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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the quarterly period ended March 31, 2003

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)  |  |                                     

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
[ ]No [x]

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 |  |                   | 36,301,082 | 
|                                        |  | at April 29, 2003





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TABLE OF CONTENTS



|                             |                                                                                               |  |  |  |  |  |  | 
|---------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                             | ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)                                                     
|                             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                             | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II OTHER INFORMATION   
|                             | ITEM 1  LEGAL PROCEEDINGS                                                                   
|                             | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.                                           
|                             | ITEM 3. DEFAULTS UPON SENIOR SECURITIES.                                                     
|                             | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                 
|                             | ITEM 5. OTHER INFORMATION.                                                                   
|                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    
|SIGNATURES                  
|CERTIFICATIONS              



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|                                                                                          |                                                                                       |      |   | 
|----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---- | - | 
|                                                                                          |                                                                                       | Page
|                                                                                          |                                                                                       |     
|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 Condensed Consolidated Financial Statements                                      | 5                                                                                     |     
|ITEM 2.                                                                                   | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS | 14   |  
|ITEM 3.                                                                                   | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK                            | 23   |  
|ITEM 4.                                                                                   | CONTROLS AND PROCEDURES                                                               | 25   |  
|PART II                                                                                   | OTHER INFORMATION                                                                     | 27   |  

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.

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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)

|                                                      |                                                    |                                                                            |        |                |         |                |        |            |         |  
|----------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------------------------------- | ------ | -------------- | ------- | -------------- | ------ | ---------- | ------- | -
|                                                      |                                                    |                                                                            |        | Quarter ended  |         | Quarter ended 
|                                                      |                                                    |                                                                            |        | March 31, 2003 |         | March 31, 2002
|                                                      |                                                    |                                                                            |        |                |         |               
|Net service revenue                                   |                                                    | $                                                                          | 57,684 |                |         | $              | 53,163 |           
|                                                      | Direct costs excluding depreciation                |                                                                            |        | (29,278        | )       |                |        | (27,626    | )      
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|                                                      |                                                    |                                                                            | 28,406 |                |         |                | 25,537 |           
|                                                      | Selling, general and administrative expenses:      |                                                                            |        |                |         |                |        |            |        
|                                                      |                                                    | Compensation expense in respect of amendment and exercise of stock options |        |                |        |                |        |            | (4,545  | )
|                                                      |                                                    | Share
offering expenses                                                    |        |                | (658    | )              |        |            |        |  
|                                                      |                                                    | Other selling, general and administrative expenses                         |        |                | (16,228 | )              |        |            | (13,414 | )
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|                                                      | Total selling, general and administrative expenses |                                                                            |        | (16,886        | )       |                |        | (17,959    | )      
|                                                      | Depreciation                                       |                                                                            |        | (2,949         | )       |                |        | (2,346     | )      
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|Income from operations                                |                                                    |                                                                            | 8,571  |                |         |                | 5,232  |           
|                                                      | Interest income                                    |                                                                            |        | 72             |         |                |        | 81         |        
|                                                      | Interest expense                                   |                                                                            |        | (971           | )       |                |        | (4,097     | )      
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|Income before income taxes                            |                                                    |                                                                            | 7,672  |                |         |                | 1,216  |           
|Provision for income taxes (Note 7)                   |                                                    |                                                                            | (295   | )              |         |                | (1,630 | )         
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|Net income (loss)                                     |                                                    | $                                                                          | 7,377  |                |         | $              | (414   | )         
|                                                      |                                                    |                                                                            |        |                |         |                |        |           
|Earnings (loss) per share:                            |                                                    |                                                                            |        |                |         |                |        |           
|                                                      | Basic                                              |                                                                            | $      | 0.20           |         |                | $      | (0.02      | )      
|                                                      | Diluted                                            |                                                                            | $      | 0.20           |         |                | $      | (0.02      | )      
|Weighted average number of common shares outstanding: |                                                    |                                                                            |        |                |         |                |        |           
|                                                      | Basic                                              |                                                                            |        | 36,081,610     |         |                |        | 23,485,654 |        
|                                                      | Diluted                                            |                                                                            |        | 37,366,463     |         |                |        | 23,485,654 |        

See accompanying notes to condensed consolidated financial statements.





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Inveresk Research Group, Inc.

Condensed Consolidated Balance Sheets
(In thousands, except share data)

|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|--------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | ------- | ------------ | - | ------- | ------- | -
|                                        |                                                                                                                                                       |   | March 31, 2003 |         | December 31,
|                                        |                                                                                                                                                       |   | (unaudited)    |         | 2002        
|                                        |                                                                                                                                                       |   |                |         |             
|ASSETS                                  |                                                                                                                                                       |   |                |         |              |   |         |        
|Current assets:                         |                                                                                                                                                       |   |                |         |              |   |         |        
|                                        | Cash and cash equivalents                                                                                                                             |   | $              | 16,108  |              |   | $       | 19,909  |  
|                                        | Accounts receivable, net                                                                                                                              |   |                | 36,289  |              |   |         | 39,266  |  
|                                        | Unbilled receivables, net                                                                                                                             |   |                | 24,371  |              |   |         | 20,706  |  
|                                        | Income taxes receivable                                                                                                                               |   |                | 4,088   |              |   |         | 2,979   |  
|                                        | Inventories                                                                                                                                           |   |                | 1,203   |              |   |         | 1,167   |  
|                                        | Other current assets                                                                                                                                  |   |                | 7,031   |              |   |         | 4,300   |  
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|Total current assets                    |                                                                                                                                                       |   | 89,090         |         |              |   | 88,327  |        
|Property, plant and equipment, net      |                                                                                                                                                       |   | 111,705        |         |              |   | 108,570 |        
|Goodwill                                |                                                                                                                                                       |   | 135,762        |         |              |   | 135,043 |        
|Deferred debt issue costs               |                                                                                                                                                       |   | 543            |         |              |   | 527     |        
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|                                        |                                                                                                                                                       | $ | 337,100        |         |              | $ | 332,467 |        
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY    |                                                                                                                                                       |   |                |         |              |   |         |        
|Current liabilities:                    |                                                                                                                                                       |   |                |         |              |   |         |        
|                                        | Accounts payable                                                                                                                                      |   | $              | 10,715  |              |   | $       | 10,792  |  
|                                        | Advance billings                                                                                                                                      |   |                | 40,625  |              |   |         | 41,415  |  
|                                        | Accrued expenses                                                                                                                                      |   |                | 20,367  |              |   |         | 21,399  |  
|                                        | Income taxes payable                                                                                                                                  |   |                | 3,627   |              |   |         | 2,871   |  
|                                        | Deferred income taxes                                                                                                                                 |   |                | 415     |              |   |         | 204     |  
|                                        | Current portion of long term debt                                                                                                                     |   |                | 228     |              |   |         | 217     |  
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|Total current liabilities               |                                                                                                                                                       |   | 75,977         |         |              |   | 76,898  |        
|Deferred income taxes                   |                                                                                                                                                       |   | 22,167         |         |              |   | 22,139  |        
|Long term debt                          |                                                                                                                                                       |   | 62,758         |         |              |   | 67,768  |        
|Defined benefit pension plan obligation |                                                                                                                                                       |   | 13,451         |         |              |   | 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; 36,265,260
and 36,004,777 issued and outstanding at March 31, 2003 and December 31,
2002 |   |                | 363     |              |   |         | 360     |  
|                                        | Additional paid-in capital                                                                                                                            |   |                | 191,681 |              |   |         | 191,618 |  
|                                        | Accumulated deficit                                                                                                                                   |   |                | (26,416 | )            |   |         | (33,793 | )
|                                        | Accumulated other comprehensive loss                                                                                                                  |   |                | (2,881  | )            |   |         | (5,782  | )
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|Total shareholders equity              |                                                                                                                                                       |   | 162,747        |         |              |   | 152,403 |        
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  
|                                        |                                                                                                                                                       | $ | 337,100        |         |              | $ | 332,467 |        
|                                        |                                                                                                                                                       |   |                |         |              |   |         |         |  

See accompanying notes to condensed consolidated financial statements.

