UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





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


ACT
OF 1934





For the
fiscal year ended December 31, 2008





OR





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


EXCHANGE ACT OF
1934





For the
transition period from _____________to _____________





Commission
file number: 0-30318





INVENTIV
HEALTH, INC.


(Exact
Name of Registrant as Specified in its Charter)





Delaware
              (State
      or Other Jurisdiction No. of Incorporation or
Organization)
            52-2181734
              (I.R.S.
      Employer Identification No.)





200
Cottontail Lane Vantage Court North; Somerset, New Jersey 08873


(Address
of Principal Executive Offices) (Zip Code)





Registrant’s
telephone number, including area code:  (800) 416-0555





Securities
registered pursuant to Section 12(b) of the Act:





Securities
registered pursuant to Section 12(g) of the Act:  Common
Stock


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [] No [X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.  Yes [  ] No
[X]





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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company..  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):





Large
accelerated filer
[X]                                                      
Accelerated filer
[  ]                                           Non-accelerated
filer
[  ]                                           Smaller
reporting company [  ]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes [_] No [X]




Based on
the closing sale price on the Nasdaq Global Select Market as of the last
business day of the registrant’s most recently completed second fiscal quarter,
the aggregate market value of the voting stock held by non affiliates of the
registrant was approximately $820,076,630.  For the purposes of this
calculation, shares owned by officers, directors and 10% shareholders known to
the registrant have been deemed to be owned by affiliates. This determination of
affiliate status is not a determination for other purposes.





As of
February 13, 2009, there were 33,362,913 outstanding shares of the
registrant's common stock.





DOCUMENTS
INCORPORATED BY REFERENCE


Certain
portions of the registrant's annual report to security holders for the fiscal
year ended December 31, 2008, are incorporated by reference into Part II of this
report.  Certain portions of the Registrant's Definitive Proxy
Statement to be filed with the Commission for use in connection with the 2009
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Form 10-K.







TABLE
OF CONTENTS





Item
            DescriptionPART
      I1
            Business1A
            Risk Factors1B
            Unresolved Staff Comments2
            Properties3
            Legal Proceedings4
            Submission of Matters to a Vote of Securities
      HoldersPART
      II5
            Market for the Registrant’s Common Equity, Related
      Stockholder Matters and Issuer Purchases of Equity
      Securities6
            Selected Financial Data7
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations7A
            Quantitative and Qualitative Disclosures About Market
      Risk8
            Financial Statements and Supplementary
      Data9
            Changes in and Disagreements with Accountants on
      Accounting and Financial Disclosure9A
            Controls and Procedures9B
            Other InformationPART
      III10
            Directors, Executive Officers and Corporate
      Governance11
            Executive Compensation12
            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters13
            Certain Relationships and Related Transactions, and Director
      Independence14
            Principal Accounting Fees and ServicesPART
      IV15
            Exhibits and Financial Statement
      Schedules









CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE





This
report contains “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  These statements concern expectations, beliefs, projections,
future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical
facts.  Specifically, this report contains forward-looking statements
regarding, among other things:





·
            our
      business strategy, outlook, objectives, plans, intentions and
      goals;


·
            our
      estimates regarding our liquidity, capital expenditures and sources of
      both, and our ability to fund our operations and planned capital
      expenditures for the foreseeable future;·
            our
      belief that our growth and success will depend on our ability to continue
      to enhance the quality of our existing services, introduce new services on
      a timely and cost-effective basis, integrate new services with existing
      services, increase penetration with existing customers, recruit, motivate
      and retain qualified personnel and economically train existing sales
      representatives and recruit new sales representatives;·
            our
      expectations regarding our pursuit of additional debt or equity sources to
      finance our internal growth initiatives or acquisitions;·
            our
      belief that there are ample opportunities for cross-selling to our
      existing clients;·
            our
      anticipation that it will be necessary to continue to select, invest in
      and develop new and enhanced technology and end-user databases on a timely
      basis in the future in order to maintain our
    competitiveness;·
            our
      expectations regarding the impact of our acquisitions, joint ventures and
      partnerships;·
            our
      expectations regarding the impact of the adoption of certain accounting
      standards;·
            our
      expectations regarding the potential impact of pending litigation;
      and·
            our
      expectations regarding the liquidation of the Columbia Strategic Cash
      Portfolio.





















These
forward-looking statements reflect our current views about future events and are
subject to risks, uncertainties and assumptions. We wish to caution readers that
certain important factors may have affected and could in the future affect our
actual results and could cause actual results to differ significantly from those
expressed in any forward-looking statement. The most important factors that
could prevent us from achieving our goals, and cause the assumptions underlying
forward-looking statements and the actual results to differ materially from
those expressed in or implied by those forward-looking statements include, but
are not limited to, the following:





·
            the
      potential impact of a recessionary environment on our customers and
      business;


·
            our
      ability to sufficiently increase our revenues and maintain or decrease
      expenses and cash capital expenditures to permit us to fund our
      operations;


·
            our
      ability to continue to comply with the covenants and terms of our credit
      facility and to access sufficient capital under our credit agreement or
      from other sources of debt or equity financing to fund our
      operations;


·
            the
      impact of any default by any of our credit providers or swap
      counterparties;


·
            our
      ability to accurately forecast costs to be incurred in providing services
      under fixed price contracts, including with respect to the leasing costs
      for our fleet vehicles and related fuel
costs;


