................................................        24,742          22,139
Long term debt......................................................................        80,808          67,768
Defined benefit pension plan obligation.............................................        14,883          13,259
Commitments and contingencies.......................................................
Shareholders' equity:
   Preferred stock, $0.01 par value 10,000,000 shares authorized, none issued.......             -               -
   Common stock, $0.01 par value 150,000,000 shares authorized; 36,640,335 and
     36,004,777 issued and outstanding at September 30, 2003 and December 31, 2002..           366             360
   Additional paid-in capital.......................................................       193,087         191,618
   Accumulated deficit..............................................................        (6,693)        (33,793)
   Accumulated other comprehensive income (loss)....................................        10,940          (5,782)
                                                                                         ---------       ---------
Total shareholders' equity..........................................................       197,700         152,403
                                                                                         ---------       ---------
                                                                                         $ 421,934       $ 332,467
                                                                                         =========       =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 2 -
<PAGE>


                          INVERESK RESEARCH GROUP, INC.

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                         NINE MONTHS      NINE MONTHS
                                                                                            ENDED            ENDED
                                                                                        SEPTEMBER 30,    SEPTEMBER 30,
                                                                                            2003             2002
                                                                                        -------------    -------------
<S>                                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .................................................................       $  27,100        $ (37,412)
Adjustments to reconcile net income (loss) to net cash provided by operating
  activities:
Non-cash compensation expense in respect of amendment and exercise of stock
  options .........................................................................               -           52,934
Depreciation of property, plant and equipment .....................................           9,083            7,510
Amortization of intangibles .......................................................             232                -
Deferred pension obligations ......................................................           1,203              437
Deferred income taxes .............................................................             125            1,055
Amortization of deferred loan issue costs .........................................             752            2,206
Interest on 10% unsecured subordinated loan stock due 2008, not payable until
  the loan stock is redeemed ......................................................               -            6,058
Payment of interest on 10% unsecured subordinated loan stock due 2008 following
  the initial public offering .....................................................               -          (17,634)
Changes in operating assets and liabilities:
   Accounts receivable ............................................................             785           (5,218)
   Advance billings ...............................................................          (3,381)           6,354
   Inventories ....................................................................            (456)             854
   Accounts payable and accrued expenses ..........................................           2,755            2,033
   Income taxes ...................................................................          (1,934)           1,555
   Other assets and liabilities ...................................................          (3,450)          (3,289)
                                                                                          ---------        ---------
Net cash provided by operating activities .........................................          32,814           17,443
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of PharmaResearch Corporation, net of cash acquired of $5,976 ............         (35,887)               -
Purchases of property, plant and equipment ........................................         (18,071)         (16,139)
Net cash used in investing activities .............................................         (53,958)         (16,139)
                                                                                          ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Issue of common stock .............................................................           1,475          138,081
Repayments of short-term borrowings ...............................................            (259)          (3,661)
Proceeds from long-term borrowings, net of issue costs ............................          86,363           69,433
Repayments of long-term debt ......................................................         (67,500)        (201,027)
                                                                                          ---------        ---------
Net cash provided by financing activities .........................................          20,079            2,826
Effect of foreign currency exchange rate changes on cash ..........................           3,854           (5,402)
                                                                                          ---------        ---------
Increase (decrease) in cash and cash equivalents ..................................           2,789           (1,272)
Cash and cash equivalents at beginning of period ..................................          19,909           16,118
                                                                                          ---------        ---------
Cash and cash equivalents at end of period ........................................       $  22,698        $  14,846
                                                                                          =========        =========
Supplemental cash flow information:
Interest paid .....................................................................       $   2,042        $   7,678
                                                                                          =========        =========
Income tax paid ...................................................................       $   1,011        $   1,001
                                                                                          =========        =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 3 -

<PAGE>

                          INVERESK RESEARCH GROUP, INC.

      CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) AND
                              SHAREHOLDERS' EQUITY
                                  (UNAUDITED)
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                           TOTAL            COMMON                                       RETAINED      ACCUMULATED
                                       SHAREHOLDERS'         STOCK        PAR VALUE      ADDITIONAL      EARNINGS         OTHER
                                          EQUITY           $0.01 PAR       PAID-IN        PAID-IN      (ACCUMULATED    COMPREHENSIVE
                                        (DEFICIT)            VALUE         CAPITAL        CAPITAL        DEFICIT)      INCOME (LOSS)
                                       -------------      ----------     ----------     -----------    ------------    -------------
<S>                                     <C>               <C>            <C>            <C>            <C>             <C>
BALANCE AT DECEMBER 31,
  2002 ..........................       $  152,403        36,004,777     $      360     $  191,618      $  (33,793)     $   (5,782)
Issue of common stock ...........            1,475           635,558              6          1,469               -               -
Comprehensive income:
  Foreign currency
    translation adjustments .....           16,587                                -              -               -          16,587
  Tax benefit arising on
    exercise of options
    granted on or after
    June 27, 2002 ...............              135                                -              -               -             135
  Net income for period
    to September 30, 2003 .......           27,100                                -              -          27,100               -
                                        ----------
Comprehensive income ............           43,822
                                        ----------        ----------     ----------     ----------      ----------      ----------
BALANCE AT SEPTEMBER 30,
  2003 ..........................       $  197,700        36,640,335     $      366     $  193,087      $   (6,693)     $   10,940
                                        ==========        ==========     ==========     ==========      ==========      ==========
BALANCE AT DECEMBER 30,
  2001 ..........................       $   (7,385)       23,469,088     $      235     $    1,118      $   (5,784)     $   (2,954)
Issue of common stock, net
  of offering costs of
  $18,019 .......................          138,081        12,467,659            124        137,957               -               -
Compensation expense in
  respect of amendment and
  exercise of stock options .....           52,934                                -         52,934               -               -
Comprehensive income (loss):
  Foreign currency
    translation adjustments .....           (3,402)                               -              -               -          (3,402)
  Net loss for period to
    September 30, 2002 ..........          (37,412)                               -              -         (37,412)              -
                                        ----------
Comprehensive loss ..............          (40,814)
                                        ----------        ----------     ----------     ----------      ----------      ----------
BALANCE AT SEPTEMBER 30,
  2002 ..........................       $  142,816        35,936,747     $      359     $  192,009      $  (43,196)     $   (6,356)
                                        ==========        ==========     ==========     ==========      ==========      ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                     - 4 -

<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.       DESCRIPTION OF BUSINESS

Inveresk Research Group, Inc. and its subsidiaries (collectively the "Company")
provide drug development services to companies in the pharmaceutical and
biotechnology industries. Through the Company's pre-clinical and clinical
business segments, it offers a broad range of drug development services,
including pre-clinical safety and pharmacology evaluation, laboratory sciences
services and clinical development services. The Company is one of a small number
of drug development service companies currently providing a comprehensive range
of pre-clinical and clinical development services on a worldwide basis. The
Company's client base includes major pharmaceutical companies in North America,
Europe, and Japan, as well as many biotechnology and specialty pharmaceutical
companies.

2.       BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). In accordance with those rules and regulations, they do not include all
of the information and footnotes required by accounting principles generally
accepted in the United States ("GAAP") for complete financial statements.

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) considered necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. The December 31, 2002 balance sheet was derived from audited
financial statements, but does not include all disclosures required by GAAP.
However, the Company believes that the disclosures are adequate to make the
information presented not misleading. The accompanying financial statements
should be read in conjunction with the audited consolidated financial statements
at and for the year ended December 31, 2002 which were filed with the SEC as
part of our annual report on Form 10-K for that year. The results of operations
for the quarter and nine months ended September 30, 2003 are not necessarily
indicative of the results of operations that may be expected for the year ending
December 31, 2003.

On June 25, 2002 there was a change in ultimate parent company from a company
organized in Scotland to a corporation organized in Delaware. This was
accomplished through a share exchange transaction in which all the shareholders
of Inveresk Research Group Limited (our former ultimate parent company)
exchanged their shares for shares of common stock of Inveresk Research Group,
Inc. (the current ultimate parent company). With the exception of the incurrence
of U.K. stamp duty charges of $1.545 million, this transaction had no impact on
the consolidated assets or liabilities of the Company. The accompanying
financial statements have been prepared as if the change of ultimate parent
company had taken place prior to the periods presented. Accordingly, the
shareholders' equity and earnings per share at the dates and for periods before
June 25, 2002 are presented on the basis of the capital structure of Inveresk
Research Group, Inc. calculated by multiplying the numbers of shares of Inveresk
Research Group Limited outstanding at the dates and for the periods presented by
the weighted average exchange ratio used in the share exchange transaction.

                                     - 5 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EARNINGS (LOSS) PER SHARE

Earnings (loss) per share is computed in accordance with Statements of Financial
Accounting Standards ("FAS") 128, "Earnings per Share". FAS 128 requires
presentation of both basic earnings (loss) per share ("Basic EPS") and diluted
earnings (loss) per share ("Diluted EPS"). Basic EPS is based on the weighted
average number of common shares outstanding during the year while Diluted EPS
also includes the dilutive effect of share options. The number of share options
not reflected in Diluted EPS because they were anti-dilutive was 7,500 in
respect of the quarter and nine months ended September 30, 2003, nil in respect
of the quarter ended September 30, 2002 and 2,444,847 in respect of the nine
months ended September 30, 2002. Historical earnings (loss) per share have been
computed assuming the historical outstanding shares in Inveresk Research Group
Limited were converted to ordinary shares in Inveresk Research Group, Inc. using
the conversion ratios applied when the change of ultimate parent company became
effective.

GOODWILL

The Company follows the requirements set out in FAS 141, "Business
Combinations", and FAS 142, "Goodwill and Other Intangible Assets". FAS 142
requires that we perform annual impairment tests on goodwill and intangible
assets with indefinite lives. The most recent such review was completed during
the second quarter of 2003 using balances recorded as at March 31, 2003. This
review did not result in any changes to the carrying value of goodwill.

NEW ACCOUNTING PRONOUNCEMENTS

In April 2003 the FASB issued FAS 149, "Amendment of SFAS No. 133 on Derivative
Instruments and Hedging Activities". The Statement amends and clarifies
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under FAS 133,
"Accounting for Derivative Instruments and Hedging Activities". FAS 149 is
effective for contracts entered into or modified after June 30, 2003, except as
stated below and for hedging relationships designated after June 30, 2003. The
provisions of FAS 149 that relate to FAS 133 Implementation Issues that have
been effective for fiscal quarters that began prior to June 15, 2003 should
continue to be applied in accordance with their respective effective dates. In
addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should be
applied to existing contracts as well as new contracts entered into after June
30, 2003. FAS 149 should be applied prospectively. The adoption did not have any
impact on the Company.

In May 2003, the FASB issued FAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". FAS 150
modifies the accounting for certain financial instruments that, under previous
guidance, issuers could account for as equity. The Statement requires that those
instruments be classified as liabilities in statements of financial position.
FAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. It is to be implemented by reporting

                                     - 6 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of the Statement and still existing
at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption did not have any impact on the Company.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities, an interpretation of ARB No. 51". This interpretation requires certain
variable interest entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. For variable interest
entities created or acquired prior to February 1, 2003, the provisions of FIN 46
must be applied for the first interim or annual period beginning after December
15, 2003. To date the adoption has not had any impact and the Company does not
expect that it will upon final adoption.