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Inveresk Research Group, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)

|                                                                                                         |                                       |   |                |        |                |   |        |        |  
|-------------------------------------------------------------------------------------------------------- | ------------------------------------- | - | -------------- | ------ | -------------- | - | ------ | ------ | -
|                                                                                                         |                                       |   | Quarter ended  |        | Quarter ended 
|                                                                                                         |                                       |   | March 31, 2003 |        | March 31, 2002
|                                                                                                         |                                       |   |                |        |               
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                     |                                       |   |                |        |                |   |        |       
|Net income (loss)                                                                                        |                                       | $ | 7,377          |        |                | $ | (414   | )     
|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                      |                                       |   |               |        |                |   | 4,459  |       
|Depreciation of property, plant and equipment                                                            |                                       |   | 2,949          |        |                |   | 2,346  |       
|Deferred pension obligations                                                                             |                                       |   | 401            |        |                |   | 115    |       
|Deferred income taxes                                                                                    |                                       |   | (278           | )      |                |   | 116    |       
|Amortization of deferred loan issue costs                                                                |                                       |   | 42             |        |                |   | 69     |       
|Interest on 10% unsecured subordinated loan stock due 2008, not payable until the loan
stock is redeemed |                                       |   |               |        |                |   | 2,908  |       
|Changes in operating assets and liabilities:                                                             |                                       |   |                |        |                |   |        |       
|                                                                                                         | Accounts receivable                   |   |                | (688   | )              |   |        | (967   | )
|                                                                                                         | Advance billings                      |   |                | (790   | )              |   |        | (736   | )
|                                                                                                         | Inventories                           |   |                | (36    | )              |   |        | 166    |  
|                                                                                                         | Accounts payable and accrued expenses |   |                | (1,108 | )              |   |        | (613   | )
|                                                                                                         | Income taxes                          |   |                | (353   | )              |   |        | 765    |  
|                                                                                                         | Other assets and liabilities          |   |                | (2,731 | )              |   |        | (3,252 | )
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Net cash provided by operating activities                                                                |                                       |   | 4,785          |        |                |   | 4,962  |       
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                     |                                       |   |                |        |                |   |        |       
|Purchases of property, plant and equipment                                                               |                                       |   | (4,302         | )      |                |   | (5,662 | )     
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Net cash used in investing activities                                                                    |                                       |   | (4,302         | )      |                |   | (5,662 | )     
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                     |                                       |   |                |        |                |   |        |       
|Issue of common stock                                                                                    |                                       |   | 66             |        |                |   | 64     |       
|Repayments of short-term borrowings                                                                      |                                       |   |               |        |                |   | (1,453 | )     
|Payment of deferred debt issue costs                                                                     |                                       |   | (58            | )      |                |   |       |       
|Repayments of long-term debt                                                                             |                                       |   | (5,000         | )      |                |   |       |       
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Net cash provided by (used in) financing activities                                                      |                                       |   | (4,992         | )      |                |   | (1,389 | )     
|Effect of foreign currency exchange rate changes on cash                                                 |                                       |   | 708            |        |                |   | (462   | )     
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Increase (decrease) in cash and cash equivalents                                                         |                                       |   | (3,801         | )      |                |   | (2,551 | )     
|Cash and cash equivalents at beginning of period                                                         |                                       |   | 19,909         |        |                |   | 16,118 |       
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Cash and cash equivalents at end of period                                                               |                                       | $ | 16,108         |        |                | $ | 13,567 |       
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Supplemental cash flow information:                                                                      |                                       |   |                |        |                |   |        |       
|Interest paid                                                                                            |                                       | $ | 18             |        |                | $ | 3,179  |       
|                                                                                                         |                                       |   |                |        |                |   |        |       
|Income tax paid                                                                                          |                                       | $ | 463            |        |                | $ | 19     |       
|                                                                                                         |                                       |   |                |        |                |   |        |       

See accompanying notes to condensed consolidated financial statements.

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Inveresk Research Group, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) and
Shareholders Equity (unaudited)
(In thousands, except share data)

|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |       |   | 
|-------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------- | ------- | ---------------- | ----- | ----------- | ---------- | --------- |  | ---------- | --- | ------------ | - | ----------------- | ------- | - | - | - | ------- | -------- | ----- | - | ------ | ----- | - | 
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         | Retained |       |   |        |      
|                                                                           |                                          |                                         |         | Total            |       | Common      |            | Par Value |  | Additional |     | Earnings     |   | Accumulated Other
|                                                                           |                                          |                                         |         | Shareholders    |       | Stock $0.01 |            | Paid-in   |  | Paid-in    |     | (Accumulated |   | Comprehensive    
|                                                                           |                                          |                                         |         | equity (deficit) |       | Par Value   |            | Capital   |  | Capital    |     | Deficit)     |   | Income (Loss)    
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                  
|Balance at December 31, 2002                                               |                                          | $                                       | 152,403 |                  |       |             | 36,004,777 |           |  | $          | 360 |              |   | $                 | 191,618 |   |   | $ | (33,793 | )        |       | $ | (5,782 | )    
|Issue of common stock                                                      |                                          |                                         | 66      |                  |       |             | 260,483    |           |  |            | 3   |              |   |                   | 63      |   |   |   |        |          |       |   |       |      
|Comprehensive income:                                                      |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|                                                                           | Foreign currency translation
adjustments |                                         |         | 2,901            |       |             |            |           |  |            |     |             |   |                   |         |  |   |   |         |         |       |   |        | 2,901 |  
|                                                                           |                                          | Net income for period to
March 31, 2003 |         |                  | 7,377 |             |            |           |  |            |     |              |  |                   |         |   |  |   |         |          | 7,377 |   |        |       |  | 
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|Comprehensive income                                                       |                                          |                                         | 10,278  |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|Balance at March 31, 2003                                                  |                                          | $                                       | 162,747 |                  |       |             | 36,265,260 |           |  | $          | 363 |              |   | $                 | 191,681 |   |   | $ | (26,416 | )        |       | $ | (2,881 | )    
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|Balance at December 30, 2001                                               |                                          | $                                       | (7,385  | )                |       |             | 23,469,088 |           |  | $          | 235 |              |   | $                 | 1,118   |   |   | $ | (5,784  | )        |       | $ | (2,954 | )    
|Issue of common stock                                                      |                                          |                                         | 64      |                  |       |             | 301,507    |           |  |            | 3   |              |   |                   | 61      |   |   |   |        |          |       |   |       |      
|Compensation expense in respect
of amendment and exercise of
stock options |                                          |                                         | 4,459   |                  |       |             |            |           |  |            |    |              |   |                   | 4,459   |   |   |   |        |          |       |   |       |      
|Comprehensive income (loss):                                               |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|                                                                           | Foreign currency translation
adjustments |                                         |         | 1,579            |       |             |            |           |  |            |     |             |   |                   |         |  |   |   |         |         |       |   |        | 1,579 |  
|                                                                           |                                          | Net income for period to
March 31, 2002 |         |                  | (414  | )           |            |           |  |            |     |              |  |                   |         |   |  |   |         |          | (414  | ) |        |       |  | 
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|Comprehensive income                                                       |                                          |                                         | 1,165   |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      
|Balance at March 31, 2002                                                  |                                          | $                                       | (1,697  | )                |       |             | 23,770,595 |           |  | $          | 238 |              |   | $                 | 5,638   |   |   | $ | (6,198  | )        |       | $ | (1,375 | )    
|                                                                           |                                          |                                         |         |                  |       |             |            |           |  |            |     |              |   |                   |         |   |   |   |         |          |       |   |        |      

See accompanying notes to condensed consolidated financial statements.

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Inveresk Research Group, Inc.

Notes to 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 financial statements should be read
in conjunction with the audited consolidated financial statements at and for
the year ended December 31, 2002 filed with the SEC on Form 10-K. The results
of operations for the quarter ended March 31, 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.

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

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

(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 11,000 in respect of the quarter ended
March 31, 2003 and the number of share options not reflected in Diluted EPS
because their exercise was conditional was 1,520,893 in respect of the quarter
ended March 31, 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 2002 using balances recorded as at March 31, 2002. These
reviews did not result in any changes to the carrying value of goodwill. A
further review will be completed during the second quarter of 2003 using
balances recorded as at March 31, 2003.

Other Recent Accounting Pronouncements

Accounting policy changes adopted on January 1, 2003

In June 2001, the Financial Accounting Standards Board (FASB) issued FAS 143
Accounting for Asset Retirement Obligations. FAS 143 requires the fair value
of a liability for asset retirement obligations to be recognized in the period
in which it is incurred if a reasonable estimate of the fair value can be made.
The associated asset retirement costs are capitalized as part of the carrying
amount of the related long-lived asset. FAS 143 was adopted by the Company on
January 1, 2003. The Company does not have any significant asset retirement
obligations and, accordingly, the adoption of FAS 143 did not have any material
impact on its results of operations or its financial position.