·
            the possibility
      that customer agreements will be terminated or not
  renewed;·
            our
      ability to grow our existing client relationships, obtain new clients and
      cross-sell our services;·
            our
      ability to successfully operate new lines of business;·
            our
      ability to manage our infrastructure and resources to support our
      growth;·
            our
      ability to successfully identify new businesses to acquire, conclude
      acquisition negotiations and integrate the acquired businesses into our
      operations;·
            any
      disruptions, impairments, or malfunctions affecting software as well as
      excessive costs or delays that may adversely impact our continued
      investment in and development of software.·
            the
      potential impact of government regulation on us and on our clients
      base;·
            our
      ability to comply with all applicable laws as well as our ability to
      successfully implement from a timing and cost perspective any changes in
      applicable laws;·
            our
      ability to recruit, motivate and retain qualified personnel, including
      sales representatives and clinical staff;·
            our
      ability to maintain technological advantages in a variety of functional
      areas, including sales force automation, electronic claims surveillance
      and patient compliance·
            the
      actual impact of the adoption of certain accounting
    standards;·
            the
      actual outcome of pending litigation;·
            any
      potential impairment of intangible assets;·
            changes
      in trends in the pharmaceutical industry or in pharmaceutical outsourcing;
      and


·
            our
      ability to determine the actual time at which the liquidation of our
      Columbia Strategic Cash Portfolio will be completed or the total losses
      that we will actually realize from that investment
      vehicle.



































Investors
should carefully consider these risk factors and the additional risk factors
outlined in more detail in Item 1A, Risk Factors, in this
report.








PART I





Item 1.  Business.





Overview





inVentiv
Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
leading provider of value-added services to the pharmaceutical, life sciences
and healthcare industries. We support a broad range of clinical development,
communications and commercialization activities that are critical to our
customers' ability to complete the development of new drug products and medical
devices and successfully commercialize them.  In addition, we provide
medical cost containment services to payors in our patient outcomes
business.  Our goal is to assist our customers in meeting their
objectives by providing our services in each of our operational areas on a
flexible and cost-effective basis. We provide services to over 350 client
organizations, including all top 20 global pharmaceutical companies, numerous
emerging and specialty biotechnology companies and payors.





Our
service offerings reflect the changing needs of our clients as their products
move through the late-stage development and regulatory approval processes and
into product launch and then throughout the product lifecycle. We have
established expertise and leadership in providing the services our clients
require at each of these stages of product development and commercialization and
seek to address their outsourced service needs on a comprehensive basis
throughout the product life cycle.





The
success of our business as a whole, and of our inVentiv Clinical, inVentiv
Commercial and inVentiv Patient Outcomes segments in particular, is related
significantly to the level of pharmaceutical spending and the portion of that
spending which pharmaceutical companies outsource services that have
traditionally been performed internally by fully integrated
manufacturers.  We believe that our business has been positively
affected by a trend of large pharmaceutical manufacturers toward utilizing
outsourcing arrangements as a means of controlling variable unit cost and
increasing flexibility.  We also believe that the significant
percentage of New Drug Application (“NDA”) and New Molecular Entity (“NME”)
approvals attributable to small and mid-tier pharmaceutical and biotechnology
companies presents an opportunity for companies providing outsourced services
because these companies often prefer to employ high-quality, third party service
providers (either directly or in co-promotion situations with pharmaceutical
partners) to effect critical late-stage developmental and commercialization
functions.  We therefore target a broad spectrum of companies within
the pharmaceutical industry in seeking to develop business
opportunities.  We are also engaged in a continuous process of
expanding and refining our service offerings, and pursuing cross-servicing
opportunities within and across our business segments, in order to respond more
flexibly to the market and address broader revenue opportunities with existing
and new clients.





Our
businesses have generated strong revenue growth for the past several
years.  Our internal revenue growth reflects our strong track record
in winning new business, which in turn is enhanced by our pursuit of
cross-servicing opportunities within and across our business
segments.  Furthermore, although our revenues are generally received
under contracts with limited terms and that can be terminated at the client’s
option on short notice, we have been successful historically in obtaining
increasing amounts of repeat business from many of our clients and in expanding
the scope of the services we provide to them and thereby sustaining multi-year
relationships with many of our clients.  Acquisitions have contributed
meaningfully to our annual growth over the last few years.





Business
Segments





We have
organized our businesses into four operating segments:  inVentiv
Clinical, inVentiv Communications, inVentiv Commercial and inVentiv Patient
Outcomes. Each of our operating segments is composed of multiple businesses that
are referred to as “business units” throughout this report.  We apply
aggregation criteria consistent with definitions under the related guidance in
Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosures about Segments of an
Enterprise and Related Information as well as SFAS 142, Goodwill and Other Intangible
Assets, for purposes of aggregating business units.  Financial
information about these segments for fiscal years 2008, 2007 and 2006 is
contained in “Note 19 – Segment Information” of the “Notes to Consolidated
Financial Statements” included in this Form 10-k and is incorporated herein by
this reference.  The following is a detailed description of our four
operating segments:





inVentiv Clinical





inVentiv
Clinical provides professional resourcing and services primarily to the
pharmaceutical, biotech and device companies.  Professional resourcing
services include providing clinical research professionals in support of
clients’ research efforts, including permanent placement, clinical staffing and
strategic resource teams.  In addition, inVentiv Clinical provides its
clinical research clients with outsourced functional services in various areas,
including clinical operations, medical affairs and biometrics/data
management.  inVentiv Clinical consists of the Smith Hanley group of
companies (which includes Smith Hanley Associates (“SHA”), Smith Hanley
Consulting Group (“SHCG”) and MedFocus), HHI Clinical & Statistical Research
Services (“HHI”), and Synergos, LLP (“Synergos”).  inVentiv Clinical's
service offerings include:





·
            Clinical Staffing and
      Recruiting.  Through SHCG and MedFocus, we meet the
      staffing and recruiting needs of more than 150 pharmaceutical and
      biotechnology clients, including 16 of the top 20 global pharmaceutical
      companies, for SASTM programmers, data managers, statisticians, monitors
      and clinical research associates, study and project managers, clinical
      trials coordinators, safety/regulatory staff, medical writers, scientific
      and laboratory staff and other clinical personnel.  Our clinical
      staffing services provide our clients with flexibility in managing and
      executing clinical trials internally and allow them to avoid the expense
      of hiring and training a full staff internally.   We draw
      from a database of over 40,000 candidates that is continually expanded
      through new recruiting techniques that include search engines, job fairs,
      conferences and referral bonuses.





·
            Functional
      Outsourcing.  We provide a variety of functional
      outsourcing services, including data management and statistical analysis
      services through HHI, through our dedicated facilities in Indiana and
      Pennsylvania, and monitoring and project management services through
      Synergos.  We have performed these services for over 150
      clinical trials.  Our functional outsourcing services complement
      SHCG and MedFocus’s contract staffing pool with
      statistically-knowledgeable physicians and medically-knowledgeable
      statisticians to deliver well-organized research used in clinical trial
      and clinical program design, data management, data analysis, double data
      entry and validation, reporting and standard operating procedures writing.
      This bi-disciplinary expertise enables us to set up, manage and present
      data to help pharmaceutical clients move from the preclinical stage
      through the drug approval process and into post-commercialization
      oversight.





·
            Executive
      Placement.  We provide executive placement services
      through SHA, which is one of the most experienced and respected executive
      placement organizations focused primarily on statisticians and
      data-related functions.





inVentiv Communications





inVentiv
Communications provides services related to pharmaceutical advertising,
branding, public relations, interactive communications and physician
education.  This segment includes  inVentiv Communications,
Inc. (formerly known as inChord Communications, Inc.), Jeffrey Simbrow
Associates (“JSAI”), ignite Health and Incendia Health Studios (collectively,
“Ignite”) (acquired in March 2007), Chamberlain Communications Group, Inc.
(“Chamberlain”) (acquired in March 2007), Addison Whitney (acquired in June
2007) and Chandler Chicco Agency (“CCA”) (acquired in July 2007):





·
            Advertising and
      Communications Support.  Advertising and communications
      support services are delivered to pharmaceutical industry clients through
      six separate agencies:





·
            GSW Worldwide
      and Palio
      are full-service agencies that create marketing solutions through
      advertising, public relations, market access strategies, media and market
      research.  GSW Worldwide has established international reach
      through a network of twelve international affiliate
      relationships.


·
            Navicor
      specializes in oncology and immunology
  expertise.


·
            Stonefly
      conducts advertising, marketing, and public relations services focused
      primarily on biotechnology and emerging pharmaceutical
      companies.


·
            JSAI is a
      leading healthcare marketing and communications agency in
      Canada.


·
            Angela Liedler
      GmbH (“Liedler”), is a leading healthcare marketing and
      communications agency in Germany.





·
            Public
      Relations. Public relations services are delivered to
      pharmaceutical industry clients through two separate
    agencies:





·
            CCA is a full
      service public relations firm that serves the healthcare sector by
      building and promoting brand value, providing leadership, protecting brand
      value and furthering public affairs agendas.  CCA operates
      through three US-based and two Europe-based offices, and has established
      broad international reach through a network of fifteen international
      affiliate relationships.


·
            Chamberlainis
      also a full-service public relations firm dedicated to creating enduring
      agendas that drive understanding and meaning for clients’ healthcare
      brands.





·
            Branding.  Addison
      Whitney focuses on creating unique corporate and product brands, and
      specializes in building powerful branding solutions for clients through
      unique and disciplined processes. Addison Whitney offers a range of
      capabilities to create, renew and strengthen brands, including an
      expertise in generating names that reflect the brand's identity and meet
      regulatory requirements.





·
            Interactive
      Communications.Ignite specializes in medical advertising and interactive
      communications targeting patients, caregivers and healthcare
      professionals.





·
            Patient and Physician
      education.  Cadent Medical Communications, Selva
      Communications and Center for Biomedical Continuing Education (“CBCE”)
      provide education and communications services to build advocacy for
      pharmaceutical and biotech brands.  CBCE is an accredited
      provider of continuing patient and physician education for
      physicians.





inVentiv Commercial





inVentiv Commercial provides a wide
range of commercialization support services, organized principally into two
subdivisions:





·
            inVentiv Selling
      Solutions.  inVentiv Selling Solutions encompasses the
      following group of companies that mainly relate to sales teams and sales
      support services:





·
            inVentiv Pharma Teams:
      inVentiv Pharma Teams provides outsourced product commercialization
      programs for prescription pharmaceutical and other life sciences
      products.  inVentiv Pharma Teams maintain and operate one of the
      largest pharmaceutical outsourced sales organizations in the United
      States, including systems, facilities, and support services necessary to
      recruit, train and deploy customized, full-service targeted sales
      forces.Life
      sciences companies, particularly pharmaceutical manufacturers, have
      traditionally relied upon product detailing as the primary means of
      influencing prescription writing patterns and promoting their products.
      Product detailing consists of a one-on-one meeting in a physician’s office
      where a sales representative reviews the medical profile of a product’s
      Food and Drug Administration approved indications.  In order to
      engage in an effective dialogue, the salesperson must be well educated and
      highly trained.  Recruiting qualified personnel and providing
      client and selling skills are both core competencies of inVentiv Selling
      Solutions.