                                     - 7 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

4.       BUSINESS ACQUISITIONS

On July 29, 2003 the Company acquired all of the outstanding capital stock of
PharmaResearch Corporation ("PharmaResearch") for $43.9 million, financed
through bank borrowings. The results of operations of PharmaResearch have been
included in the consolidated financial statements since that date.
PharmaResearch is a US-based drug development services group focused on the
provision of Phase II-IV clinical trials support services, principally in the
areas of respiratory and infectious diseases. PharmaResearch is based in
Morrisville and Wilmington, North Carolina, with foreign operations based in the
United Kingdom, France, Spain and China.

The acquisition of PharmaResearch allows the Company to increase significantly
the scale and service of its North American clinical development operations. Its
strong presence in the field of respiratory and infectious diseases enables
Inveresk Research to build value-added clinical support services for the benefit
of the enlarged client base. The following table summarizes the estimated fair
value of the assets acquired and liabilities assumed at the acquisition date.
The Company is in the process of finalizing the purchase price allocation and
these fair values may change once this process is complete.

<TABLE>
<CAPTION>
                                                                                                      (DOLLARS IN
                                                                                                       THOUSANDS)
                                                                                                      -----------
<S>                                                                                                   <C>
Cash..........................................................................................         $  5,976
Other current assets..........................................................................           15,500
                                                                                                       --------
   Total current assets.......................................................................           21,476
Property, plant and equipment.................................................................            2,249
Customer contracts............................................................................            2,783
Goodwill......................................................................................           34,533
Current liabilities...........................................................................          (17,128)
Deferred taxation liabilities.................................................................              (53)
Long term portion of capital leases...........................................................               (9)
                                                                                                       --------
                                                                                                       $ 43,851
                                                                                                       ========
</TABLE>

The purchase price payable for PharmaResearch is subject to adjustment based on
the amount of liquid net worth of PharmaResearch at the acquisition date. At
September 30, 2003, approximately $2.0 million of the total amount that will be
payable in connection with the acquisition remained unpaid. The customer
contracts acquired have an estimated useful life of two years. The goodwill
arising from the transaction was all assigned for financial reporting purposes
to the clinical segment of the business. The customer contracts and goodwill are
not deductible for tax purposes.

                                     - 8 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth certain pro forma financial information for the
Company as if the acquisition of PharmaResearch had occurred as of the beginning
of each reported period. The pro forma financial information reflects the
amortization of the customer contracts and the interest cost on the indebtedness
incurred to finance the acquisition.

<TABLE>
<CAPTION>
                                                                            NINE MONTHS        NINE MONTHS
                                                                               ENDED              ENDED
                                                                           SEPTEMBER 30,      SEPTEMBER 30,
                                                                               2003               2002
                                                                           -------------      -------------
                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                        <C>                <C>
Net service revenue ................................................       $    219,183       $    197,973
                                                                           ------------       ------------
Net income (loss) ..................................................       $     26,153       $    (35,800)
                                                                           ============       ============
Earnings (loss) per share
   Basic ...........................................................       $       0.72       $      (1.30)
   Diluted .........................................................       $       0.70       $      (1.30)
Number of shares used in calculating earnings (loss) per share
   Basic ...........................................................         36,314,648         27,637,956
   Diluted .........................................................         37,530,044         27,637,956
</TABLE>

This unaudited pro forma financial information has been prepared for comparative
purposes only and does not purport to be indicative of the results of operations
which would actually have occurred had the companies operated as one during the
period. No effect has been included for synergies, if any, that might have been
realized through the acquisition.

RESTRUCTURING AND INTEGRATION COSTS

The Company established a plan at the acquisition date to integrate the
operations of PharmaResearch with its existing operations. The actions covered
by the integration plan include a headcount reduction of 58 employees (37
employees of PharmaResearch and 21 employees of the Company), the relocation of
the Morrisville, North Carolina operations of PharmaResearch to the Company's
premises in Cary, North Carolina, integration of certain administrative
functions between the two businesses, combination of the PharmaResearch
operations in London, Paris and Madrid with those of the Company and the closure
of certain office premises.

In connection with this integration plan the Company has recorded a provision of
$1.8 million that has been reflected in the purchase price allocation and a
provision of $0.8 million that is reflected on its consolidated statement of
operations in restructuring and integration costs arising from business
acquisitions. The Company implemented the headcount reductions in early
September, with 37 former PharmaResearch employees and 21 former Inveresk
employees leaving the Company during September. In many cases, however,
severance payments relating to this restructuring were not made until after
September 30, 2003. The following amounts have been recorded in respect of the
restructuring plan:

                                     - 9 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                            LEASE
                                                                                                         TERMINATION
                                     SEVERANCE AND RELATED COSTS               OTHER COST                    AND
                                    -----------------------------     -----------------------------      ABANDONMENT
                                    PHARMARESEARCH       INVERESK     PHARMARESEARCH       INVERESK          COSTS
                                    --------------       --------     --------------       --------      -----------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                 <C>                  <C>          <C>                  <C>           <C>
Amount established at
  acquisition...................        $1,216            $  587          $  355            $  211          $  259
Utilized from July 29, 2003
  to September 30, 2003.........          (743)             (201)              -               (86)              -
                                        ------            ------          ------            ------          ------
BALANCE AT SEPTEMBER 30, 2003.          $  473            $  386          $  355            $  125          $  259
                                        ======            ======          ======            ======          ======
</TABLE>

5.       SHAREHOLDERS' EQUITY

As described in Note 2, during the quarter ended June 30, 2002, the Company
completed a transaction that created a new ultimate parent company for Inveresk
Research Group Limited and its subsidiaries ("the Group"). All the outstanding
shares of Inveresk Research Group Limited (the former ultimate holding company,
organized in Scotland) were exchanged for shares of common stock of Inveresk
Research Group, Inc. (the current ultimate parent company, organized in
Delaware). The capital structure is presented on the basis described in Note 2
and is as follows:

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,    DECEMBER 31,
                                                                                           2003             2002
                                                                                       -------------    ------------
                                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                                    <C>              <C>
Preferred stock, $0.01 par value 10,000,000 shares authorized, none issued........        $    -           $    -
Common stock, $0.01 par value 150,000,000 shares authorized; issued and
  outstanding 36,640,335 and 36,004,777 at September 30, 2003 and December 31,
  2002, respectively................................................................         366              360
                                                                                          ------           ------
                                                                                          $  366           $  360
                                                                                          ======           ======
</TABLE>

The increase of 635,558 shares during 2003 resulted from the exercise of
employee stock options to acquire 635,558 shares at an average exercise price of
$2.32 per share.

6.       CREDIT FACILITIES AND DEBT

In July 2003 the Company entered into a new $150 million syndicated bank credit
facility which was used to finance the acquisition of PharmaResearch and also to
repay the borrowings outstanding under our former bank credit facility. The
first scheduled principal repayment of $1.9 million was made on September 30,
2003 and at September 30, 2003 the facility provided an aggregate availability
of up to $148.1 million comprised of $73.1 million of term loans in U.S. dollars
and up to $75 million of loans available in multiple-currencies under a
revolving credit arrangement. At September 30, 2003, a subsidiary company had
borrowed $88.1 million under this facility, of which $73.1 million was drawn
down as a five year term loan with repayments due quarterly until June 30, 2008,
and $15 million was drawn down pursuant to the revolving credit portion of the
facility. The $15 million drawn under the revolving credit portion of the
facility is repayable on or before June 30, 2006. The facility bears interest at
rates between LIBOR plus 1.25% and LIBOR plus 2.00% depending on the ratio of
EBITDA to borrowings. The initial borrowings bear interest at LIBOR plus 1.75%.
The exposure to interest rate

                                     - 10 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

fluctuations on the loans drawn under this facility has been limited by
retaining the interest rate swaps entered into previously in connection with the
previous bank credit facility. The bank credit facility subjects us to
significant affirmative, negative and financial covenants, is guaranteed by the
Company and its significant subsidiaries and is secured by liens on
substantially all of the assets and pledges of the shares of the subsidiaries.
We were in compliance with these covenants at September 30, 2003.

7.       STOCK OPTIONS AND OTHER EQUITY-BASED COMPENSATION PLANS

The Company has issued options to employees pursuant to the Inveresk Research
Group, Inc. 2002 Stock Option Plan and to non-executive directors pursuant to
the Inveresk Research Group, Inc 2002 Non-employee Directors Stock Option Plan.
The objectives of these plans include attracting and retaining personnel and
promoting the success of the Company by providing employees and non-executive
directors with the opportunity to acquire shares.

All options issued before June 27, 2002 were issued by Inveresk Research Group
Limited. Those options subsequently were exchanged for stock options issued by
Inveresk Research Group, Inc. (the "replacement options") on June 28, 2002 under
its 2002 Stock Option Plan. The replacement options were issued with exercise
prices, exercise periods and other terms substantially the same as those of the
options they replaced.

The replacement options became fully vested (immediately exercisable in full)
upon completion of the Company's initial public offering and such options will
expire 10 years after the date of grant of the options they replaced. At
September 30, 2003 the number of replacement options remaining outstanding was
778,322. The Company has also issued options that vest in equal annual
installments over the three years following the date of grant. At September 30,
2003 the number of shares issuable on exercise of these options outstanding was
1,282,326.

The following table summarizes the options outstanding at September 30, 2003:

<TABLE>
<CAPTION>
                                                             SHARES OF COMMON
                                                              STOCK ISSUABLE                          WEIGHTED AVERAGE
                                                               UPON EXERCISE       EXERCISE PRICE      EXERCISE PRICE
                                                             ----------------      ---------------    ----------------
<S>                                                          <C>                   <C>                <C>
Outstanding at December 31, 2002........................        2,366,217          $ 0.03 - $20.14        $   5.05
Granted.................................................          421,950          $14.68 - $17.75        $  17.40
Forfeited...............................................           91,961          $10.60 - $17.75        $  11.31
Exercised...............................................          635,558          $ 0.03 - $10.60        $   2.32
                                                                ---------          ---------------        --------
Outstanding at September 30, 2003.......................        2,060,648          $ 0.03 - $20.14        $   8.14
                                                                =========          ===============        ========
</TABLE>

                                     - 11 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the exercise prices of the options outstanding at
September 30, 2003:

<TABLE>
<CAPTION>
  Shares of Common
Stock Issuable Upon
      Exercise          Exercise Price
-------------------    ----------------
<S>                    <C>
      237,891          $ 0.03 per share
       23,474          $ 0.05 per share
       33,388          $ 0.19 per share
      483,569          $ 0.40 per share
      823,476          $10.60 per share
       35,000          $13.00 per share
       40,000          $14.68 per share
        3,500          $16.35 per share
       40,000          $17.17 per share
      332,850          $17.75 per share
        7,500          $20.14 per share
    ---------
    2,060,648
    =========
</TABLE>

The weighted average exercise price of our outstanding stock options was $8.14
per share at September 30, 2003 and $5.05 at December 31, 2002.

In the quarter ended March 31, 2002, the terms of the options held by one
individual were amended to enable him to exercise his options prior to the
completion of our initial public offering. Compensation expense was recorded in
respect of those options in the quarter ended March 31, 2002, reducing income
from operations by $4.545 million and net income by $4.490 million.