In June 2002, the FASB issued FAS 146, Accounting for Costs Associated with
Disposal or Exit Activities. This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and supersedes
Emerging Issues Task Force (EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring) (EITF 94-3). This
Statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. Under EITF
94-3, a liability for an exit cost as defined in EITF 94-3 was recognized at
the date of an entitys commitment to an exit plan. FAS 146 provides that an
entitys commitment to a plan, by itself, does not create a present obligation
to others that meets the definition of a liability. Therefore, FAS 146
eliminates the definition and requirements for recognition of exit costs in
EITF 94-3 until a liability has been incurred and establishes that fair value
is the objective for initial measurement of the liability. However, this
standard does not apply to costs associated with exit activities involving
entities acquired under business combinations or disposal activities covered
under FAS 144. The provisions of FAS 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. The Company adopted FAS
146 effective January 1, 2003. No such exit or disposal activities have been
initiated since this date.

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which clarifies disclosure and
recognition/measurement requirements related to certain guarantees. The
disclosure requirements are effective for the Company on January 1, 2003 and
the recognition/measurements requirements are effective on a prospective basis
for guarantees issued or modified after December 31, 2002. The application of
the requirements of FIN 45 did not have a material impact on our financial
position or results of operations.

In December 2002, the FASB issued FAS 148, Accounting for Stock-Based
Compensation  Transition and Disclosure which is an amendment of FAS 123,
Accounting for Stock-Based Compensation. FAS 148 provides alternative
methods of transition from the intrinsic value method of accounting for stock
options prescribed in APB Opinion No. 25, Accounting for Stock Issued to
Employees to the fair value-based method of accounting required by FAS 123.
The Company has decided not to move away from the intrinsic value method at
present.

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

4. Shareholders Equity

As described in Note 2, during the quarter ended June 30, 2002, we 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 1 and is as follows:

|                                                                                                                                                                    |  |                        |     |              |  |   |     | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --- | ------------ |  | - | --- | 
|                                                                                                                                                                    |  | March 31,              |     | December 31,
|                                                                                                                                                                    |  | 2003                   |     | 2002        
|                                                                                                                                                                    |  |                        |     |             
|                                                                                                                                                                    |  | (Dollars in thousands)
|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 36,265,260 and 36,004,777 at March 31, 2003 and December 30,
2002, respectively |  |                        | 363 |              |  |   | 360 | 
|                                                                                                                                                                    |  |                        |     |              |  |   |     | 
|                                                                                                                                                                    |  | $                      | 363 |              |  | $ | 360 | 
|                                                                                                                                                                    |  |                        |     |              |  |   |     | 

The increase of 260,483 shares during 2003 resulted from the exercise of
employee stock options to acquire 260,483 shares at an average exercise price
of $0.25 per share.

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

5. Credit Facilities and Debt

At March 31, 2003 the $62.5 million of bank debt drawn under our bank credit
facility is repayable in U.S. dollars and bears interest at the London
Inter-Bank Offered Rate (LIBOR) plus 1.25%. The total amount available to us
under this facility is $75 million. The borrowings of a subsidiary company
which had utilized this facility at March 31, 2003 were guaranteed by the
Company, the principal trading subsidiaries in the group and certain
intermediate holding companies. The first scheduled principal repayment under
the facility is due on June 30, 2004.

6. 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 prior to 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) under its
2002 Stock Option Plan on June 28, 2002. The replacement options had exercise
prices, exercise periods and other terms substantially the same as those that
were replaced. The data with respect to stock options set forth below gives
effect to the issuance of the replacement options as if they had been issued at
the same time as 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 original date of grant. At March 31, 2003 the number
of replacement options remaining outstanding was 1,025,434. The Company has
also issued options that vest in equal annual installments over the three years
following the date of grant. At March 31, 2003 the amounts of these options
outstanding are 35,000 shares at an option price of $13.00 per share, 1,007,730 at
an option price of $10.60 per share, 3,500 at an option price of $16.35 per
share and 7,500 at an option price of $20.14.

|                                 |  |                     |           |                |  |                |               |                  |  |   |       | 
|-------------------------------- |  | ------------------- | --------- | -------------- |  | -------------- | ------------- | ---------------- |  | - | ----- | 
|                                 |  | Shares of Common    |           |                |  |                |               |                  |  |  
|                                 |  | Stock Issuable Upon |           |                |  |                |               | Weighted Average
|                                 |  | Exercise            |           | Exercise Price |  | Exercise Price
|                                 |  |                     |           |                |  |               
|Outstanding at December 31, 2002 |  |                     | 2,366,217 |                |  | $              | 0.03 - $20.14 |                  |  | $ | 5.05  | 
|Granted                          |  |                     |          |                |  |                |              |                  |  |   |      | 
|Forfeited                        |  |                     | (26,570   | )              |  | $              | 10.60         |                  |  | $ | 10.60 | 
|Exercised                        |  |                     | (260,483  | )              |  | $              | 0.05 - $0.40  |                  |  | $ | 0.25  | 
|                                 |  |                     |           |                |  |                |               |                  |  |   |       | 
|Outstanding at March 31, 2003    |  |                     | 2,079,164 |                |  | $              | 0.03 - $20.14 |                  |  | $ | 5.58  | 
|                                 |  |                     |           |                |  |                |               |                  |  |   |       | 

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

The following table summarizes the exercise prices of the options outstanding
at March 31, 2003:

| |  |               |           |                |  |                  |  | 
| |  | ------------- | --------- | -------------- |  | ---------------- |  | 
| |  |               |           |                |  |                  |  | 
| |  | Shares of     |           |                |  |                 
| |  | Common
Stock  |           |                |  |                 
| |  | Issuable      |           |                |  |                 
| |  | Upon Exercise |           | Exercise Price
| |  |               |           |               
| |  |               | 329,891   |                |  | $0.03 per share 
| |  |               | 47,820    |                |  | $0.05 per share 
| |  |               | 41,211    |                |  | $0.19 per share 
| |  |               | 606,512   |                |  | $0.40 per share 
| |  |               | 1,007,730 |                |  | $10.60 per share
| |  |               | 35,000    |                |  | $13.00 per share
| |  |               | 3,500     |                |  | $16.35 per share
| |  |               | 7,500     |                |  | $20.14 per share
| |  |               |           |                |  |                  |  | 
| |  |               | 2,079,164 |                |  |                  |  | 
| |  |               |           |                |  |                  |  | 

The weighted average exercise price of our outstanding stock options was $5.58
per share at March 31, 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.

7. Income Taxes

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

|                                            |  |                        |         |              |  |   |         |  
|------------------------------------------- |  | ---------------------- | ------- | ------------ |  | - | ------- | -
|                                            |  | March 31,              |         | December 31,
|                                            |  | 2003                   |         | 2002        
|                                            |  |                        |         |             
|                                            |  | (Dollars in thousands)
|Deferred tax assets:                        |  |                        |         |              |  |   |         |  
|Defined benefit pension obligations         |  | $                      | 4,028   |              |  | $ | 3,987   |  
|Federal and state net operating losses      |  |                        | 15,053  |              |  |   | 14,893  |  
|Foreign net operating losses                |  |                        | 376     |              |  |   | 768     |  
|Interest rate swaps                         |  |                        | 427     |              |  |   | 329     |  
|U.K. share option deductions                |  |                        | 2,834   |              |  |   |        |  
|Other deferred tax assets                   |  |                        | 987     |              |  |   | 1,451   |  
|                                            |  |                        |         |              |  |   |         |  
|Total deferred tax assets                   |  |                        | 23,705  |              |  |   | 21,428  |  
|Valuation allowance for deferred tax assets |  |                        | (18,376 | )            |  |   | (15,830 | )
|                                            |  |                        |         |              |  |   |         |  
|Net deferred tax assets                     |  | $                      | 5,329   |              |  | $ | 5,598   |  
|Deferred tax liabilities                    |  |                        |         |              |  |   |         |  
|Property, plant and equipment               |  |                        | (27,211 | )            |  |   | (27,241 | )
|Other deferred tax liabilities              |  |                        | (700    | )            |  |   | (700    | )
|                                            |  |                        |         |              |  |   |         |  
|Net deferred tax liabilities                |  | $                      | (22,582 | )            |  | $ | (22,343 | )
|                                            |  |                        |         |              |  |   |         |  

In the first quarter of 2003, the Company recorded a deferred tax asset of
$2.834 million less a valuation allowance of $2.834 million
in respect of U.K. share
option deductions.