·
            Recruiting: To
      accomplish a coordinated recruiting effort, our regionally based
      recruiters coordinate through a national recruitment office that locates
      and hires potential sales representatives. Our in-house recruiting team
      adheres to selective hiring criteria and conducts detailed evaluations to
      ensure high quality of representation for our clients. inVentiv Selling
      Solutions’ recruiters maintain a fully automated database of qualified
      candidates for immediate hiring opportunities, and our website offers an
      online application for employment. We offer these recruitment services to
      clients as part of an integrated sales force recruitment, training and
      management program, as well as on a standalone basis.  inVentiv
      Selling Solutions hires a mix of full-time and flex-time representatives
      in order to accommodate the detailing level required by clients and
      enhance cost efficiency.





·
            Professional Development and
      Training: We have one of the largest dedicated training facilities
      of its type in the U.S.  Topics such as sample accountability,
      negotiation tactics, personal writing skills, integrity selling, time and
      territory management, team productivity and pharma-manager leadership are
      covered extensively in order to prepare the representatives for their
      interactions with medical professionals.  Our trainers have
      access to proprietary information about the prescription writing behavior
      of physicians.  We provide this training both for our own and
      for our clients' sales forces and training and development services are
      essential to maintaining and building our relationships with
      pharmaceutical companies.  Our training efforts are further
      enhanced through a proprietary voice-recognition software platform
      enabling remote training practices. These strengths are widely recognized
      as distinguishing inVentiv Selling Solutions from its
      competitors.





·
            Regulatory Compliance
      Services: Through our PRS business unit, we provide independent
      oversight of Prescription Drug Marketing Act (“PDMA”) and Office of
      Inspector General compliance to clients and to internal inVentiv Pharma
      Teams.  Our expertise in PDMA compliance issues is nationally
      recognized.  We provide a number of processes, systems and
      services to help clients comply with federal and state regulations
      specific to sample accountability, including auditing of sample
      accountability compliance by field force professionals and “whole systems”
      sample accountability assessments.  We also license software
      solutions for the implementation of sophisticated PDMA compliance
      strategies.





·
            Non-Personal Promotion:
      We provide warehousing, assembly, mailing, fulfillment, teleservices and
      eServices through our Promotech business unit, which was
      augmented with the acquisition of Promotech Logistics Solutions LLC
      ("PLS") in December 2008.  Promotech operates east coast
      and west coast divisions and maintains three facilities:  a
      facility in New Jersey with approximately 130,000 square feet and two
      facilities in Colorado totaling approximately 190,000 square
      feet.  Each of these facilities includes an environmentally
      controlled, FDA and Drug Enforcement Agency (“DEA”) certified and PDMA
      compliant warehouse and office space.  The west coast facility
      includes a 64-station call center.





·
            Virtual Event Services:
      MedConference is a leading provider of live and on-demand virtual event
      services to the pharmaceutical industry.  MedConference’s
      flagship service, MedConferenceLiveTM, creates and manages live and
      on-demand web events for the healthcare industry. MedConference’s turnkey
      package of reliable technology and full-support services provides a
      flexible, easy-to-use online communication platform for pharmaceutical
      companies, medical education providers, professional medical associations
      and others who need to deliver timely information to physicians and
      healthcare practitioners.





·
            Sales Force Automation/Data
      Analysis:OurTotal Data
      Solutions (“TDS”) business unit collects and analyzes sales force level
      data necessary to make marketing resource allocation decisions. Sales
      representatives are equipped with an industry-leading palm-top and laptop
      sales force automation system developed for inVentiv Selling
      Solutions.  This system enables our sales representatives to
      rapidly collect sales call and physician profiling information while in
      the field, which is compiled daily in a central data storage server. Our
      information processing system allows sales management teams to analyze
      data regularly, compare the results with targeted initiatives and
      historical data and make necessary adjustments to the sales
      strategy.  TDS supports inVentiv Pharma Teams’ needs and also
      offers this sales force automation system on a standalone basis to
      clients.





·
            inVentiv Strategy and
      Analytics. inVentiv Strategy and Analytics encompasses our
      consulting offerings focused on strategy, analytics, market research,
      managed care and commercialization
planning:





·
            Planning and Analytics:
      Health Products Research (“HPR”) is a leader in the development and
      implementation of advanced data analysis and market research technologies
      to support client decision making within pharmaceutical and biotechnology
      companies. HPR combines leading edge technology with advanced statistical
      techniques and empirical research to deliver strategic and tactical
      solutions that help pharmaceutical executives maximize their return on
      investment for promotional resources.  HPR’s range of services
      includes a variety of quantitative and other tools that supports HPR’s
      clients in optimizing and continually improving the effectiveness of
      deployed promotional and sales force
resources.





·
            Strategic
      Consulting:  Strategyx, acquired in June 2007, is a
      strategy consulting firm, focused on delivering effective and innovative
      approaches to participating in the emerging, managed healthcare
      marketplace. Strategyx specializes in three practice areas: managed
      markets strategy, product strategy and organization
  design.





·
            Product Access and Managed
      Market Support:  Ventiv Access Group provides the
      strategy and tactics to increase access to clients' products in managed
      markets, trade distribution channels, Medicaid, Medicare and other
      State and Federal outlets.