In the quarter ended June 30, 2002, compensation expense of $19.383 million was
recorded in respect of the outstanding share options that vested in accordance
with their terms. We recorded an additional compensation expense of $29.092
million in connection with our initial public offering, when the percentage
equity interest held by certain members of our management team increased in
accordance with the terms governing the original issuance of shares of those
individuals.

Pro forma information regarding net income is required by FAS 123, which also
requires that the information be determined as if the Company has accounted for
its employee stock options under the fair value method of that statement.

For purposes of this disclosure, the fair value of the fixed option grants were
estimated using the Black-Scholes option - pricing model with the following
weighted average assumptions used for option grants:

<TABLE>
<S>                                                                                <C>
Risk-free interest rate....................................................         3.0%
Volatility factor..........................................................        60.0%
Weighted average expected life of options in months........................        21.8
</TABLE>

                                     - 12 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective valuation assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in subjective assumptions can
materially affect the fair value estimates, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of the Company's stock options.

Had compensation expense been determined for the Company's option grants
consistent with the provisions of FAS 123, the Company's net income (loss) for
the periods shown below would have reflected the pro forma amounts set forth in
the table below.

<TABLE>
<CAPTION>
                                                             QUARTER           QUARTER         NINE MONTHS      NINE MONTHS
                                                              ENDED             ENDED             ENDED             ENDED
                                                            SEPTEMBER         SEPTEMBER         SEPTEMBER         SEPTEMBER
                                                            30, 2003          30, 2002          30, 2003          30, 2002
                                                           -----------       -----------       -----------      -----------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>               <C>               <C>              <C>
Reported net income (loss) ...........................     $    9,564        $    7,339        $   27,100        $  (37,412)
Compensation expense in respect of stock options
  deducted in the computation of reported net income..              -                 -                 -            23,873
Compensation expense in respect of stock options
  computed on the fair value method ..................           (616)             (383)           (1,257)          (24,256)
                                                           ----------        ----------        ----------        ----------
Pro forma net income (loss) ..........................     $    8,948        $    6,956        $   25,843        $  (37,795)
                                                           ==========        ==========        ==========        ==========
Reported basic earnings (loss) per share .............     $     0.26        $     0.21        $     0.75        $    (1.35)
Pro forma basic earnings (loss) per share ............     $     0.25        $     0.20        $     0.71        $    (1.37)
Reported diluted earnings (loss) per share ...........     $     0.25        $     0.20        $     0.72        $    (1.35)
Pro forma diluted earnings (loss) per share ..........     $     0.24        $     0.19        $     0.69        $    (1.37)
</TABLE>

                                     - 13 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8.       INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities are
as follows:

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,   DECEMBER 31,
                                                                                           2003            2002
                                                                                       -------------   ------------
                                                                                          (DOLLARS IN THOUSANDS)
<S>                                                                                    <C>             <C>
Deferred tax assets:
Defined benefit pension obligations................................................     $    4,457      $    3,987
Federal and state net operating losses.............................................         14,936          14,893
Foreign net operating losses.......................................................            396             768
Interest rate swaps................................................................            531             329
U.K. share option deductions.......................................................          2,253               -
Other deferred tax assets..........................................................          1,475           1,451
                                                                                        ----------      ----------
Total deferred tax assets..........................................................         24,048          21,428
Valuation allowance for deferred tax assets........................................        (17,704)        (15,830)
                                                                                        ----------      ----------
Net deferred tax assets............................................................     $    6,344      $    5,598
Deferred tax liabilities
Property, plant and equipment......................................................        (29,629)        (27,241)
Intangible assets..................................................................           (616)              -
Other deferred tax liabilities.....................................................           (600)           (700)
                                                                                        ----------      ----------
Net deferred tax liabilities.......................................................     $  (24,501)     $  (22,343)
                                                                                        ==========      ==========
</TABLE>

In the first nine months of 2003, the company recorded a deferred tax asset of
$2.3 million less a valuation allowance of $2.3 million in respect of U.K. share
option deductions.

The balance sheet classification of net deferred tax liabilities is as follows:

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,    DECEMBER 31,
                                                                                           2003            2002
                                                                                       -------------    ------------
                                                                                           (DOLLARS IN THOUSANDS)
<S>                                                                                    <C>              <C>
Non current deferred tax assets....................................................     $      475      $        -
Net current deferred tax liabilities...............................................           (234)           (204)
Net non current deferred tax liabilities...........................................        (24,742)        (22,139)
                                                                                        ----------      ----------
Net deferred tax liabilities.......................................................     $  (24,501)     $  (22,343)
                                                                                        ==========      ==========
</TABLE>

The provision for income taxes is affected by various factors. The Company
receives research and development tax credits in Canada and the United Kingdom.
The level of such credits is dependent upon the amount of qualifying costs in
these jurisdictions and therefore the tax credits are not a constant percentage
of income before income taxes. In addition the Company expects to receive tax
deductions equal to the gains made by United Kingdom employees on exercising
their stock options after January 1, 2003. These deductions will arise at the
time of exercise of the options and will depend on the market price of our stock
at the time of exercise. Such amounts may therefore fluctuate from period to
period.

                                     - 14 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As a consequence of these factors, the provision for income taxes expressed as a
percentage of income before income taxes may fluctuate from period to period.

The Company's consolidated effective tax rate differed from the federal
statutory rate as set forth below:

<TABLE>
<CAPTION>
                                                               QUARTER        QUARTER     NINE MONTHS    NINE MONTHS
                                                                ENDED          ENDED         ENDED          ENDED
                                                              SEPTEMBER      SEPTEMBER     SEPTEMBER      SEPTEMBER
                                                              30, 2003       30, 2002       30, 2003      30, 2002
                                                              ---------      ---------    -----------    -----------
                                                                             (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>          <C>            <C>
U.S. Federal statutory rate...............................    $  3,777       $  3,065       $ 10,671      $(11,517)
Non deductible compensation expense on exercise of
  share options...........................................           -              -              -        15,906
U.K. and Canadian Research and Development tax credits....      (1,650)        (1,578)        (5,165)       (3,803)
Difference between foreign income taxed at U.S.
  Federal Statutory rates and foreign income tax expense..        (293)            48           (966)        3,194
Increase (reduction) in federal valuation allowance.......          22             65            159           187
Increase (reduction) in valuation allowance against
  losses of foreign subsidiaries..........................          94           (263)           (76)          553
U.K. share option deductions..............................        (269)             -         (1,135)            -
Other.....................................................        (454)            82           (100)          (12)
                                                              --------       --------       --------      --------
                                                              $  1,227       $  1,419       $  3,388      $  4,508
                                                              ========       ========       ========      ========
</TABLE>

                                     - 15 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.       SEGMENT REPORTING

The Company is a full-service drug development services group serving the
pharmaceutical, biotechnology and medical device industries. Its drug
development services comprise two operating segments - pre-clinical and
clinical. Pre-clinical services include pre-clinical safety and pharmacology
evaluation as well as laboratory sciences services. Pre-clinical services are
performed in Edinburgh, Scotland and Montreal, Canada. Clinical services consist
of designing, monitoring, and managing trials of new pharmaceutical and
biotechnology products on humans, and providing clinical data management,
biostatistical, product registration, and pharmacovigilance services. Clinical
service activities and revenues are performed and earned primarily in the United
States and Europe. The Company's European clinical operations are performed in
Maidenhead, England and Edinburgh, Scotland with its primary satellite offices
in Brussels, Belgium and Glasgow, Scotland. The operating results of the Company
in the individual European countries apart from the United Kingdom are not
material. Financial data by segment are as follows:

<TABLE>
<CAPTION>
                                                                                         PRE-CLINICAL   CLINICAL        TOTAL
                                                                                         ------------   --------       -------
                                                                                                (DOLLARS IN THOUSANDS)
<S>                                                                                      <C>            <C>            <C>
QUARTER ENDED SEPTEMBER 30, 2003
Net service revenue from external customers ..............................                 $41,590       $28,981       $70,571
Depreciation .............................................................                   2,292           753         3,045
Amortization of intangibles ..............................................                       -           232           232
Segment income ...........................................................                  11,668         2,980        14,648
Expenditures for long-lived assets in quarter ended September 30, 2003 ...                   7,144         2,379         9,523

QUARTER ENDED SEPTEMBER 30, 2002
Net service revenues from external customers .............................                 $35,236       $20,687       $55,923
Depreciation .............................................................                   2,101           588         2,689
Segment income ...........................................................                  10,839         2,786        13,625
Expenditures for long-lived assets in quarter ended September 30, 2002 ...                   2,911           415         3,326

</TABLE>

<TABLE>
<CAPTION>
                                                                                          PRE-CLINICAL     CLINICAL          TOTAL
                                                                                          ------------     --------       ---------
                                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                                       <C>              <C>            <C>
NINE MONTHS ENDED SEPTEMBER 30, 2003
Net service revenue from external customers .........................................       $120,150       $ 75,140       $195,290
Depreciation ........................................................................          7,199          1,884          9,083
Amortization of intangibles .........................................................              -            232            232
Segment income ......................................................................         32,656          8,040         40,696
Segment assets at September 30, 2003 ................................................        340,421        246,749        587,170
Goodwill and intangibles at September 30, 2003 ......................................         61,522        117,759        179,281
Long-lived assets at September 30, 2003 .............................................        176,291        131,153        307,444
Expenditures for long-lived assets in the nine months ended  September 30, 2003 .....         14,846          3,218         18,064

NINE MONTHS ENDED SEPTEMBER 30, 2002
Net service revenues from external customers ........................................       $106,082       $ 58,553       $164,635
Depreciation ........................................................................          5,759          1,751          7,510
</TABLE>

                                     - 16 -
<PAGE>

                          INVERESK RESEARCH GROUP, INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                          PRE-CLINICAL     CLINICAL          TOTAL
                                                                                          ------------     --------       ---------
<S>                                                                                       <C>              <C>            <C>
Segment income ......................................................................         32,577          5,937         38,514
Segment assets at December 31, 2002 .................................................        290,557        176,746        467,303
Goodwill at December 31, 2002 .......................................................         56,063         78,980        135,043
Long-lived assets at December 31, 2002 ..............................................        155,485         88,128        243,613
Expenditures for long-lived assets in the nine months ended September 30, 2002 ......         15,528            611         16,139
</TABLE>

The following table summarizes net service revenues and long-lived assets by
geographic area.

<TABLE>
<CAPTION>
                                                            USA           CANADA          EUROPE          TOTAL
                                                         --------        --------        --------        --------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                      <C>             <C>             <C>             <C>
QUARTER ENDED SEPTEMBER 30, 2003
Net service revenue from external customers........      $ 15,587        $ 24,262        $ 30,722        $ 70,571

QUARTER ENDED SEPTEMBER 30, 2002
Net service revenues from external customers.......      $  9,203        $ 20,750        $ 25,970        $ 55,923
</TABLE>

<TABLE>
<CAPTION>
                                                            USA           CANADA          EUROPE           TOTAL
                                                         --------        --------        --------        ---------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                      <C>             <C>             <C>             <C>
NINE MONTHS ENDED SEPTEMBER 30, 2003
Net service revenue from external customers........      $ 34,884        $ 69,941        $ 90,465        $195,290
Long-lived assets at September 30, 2003............        76,051          89,231         142,162         307,444

NINE MONTHS ENDED SEPTEMBER 30, 2002
Net service revenues from external customers.......      $ 25,502        $ 64,274        $ 74,859        $164,635
Long-lived assets at December 31, 2002.............        36,185          75,052         132,376         243,613
</TABLE>

The Company's operations in Europe comprise operations in a number of countries
that are coordinated from the United Kingdom. No European country apart from the
United Kingdom is significant in terms of revenues generated or assets held.