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

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

|                                         |  |                        |         |              |  |   |         |  
|---------------------------------------- |  | ---------------------- | ------- | ------------ |  | - | ------- | -
|                                         |  | March 31,              |         | December 31,
|                                         |  | 2003                   |         | 2002        
|                                         |  |                        |         |             
|                                         |  | (Dollars in thousands)
|Net current deferred tax liabilities     |  | $                      | (415    | )            |  | $ | (204    | )
|Net non current deferred tax liabilities |  |                        | (22,167 | )            |  |   | (22,139 | )
|                                         |  |                        |         |              |  |   |         |  
|Net deferred tax liabilities             |  | $                      | (22,582 | )            |  | $ | (22,343 | )
|                                         |  |                        |         |              |  |   |         |  

Our provision for income taxes is affected by various factors. We receive
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, we expect to receive tax deductions equal to the gains made by
United Kingdom employees on exercising their stock options in 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.

As a consequence of these factors, our 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:

|                                                                                                       |  |                        |        |                |  |   |        |  
|------------------------------------------------------------------------------------------------------ |  | ---------------------- | ------ | -------------- |  | - | ------ | -
|                                                                                                       |  | Quarter ended          |        | Quarter ended 
|                                                                                                       |  | March 31, 2003         |        | March 31, 2002
|                                                                                                       |  |                        |        |               
|                                                                                                       |  | (Dollars in thousands)
|U.S. Federal statutory rate                                                                            |  | $                      | 2,686  |                |  | $ | 426    |  
|Non deductible compensation expense on exercise of share options                                       |  |                        |       |                |  |   | 1,363  |  
|U.K. and Canadian Research and Development tax credits                                                 |  |                        | (1,761 | )              |  |   | (1,097 | )
|Difference
between foreign income taxed at U.S. Federal Statutory rates and foreign
income tax expense |  |                        | (276   | )              |  |   | 456    |  
|Increase in federal valuation allowance                                                                |  |                        | 196    |                |  |   | 140    |  
|Increase (reduction) in valuation allowance against losses of foreign subsidiaries                     |  |                        | (53    | )              |  |   | 453    |  
|U.K. share option deductions                                                                           |  |                        | (554   | )              |  |   |       |  
|Other                                                                                                  |  |                        | 57     |                |  |   | (111   | )
|                                                                                                       |  |                        |        |                |  |   |        |  
|                                                                                                       |  | $                      | 295    |                |  | $ | 1,630  |  
|                                                                                                       |  |                        |        |                |  |   |        |  

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

8. Segment Reporting

The Company is a full-service drug development services group serving the
pharmaceutical, biotechnology and medical device industries. Our 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:

|                                                                   |  |                        |         |          |  |       |         |  |  |   |         | 
|------------------------------------------------------------------ |  | ---------------------- | ------- | -------- |  | ----- | ------- |  |  | - | ------- | 
|                                                                   |  | Pre-clinical           |         | Clinical |  | Total
|                                                                   |  |                        |         |          |  |      
|Quarter Ended March 31, 2003                                       |  | (Dollars in thousands)
|Net service revenue from external customers                        |  | $                      | 36,329  |          |  | $     | 21,355  |  |  | $ | 57,684  | 
|Depreciation                                                       |  |                        | 2,381   |          |  |       | 568     |  |  |   | 2,949   | 
|Segment income                                                     |  |                        | 8,782   |          |  |       | 2,263   |  |  |   | 11,045  | 
|Segment assets at March 31, 2003                                   |  |                        | 299,137 |          |  |       | 180,919 |  |  |   | 480,056 | 
|Goodwill at March 31, 2003                                         |  |                        | 57,528  |          |  |       | 78,234  |  |  |   | 135,762 | 
|Long-lived assets at March 31, 2003                                |  |                        | 160,323 |          |  |       | 87,139  |  |  |   | 247,462 | 
|Expenditures for long-lived assets in quarter ended March 31, 2003 |  |                        | 3,899   |          |  |       | 403     |  |  |   | 4,302   | 
|Quarter Ended March 31, 2002                                       |  |                        |         |          |  |       |         |  |  |   |         | 
|Net service revenues from external customers                       |  | $                      | 34,479  |          |  | $     | 18,684  |  |  | $ | 53,163  | 
|Depreciation                                                       |  |                        | 1,766   |          |  |       | 580     |  |  |   | 2,346   | 
|Segment income                                                     |  |                        | 10,382  |          |  |       | 770     |  |  |   | 11,152  | 
|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 quarter ended March 31, 2002 |  |                        | 5,545   |          |  |       | 117     |  |  |   | 5,662   | 

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

|                                             |  |     |        |        |  |                        |        |       |  |   |         |  |  |   |         | 
|-------------------------------------------- |  | --- | ------ | ------ |  | ---------------------- | ------ | ----- |  | - | ------- |  |  | - | ------- | 
|                                             |  | USA |        | Canada |  | Europe                 |        | Total
|                                             |  |     |        |        |  |                        |        |      
|Quarter Ended March 31, 2003                 |  |     |        |        |  | (Dollars in thousands) |        |       |  |  
|Net service revenue from external customers  |  | $   | 9,362  |        |  | $                      | 20,377 |       |  | $ | 27,945  |  |  | $ | 57,684  | 
|Long-lived assets at March 31, 2003          |  |     | 36,090 |        |  |                        | 80,064 |       |  |   | 131,308 |  |  |   | 247,462 | 
|Quarter Ended March 31, 2002                 |  |     |        |        |  |                        |        |       |  |   |         |  |  |   |         | 
|Net service revenues from external customers |  | $   | 7,759  |        |  | $                      | 20,988 |       |  | $ | 24,416  |  |  | $ | 53,163  | 
|Long-lived assets at December 31, 2002       |  |     | 36,185 |        |  |                        | 75,052 |       |  |   | 132,376 |  |  |   | 243,613 | 

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Inveresk Research Group, Inc.

Notes to Condensed Consolidated Financial Statements

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

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.

|                                                                               |  |                        |          |                |  |   |          |  
|------------------------------------------------------------------------------ |  | ---------------------- | -------- | -------------- |  | - | -------- | -
|                                                                               |  | Quarter ended          |          | Quarter ended 
|                                                                               |  | March 31, 2003         |          | March 31, 2002
|                                                                               |  |                        |          |               
|                                                                               |  | (Dollars in thousands)
|Segment income per above segment analysis                                      |  | $                      | 11,045   |                |  | $ | 11,152   |  
|Corporate
overhead, including share offering expenses and compensation charges |  |                        | (2,474   | )              |  |   | (5,920   | )
|                                                                               |  |                        |          |                |  |   |          |  
|Income (loss) from operations per financial statements                         |  | $                      | 8,571    |                |  | $ | 5,232    |  
|                                                                               |  |                        |          |                |  |   |          |  
|Segment assets per above segment analysis                                      |  | $                      | 480,056  |                |  | $ | 467,303  |  
|Long lived assets not allocated to segments                                    |  |                        | 5        |                |  |   |         |  
|Deferred debt issue costs not allocated to segments                            |  |                        | 543      |                |  |   | 527      |  
|Elimination of inter segment balances                                          |  |                        | (143,504 | )              |  |   | (135,363 | )
|                                                                               |  |                        |          |                |  |   |          |  
|Assets per financial statements                                                |  | $                      | 337,100  |                |  | $ | 332,467  |  
|                                                                               |  |                        |          |                |  |   |          |  
|Long lived assets per above segment analysis                                   |  | $                      | 247,462  |                |  | $ | 243,613  |  
|Long lived assets not allocated to segments                                    |  |                        | 5        |                |  |   |         |  
|Deferred debt issue costs not allocated to segments                            |  |                        | 543      |                |  |   | 527      |  
|                                                                               |  |                        |          |                |  |   |          |  
|                                                                               |  | $                      | 248,010  |                |  | $ | 244,140  |  
|                                                                               |  |                        |          |                |  |   |          |  

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

9. Contingencies

From time to time we are subject to claims, suits and administrative
proceedings arising in the ordinary course of business. We do not expect that
any of the claims, suits or proceedings of which we have been notified will have
a material adverse effect upon our operations or financial condition.