·
            Consulting and Contract
      Marketing:  Creative Healthcare Solutions, LLC (“CHS”) is
      a leading provider of contract marketing services for pharmaceutical and
      biotech companies.  CHS supports product teams by adding
      expertise in brand management, new product planning, market research and
      business development.





inVentiv Patient Outcomes





inVentiv Patient Outcomes provides
services related to patient pharmaceutical compliance programs, patient support
programs, clinical educator teams, medical cost containment and consulting
solutions and patient relationship marketing.  This segment includes
Adheris, Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
Institute, AWAC (acquired in July 2007) and Patient Marketing Group, LLC (“PMG”)
(acquired in August 2008).





·
            Patient Pharmaceutical
      Compliance Programs. Through Adheris, we provide a variety of
      patient support services with a proven history of improving medication
      adherence across nearly every chronic therapeutic category.  By
      partnering with pharmacies around the country, Adheris’ programs build on
      the pharmacist-patient relationship and trust with personalized letters
      from pharmacists themselves.  Adheris programs comply with the
      patient privacy provisions of the Health Insurance Portability and
      Accountability Act of 1996, (“HIPAA”), and its OnSyte(TM) technology
      allows retail pharmacies to help patients stay on therapy while protecting
      their confidentiality and private medical
  information.





·
            Patient Support
      Programs.We offer patient
      assistance programs and reimbursement counseling through our Franklin
      business unit.  Franklin has established a leadership position
      in providing reliable and innovative patient assistance programs,
      reimbursement counseling, web-based programs, missions programs and
      proactive fulfillment.  Franklin also provides a variety of
      additional patient support services to clients, including support in
      Medicare Part D education.





·
            ClinicalNurse
      Educators, On-Call
      Specialists, and Medical Science Liaison Programs: The
      Therapeutics Institute offers highly qualified clinical and scientific
      professionals to build advocacy, educate healthcare professionals and
      sensitize markets to novel and exciting
  therapies.





·
            Medical Cost
      Containment and Consulting Solutions.  AWAC is a leading
      provider of proprietary IT-driven cost containment and medical consulting
      solutions to third party administrators, ERISA self-funded plans, fully
      insured plans, employer groups, managing general underwriters and
      insurance carriers.  AWAC provides unique data integration and
      access and analysis capabilities including real-time claims evaluation and
      intervention, disease management, demand management, risk assessment,
      wellness programs and
pre-certification.





·
            Patient
      Relationship Marketing.We design, develop and implement
      patient relationship marketing services through our PMG business unit.PMG's range of capabilities
      includes direct-to-patient strategy, patient research and insights mining,
      relationship marketing campaigns, online promotion, interactive tools and
      provider integration.





Acquisitions





Strategic
acquisitions have been a core element of our business strategy since
2004.  While acquisitions have contributed meaningfully to our annual
growth during this period, we expect to be more selective and execute fewer
acquisitions going forward.





The
following is a summary of our acquisitions to date:





Acquisition
            Type
      of Business
            Segment
      (“inVentiv”)
            Headquarters
      Location
            Month
      AcquiredPromotech
      Logistics Solutions LLC
            Sample
      fulfillment, direct mail and document imaging
            Commercial
            New
      Jersey
            December
      2008Patient
      Marketing Group
            Patient
      relationship marketing
            Patient
      Outcomes
            New
      Jersey
            August
      2008Chandler
      Chicco Agency
            Public
      relations
            Communications
            New
      York
            July
      2007AWAC
            Medical
      cost containment services
            Patient
      Outcomes
            Georgia
            July
      2007Addison
      Whitney
            Global
      branding consultancy
            Communications
            North
      Carolina
            June
      2007Strategyx
            Strategic
      consulting
            Commercial
            New
      Jersey
            June
      2007Ignite
      Health
            Interactive
      communications agency
            Communications
            California
            March
      2007Chamberlain
            Public
      relations
            Communications
            New
      York
            March
      2007MedConference
            Virtual
      event services
            Commercial
            Pennsylvania
            November
      2006DialogCoach
            Education
      and training
            Commercial
            Pennsylvania
            November
      2006JSAI
            Marketing
      and communications agency
            Communications
            Ontario,Canada
            April
      2006Synergos
            Clinical
      trial management services
            Clinical
            Texas
            April
      2006Adheris
            Patient
      pharmaceutical compliance
            Patient
      Outcomes
            Massachusetts
            February
      2006inVentiv
      Communications, Inc.
            Advertising
      and communications services
            Communications
            Ohio
            October
      2005PRS
            Regulatory
      compliance
            Commercial
            Pennsylvania
            August
      2005HHI
            Data
      management and statistical analyses
            Clinical
            Maryland
            November
      2004Smith
      Hanley
            Contract
      staffing and clinical trial support
            Clinical
            Connecticut
            October
      2004Franklin
            Patient
      support programs
            Patient
      Outcomes
            New
      Jersey
            June
      2004




We
believe that our expertise in identifying potential acquisition targets,
assessing their importance to our operational and growth objectives, performing
due diligence and completing the acquisition of appropriate businesses and
effectively integrating them with our existing operations is a competitive
advantage.





Our
acquisition activity adds complexity to the analysis of period-to-period
financial results and makes direct comparison of those financial results
difficult.  The financial results of the acquired businesses are
included in our consolidated financial statements from their acquisitions
dates.  The periods prior to an acquisition being completed do not
include the corresponding financial results of the acquired
business.