                                     - 17 -
<PAGE>

                         INVERESK RESEARCH GROUP, INC.

          NOTES UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the above totals for net service revenues,
segment income (loss), segment assets and long-lived assets to the appropriate
figures in the financial statements.

<TABLE>
<CAPTION>
                                                               QUARTER        QUARTER       NINE MONTHS    NINE MONTHS
                                                                ENDED          ENDED           ENDED          ENDED
                                                            SEPTEMBER 30,  SEPTEMBER 30,   SEPTEMBER 30,  SEPTEMBER 30,
                                                                2003           2002            2003           2002
                                                            -------------  -------------   -------------  -------------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                         <C>            <C>             <C>            <C>
Segment income per above segment analysis...............      $  14,648      $  13,625       $  40,696       $  38,514
Corporate overhead, including share offering expenses
and compensation charges................................         (2,784)        (1,930)         (7,320)        (59,464)
                                                              ---------      ---------       ---------       ---------
Income (loss) from operations per financial statements..      $  11,864      $  11,695       $  33,376       $ (20,950)
                                                              =========      =========       =========       =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                         SEPTEMBER 30,   DECEMBER 31,
                                                                                             2003            2002
                                                                                         -------------   ------------
                                                                                            (DOLLARS IN THOUSANDS)
<S>                                                                                      <C>             <C>
Segment assets per above segment analysis...............                                   $ 587,170      $ 467,303
Long lived assets not allocated to segments.............                                           6              -
Deferred debt issue costs not allocated to segments.....                                       1,672            527
Elimination of inter segment balances...................                                    (166,914)      (135,363)
                                                                                           ---------      ---------
Assets per financial statements.........................                                   $ 421,934      $ 332,467
                                                                                           =========      =========

Long lived assets per above segment analysis............                                   $ 307,444      $ 243,613
Long lived assets not allocated to segments.............                                           6              -
Deferred debt issue costs not allocated to segments.....                                       1,672            527
                                                                                           ---------      ---------
                                                                                           $ 309,122      $ 244,140
                                                                                           =========      =========
</TABLE>

No clients accounted for more than 10% of the Company's consolidated net revenue
for any of the periods covered by these financial statements.

10.      CONTINGENCIES

From time to time the Company is subject to claims, suits and administrative
proceedings arising in the ordinary course of business. It does not expect that
any of the claims suits or proceedings of which it has been notified will have a
material adverse effect upon its operations, liquidity or financial condition.

                                     - 18 -
<PAGE>

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

The following discussion should be read in conjunction with the corresponding
section of our Form 10-K for the year ended December 31, 2002 filed with the
Securities and Exchange Commission on February 18, 2003 and our Form 8-K/A filed
with the Securities and Exchange Commission on September 25, 2003, respectively.

The information set forth and discussed below for the quarters and nine months
ended September 30, 2003 and September 30, 2002 is derived from the Condensed
Consolidated Financial Statements included under Item 1 above. The financial
information set forth and discussed below is unaudited but includes all
adjustments (consisting of normal recurring adjustments) which the Company's
management considers necessary for a fair presentation of the financial position
and the operating results and cash flows for those periods. The Company's
results of operations for a particular quarter may not be indicative of the
results that may be expected for other quarters or the entire year.

OVERVIEW

Effective June 25, 2002, we changed our ultimate parent company from a company
organized in Scotland to a corporation organized in Delaware.

We completed our initial public offering of 12,000,000 shares of common stock,
at a price of $13 per share, in the third quarter of 2002. The net proceeds from
the offering, together with drawings under our new bank credit facility and
existing cash resources, were used to repay all of the outstanding principal and
interest at June 30, 2002 under our former bank facility and our 10% unsecured
subordinated loan stock due 2008.

We were highly leveraged from the time of our management buyout in 1999 through
to the time of the completion of our initial public offering on July 3, 2002. We
also incurred additional debt in connection with our acquisition of ClinTrials
in 2001. Our interest expense has therefore been high in relation to our income
before taxes. We believe that, because of the size of our interest expense
during the period preceding the completion of our initial public offering, our
income from operations (i.e. before interest income and interest expenses) is a
better measure of the past performance of our businesses than income (or loss)
before income taxes or net income.

On July 29, 2003 we acquired PharmaResearch Corporation in an all-cash
transaction. We recorded an aggregate acquisition cost for PharmaResearch of
$43.9 million, consisting of a purchase price of $37.1 million net of cash
acquired, acquisition costs of approximately $0.7 million and $6.1 million in
respect of cash acquired and other changes in working capital. The results of
operations of PharmaResearch are included in our consolidated statement of
operations with effect from July 29, 2003. The acquisition was financed through
a new $150.0 million syndicated bank credit facility arranged by Wachovia Bank
N.A. Funds drawn down under the new credit facility were also used to repay all
bank borrowings under our prior bank credit facility, which had been arranged at
the time of our initial public offering in July 2002.

We operate in two segments for financial reporting purposes: pre-clinical and
clinical. The following table shows a summary of our financial performance for
the quarter ended and nine months September 30, 2003 compared with the
corresponding periods in 2002.

                                     - 19 -

<PAGE>

<TABLE>
<CAPTION>
                                                     QUARTER          QUARTER         NINE MONTHS      NINE MONTHS
                                                      ENDED            ENDED             ENDED            ENDED
                                                  SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,
                                                      2003             2002              2003             2002
                                                  -------------    -------------     -------------    -------------
                                                                       (DOLLARS IN THOUSANDS)
                                                                             (UNAUDITED)
<S>                                               <C>              <C>               <C>              <C>
NET SERVICE REVENUE:
Pre-clinical....................................    $  41,590        $  35,236         $ 120,150        $ 106,082
Clinical........................................       28,981           20,687            75,140           58,553
                                                    ---------        ---------         ---------        ---------
                                                       70,571           55,923           195,290          164,635
                                                    ---------        ---------         ---------        ---------
DIRECT COSTS EXCLUDING DEPRECIATION:
Pre-clinical....................................      (19,783)         (15,906)          (55,883)         (47,327)
Clinical........................................      (17,589)         (11,874)          (44,846)         (34,650)
                                                    ---------        ---------         ---------        ---------
                                                      (37,372)         (27,780)         (100,729)         (81,977)
                                                    ---------        ---------         ---------        ---------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Pre-clinical....................................       (7,847)          (6,390)          (24,412)         (20,419)
Clinical........................................       (7,427)          (5,439)          (20,138)         (16,215)
Corporate overhead:
Compensation expense in respect of amendment
  and exercise of stock options and management
  equity incentives.............................            -                -                 -          (53,020)
Stamp duty arising on change of ultimate
  parent company................................            -                -                 -           (1,545)
Share offering expenses ........................            -                -              (658)               -
Restructuring costs arising from business
  acquisitions..................................         (798)               -              (798)               -
Other selling, general and administrative
  expenses......................................       (1,986)          (1,930)           (5,864)          (4,899)
                                                    ---------        ---------         ---------        ---------
                                                      (18,058)         (13,759)          (51,870)         (96,098)
                                                    ---------        ---------         ---------        ---------
DEPRECIATION:
Pre-clinical....................................       (2,292)          (2,101)           (7,199)          (5,759)
Clinical........................................         (753)            (588)           (1,884)          (1,751)
                                                    ---------        ---------         ---------        ---------
                                                       (3,045)          (2,689)           (9,083)          (7,510)
                                                    ---------        ---------         ---------        ---------
AMORTIZATION OF INTANGIBLES:
Pre-clinical....................................            -                -                 -                -
Clinical........................................         (232)               -              (232)               -
                                                    ---------        ---------         ---------        ---------
                                                         (232)               -              (232)               -
                                                    ---------        ---------         ---------        ---------
   INCOME (LOSS) FROM OPERATIONS:
   Pre-clinical.................................       11,668           10,839            32,656           32,577
   Clinical.....................................        2,980            2,786             8,040            5,937
   Corporate overhead including compensation
     expense, stamp duty, share offering
     expenses, restructuring and other
     selling, general and administrative
     expenses...................................       (2,784)          (1,930)           (7,320)         (59,464)
                                                    ---------        ---------         ---------        ---------
                                                       11,864           11,695            33,376          (20,950)
Interest expense, net including write off of
   deferred debt issue and other costs..........       (1,073)          (2,937)           (2,888)         (11,954)
                                                    ---------        ---------         ---------        ---------
   INCOME (LOSS) BEFORE INCOME TAXES............       10,791            8,758            30,488          (32,904)
Provision for income taxes......................       (1,227)          (1,419)           (3,388)          (4,508)
                                                    ---------        ---------         ---------        ---------
NET INCOME (LOSS)...............................    $   9,564        $   7,339         $  27,100        $ (37,412)
                                                    =========        =========         =========        =========
</TABLE>

                                     - 20 -
<PAGE>

The following table summarizes the above results of operations as a percentage
of net service revenue:

<TABLE>
<CAPTION>
                                                     QUARTER          QUARTER         NINE MONTHS      NINE MONTHS
                                                      ENDED            ENDED             ENDED            ENDED
                                                   SEPTEMBER 30,    SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,
                                                       2003              2002             2003             2002
                                                   -------------    -------------     -------------    -------------
                                                                            (UNAUDITED)
<S>                                                <C>              <C>               <C>              <C>
NET SERVICE REVENUE:
Pre-clinical.................................         100.0%           100.0%            100.0%           100.0%
Clinical.....................................         100.0%           100.0%            100.0%           100.0%
Total........................................         100.0%           100.0%            100.0%           100.0%

DIRECT COSTS EXCLUDING DEPRECIATION:
Pre-clinical.................................          47.6%            45.1%             46.5%            44.6%
Clinical                                               60.7%            57.4%             59.7%            59.2%
TOTAL........................................          53.0%            49.7%             51.6%            49.8%

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Pre-clinical.................................          18.9%            18.1%             20.3%            19.2%
Clinical.....................................          25.6%            26.3%             26.8%            27.7%
TOTAL (1)....................................          25.6%            24.6%             26.6%            58.3%

DEPRECIATION:
Pre-clinical.................................           5.5%             6.0%              6.0%             5.4%
Clinical.....................................           2.6%             2.8%              2.5%             3.0%
TOTAL........................................           4.3%             4.8%              4.7%             4.6%

AMORTIZATION OF INTANGIBLES:
Pre-clinical.................................             -                -                 -                -
Clinical.....................................           0.8%               -               0.3%               -
TOTAL........................................           0.3%               -               0.1%               -

   INCOME (LOSS) FROM OPERATIONS:
   Pre-clinical..............................          28.1%            30.8%             27.2%            30.7%
   Clinical..................................          10.3%            13.5%             10.7%            10.1%
   TOTAL (1).................................          16.8%            20.9%             17.1%           (12.7)%

Interest expense, net........................           1.5%             5.3%              1.5%             7.3%

   INCOME (LOSS) BEFORE INCOME TAXES                   15.3%            15.7%             15.6%           (20.0)%
</TABLE>

(1) Including corporate overhead.