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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.

The information set forth and discussed below for the quarters ended March 31,
2003 and March 31, 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 significant 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.

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 March 31, 2003 compared to the quarter ended March 31, 2002.

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|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |        |        |  
|------------------------------------------------------------------ | --------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ------- | -------------- | ------ | -------------- | ------- | ------ | ------ | -
|                                                                   |                                   |                                                                                                                                   |         | Quarter ended  |        | Quarter ended 
|                                                                   |                                   |                                                                                                                                   |         | March 31, 2003 |        | March 31, 2002
|                                                                   |                                   |                                                                                                                                   |         |                |        |               
|Net service revenue:                                               |                                   | (Dollars in thousands)                                                                                                           
|Pre-clinical                                                       |                                   | $                                                                                                                                 | 36,329  |                |        | $              | 34,479  |       
|Clinical                                                           |                                   |                                                                                                                                   | 21,355  |                |        |                | 18,684  |       
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   |                                   |                                                                                                                                   | 57,684  |                |        |                | 53,163  |       
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|Direct costs excluding depreciation:                               |                                   |                                                                                                                                   |         |                |        |                |         |       
|Pre-clinical                                                       |                                   |                                                                                                                                   | (16,824 | )              |        |                | (15,798 | )     
|Clinical                                                           |                                   |                                                                                                                                   | (12,454 | )              |        |                | (11,828 | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   |                                   |                                                                                                                                   | (29,278 | )              |        |                | (27,626 | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|Selling, general and administrative expenses:                      |                                   |                                                                                                                                   |         |                |        |                |         |       
|Pre-clinical                                                       |                                   |                                                                                                                                   | (8,342  | )              |        |                | (6,533  | )     
|Clinical                                                           |                                   |                                                                                                                                   | (6,070  | )              |        |                | (5,506  | )     
|Corporate overhead                                                 |                                   |                                                                                                                                   |         |                |        |                |         |       
|Compensation expense in respect of amendment and exercise of share |                                   |                                                                                                                                   |        |                |        |                | (4,545  | )     
|Share
offering expenses                                            |                                   |                                                                                                                                   | (658    | )              |        |                |        |       
|Other selling, general and administrative expenses                 |                                   |                                                                                                                                   | (1,816  | )              |        |                | (1,375  | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   |                                   |                                                                                                                                   | (16,886 | )              |        |                | (17,959 | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|Depreciation:                                                      |                                   |                                                                                                                                   |         |                |        |                |         |       
|Pre-clinical                                                       |                                   |                                                                                                                                   | (2,381  | )              |        |                | (1,766  | )     
|Clinical                                                           |                                   |                                                                                                                                   | (568    | )              |        |                | (580    | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   |                                   |                                                                                                                                   | (2,949  | )              |        |                | (2,346  | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   | Income from operations:           |                                                                                                                                   |         |                |        |                |         |        |       
|                                                                   | Pre-clinical                      |                                                                                                                                   |         | 8,782          |        |                |         | 10,382 |       
|                                                                   | Clinical                          |                                                                                                                                   |         | 2,263          |        |                |         | 770    |       
|                                                                   |                                   | Corporate overhead including compensation expense, share offering expenses and other selling, general and
administrative expenses |         |                | (2,474 | )              |         |        | (5,920 | )
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   |                                   |                                                                                                                                   | 8,571   |                |        |                | 5,232   |       
|Interest expense, net                                              |                                   |                                                                                                                                   | (899    | )              |        |                | (4,016  | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|                                                                   | Income (loss) before income taxes |                                                                                                                                   |         | 7,672          |        |                |         | 1,216  |       
|Provision for income taxes                                         |                                   |                                                                                                                                   | (295    | )              |        |                | (1,630  | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       
|Net income (loss)                                                  |                                   | $                                                                                                                                 | 7,377   |                |        | $              | (414    | )     
|                                                                   |                                   |                                                                                                                                   |         |                |        |                |         |       

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

|                                              |                                   |  |                |      |                |  |       |      |  
|--------------------------------------------- | --------------------------------- |  | -------------- | ---- | -------------- |  | ----- | ---- | -
|                                              |                                   |  | Quarter ended  |      | Quarter ended 
|                                              |                                   |  | March 31, 2003 |      | March 31, 2002
|                                              |                                   |  |                |      |               
|Net service revenue:                          |                                   |  |                |      |                |  |       |     
|Pre-clinical                                  |                                   |  | 100.0          | %    |                |  | 100.0 | %   
|Clinical                                      |                                   |  | 100.0          | %    |                |  | 100.0 | %   
|Total                                         |                                   |  | 100.0          | %    |                |  | 100.0 | %   
|Direct costs excluding depreciation:          |                                   |  |                |      |                |  |       |     
|Pre-clinical                                  |                                   |  | 46.3           | %    |                |  | 45.8  | %   
|Clinical                                      |                                   |  | 58.3           | %    |                |  | 63.3  | %   
|Total                                         |                                   |  | 50.8           | %    |                |  | 52.0  | %   
|Selling, general and administrative expenses: |                                   |  |                |      |                |  |       |     
|Pre-clinical                                  |                                   |  | 23.0           | %    |                |  | 18.9  | %   
|Clinical                                      |                                   |  | 28.4           | %    |                |  | 29.5  | %   
|Total (1)                                     |                                   |  | 29.3           | %    |                |  | 33.8  | %   
|Depreciation:                                 |                                   |  |                |      |                |  |       |     
|Pre-clinical                                  |                                   |  | 6.6            | %    |                |  | 5.1   | %   
|Clinical                                      |                                   |  | 2.7            | %    |                |  | 3.1   | %   
|Total                                         |                                   |  | 5.1            | %    |                |  | 4.4   | %   
|                                              | Income from operations:           |  |                |      |                |  |       |      |  
|                                              | Pre-clinical                      |  |                | 24.2 | %              |  |       | 30.1 | %
|                                              | Clinical                          |  |                | 10.6 | %              |  |       | 4.1  | %
|                                              | Total (1)                         |  |                | 14.9 | %              |  |       | 9.8  | %
|Interest expense, net                         |                                   |  | 1.6            | %    |                |  | 7.6   | %   
|                                              | Income (loss) before income taxes |  |                | 13.3 | %              |  |       | 2.3  | %



|(1) |  | Including corporate overhead.
|--- |  | -----------------------------

Critical Accounting Policies and Estimates

Our significant accounting policies are described in our consolidated financial
statements for the year ended December 31, 2002 included in Form 10-K. We
believe our most critical accounting policies include revenue recognition and
cost estimation on certain contracts for which we use a
percentage-of-completion method of accounting. In addition, the preparation of
consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. A
discussion of our critical accounting policies and areas where significant
estimates are made is set forth in the following paragraphs.

Revenue Recognition

The majority of our revenues are recorded from fixed-price contracts on a
percentage-of-completion basis based on assumptions regarding the estimated
cost of completion of the work. Each month costs are accumulated on each
project and compared to the budget for that particular project. This determines
the percentage-of-completion on the project. This percentage is multiplied by
the contract

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value to determine the amount of revenue that can be recognized. Each month or
each quarter, management reviews the budget on each project to determine if the
assumptions within the budget are still correct and budgets are adjusted
accordingly. As the work progresses, original estimates might be deemed
incorrect due to revisions in the scope of work or other factors and a contract
modification might be negotiated with the customer to cover additional costs.
We bear the risk of cost overruns. In the past, we have had to commit
unanticipated resources to complete projects, resulting in lower gross margins
on those projects. We might experience similar situations in the future. Should
our estimated costs on fixed price contracts prove to be low in comparison to
actual costs, future margins could be reduced, absent our ability to negotiate
a contract modification. We accumulate information on each project to refine
our bidding process. Historically, the majority of our estimates and
assumptions have been materially correct, but these estimates might not
continue to be accurate. Clients generally may terminate a study at any time,
which might cause unplanned periods of excess capacity and reduced revenues and
earnings. To offset the effects of early terminations of significant contracts,
we attempt to negotiate the payment of an early termination fee as part of the
original contract.