International
Operations





Our
inVentiv Communications division currently includes the most significant
component of our international operations.  As part of the acquisition
of inVentiv Communications, Inc., we added operations in the United Kingdom.As part of the
acquisition of CCA, we added operations in the United Kingdom and
France.  As of December 2008, we have an 85% ownership interest in
Liedler, located in Germany,  and in December 2008, we acquired a
19.9% interest in each of Haas and Health Partner Public Relations and SanCom
Creative Communications Solutions GmbH (collectively, "Haas and Health"),
leading healthcare public relations firms in Germany.  As part of the
Haas and Health agreement, we have an additional purchase option of 60.1%
(for a total 80% ownership stake) within 90 days following calendar year
2010. 
The final 20% may be purchased by inVentiv for a period of 90 days following the
third anniversary of the acquisition of inVentiv of the 60.1% equity
interest.JSAI, which is included in our Communications division, is a leading
healthcare marketing and communications agency in Canada.  These units
collectively provide advertising, marketing and public relations services to
clients throughout Europe and Canada.





We also
seek to establish (sometimes through the acquisition of preexisting "shelf"
companies) foreign affiliates to increase the international visibility and
capabilities of our segments.  During 2008, we established inVentiv
Clinical Solutions Pesquisa Clinica Ltda. in Brazil and  inVentiv
Mexico, S. De R.L. de C.V. in Mexico.  In 2005, we established
inVentiv Pharma Services India Private Limited (formerly inVentiv-Siro Clinical
Private Limited), which is currently operated as a joint venture with Sciformix
Corp., to establish clinical trials capabilities in India.  Sciformix
Corp. has an option to acquire 20% of the joint venture entity.We anticipate
establishing additional international entities in 2009 and beyond as
our client's business requires our support in additional locations
around the world.





We also
have a 15% ownership interest in Heart Reklambyra AB (“Heart”), an advertising
agency located in Swedenand in
December 2004 we acquired a 40% interest in DWA Health s.r.l. in
Italy.  This ownership interest was reduced to 37.5% in 2008 as
the DWA Health Managing Director was awarded a 5% ownership stake (2.5% from
each major shareholder) pursuant to the purchase agreement, based on
performance. Foreign
operations are accounted for using the functional currency of the country where
the business is located, translated to US dollars in the inVentiv Health, Inc.
consolidated financial statements.  These investments are accounted
for using various methods depending on ownership % and control. For investments
below the 20% threshold where inVentiv does not have significant influence,
these are maintained on the cost method.





For
investment ownership that is between 20% and 50%, or in cases where a lower
ownership percentage is owned but where we exercise significant influence, we
use the equity method of accounting. For investments where we own greater
than 50% and exercise significant influence over the entities, financial results
are consolidated in our year-end financial statements. Although the financial
results of our international operations are immaterial to the financial
statements as a whole, their existence is an important component of our
continued global approach and marketing strategy with our clients.In addition to
our fully-owned international operations and our minority ownership interests,
we have within GSW Worldwide and within CCA an established network of over a
dozen international affiliate relationships, which do not involve any equity
interest in those affiliates, that help support our client needs in additional
international markets.





Clients





We
provide our services to leading pharmaceutical and life sciences companies and
healthcare companies.  For the years ended December 31, 2008 and 2007,
no client individually exceeded 10% of our total revenues, and we served over
350 unique clients in 2008, while supporting over 850 client
brands.  Approximately 50% and 51% of our revenues in 2008 and 2007,
respectively, were derived from our ten largest clients, which for 2008, listed
alphabetically, were as follows: Allergan, Boehringer Ingelheim, Inc., Cephalon,
Inc., Eli Lilly and Company, Johnson and Johnson, Merck and Company, Inc.,
Novartis Pharmaceuticals, Inc., Pfizer, sanofi-aventis Group, and
Wyeth.





We
consider the breadth of our client portfolio and our close relationships with
leading pharmaceutical manufacturers to be an important competitive advantage,
providing us with a source for recurring revenues, as well as sales growth
opportunities as our clients launch new products and as we develop new
offerings.  Our services are typically sold to several target groups
within the client organization, typically their clinical, marketing and sales
departments and brand teams.  This provides the basis for continuous
interaction and feedback, allowing us to continuously improve our services and
identify new business opportunities, a process augmented by the longevity of
many of our client relationships.  We have developed sustained
relationships with large, mid-tier, emerging pharmaceutical and biotechnology
clients that provide us with recurring revenue streams and cross-selling
opportunities.  Our ability to perform services and add value at every
part of the product life cycle enhances our ability to develop new business
opportunities and form long-lasting relationships with clients.





Our
relationships with a client's clinical or marketing and sales organizations also
benefit from high switching costs, as retaining another sales force or
advertising agency and redesigning a marketing program creates substantial
additional expense and causes losses in time and productivity for our clients.
In addition, successful marketing and sales outsourcers have established their
reputations due to sophisticated performance evaluation capabilities, and
clients are unlikely to use vendors without widely recognized expertise, a
strong track record and recognized brand names.





Competition





We
operate in highly competitive industries.  Our competitors include a
variety of vendors providing services to the pharmaceutical, life sciences and
healthcare industries, including outsourced sales organizations, medical
communications agencies, contract research organizations and medical cost
containment consultants.  Each of our business segments faces distinct
competitors in the individual markets in which each operates:





·
            inVentiv
      Clinical:  The specialty staffing services industry is
      very competitive and fragmented with relatively few barriers to
      entry.  We compete with several large nationwide temporary
      staffing companies.  The primary clinical staffing competitors
      to our SHCG and MedFocus business units include ClinForce (a division of
      Cross Country Healthcare, Inc.), Managed Clinical Solutions (a division of
      ICON), ASG, Advanced Clinical Services, RPS, i3Pharma Resourcing
      and Kforce Inc.  Primary competitors in the permanent placement
      area include numerous smaller specialty permanent placement groups which
      compete with us, as well as to some degree larger national firms such as
      Korn/Ferry International, Russell Reynolds Associates and Heidrick &
      Struggles International, Inc.; however we are one of the only national
      firms that specializes primarily in professional clinical trials research
      personnel.  In functional outsourcing (or Contract Research
      Organizations), the competition ranges from small specialty organizations
      to global CROs such as Quintiles Transnational Corp. (“Quintiles”) or
      Covance Inc.