SHARE OFFERING EXPENSES

On February 18, 2003 we announced a proposed public offering of up to 10,350,000
shares of common stock. 3,000,000 shares were to be offered by the Company and
7,350,000 shares were to be offered by certain selling stockholders. On March 7,
2003, we announced the withdrawal of the registration statement relating to this
offering because market conditions at the time made it inadvisable to proceed
with the offering. The costs relating to this offering were expensed in the
first quarter of 2003 and reduced the first quarter net income by approximately
$0.7 million. We do not expect such costs to recur in the foreseeable future.

                                     - 21 -
<PAGE>

EARNINGS CHARGES IN RESPECT OF THE CHANGE IN ULTIMATE PARENT COMPANY AND IN
RESPECT OF EQUITY-BASED COMPENSATION

The transactions through which we changed our ultimate parent company, and
certain equity-based compensation (including stock options) which had been
awarded to our directors, officers and employees before our initial public
offering, had several effects that required us to take charges against earnings.
These charges comprised:

(i)      U.K. National Insurance costs relating to exercise of stock options. We
         incur U.K. National Insurance costs at the point of exercise of certain
         stock options that are subject to U.K. National Insurance taxes. The
         total such expense for the quarter and nine months ended September 30,
         2003 was $0.1 million and $0.4 million before income taxes, $0.1
         million and $0.3 million net of income taxes.

(ii)     A Compensation Charge in Respect of a Change in the Relative Equity
         Ownership of Certain Members of Management. Under the terms of a
         management incentive scheme originally put in place at the time of our
         leveraged buy-out in 1999, management's percentage ownership of the
         Company's common stock increased as a consequence of the change in our
         ultimate parent company. In the second quarter of 2002, we recorded a
         charge for compensation expense equal to the increase in value of the
         equity ownership position of management resulting from the increase in
         their percentage ownership of the Company. Based on the initial public
         offering price of $13 per share, this compensation expense amounted to
         $29.1 million.

(iii)    A Compensation Charge in Respect of Certain Outstanding Employee Stock
         Options. Due to certain features of the share options granted by the
         Company prior to the initial public offering, we recorded a charge for
         compensation expense in connection with the offering in June 2002.
         Based on the offering price of $13, this compensation expense amounted
         to $19.4 million. In addition, we recorded a charge of $4.5 million
         before income taxes, $4.4 million net of income taxes for compensation
         expense on the amendment and exercise of share options in the first
         quarter of 2002.

RESTRUCTURING AND INTEGRATION EXPENSES

We established a plan at the acquisition date to integrate the operations of
PharmaResearch with our existing operations. The actions covered by the
integration plan include a headcount reduction of 58 employees (37 employees of
PharmaResearch and 21 employees of our company), the relocation of the
Morrisville, North Carolina operations of PharmaResearch to our premises in
Cary, North Carolina, integration of certain administrative functions between
the two businesses, combination of the PharmaResearch operations in London,
Paris and Madrid with those of our company and the closure of certain office
premises.

In connection with this integration plan we have recorded a provision of $1.8
million that has been reflected in the purchase price allocation and a provision
of $0.8 million that is reflected on our consolidated statement of operations in
restructuring and integration costs arising from business acquisitions. We
implemented the headcount reductions in early September, with 37 former
PharmaResearch employees and 21 former Inveresk employees leaving us during
September. In many cases, however, severance payments relating to this
restructuring were not made until after September 30, 2003. The following
amounts have been recorded in respect of the restructuring plan:

                                     - 22 -
<PAGE>

<TABLE>
<CAPTION>
                                                                                                           LEASE
                                    SEVERANCE AND RELATED COSTS              OTHER COSTS               TERMINATION AND
                                    ---------------------------   --------------------------------      ABANDONMENT
                                    PHARMARESEARCH     INVERESK       PHARMARESEARCH      INVERESK         COSTS
                                    --------------     --------       --------------      --------         -----
                                                                  (DOLLARS IN THOUSANDS)
<S>                                 <C>                <C>            <C>                 <C>          <C>
Amount established at
  acquisition....................       $1,216          $  587           $  355            $  211          $  259
Utilized from July 29, 2003
  to September 30, 2003..........         (743)           (201)               -               (86)              -
                                        ------          ------           ------            ------          ------
BALANCE AT SEPTEMBER 30, 2003..         $  473          $  386           $  355            $  125          $  259
                                        ======          ======           ======            ======          ======
</TABLE>

EXCHANGE RATE FLUCTUATIONS

Our condensed consolidated financial statements are prepared in U.S. dollars.
Our principal businesses are based in the United States, the U.K. and Canada.
Our U.K. and Canadian operations record their transactions in local currencies.
Accordingly, fluctuations in the pound sterling and Canadian dollar exchange
rates will impact the results of operations reported in U.S. dollars. The
results of our non-U.S. operations have been translated from pounds sterling and
Canadian dollars using the following average exchange rates:

<TABLE>
<CAPTION>
                                                                                      U.S. DOLLARS     U.S. DOLLARS
                                                                                       PER POUND       PER CANADIAN
                                                                                        STERLING          DOLLAR
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>
Quarter ended September 30, 2003..............................................           1.6098            0.7251
Quarter ended September 30, 2002..............................................           1.5461            0.6401
Nine months ended September 30, 2003..........................................           1.6104            0.7014
Nine months ended September 30, 2002..........................................           1.4804            0.6372
                                                                                         ------            ------
</TABLE>

The following table sets forth the percentage of our net service revenue arising
in the U.K. and Canada:

<TABLE>
<CAPTION>
                                                                                           U.K.            CANADA
                                                                                           ----            ------
<S>                                                                                        <C>             <C>
Quarter ended September 30, 2003..............................................             44%               34%
Quarter ended September 30, 2002..............................................             46%               37%
Nine months ended September 30, 2003..........................................             46%               36%
Nine months ended September 30, 2002..........................................             45%               39%
                                                                                           --                --
</TABLE>

Our Canadian business invoices a significant proportion of its revenues in U.S.
dollars, although its costs are largely payable in Canadian dollars. This can
result in transaction exchange gains or losses that are reflected in its
statement of operations. The foreign currency gains or losses recognized in the
statement of operations and included in "Selling, general and administrative
expenses" were a gain of $0.2 million and a loss of $1.7 million for the quarter
ended and nine months September 30, 2003 and a gain of $0.6 million and a loss
of $0.2 million for the quarter ended and nine months ended September 30, 2002.

For ease of comparison and because we are a global business, we provide revenue
growth information based on constant dollar exchange rates as well as based on
actual exchange rates.

RESULTS OF OPERATIONS

THIRD QUARTER 2003 COMPARED WITH THIRD QUARTER 2002

NET SERVICE REVENUE. Net service revenue in the third quarter of 2003 was $70.6
million, an increase of $14.6 million or 26% over third quarter 2002 net service
revenue of $55.9 million.

Pre-clinical. Net service revenue in the third quarter of 2003 was $41.6
million, an increase of $6.4 million or 18% over revenues of $35.2 million in
the third quarter of 2002. At constant dollar exchange rates, net service
revenue in our pre-clinical segment would have increased by 8% in the third

                                     - 23 -
<PAGE>
quarter of 2003 compared with 2002. In our North American pre-clinical
operations, the levels of inquiries from clients and of new business signings
remain strong; however, slow or delayed decisions by clients to commit to
studies adversely impacted the rate of growth of our third quarter revenues. A
change in business mix also impacted revenues in the third quarter.
Consequently, our North American pre-clinical operations recorded year-on-year
growth, assuming a constant dollar exchange rate, of 3% in the third quarter. As
reported, based on actual exchange rates, net service revenue at our North
American pre-clinical operations increased by 17% in the third quarter of 2003
compared with the corresponding period in 2002. In Europe, our pre-clinical
operations continued to experience strong demand for their services during the
third quarter, including both safety evaluation services and laboratory sciences
services. Room occupancy rates at our testing facilities remain high and
continue to benefit from a favorable mix of business in these operations. As a
consequence, our European pre-clinical operations experienced significant
year-on-year growth, which at constant dollar exchange rates would have been 15%
in the third quarter. As reported, based on actual exchange rates, net service
revenues in our European pre-clinical operations increased by 20% in the third
quarter of 2003 compared with the corresponding period in 2002.

Clinical. Net service revenue in the third quarter of 2003 was $29.0 million, an
increase of $8.3 million or 40% over revenues of $20.7 million in the third
quarter of 2002. Our Phase I clinical operations experienced 24% growth in net
service revenue, or 19% at constant dollar exchange rates, reflecting continued
strength in the underlying performance of our Phase I clinic compared with the
same period in 2002. At constant dollar exchange rates, net service revenue in
our Phase II-IV clinical trials operations would have increased by 43% in the
third quarter of 2003 compared with the corresponding period in 2002. Almost all
of this increase is attributable to the acquisition of PharmaResearch on July
29, 2003. The key steps in the integration of PharmaResearch are now complete,
and consequently it will not be meaningful in the future to present separate
financial information about the operations of PharmaResearch.

DIRECT COSTS EXCLUDING DEPRECIATION. In the third quarter of 2003, direct costs
excluding depreciation totaled $37.4 million, an increase of $9.6 million or 35%
from $27.8 million in the third quarter of 2002. Direct costs excluding
depreciation were 53% of net service revenue in the third quarter of 2003
compared with 50% in the third quarter of 2002, largely reflecting the increase
in the percentage of net service revenues in our clinical business as a result
of our acquisition of PharmaResearch and, as explained below, the decline in the
operating margins of our pre-clinical business during the third quarter of 2003.

Pre-clinical. Direct costs excluding depreciation in the third quarter of 2003
were $19.8 million, an increase of $3.9 million or 24% over costs of $15.9
million in the third quarter of 2002. In the third quarter of 2003, direct costs
excluding depreciation were 48% of net service revenue, compared with 45% in the
third quarter of 2002. This increase is attributable primarily to continued
adverse movements in exchange rates, particularly having an impact on our North
American pre-clinical operations. A majority of the revenues in our North
American operations are invoiced in U.S. dollars whereas the costs incurred by
this operation are almost entirely denominated in Canadian dollars. Compared
with the corresponding quarter in 2002, the Canadian dollar has appreciated by
more than 13% against the U.S. dollar.

Clinical. Direct costs excluding depreciation in the third quarter of 2003 were
$17.6 million, an increase of $5.7 million or 48% over costs of $11.9 million in
the third quarter of 2002. In the third quarter of 2003 direct costs excluding
depreciation were 61% of net service revenues compared with 57% in the third
quarter of 2002. The increase is mainly due to the results of the acquired
PharmaResearch business where historically direct costs excluding depreciation
as a percentage of net service revenues have been significantly higher than in
our other clinical businesses.

                                     - 24 -
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. In the third quarter of 2003,
selling, general and administrative expenses totaled $18.1 million, an increase
of $4.3 million or 31% from $13.8 million in the third quarter of 2002. In the
third quarter of 2003, selling, general and administrative expenses included
$0.8 million of restructuring and integration costs related to the acquisition
of PharmaResearch and represented 26% of net service revenue, compared with 25%
in the third quarter of 2002.

Pre-clinical. Selling, general and administrative costs in the third quarter of
2003 were $7.8 million, an increase of $1.5 million or 23% from $6.4 million in
the third quarter of 2002. Selling, general and administrative costs were 19% of
net service revenue in the third quarter of 2003, compared with 18% in the third
quarter of 2002. Selling, general and administrative costs included currency
exchange gains of $0.4 million in the third quarter of 2003 compared with
currency exchange gains of $0.5 million in the corresponding period during 2002.