Reserve for Losses on Contracts

We have a reserve for losses on contracts which is split between Unbilled
Receivables, net and Accrued Expenses on our Consolidated Balance Sheets.
This reflects the fact that our revenue recognition process involves a
significant element of judgement in order to estimate the outcome of each
contract and that there may be instances where the estimated costs are not
covered by the estimated contract revenues. In such instances, we accrue for
the whole of the estimated loss on the contract as soon as the estimated loss
is identified. We believe our reserve for losses on contracts was adequate as
of March 31, 2003 based on our experience of performing contractual work for
clients. However, no assurances can be given that actual losses will not exceed
the recorded reserve.

Pensions

Certain of our U.K. based subsidiaries maintain a defined benefit pension plan.
This plan provides benefits to substantially all employees and former employees
of these subsidiaries in the U.K. On December 31, 2002 this plan was closed to
new entrants but it will continue to provide benefits to existing beneficiaries
(including existing employees who have not yet retired).

The net periodic pension charge for the defined benefit pension plan was $1.2
million for the quarter ended March 31, 2003 and $0.9 million for the quarter
ended March 31, 2002. These charges have been calculated based upon a number of
actuarial assumptions. These include an expected long-term rate of return on
our plan assets, expected long-term rates of compensation increase, price
inflation, expected rates of increase for pensions in payment and the discount
rate applicable to the plan liabilities.

We review these assumptions annually. At December 31, 2002 the assumptions were
as follows:

|                               |  |  |     |  
|------------------------------ |  |  | --- | -
|Expected return on plan assets |  |  | 7.5 | %
|Rate of compensation increase  |  |  | 3.5 | %
|Rate of increase in pensions   |  |  | 2.0 | %
|Price inflation                |  |  | 2.0 | %
|Discount rate                  |  |  | 5.6 | %

If results were to differ from these assumptions there would be an impact on
our pension liability.

Taxation

Our provision for income taxes is affected by various factors. We receive
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

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percentage of income before income
taxes. In addition, we expect to receive tax deductions equal to the
gains made by United Kingdom employees on exercising their stock options in 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.

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

The calculation of the provision for income taxes also requires us to make a
number of estimates, including the quantification of the level of costs that
will qualify for research and development tax credits in Canada and the United
Kingdom. Actual results could differ from those estimates.

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 have been expensed in the first quarter of 2003 and reduce the
first quarter net income by approximately $0.7 million. We do not expect such
costs to recur in the foreseeable future.

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 in the first quarter of 2003 was $0.2 million, $0.1 million
net of income taxes.
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(ii) |  | A Compensation Charge in Respect of Certain Outstanding Employee Stock
Options.We recorded a charge of $4.5 million for compensation expense on
the amendment and exercise of share options in the first quarter of 2002,
$4.4 million net of income taxes.                                                             

Exchange rate fluctuations

Our condensed consolidated financial statements are prepared in U.S. dollars.
Our principal businesses are based in the United States, United Kingdom and
Canada. Our United Kingdom 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:

|                             |  |                  |        |                  |  |  |        | 
|---------------------------- |  | ---------------- | ------ | ---------------- |  |  | ------ | 
|                             |  | U.S. Dollars per |        | U.S. Dollars per
|                             |  | Pound Sterling   |        | Canadian Dollar 
|                             |  |                  |        |                 
|Quarter ended March 31, 2003 |  |                  | 1.6025 |                  |  |  | 0.6628 | 
|Quarter ended March 31, 2002 |  |                  | 1.4263 |                  |  |  | 0.6274 | 

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The following table sets forth the percentage of our net service revenue
arising in the United Kingdom and Canada:

|                             |  |                |    |        |  |  |    |  
|---------------------------- |  | -------------- | -- | ------ |  |  | -- | -
|                             |  | United Kingdom |    | Canada
|                             |  |                |    |       
|Quarter ended March 31, 2003 |  |                | 48 | %      |  |  | 35 | %
|Quarter ended March 31, 2002 |  |                | 46 | %      |  |  | 39 | %

Our Canadian business invoices a significant proportion of its revenues in U.S.
dollars, although its costs are largely 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
was a loss of $1.5 million for the quarter ended March 31, 2003 and a gain of
$0.2 million for the quarter ended March 31, 2002.

Results of operations

First quarter 2003 compared to first quarter 2002

Net service revenue.Net service revenue in the first quarter of 2003 was
$57.7 million, an increase of $4.5 million or 9% over first quarter 2002 net
service revenue of $53.2 million.

Pre-clinical.Net service revenue in the first quarter of 2003 was $36.3
million, an increase of $1.8 million or 5% over revenues of $34.5 million in
the first quarter of 2002. Our pre-clinical operations in Europe continued to
experience strong demand for its services during the first quarter, both for
its safety evaluation services and its laboratory sciences services. Our
pre-clinical operations in Montreal experienced some volatility in business
flow in short-term toxicology work, resulting in an unusually high level of
project delays. This had an impact on the level of net service revenue
recorded by this operation in January and February. Net service revenue
recorded in March was higher than in January and February and marginally
exceeded budgeted expectations. As a result, for the first quarter of 2003 net
service revenue in our Canadian operations was 3% behind 2002. The volatility
experienced by our Montreal-based pre-clinical operations in the first two
months of this year appeared to result from cautious behavior on the part of
our clients leading to higher than usual levels of project delays. Management
believes that volatility is diminishing and that the near-term outlook for
demand for services at our Montreal-based pre-clinical operations has improved.
This belief is based on a number of factors, particularly overall activity
levels and continued strength in new business signings. Notwithstanding this
cautious optimism, management has taken and intends to continue taking a series
of actions to address this situation, including continuing to focus on the
changing business mix to emphasize services for which continuing demand appears
strong while carefully controlling discretionary expenditures with a view to
mitigating the impact on profits of any volatility. These measures will be
continued at least until the business prospects become more clear. Assuming
constant dollar exchange rates, net service revenues in the pre-clinical
segment decreased by 3% in the first quarter of 2003 compared with 2002.

Clinical.Net service revenue in the first quarter of 2003 was $21.4 million,
an increase of $2.7 million or 14% over revenues of $18.7 million in the first
quarter of 2002. The Phase II-IV business experienced a 12% increase in net
service revenue, generally reflecting higher activity levels in those
operations. Our Phase I clinic experienced 22% growth in net service revenue.
Assuming constant dollar exchange rates, net service revenue in the clinical
segment increased by 7% in the first quarter of 2003 compared to 2002.

Direct costs excluding depreciation.In the first quarter of 2003 direct costs
excluding depreciation totaled $29.3 million, an increase of $1.7 million, or
6%, from $27.6 million in the first quarter of

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2002. Direct costs excluding depreciation were 51% of net service revenue in
the first quarter of 2003 compared to 52% in the first quarter of 2002.

Pre-clinical.Direct costs excluding depreciation in the first quarter of 2003
were $16.8 million, an increase of $1.0 million, or 6%, over costs of $15.8
million in the first quarter of 2002. In the first quarter of 2003, direct
costs excluding depreciation were 46% of net service revenue, compared to 46%
in the first quarter of 2002. This constant margin was despite the volatility
in business flow in short-term toxicology experienced in the first quarter by
our Canadian pre-clinical operations, and the impact this had on net service
revenue, and reflects the tight cost controls in place in our operations and a
continuation of the favorable study mix that we saw in 2002.

Clinical.Direct costs excluding depreciation in the first quarter of 2003
were $12.5 million, an increase of $0.6 million, or 5% over costs of $11.8
million in the first quarter of 2002. In the first quarter of 2003 direct
costs excluding depreciation were 58% of net service revenues compared to 63%
in the first quarter of 2002 reflecting the continued focus of the clinical
segment on improved contract pricing and cost control.

Selling, general and administrative expenses.In the first quarter of 2003
selling, general and administrative expenses totaled $16.9 million, a decrease
of $1.1 million, or 6% from $18.0 million in the first quarter of 2002.
Selling, general and administrative expenses in the first quarter of 2003
included an expense of $0.7 million relating to the share offering
announced and withdrawn in the quarter. Selling, general and administrative expenses in the
first quarter of 2002 included an expense of $4.5 million relating to the
amendment and exercise of an employee share option. Before taking account of
these charges, selling general and administrative expenses represented 28% of
net service revenue in the first quarter of 2003, compared with 25% in the
first quarter of 2002. The increase is mainly attributable to the impact of
foreign exchange losses in the pre-clinical operations described below.