·
            inVentiv
      Communications:  Marketing and communications services is
      a relatively fragmented and competitive market.  Our
      Communications Services group competes with the healthcare offerings of
      the five large global advertising holding companies, which include WPP
      Group PLC, Omnicom Group Inc., Publicis Groupe S.A., IPG and
      Havas.  In addition, we compete with a large number of smaller
      specialized agencies that have focused either on a therapeutic area or a
      particular service offering.





·
            inVentiv
      Commercial:  The majority of sales teams are currently
      managed internally by our clients, and we to some degree “compete” with
      our clients' alternative choices of managing their needs internally or
      co-promoting with another pharmaceutical company.  In addition,
      a small number of providers comprise the market for outsourced sales
      teams, and we believe that inVentiv, Quintiles, Professional Detailing,
      Inc. and Publicis Groupe S.A. combined account for the majority of the
      U.S. outsourced sales team market share. The rest of the industry is
      fragmented, with a number of small providers focused on niche
      services.  One or more of our large competitors in the
      outsourced sales team market could become significant competitors with
      regard to the other services we offer by either developing additional
      capabilities or acquiring these capabilities.  For Strategy and
      Analytics, our competitors include IMS Health, TargetRx, ZS Associates and
      Trinity Pharma Solutions.





·
            inVentiv Patient
      Outcomes:  Adheris’ offerings compete with several third
      party companies that implement adherence programs through major chains,
      including Catalina Marketing Corporation and Mirixa Corporation, as well
      as less directly with a number of specialty agencies and specialist
      service providers that focus on various aspects of patient adherence and
      compliance.  The Franklin Group competes with several other
      service companies and reimbursement specialists, including Express Scripts
      and the Lash Group.  The Therapeutics Institute competes with
      Innovex (Quintiles Transnational Corp.) and several other specialty
      nurse educator companies.  While payor cost containment services
      is a relatively fragmented and competitive market, we believe there is no
      single company providing AWAC’s range of services.  AWAC
      competitors in the technology arena include Active Health (a subsidiary of
      Aetna Health), D2 Hawkeye, MedStat and MEDai.  In the demand
      management area many companies provide pre-certification, utilization
      review and case management, and in the wellness area many companies
      provide wellness programs of varying types and focus.  Among the
      competitors for PMG are large, and smaller specialized, communications
      agencies.




We believe that our business units
individually and our organization as a whole have a variety of competitive
advantages that have allowed us to compete successfully in the marketplaces for
our services.  These advantages include the following:




·
            Leading Position
      Within Service Categories:  We believe that our operating
      divisions, and the business units within each operating division, have
      achieved positions of leadership within their respective service areas.
      inVentiv Communications, through its well known agencies, such as GSW
      Worldwide, Palio and Chandler Chicco, is a major force in healthcare
      advertising, public relations and communications.  Prior to our
      acquisition of inVentiv Communications, Inc., that company was the largest
      privately-held healthcare marketing organization in the
      world.   inVentiv Clinical, through its Smith Hanley
      division, is recognized as a leader in clinical trials staffing and a
      leading provider of clinical trials-related SAS programmers,
      statisticians, data management and monitoring personnel to the major
      pharmaceutical and life sciences companies.  inVentiv Pharma
      Teams is the leading provider of outsourced product detailing services in
      the pharmaceutical industry.  InVentiv Patient Outcomes is a
      leader in proprietary patient compliance programs.  Our business
      units have extensive experience and proven track records that support our
      business development efforts.





·
            Comprehensive Service
      Offering:  We are one of the largest providers of
      services to the pharmaceutical and life sciences industry in the U.S. and
      offer among the broadest range of services.  These are important
      factors to our clients and potential clients, many of whom prefer to work
      with organizations that can provide a comprehensive suite of complementary
      services and have a proven track record of
  execution.





·
            Broad and Diversified
      Client Base:  In addition to serving most of the largest
      pharmaceutical companies, we also serve a large number of mid-size and
      smaller biotechnology and life sciences companies.  As each of
      these companies uses our services, our relationship is expanded and the
      opportunity to cross-sell our services increases.  Our client
      base of over 350 pharmaceutical and biotechnology clients is broad and
      diversified, and with many of these clients we have maintained long-term
      relationships that help us in continuing to win new
    business.





·
            Well-Recognized Trade
      Names:  We recognize that the established trade names
      with a long history possess a powerful and enduring nature that transcends
      general trade name recognition.  One of the most valuable assets
      to inVentiv is the trade names of many of our business
      units.  These names are a competitive advantage in the
      marketplace because they generate a favorable customer perception in brand
      name recognition in the pharmaceutical, life sciences and healthcare
      industries.  Our focus on building a comprehensive suite of
      best-in-class service providers with strong marketplace awareness has been
      a key strategy in our acquisitions.  A few examples of our
      strong brand names in their respective
      marketplaces include Smith Hanley, GSW Worldwide, Palio,
      Chandler Chicco, Chamberlain, Ignite, Adheris and
  AWAC.