Clinical. Selling, general and administrative costs in the third quarter of 2003
were $7.4 million, an increase of $2.0 million or 37% from $5.4 million in the
third quarter of 2002. Selling, general and administrative costs were 26% of net
service revenue in the third quarter of 2003 compared with 26% in the third
quarter of 2002.

Corporate overhead. Corporate overhead amounted to $2.8 million, an increase of
$0.9 million or 44% from $1.9 million in the third quarter of 2002. Corporate
overhead in the third quarter of 2003 includes $0.8 million of restructuring and
integration costs incurred following our acquisition of PharmaResearch.

AMORTIZATION OF INTANGIBLES. Amortization of intangibles in the third quarter of
2003 amounted to $0.2 million or 1% of net service revenues. It arises in the
clinical business where, following the acquisition of PharmaResearch, we have
valued the customer contracts at acquisition at $2.8 million. This amount will
be amortized over a two-year period commencing July 30, 2003.

INCOME FROM OPERATIONS. In the third quarter of 2003, income from operations
amounted to $11.9 million or 17% of net service revenue. Income from operations
in the third quarter of 2002 amounted to $11.7 million or 21% of net service
revenue. Overall this reduction in the percentage of net service revenue
accounted for by income from operations is attributable to the reduced operating
margins in our pre-clinical operations, the greater proportion of net service
revenue accounted for by our clinical operations as a result of our acquisition
of PharmaResearch and charges associated with the integration of the former
PharmaResearch operations.

Pre-clinical. Income from operations increased to $11.7 million in the third
quarter of 2003 compared with $10.8 million in the corresponding period during
2002 for the reasons set forth above.

Clinical. Income from operations was $3.0 million in the third quarter of 2003
compared with $2.8 million in the corresponding period during 2002 for the
reasons set forth above.

INTEREST EXPENSE, NET, INCLUDING WRITE-OFF OF DEFERRED DEBT AND OTHER COSTS.
Interest expense in the third quarter of 2003 was $1.1 million, a decrease of
$1.9 million or 63% from $2.9 million in the corresponding period during 2002.
In the third quarter of 2003 interest expense included $0.8 million of net
interest and amortization of deferred debt costs on our bank credit facilities
and a gain of $0.4 million on the mark-to-market revaluation of the interest
rate swaps we entered into during the third quarter of 2002. It also included
$0.7 million relating to the write-off of deferred debt issue and other costs on
our former bank credit facilities. The interest expense of $2.9 million in the
third quarter of 2002 included $0.6 million of net interest and amortization of
deferred debt costs on our bank credit facilities, $0.3 million of interest
expense relating to our pre-IPO debt and termination of the hedges associated
with

                                     - 25 -
<PAGE>

our pre-IPO bank credit facilities and a $2.0 million write-off of deferred debt
costs relating to the bank credit facilities we replaced at the time of our IPO.

PROVISION FOR INCOME TAXES. Provision for income taxes was $1.2 million or 11%
of income before taxes in the third quarter of 2003. U.K. and Canadian research
and development tax credits reduced the provision for income taxes by $1.7
million or 15% of income before taxes. We recorded a reduction in tax expense
amounting to $0.3 million in the third quarter of 2003 in respect of gains made
in 2003 by our U.K. employees on exercise of stock options. In addition, the
2003 Canadian Federal tax rate is 2% lower than in 2002. The tax charge in the
third quarter of 2002 was $1.4 million or 16% of income before taxes. U.K. and
Canadian research and development tax credits reduced the provision for income
taxes by $1.6 million or 15% of income before taxes.

FIRST NINE MONTHS OF 2003 COMPARED WITH FIRST NINE MONTHS OF 2002

NET SERVICE REVENUE. Net service revenue in the first nine months of 2003 was
$195.3 million, an increase of $30.7 million or 19% over first nine months 2002
net service revenue of $164.6 million.

Pre-clinical. Net service revenue in the first nine months of 2003 was $120.2
million, an increase of $14.1 million or 13% over revenues of $106.1 million in
the corresponding period during 2002. At constant dollar exchange rates, net
service revenue in the pre-clinical segment would have increased by 3% in the
first nine months of 2003 compared with 2002. In North America, our pre-clinical
operations experienced some volatility in business flow in short-term toxicology
work in the first quarter of 2003, resulting in an unusually high level of
project delays. The impact of this was largely reversed in the second quarter of
2003 when the North American operations recorded net service revenue 24% higher
than that recorded in the first quarter of 2003. Slow or delayed decisions by
its clients and an unfavorable change in business mix also impacted the revenues
of our North American pre-clinical operations in the third quarter. Consequently
the net service revenue for our North American pre-clinical operations decreased
year-on-year by 1%, assuming a constant dollar exchange rate, in the first nine
months of 2003 compared with the corresponding period in 2002. As reported,
based on actual exchange rates, net service revenue for our North American
pre-clinical operations increased by 9% in the first nine months of 2003
compared with the corresponding period in 2002. In Europe, our pre-clinical
operations continued to experience strong demand for its services during the
first nine months of 2003, both for its safety evaluation services and its
laboratory sciences services. Room occupancy rates have remained high throughout
this period during the first nine months of 2003, and we have continued to
benefit from a favorable mix of business in these operations. As a consequence,
our European pre-clinical operations experienced year-on-year growth that at
constant dollar exchange rates would have been 10% in the first nine months of
2003 compared with the corresponding period in 2002. As reported, based on
actual exchange rates, net service revenue at our European pre-clinical
operations increased by 20% in the first nine months of 2003 compared with the
corresponding period in 2002.

Clinical. Net service revenue in the first nine months of 2003 was $75.1
million, an increase of $16.6 million or 28% over revenues of $58.6 million in
the corresponding period during 2002. Assuming constant dollar exchange rates,
net service revenue in the clinical segment increased by 23% in the first nine
months of 2003 compared with 2002. The Phase II-IV business experienced a 28%
increase in net service revenue, attributable largely to the acquisition of
PharmaResearch on July 29, 2003 and to higher activity levels in our other Phase
II-IV clinical businesses. Key steps in the integration of the PharmaResearch
acquisition are now complete. Consequently it is not meaningful to report the
revenues of this business separately. Additionally, our Phase I clinical
operations recorded year-on-year growth of 18% in the first nine months of 2003,
assuming constant dollar exchange rates.

                                     - 26 -
<PAGE>

DIRECT COSTS EXCLUDING DEPRECIATION. In the first nine months of 2003, direct
costs excluding depreciation totaled $100.7 million, an increase of $18.8
million or 23% from $82.0 million in the first nine months of 2002. Direct costs
excluding depreciation were 52% of net service revenue in the first nine months
of 2003 compared with 50% in the corresponding period during 2002.

Pre-clinical. Direct costs excluding depreciation in the first nine months of
2003 were $55.9 million, an increase of $8.6 million or 18% over costs of $47.3
million in the first nine months of 2002. In the first nine months of 2003,
direct costs excluding depreciation were 47% of net service revenue, compared
with 45% in the corresponding period during 2002. This increase is attributable
primarily to continued adverse movements in exchange rates, particularly having
an impact on our North American pre-clinical operations. A majority of the
revenues in our North American operations are invoiced in U.S. dollars whereas
the costs incurred by these operations are almost entirely denominated in
Canadian dollars. Compared with the corresponding period in 2002, the Canadian
dollar has appreciated by more than 10% compared with the U.S. dollar in the
first nine months of 2003.

Clinical. Direct costs excluding depreciation in the first nine months of 2003
were $44.8 million, an increase of $10.2 million, or 29% over costs of $34.7
million in the first nine months of 2002. In the first nine months of 2003
direct costs excluding depreciation were 60% of net service revenue compared to
59% in the first nine months of 2002. The increase is mainly due to the results
of the acquired PharmaResearch business where historically direct costs
excluding depreciation as a percentage of net service revenue have been
significantly higher than in the equivalent Inveresk businesses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. In the first nine months of 2003
selling, general and administrative expenses totaled $51.9 million, a decrease
of $44.2 million, or 46% from $96.1 million in the corresponding period during
2002. Selling, general and administrative expenses in the first nine months of
2003 included an expense of $0.7 million relating to our withdrawn share
offering in the first quarter and $0.8 million of restructuring and integration
costs related to the acquisition of PharmaResearch. Our selling, general and
administrative expenses in the first nine months of 2002 included compensation
charges of $53.0 million in respect of share options and management equity
incentives as well as a $1.5 million charge for stamp duty taxes on the change
of our ultimate parent company immediately prior to our initial public offering.
Excluding these charges, selling general and administrative expenses represented
26% of net service revenue in the first nine months of 2003, compared with 25%
in the first nine months of 2002. This increase is mainly attributable to the
impact of foreign exchange losses in the pre-clinical operations during the
first nine months of 2003.

Pre-clinical. Selling, general and administrative costs in the first nine months
of 2003 were $24.4 million, an increase of $4.0 million or 20% from $20.4
million in the first nine months of 2002. Selling, general and administrative
costs were 20% of net service revenue in the first nine months of 2003, compared
to 19% in the corresponding period during 2002. This increase in selling,
general and administrative costs as a percentage of net service revenue in the
first nine months of 2003 is attributable primarily to exchange losses during
the period totaling $1.5 million compared to exchange losses of $0.2 million in
the first nine months of 2002.

Clinical. Selling, general and administrative costs in the first nine months of
2003 were $20.1 million, an increase of $3.9 million or 24% from $16.2 million
in the first nine months of 2002. Selling, general and administrative costs were
27% of net service revenue in the first nine months of 2003 compared to 28% in
the corresponding period during 2002. This increase is attributable primarily to
the acquisition of PharmaResearch in July 2003, offset by increased efficiencies
in our clinical businesses.

Corporate overhead. Corporate overhead amounted to $7.3 million, a decrease of
$52.1 million or 88% over $59.5 million in the corresponding period during 2002.
Corporate overhead in the first nine months

                                     - 27 -
<PAGE>

of 2003 included an expense of $0.7 million relating to our withdrawn share
offering in the first quarter of 2003 and $0.8 million of restructuring and
integration costs incurred following our acquisition of PharmaResearch. Other
corporate overhead in the first nine months of 2002 amounted to $5.9 million.
Corporate overhead in the first nine months of 2002 included a compensation
charge of $23.9 million in respect of share options, a compensation charge of
$29.1 million in respect of management equity incentives and a charge of $1.5
million relating to stamp duty taxes payable on the change of our ultimate
parent company immediately prior to our initial public offering. Excluding these
charges, corporate expenses in the first nine months of 2003 amounted to $5.8
million, compared with $4.9 million during the corresponding period in 2002.
This increase is due primarily to additional costs associated with the corporate
governance and other regulatory costs of a publicly listed company.

AMORTIZATION OF INTANGIBLES. Amortization of intangibles in the first nine
months of 2003 amounted to $0.2 million. It arises in the clinical business
segment where, following our acquisition of PharmaResearch, we have valued the
customer contracts at acquisition at $2.8 million. This amount is being
amortized over a two-year period from July 30, 2003.