Pre-clinical.Selling, general and administrative costs in the first quarter
of 2003 were $8.3 million, an increase of $1.8 million or 28% from $6.5 million
in the first quarter of 2002. Selling, general and administrative costs were
23% of net service revenue in the first quarter of 2003, compared to 19% in the
first quarter of 2002. Selling, general, and administrative costs increased in
the first quarter of 2003 as a consequence of exchange losses during the period
totaling $1.5 million compared to exchange gains of $0.2 million in the first
quarter of 2002. Excluding the impact of exchange gains and losses, selling,
general and administrative costs in the pre-clinical business segment increased
by 2% in the first quarter of 2003 compared to the corresponding period in
2002.

Clinical.Selling, general and administrative costs in the first quarter of
2003 were $6.1 million, an increase of $0.6 million or 10% from $5.5 million in
the first quarter of 2002. Selling, general and administrative costs were 28%
of net service revenue in the first quarter of 2003 compared to 29% in the
first quarter of 2002.

Corporate overhead.Corporate overhead amounted to $1.8 million, an increase
of $0.4 million, or 32%, over the first quarter of 2002. The increase is due
primarily to additional costs associated with the corporate governance and
other regulatory costs of a publicly listed company.

Income from operations.In the first quarter of 2003 income from operations
amounted to $8.6 million, or 15% of net service revenue.
Excluding share offering expenses and the foreign exchange losses referred to
above, income from operations amounted to $10.7 million or 19% of net service
revenue. Income from operations in the first quarter of 2002 amounted to $9.6
million, or 18% of net service revenue, excluding expenses of $4.5 million
relating to the amendment and exercise of an employee share option and foreign
exchange translation gains in our Canadian operations.

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Pre-clinical.Income from operations decreased to $8.8 million in the first
quarter of 2003 compared to $10.4 million in the first quarter of 2002 for the
reasons set forth above. Excluding the impact of exchange gains and losses
discussed above, income from operations in the pre-clinical business segment
increased by 1% in the first quarter of 2003 compared to the corresponding
period in 2002.

Clinical.Income from operations was $2.3 million in the first quarter of 2003
compared to $0.8 million in the first quarter of 2002 for the reasons set forth
above.

Interest expense.Interest expense in the first quarter of 2003 was $0.9
million, a reduction of $3.1 million or 78% from $4.0 million in the first
quarter of 2002. In the first quarter of 2003 interest expense included
$0.7 million of net interest and amortization of deferred debt costs on our
bank facilities and cash resources. In the first quarter of 2003, our interest
expense includes a charge of $0.2 million, reflecting a mark-to-market
revaluation of the interest rate swaps we entered into during the third quarter
of 2002. The interest expense of $4.0 million in the first quarter of 2002
reflected the capital structure of the Group prior to our initial public
offering.

Provision for income taxes.Provision for income taxes was $0.3 million or 4%
of income before taxes in the first quarter of 2003. U.K. and Canadian research
and development tax credits reduced the provision for income taxes by $1.8
million or 23% of income before taxes. U.K. research and development tax credits
were introduced in 2002, and came into effect from April 1, 2002. The
Company recorded a reduction in tax expense amounting to
$0.6 million in the first 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 first quarter
of 2002 was $1.6 million on income before income taxes of $1.2 million. The
tax charge in 2002 represented 17% of income before taxes after adding back the
non-deductible expense of $4.5 million relating to the amendment and exercise
of an employee share option.

Liquidity and capital resources

Cash and cash equivalents totaled $16.1 million at March 31, 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 March 31, 2003, our bank credit facility provided us with an aggregate of up
to $75 million through $50 million of term loans in U.S. dollars and up to $25
million of multi-currency revolving loans. At March 31, 2003, we had drawn
$62.5 million in term and revolving loans under the facility. Of that amount,
$50 million has been drawn as a five year term loan with repayments commencing
in June 2004 and ending in June 2007, and $12.5 million was drawn pursuant to
the multi-currency revolver portion of the facility. The $12.5 million drawn
under the revolver is repayable on or prior to June 20, 2005. This facility
bears interest at floating, LIBOR-based rates. However, we have limited our
exposure to interest rate fluctuations on the loans drawn under this facility
through a series of interest rate swaps. Our 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. At March 31, 2003 we were in compliance with the covenants in
our credit facility.

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, 2002, June 30, 2002, March 31, 2002 and
December 30, 2001 together with the number of days billings that they represent
is set forth below.

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|                     |  |                |         |                   |  |                    |     |               |  |                |         |          |  |          |     |          |  |          |         |          |  |  |     |        |  |   |         |   |  |        |     |   |  |   |         |   |  |  |     |  
|-------------------- |  | -------------- | ------- | ----------------- |  | ------------------ | --- | ------------- |  | -------------- | ------- | -------- |  | -------- | --- | -------- |  | -------- | ------- | -------- |  |  | --- | ------ |  | - | ------- | - |  | ------ | --- | - |  | - | ------- | - |  |  | --- | -
|                     |  | March 31, 2003 |         | December 31, 2002 |  | September 30, 2002 |     | June 30, 2002 |  | March 31, 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 
|                     |  |                |         |                   |  |                    |     |               |  |                |         |          |  |          |     |          |  |          |         |         
|Accounts receivable  |  | $              | 36,289  |                   |  |                    | 57  |               |  | $              | 39,266  |          |  |          | 64  |          |  | $        | 34,184  |          |  |  | 57  |        |  | $ | 35,323  |   |  |        | 59  |   |  | $ | 32,258  |   |  |  | 55  |  
|Unbilled receivables |  |                | 24,371  |                   |  |                    | 38  |               |  |                | 20,706  |          |  |          | 34  |          |  |          | 23,679  |          |  |  | 39  |        |  |   | 22,354  |   |  |        | 37  |   |  |   | 21,354  |   |  |  | 37  |  
|                     |  |                |         |                   |  |                    |     |               |  |                |         |          |  |          |     |          |  |          |         |          |  |  |     |        |  |   |         |   |  |        |     |   |  |   |         |   |  |  |     |  
|Sub total            |  |                | 60,660  |                   |  |                    | 95  |               |  |                | 59,972  |          |  |          | 98  |          |  |          | 57,863  |          |  |  | 96  |        |  |   | 57,677  |   |  |        | 96  |   |  |   | 53,612  |   |  |  | 92  |  
|Advance billings     |  |                | (40,625 | )                 |  |                    | (64 | )             |  |                | (41,415 | )        |  |          | (68 | )        |  |          | (36,734 | )        |  |  | (61 | )      |  |   | (33,656 | ) |  |        | (56 | ) |  |   | (29,644 | ) |  |  | (51 | )
|                     |  |                |         |                   |  |                    |     |               |  |                |         |          |  |          |     |          |  |          |         |          |  |  |     |        |  |   |         |   |  |        |     |   |  |   |         |   |  |  |     |  
|                     |  | $              | 20,035  |                   |  |                    | 31  |               |  | $              | 18,557  |          |  |          | 30  |          |  | $        | 21,129  |          |  |  | 35  |        |  | $ | 24,021  |   |  |        | 40  |   |  | $ | 23,968  |   |  |  | 41  |  
|                     |  |                |         |                   |  |                    |     |               |  |                |         |          |  |          |     |          |  |          |         |          |  |  |     |        |  |   |         |   |  |        |     |   |  |   |         |   |  |  |     |  

The impact of the above balances on our cash flow from operations in the first
quarter of 2003 as well as in 2002 was as follows:

|                                                   |  |                        |        |                   |  |                    |        |               |  |                |       |   |  |   |        |   |  |   |        |  
|-------------------------------------------------- |  | ---------------------- | ------ | ----------------- |  | ------------------ | ------ | ------------- |  | -------------- | ----- | - |  | - | ------ | - |  | - | ------ | -
|                                                   |  | Quarter ended          |        | Quarter ended     |  | Quarter ended      |        | Quarter ended |  | Quarter ended 
|                                                   |  | March 31, 2003         |        | December 31, 2002 |  | September 30, 2002 |        | June 30, 2002 |  | March 31, 2002
|                                                   |  |                        |        |                   |  |                    |        |               |  |               
|Cash inflow (outflow)                              |  | (Dollars in thousands)
|Accounts
receivable including
unbilled receivables |  | $                      | (688   | )                 |  | $                  | (2,109 | )             |  | $              | (186  | ) |  | $ | (4,065 | ) |  | $ | (967   | )
|Advance billings                                   |  |                        | (790   | )                 |  |                    | 4,681  |               |  |                | 3,078 |   |  |   | 4,012  |   |  |   | (736   | )
|                                                   |  |                        |        |                   |  |                    |        |               |  |                |       |   |  |   |        |   |  |   |        |  
|                                                   |  | $                      | (1,478 | )                 |  | $                  | 2,572  |               |  | $              | 2,892 |   |  | $ | (53    | ) |  | $ | (1,703 | )
|                                                   |  |                        |        |                   |  |                    |        |               |  |                |       |   |  |   |        |   |  |   |        |  

The cash generated by operating activities was $4.8 million in the first
quarter 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 to this, the cash flows
relating to working capital movements are not a major factor affecting
liquidity.