INCOME FROM OPERATIONS. In the first nine months of 2003 income from operations
amounted to $33.4 million, or 17% of net service revenue. Excluding share
offering expenses, restructuring and integration related to our acquisition of
PharmaResearch and the foreign exchange losses referred to above, income from
operations amounted to $36.6 million or 19% of net service revenue. Loss from
operations in the first nine months of 2002 amounted to $21.0 million, or 13% of
net service revenue after deducting the compensation charges and stamp duty
costs of $54.6 million referred to above. Excluding these compensation charges
and stamp duty costs, income from operations in the first nine months of 2002
amounted to $33.6 million or 20% of net service revenue.

Pre-clinical. Income from operations was $32.6 million in the first nine months
of 2003 compared with $32.6 million in the corresponding period during 2002 for
the reasons set forth above.

Clinical. Income from operations was $8.0 million in the first nine months of
2003 compared with $5.9 million in the corresponding period during 2002 for the
reasons set forth above.

INTEREST EXPENSE, NET, INCLUDING WRITE-OFF OF DEFERRED DEBT AND OTHER COSTS. Our
interest expense in the first nine months of 2003 was $2.9 million, a reduction
of $9.1 million or 76% from $12.0 million in the corresponding period during
2002. In the first nine months of 2003 our interest expense included $2.1
million of net interest and amortization of deferred debt costs on our bank
facilities and cash resources, a charge of $0.1 million arising from the
mark-to-market revaluation of the interest rate swaps we entered into during the
third quarter of 2002 and an expense of $0.7 million relating to the write-off
of deferred debt issue and other costs on bank facilities replaced when we
acquired PharmaResearch. The interest expense of $12.0 million in the first nine
months of 2002 included an expense of $9.0 million for the first half of 2002
that reflected our capital structure prior to our initial public offering. It
also included an expense of $2.0 million relating to the write-off of deferred
debt issue costs on the bank facilities we replaced at the time of our initial
public offering in July 2002 and an interest expense incurred in the third
quarter of 2002 of $0.9 million that included $0.6 million of net interest and
amortization of deferred debt costs on our bank facilities and cash resources
and $0.3 million of interest expense relating to our pre-IPO debt and
termination of the hedges associated with the pre-IPO bank debt.

PROVISION FOR INCOME TAXES. Provision for income taxes was $3.4 million or 11%
of income before taxes in the first nine months of 2003. U.K. and Canadian
research and development tax credits reduced the provision for income taxes by
$5.2 million or 17% of income before taxes. U.K. research and development tax
credits were introduced in 2002, and came into effect from April 1, 2002. We
recorded a reduction in tax expense amounting to $1.1 million or 4% of income
before taxes in the first nine

                                     - 28 -
<PAGE>

months of 2003 in respect of gains made in 2003 by our U.K. employees on
exercise of stock options. In addition, the 2003 Canadian Federal tax rate is 2%
lower than in 2002. The tax charge in the first nine months of 2002 was $4.5
million on a loss before income taxes of $32.9 million. The tax charge in 2002
was reduced by $3.8 million of research and development tax credits and
represented 21% of income before taxes after adding back the non-deductible
expense of $54.6 million relating to the compensation charges and stamp duty
expense.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents totaled $22.7 million at September 30, 2003
compared with $19.9 million at December 31, 2002. Our principal sources of
liquidity are cash flow from operations and borrowings under our credit
facilities.

At September 30, 2003, our bank credit facility provided us with aggregate
availability of up to $148.1 million through $73.1 million of term loans in U.S.
dollars and up to $75.0 million of multi-currency revolving loans. At September
30, 2003, we had drawn $88.1 million in term and in revolving loans under the
facility. Of that amount, $73.1 million had been drawn as a five year term loan
with repayments due quarterly until June 30, 2008, and $15.0 million was drawn
pursuant to the multi-currency revolver portion of the facility. The $15.0
million drawn under the revolver is repayable on or prior to June 30, 2006. The
facility bears interest at rates between LIBOR plus 1.25% and LIBOR plus 2.00%
depending upon the ratio of EBITDA to borrowings. The initial borrowings bear
interest at LIBOR plus 1.75%. We have limited our exposure to interest rate
fluctuations on the loans drawn under this facility by retaining, with minor
modifications to conform to the terms of our new bank credit facility, the
interest rate swaps entered into previously in connection with our former bank
credit facility. Our bank credit facility subjects us to significant
affirmative, negative and financial covenants, is guaranteed by us and our
significant subsidiaries and is secured by liens on substantially all of our
assets and pledges of the shares of our subsidiaries.

Working capital balances which arise from our contracts with customers comprise
accounts receivable, unbilled receivables and advance billings. A summary of
these balances at September 30, 2003, June 30, 2003, March 31, 2003, December
31, 2002 and September 30, 2002, together with the number of days billings that
they represent is set forth below.

<TABLE>
<CAPTION>
                         SEPTEMBER 30, 2003     JUNE 30, 2003        MARCH 31, 2003      DECEMBER 31, 2002    SEPTEMBER 30, 2002
                        -------------------   -------------------  -------------------   -------------------  -------------------
                                    NO. OF                NO. OF               NO. OF                NO. OF               NO. OF
                        BALANCE    DAYS NET   BALANCE    DAYS NET   BALANCE   DAYS NET   BALANCE    DAYS NET   BALANCE   DAYS NET
                        ($'000S)   REVENUE    ($'000S)   REVENUE   ($'000S)   REVENUE    ($'000S)   REVENUE   ($'000S)   REVENUE
                        --------   -------    --------   -------   --------   -------    --------   -------   --------   -------
<S>                     <C>        <C>        <C>        <C>       <C>        <C>        <C>        <C>       <C>        <C>
Accounts
receivable....          $ 45,012      62      $ 36,428      53      $ 36,289     57      $ 39,266      64      $ 34,184     57

Unbilled
receivables...            26,144      36        25,643      37        24,371     38        20,706      34        23,679     39
                        --------     ---      --------     ---      --------    ---      --------     ---      --------    ---
Sub total.....            71,156      98        62,071      90        60,660     95        59,972      98        57,863     96

Advance
billings......           (48,266)    (67)      (40,840)    (59)      (40,625)   (64)      (41,415)    (68)      (36,734)   (61)
                        --------     ---      --------     ---      --------    ---      --------     ---      --------    ---
                        $ 22,890      31      $ 21,231      31      $ 20,035     31      $ 18,557      30      $ 21,129     35
                        ========     ===      ========     ===      ========    ===      ========     ===      ========    ===
</TABLE>

The impact of the above balances on our cash flow from operations in the first
three quarters of 2003 as well as the last two quarters of 2002 after adjusting
for the balances acquired with PharmaResearch, was as follows:

                                     - 29 -
<PAGE>

<TABLE>
<CAPTION>
                                                              QUARTER          QUARTER      QUARTER       QUARTER       QUARTER
                                                               ENDED            ENDED        ENDED         ENDED         ENDED
                                                           SEPTEMBER 30,       JUNE 30,    MARCH 31,    DECEMBER 31,  SEPTEMBER 30,
                                                               2003              2003        2003           2002           2002
                                                           -------------       --------    ---------    ------------  -------------
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                        <C>                 <C>         <C>          <C>           <C>
Cash inflow (outflow)..................................
Accounts receivable including unbilled receivables.....       $ 2,884          $(1,411)     $  (688)      $(2,109)       $  (186)
Advance billings.......................................        (2,806)             215         (790)        4,681          3,078
                                                              -------          -------      -------       -------        -------
                                                              $    78          $(1,196)     $ 1,478       $ 2,572        $ 2,892
                                                              =======          =======      =======       =======        =======
</TABLE>

The cash generated by operating activities was $32.8 million in the first nine
months of 2003, and $29.8 million in 2002 after paying $21.5 million of
accumulated interest on our 10% unsecured subordinated loan stock due 2008
following our initial public offering. When compared with this, the cash flows
relating to working capital movements are not a major factor affecting
liquidity.

During the twelve months from October 1, 2003 to September 30, 2004 we are
scheduled to make repayments of $7.5 million of principal indebtedness under our
bank credit facility. We anticipate that our operating cash flow, together with
available borrowings under our 2003 bank credit facility and the net proceeds we
receive from any offerings, will be sufficient to meet our anticipated future
operating expenses, capital expenditures (including our planned expansions at
our pre-clinical facilities) and debt service obligations as they become due
over the next twelve months. Our corporate strategy of seeking continued growth
contemplates the possibility of growth through acquisitions of other businesses,
should appropriate opportunities become available. If we decide to seek to
acquire other businesses, we expect to fund these acquisitions from existing
cash resources, through additional borrowings and, possibly, with the proceeds
of sales of our capital stock. We also may pursue acquisitions in which the
consideration we pay takes the form of our capital stock.

THIRD QUARTER 2003 COMPARED WITH THIRD QUARTER 2002

Cash flow from operations in the third quarter of 2003 was $15.8 million
compared to a cash outflow of $1.1 million in the third quarter of 2002 after
paying $17.6 million of accumulated interest on the 10% unsecured subordinated
loan stock due 2008 following the completion of our initial public offering.
Capital expenditures were $9.5 million compared to $3.3 million in 2002. The
increase is mainly attributable to our pre-clinical operations in Canada where
capital expenditure amounted to $4.8 million in the third quarter of 2003
compared to $1.2 million in the third quarter of 2002. The next phase of the
expansion of our facilities in North America has been approved and has commenced
in the third quarter. We are also expanding our U.K. pre-clinical operations
where capital expenditure amounting to $2.4 million in the third quarter of 2003
was $0.7 million more than the prior year. In addition we are investing in our
systems in the clinical business and capital expenditure in clinical amounted to
$2.4 million in the third quarter of 2003 compared to $0.4 million in the third
quarter of 2002.

In the third quarter of 2003 the net cash outflow in respect of the acquisition
of PharmaResearch was $35.9 million. This comprised the acquisition price of
$43.9 million less cash acquired of $6.0 million less the element of the
purchase price and acquisition costs outstanding at September 30, 2003 which
together amount to $2.0 million. We also repaid $57.5 million of borrowings
under our former bank credit facilities in the third quarter of 2003 and drew
down net new borrowings under the new $150 million facility amounting to $88.1
million. In the third quarter of 2002 we repaid $91.1 million of bank debt as
well as $109.8 million of 10% unsecured subordinated loan stock due 2008
excluding accrued interest. This comprised all of the debt under the bank
facilities in place prior to our initial public offering and all of the 10%
unsecured subordinated loan stock due 2008, apart from withholding taxes of $3.8
million payable on the loan stock interest. We also received IPO proceeds of
$138.0 million net of expenses and drew down bank borrowings of $69.4 million,
net of expenses under the bank credit facility arranged at

                                     - 30 -
<PAGE>

the time of our initial public offering. As a consequence, the net cash inflow
from financing activities was $6.5 million in the third quarter of 2002.

FIRST NINE MONTHS OF 2003 COMPARED WITH FIRST NINE MONTHS OF 2002

Cash flow from operations in the first nine months of 2003 was $32.8 million
compared to $17.4 million in the first nine months of 2002 after paying $17.6
million of accumulated interest on the 10% unsecured subordinated loan stock due
2008 following the completion of our initial public offering. Our capital
expenditures were $18.0 million compared to $16.1 million in 2002. There was a
decrease in expenditure at our pre-clinical operations in Canada where capital
expenditure amounted to $8.0 million in the first nine months of 2003 compared
to $11.5 million in the first nine months of 2002. The decrease in capital
expenditure arose because the first stage of the expansion in our Canadian
pre-clinical operations was completed in December 2002 and the next phase of
expansion at these facilities has only recently commenced. We are also expanding
our U.K. pre-clinical operations where capital expenditure amounting to $6.8
million in the first nine months of 2003 was $2.8 million more than in the
comparable period in 2002. In addition we are investing in our systems in the
clinical business and capital expenditure in clinical amounted to $3.2 million
in the first nine months of 2003 compared to $0.6 million in the first nine
months of 2002.

In the first nine months of 2003 the net cash outflow in respect of the
acquisition of PharmaResearch was $35.9 million. This comprised the acquisition
price of $43.9 million less cash acquired of $6.0 million less the element of
the purchase price and acquisition costs outstanding at September 30, 2003 which
together amount to $2.0 million. We also repaid $67.5 million of borrowings
under our former bank credit facilities and drew down net new borrowings under
the new $150 million facility amounting to $88.1 million. In the first nine
months of 2002 we repaid $94.8 million of bank debt as well as $109.8 million of
10% unsecured subordinated loan stock due 2008 excluding accrued interest. This
comprised all of the debt under the bank facilities in place prior to our
initial public offering and all of the 10% unsecured subordinated loan stock due
2008, apart from withholding taxes of $3.8 million payable on the loan stock
interest. We also received initial public offering proceeds of $138.0 million
net of expenses and drew down bank borrowings of $69.4 million, net of expenses
under the bank credit facility arranged at the time of our initial public
offering. We received $0.1 million in respect of the exercise of share options.
As a consequence, the net cash inflow from financing activities was $2.8 million
in the first nine months of 2002.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued FAS 145, "Rescission of FASB Statements Nos. 4,
44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections." The
principal change reflected in these pronouncements is that gains or losses from
extinguishment of debt which were classified as extraordinary items by FAS 4 are
no longer classified as such. The Company adopted FAS 145 on January 1, 2003.
This resulted in the extraordinary items of $1.6 million (being $2.0 million
before taxes and $0.4 million of income taxes) in the third quarter of 2002,
being reclassified to the interest expense and income taxes captions.

                                     - 31 -
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to market risks arising from changes in interest rates and
foreign currency exchange rates.

Our primary interest rate exposure is in respect of future changes in the LIBOR
or base rates that are used to determine the amounts of interest we are required
to pay on borrowings under our bank credit facility. The outstanding
indebtedness under our bank credit facility, which was incurred in July 2003 to
finance the acquisition of PharmaResearch and to repay the outstanding
borrowings under our previous credit facility, bears interest at a rate equal to
LIBOR plus a margin of between 1.25% and 2.00%. That margin is set each quarter
based on specified financial ratio tests. The initial borrowings under our 2003
bank credit facility bear interest at LIBOR plus 1.75%.

In the third quarter of 2002 we cancelled the interest rate hedges we had used
to hedge the interest exposure on our bank borrowings before our initial public
offering. We subsequently entered into two new interest rate swap arrangements
to hedge the interest rate exposure on our bank borrowings. The first
arrangement is an interest rate swap with a notional amount of $50 million,
which expires on September 30, 2005. Under this arrangement the LIBOR rate
applicable to $50 million of bank debt is fixed at 2.9975%. The second
arrangement is an interest rate swap with a notional amount of $10 million,
which expires on September 30, 2004. Under this arrangement the LIBOR rate
applicable to $10 million of bank debt is fixed at 2.5225%.

After giving effect to these interest rate swaps, at September 30, 2003 we had
$28.1 million of bank debt which was exposed to unhedged fluctuations in
interest rates. Our potential loss over one year that would result from a
hypothetical, instantaneous change of 100 basis points in the interest rate on
all our variable rate obligations would be approximately $0.3 million.

We have not designated the interest rate swaps as hedges for financial reporting
purposes pursuant to FAS 133. As a consequence, we record, through the interest
expense category in our statement of operations, any changes in the fair value
of the swaps. The fair value of the swaps will fluctuate, mainly as a
consequence of changes in market rates of interest. Accordingly, changes in
market rates of interest can cause fluctuations in the level of our recorded
interest expense from period to period. However, over the term of the swaps, the
total LIBOR rates applicable to our bank borrowings will equate to the fixed
rates of 2.9975% on $50 million of debt and 2.54% on $10 million of debt as
mentioned above.

A significant proportion of the revenues of our Canadian business is earned in
U.S. dollars. Accordingly, fluctuations in the U.S. dollar / Canadian dollar
exchange rate will give rise to translation exchange gains and losses. These
gains and losses arise from the conversion of U.S. dollars to Canadian dollars
and the retranslation of cash, accounts receivable and unbilled receivable
balances and to a lesser extent accounts payable balances. On September 30, 2003
we entered into a forward contract to sell U.S.$12 million and buy Can$16.2
million on December 31, 2003. This contract will reduce our exposure to exchange
gains and losses arising from the retranslation of the above balances during the
life of the contract. The amounts of the U.S. dollar denominated balances held
by our Canadian subsidiary fluctuate from time to time and based on the balances
in the quarter ended September 30, 2003 offset by the effects of the forward
contract, we estimate that a hypothetical instantaneous 5% devaluation of the
U.S. dollar against the Canadian dollar would give rise to recognition of an
exchange loss (which would be included for financial reporting purposes in
selling general and administrative expenses) of less than $0.1 million, before
income tax effects. On the same basis, we estimate that a hypothetical
instantaneous 5% devaluation of the Canadian dollar against the U.S. dollar
would give rise to recognition of an exchange

                                     - 32 -
<PAGE>

gain (which for financial reporting purposes would be netted against and
therefore reduce selling, general and administrative expenses) of less than $0.1
million before income tax effects.

Our consolidated financial statements are prepared in U.S. dollars. The
functional currency of each of our subsidiaries is the local currency of the
country in which the subsidiary is located. Our principal operating subsidiaries
are located in the U.K. and Canada and together they accounted for 82% of our
net service revenue in the first nine months of 2003. Accordingly, fluctuations
in the exchange rates between pounds sterling, Canadian dollars and U.S. dollars
will affect the operating results reported by us.

We potentially also would have exposure to foreign currency exchange rate
fluctuations in respect of the cash flows received from our foreign affiliates.
This risk is mitigated by the fact that their operations are conducted in their
respective local currencies, and it is not our intention to repatriate earnings
prospectively.

We do not use financial instruments for trading or other speculative purposes.

Our management does not believe that inflation in past years has had a
significant impact on our results from operations. Our management believes that,
in the event inflation affects our costs in the future, we will offset the
effect of inflation and maintain appropriate margins through increased fees.

                                     - 33 -
<PAGE>

ITEM 4. CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer are responsible for
establishing and maintaining a system of disclosure controls and procedures to
ensure the accuracy and completeness of the Company's quarterly and annual
reports. They are also responsible for conducting a review of the effectiveness
of the disclosure controls and procedures as of a date within 90 days of the
filing date of the quarterly or annual report and disclosing their conclusions
about the effectiveness of the disclosure controls and procedures based on the
review.

DESCRIPTION OF PRINCIPAL DISCLOSURE CONTROLS AND PROCEDURES

The system of disclosure controls and procedures cannot provide absolute
assurance on the accuracy and completeness of the Company's annual and quarterly
reports, but it has been designed to meet the Group's needs and the risks to
which it is exposed.

There is a continuous process of identifying, evaluating and managing the risks
to which the Company is exposed that has been in place throughout the current
fiscal year and up to the date of this filing. The key elements of the process
are:

     -   Formal reporting on a monthly basis to the Chief Executive Officer and
         Chief Financial Officer on the results of operations and on any
         emerging risks and issues. The monthly results are analysed by business
         segment and all significant variations from budget and the prior year
         are investigated. The day-to-day responsibility for each business unit
         rests with experienced management and the Company has a clear
         organization structure that includes appropriate delegation of
         authority. There is regular contact between the Chief Executive Officer
         and Chief Financial Officer and the President of each business unit.

     -   Formal Board approval of the annual budget for each financial year.
         Annual budgets are prepared in detail for each business unit.

     -   Review of each quarterly or annual report by the Audit Committee. The
         Audit Committee also meets with the Company's external auditors on a
         quarterly basis to discuss the results of the external auditors' review
         of the quarterly financial statements and any internal control matters
         arising from such review.

     -   Confirmation each quarter from the President of each business unit
         covering the accuracy of the reported financial results of the business
         and that all significant issues affecting the business have been
         reported to the Chief Executive Officer and Chief Financial Officer.

     -   Confirmation from the Vice-President of Finance for each business unit
         that certain financial control procedures have been completed.

     -   Consultation on significant matters with the Company's professional
         advisers.

In addition to the above procedures, the Company has introduced an internal
audit function and a formal plan is now in place. The internal audit function
has been outsourced to one of the big four international accounting firms other
than Deloitte & Touche LLP, our external auditors. The internal audit team will
report regularly to the Audit Committee and senior management.

                                     - 34 -
<PAGE>

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Based on their review of the disclosure controls and procedures as of September
30, 2003, the Chief Executive Officer and Chief Financial Officer have concluded
that the Company has effective disclosure controls and procedures.

CHANGES IN INTERNAL CONTROLS

There have been no significant changes in the internal controls nor in other
factors that could significantly affect these controls subsequent to September
30, 2003.

                                     - 35 -
<PAGE>

                           PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

         The information provided in Note 10 to the financial statements
contained in Part I of this Form 10-Q is incorporated herein by reference.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

         N/A

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

         N/A

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

         N/A

ITEM 5. OTHER INFORMATION.

         N/A

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibits.

         31.1     - Certification of Walter S. Nimmo, Chief Executive, President
                  and Director Inveresk Research Group, Inc. Pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

         31.2     - Certification of D. J. Paul E. Cowan, Chief Executive, Chief
                  Financial Officer and Treasurer of Inveresk Research Group,
                  Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.

         32.1     - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  executed by Walter S. Nimmo, Chief Executive Officer,
                  President and Director Inveresk Research Group, Inc.

         32.2     - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  executed by D. J. Paul E. Cowan, Chief Financial Officer and
                  Treasurer of Inveresk Research Group, Inc.

(b)      Reports on Form 8-K.

         We filed a Current Report on Form 8-K, dated July 31, 2003 containing
details of the acquisition of the whole of the issued capital stock of
PharmaResearch Corporation, a copy of the press release announcing the
acquisition, a copy of the merger agreement, a copy of our press release
announcing our earnings information for the quarter ended June, 2003, a
transcript of a conference call held on July 30, 2003 discussing the results for
the quarter ended June 30, 2003 and a slide presentation given on July 30, 2003
with respect to the results for the quarter ended June 30, 2003.

                                     - 36 -
<PAGE>

         We filed an amended Current Report on Form 8-K/A on September 25, 2003
containing the historical financial statements of PharmaResearch Corporation,
pro forma financial information and other information relating to the
acquisition of PharmaResearch Corporation.

         We filed an amendment Current Report on Form 8-K/A on October 30, 2003
containing the consent of Ernst & Young LLP.

                                     - 37 -
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date : November 7, 2003                   INVERESK RESEARCH GROUP, INC.

                                          By:/S/ D.J. Paul E. Cowan
                                             ----------------------
                                             D.J. Paul E. Cowan
                                             Chief Financial Officer, Treasurer
                                             and Secretary

                                     - 38 -