Our scheduled debt repayments during 2003 are $0.2 million. We anticipate that
our operating cash flow, together with available borrowings under our 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.

First quarter 2003 compared to First quarter 2002

Cash flow from operations in the first quarter of 2003 was $4.8 million
compared to $5.0 million in the first quarter of 2002. Capital expenditures
were $4.3 million compared to $5.7 million in 2002. The decrease is mainly
attributable to our pre-clinical operations in Canada where capital expenditure
amounted to $1.7 million in the first quarter of 2003 compared to $4.3 million
in the first quarter 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. Planning for the next stage of
expansion at these facilities is now underway, although works have not yet
commenced. We are also expanding our United Kingdom pre-clinical operations
where capital expenditure amounting to $2.2 million in the first quarter of
2003 was $0.9 million more than the prior year.

In the first quarter of 2003 we repaid $5.0 million of our bank debt. In the
first quarter of 2002 we repaid $1.5 million of our bank debt.

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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 results from changes in LIBOR or the base
rates that are used to determine the applicable interest rates under our bank
credit facility. The bank facilities that we put in place at the time of our
initial public offering of shares in June 2002 bear interest at LIBOR plus
1.25%.

In the third quarter of 2002 we cancelled the interest rate hedges we used to
hedge the interest exposure on our bank borrowings prior to our initial public
offering. We subsequently entered into two new interest rate swap arrangements
to hedge the interest rate exposure on our current bank borrowings. The first
arrangement is an interest rate swap with a notional amount of $50 million,
which expires on October 5, 2005. Under this agreement the interest rate on $50
million of bank debt is fixed at 4.23%. The second arrangement is an interest
rate swap with a notional amount of $10 million, which expires on October 5,
2004. Under this arrangement the interest rate on $10 million of bank debt is
fixed at 3.77%.

As a consequence of these interest rate swaps, the current level of our bank
debt which is exposed to fluctuations in interest rates is $2.5 million. 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 less than $0.1 million. Our bank debt is all
denominated in U.S. dollars and thus fluctuations in exchange rates do not
impact these borrowings.

We have not designated these interest rate swaps as hedges 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 interest expense on our
bank borrowings will equate to the fixed rates of 4.23% on $50 million of debt
and 3.77% on $10 million of debt as mentioned above.

A significant proportion of the revenues of our Canadian business are 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 March 7, 2003 we
entered into a forward contract to sell $12 million and buy Can$17.7 million on
June 30, 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 last six months of 2002 offset by the effects of the forward contract, we
estimate that a hypothetical instantaneous 5% devaluation of the U.S. dollar
compared to the Canadian dollar would give rise to an exchange loss
in selling,
general and administrative expenses of approximately $0.2 million, before
income tax effects. On the same basis, we estimate that a hypothetical
instantaneous 5% devaluation of the Canadian dollar compared to the U.S. dollar
would give rise to an exchange gain in selling, general and administrative
expenses of approximately $0.2 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 United Kingdom and Canada and together they
accounted for 83% of our net service revenue in the first quarter of 2003.
Accordingly, fluctuations in the exchange

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rates between pounds sterling, Canadian dollars and U.S. dollars will affect
the translation of our results for financial reporting purposes.

We would also have exposure to foreign currency exchange rate fluctuations for
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.

Management does not believe that inflation in past years has had a significant
impact on our results from operations. 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.

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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 receives a report from the
Companys external auditors on a quarterly basis on 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, our external auditors. The internal audit team will
report regularly to the Audit Committee and senior management.

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Evaluation of disclosure controls and procedures

Based on their review of the disclosure controls and procedures as of March 31,
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 March 31,
2003.

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PART II OTHER INFORMATION




ITEM 1  LEGAL PROCEEDINGS

The information provided in Note 9 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.

We did not file any during the quarter ended March 31, 2003

(b)  Reports on Form 8-K.

We filed a Current Report on Form 8-K, dated February 18, 2003 including
our press release announcing our earnings information for the year ended
December 31, 2002.

We filed a Current Report on Form 8-K, dated February 19, 2003 including
our press release announcing that we filed with the SEC on February 18, 2003 a
registration statement for a proposed offering of up to 10,350,000 shares of
common stock.

We filed a Current Report on Form 8-K, dated March 3, 2003 providing
certain information with respect to our first quarter 2003 financial
information.

We filed a Current Report on Form 8-K, dated March 7, 2003 announcing the
withdrawal of the registration statement filed with the SEC on February 18,
2003 for a proposed offering of up to 10,350,000 shares of common stock.

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SIGNATURES

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

|      |  |             |  |                                                  |  |                        
|----- |  | ----------- |  | ------------------------------------------------ |  | -----------------------
|Date: |  | May 2, 2003 |  | INVERESK RESEARCH GROUP, INC.                   
|      |  |             |  |                                                  |  |                        
|      |  |             |  | By:                                              |  | /s/ D. J. Paul E. Cowan
|      |  |             |  |                                                  |  |                        
|      |  |             |  | D.J. Paul E. Cowan                              
|      |  |             |  | Chief Financial Officer, Treasurer and Secretary

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CERTIFICATIONS

I, Walter S. Nimmo, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Inveresk Research
Group, Inc;                                                                                                                                                                                                                                                                                                   
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                        
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations, and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                          
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                             
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                    
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                      
|  
|   |  | c) presented in this quarterly our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                                                                                                                   
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):                                                                                                                                    
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                     
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                             
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|      |  |             |  |                         
|----- |  | ----------- |  | ------------------------
|Date: |  | May 2, 2003 |  | /s/ Walter S. Nimmo     
|      |  |             |  |                         
|      |  |             |  | Chief Executive Officer,
|      |  |             |  | President and Director  

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##### Table of Contents



I, D. J. Paul E. Cowan, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Inveresk Research
Group, Inc;                                                                                                                                                                                                                                                                                                   
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;                                                        
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations, and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                                                                          
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                                                                             
|  
|   |  | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;                                                                                    
|  
|   |  | b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                                                                                                      
|  
|   |  | c) presented in this quarterly our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;                                                                                                                                                                                                                   
|  
|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent function):                                                                                                                                    
|  
|   |  | a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and                                                                                     
|  
|   |  | b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal
controls; and                                                                                                                                                                                                                             
|  
|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

|      |  |             |  |                         
|----- |  | ----------- |  | ------------------------
|Date: |  | May 2, 2003 |  | /s/ D. J. Paul E. Cowan 
|      |  |             |  |                         
|      |  |             |  | Chief Financial Officer,
|      |  |             |  | Secretary and Treasurer 

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OFFICERS CERTIFICATE

The undersigned officers of Inveresk Research Group, Inc., a Delaware
corporation (the Company), hereby certify that (i) the Companys Form 10-Q
for the quarter ended March 31, 2003 fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 and (ii) the information
contained in the Companys Form 10-Q for the quarter ended March 31, 2003
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

|      |  |             |  |     |  |                         
|----- |  | ----------- |  | --- |  | ------------------------
|Date: |  | May 2, 2003 |  | /s/ |  | Walter S. Nimmo         
|      |  |             |  |     |  |                         
|      |  |             |  |     |  | Chief Executive Officer,
|      |  |             |  |     |  | President and Director  
|      |  |             |  |     |  |                         
|Date: |  | May 2, 2003 |  | /s/ |  | D. J. Paul E. Cowan     
|      |  |             |  |     |  |                         
|      |  |             |  |     |  | Chief Financial Officer,
|      |  |             |  |     |  | Secretary and Treasurer 

-31-