·
            Proprietary
      Technologies and Data:  We maintain and operate a number
      of proprietary software programs and systems for marketing development and
      data gathering.  We invest in technology and have developed and
      deployed cutting-edge marketing and sales force automation
      tools.  Our technology advantages in the sales force automation
      and in the virtual events areas are important for the management of sales
      and marketing campaigns for pharmaceutical products throughout their life
      cycle, particularly during the product launch phase.  Our
      patient compliance offerings rely on a broad network of retail pharmacies
      and our use of proprietary technologies to effectively manage the large
      amount of underlying data in a timely and targeted manner.  Our
      medical cost containment business unit utilizes an electronic claims
      surveillance system to monitor medical claims data, prescriptions and
      pre-certification records, which are then reviewed by our expert
      physicians and case managers.





·
            Experienced Management
      Team:  Our management team includes executives with
      substantial expertise in pharmaceutical and healthcare services, as well
      as substantial background within pharmaceutical companies themselves,
      including managing pharmaceutical sales forces, establishing sales and
      marketing strategies, and product management industry
      experience.  The team also has extensive experience in the areas
      of outsourced staffing, permanent placement and executive search
      services.  We believe our mix of senior management with
      pharmaceutical and healthcare services experience, entrepreneurial talent
      and strategic perspective is unique in the
  industry.





Seasonality





Although
our business is subject to some variability as a result of the ongoing startup
and completion of contracts, periodic receipt of incentive fees and the ramp up
of product revenues in certain contracts, and select businesses do have some
degree of seasonality, our business in aggregate is not generally subject to
significant seasonal variation.





Employees





At
December 31, 2008, we employed approximately 7,100 people in our
operations.  Many aspects of our business are very labor intensive and
the turnover rate of employees in our industry, and in corresponding segments of
the pharmaceutical industry, is generally high, particularly with respect to
sales force employees.  We believe our turnover rate is comparable to
that of other outsourced service organizations and that turnover in our contract
sales and communications businesses is comparable to turnover in internal
pharmaceutical sales and marketing departments.  We have no collective
bargaining agreements covering any of our employees and are unaware of any
current efforts or plans to organize any of our employees.  We believe
that our relations with our employees are satisfactory.





Government
Regulation





Our
inVentiv Communications segment is subject to all of the risks, including
regulatory risks, that advertising companies generally experience as well as
risks that relate specifically to the provision of advertising services to the
pharmaceutical industry.  Such regulatory risks may include
enforcement by the Food and Drug Administration, the Federal Trade Commission as
well as state agencies enforcing laws relating to drug advertising, false
advertising, and unfair and deceptive trade practices.  There has been
an increasing tendency in the U.S. on the part of advertisers to resort to the
courts and industry and self-regulatory bodies to challenge comparative
advertising on the grounds that the advertising is false and deceptive. Through
the years, there has been a continuing expansion of specific rules,
prohibitions, media restrictions, labeling disclosures and warning requirements
with respect to the advertising for certain products.





Adheris, a part of our inVentiv Patient
Outcomes segment, provides persistence and compliance programs, principally in
the form of refill reminder communications, to pharmacy chains.  These
activities are subject to regulation under HIPAA, the Federal Health Care
Programs Antikickback Law and corresponding state laws.  We believe
that Adheris's activities comply with all applicable federal and state laws in
all material respects.  Certain of these laws are subject to
interpretation that is evolving.  We could incur significant expenses
or be prohibited from providing certain service offerings if Adheris's
activities are determined to be non-compliant and, depending on the extent and
scope of any such regulatory developments, our consolidated financial condition
and results of operations could be materially and adversely
affected.





Our
inVentiv Commercial segment provides contract sales services to the
pharmaceutical industry and employs sales representatives who handle and
distribute samples of pharmaceutical products.  We are required to
obtain state prescription drug wholesaler and pharmacy permits in nearly all
states where these drug samples are distributed or dispensed and are subject to
extensive licensing and regulatory requirements for such activities. The
handling and distribution of prescription drug products are subject to
regulation under the Prescription Drug Marketing Act of 1987 and other
applicable federal, state and local laws and regulations.  These laws
and regulations regulate the distribution of drug samples by mandating storage,
handling, solicitation and record-keeping requirements for drug samples and by
banning the purchase or sale of drug samples.  These laws also subject
in Ventiv to all of the regulatory requirements imposed on pharmacies for
dispensing drug samples including patient confidentiality, recordkeeping,
labeling and facility requirements.





Some of
our physician education services in our inVentiv Commercial and inVentiv
Communications segments are subject to a variety of federal and state
regulations relating to both the education of medical professionals and the
marketing and sale of pharmaceuticals.  In addition, certain ethical
guidelines promulgated by the American Medical Association (“AMA”) and state
medical associations govern the receipt by physicians of gifts in connection
with the marketing of healthcare products.  These guidelines govern
the honoraria and other items of value that AMA physicians may receive, directly
or indirectly, from pharmaceutical companies.  Any changes in such
regulations or guidelines or their application could have a material adverse
effect on inVentiv.  Failure to comply with these requirements could
result in the imposition of fines, loss of licenses and other penalties and
could have a material adverse effect on our consolidated financial condition and
results of operations.





From time
to time, state and federal legislation are proposed with regard to the use of
proprietary databases of consumer and health groups.  The uncertainty
of the regulatory environment is increased by the fact that we generate and
receive data from many sources.  As a result, there are many ways
government might attempt to regulate our use of this data.  Any such
restriction could have a material adverse effect on our consolidated financial
condition and results of operations.





Our
pharmaceutical and life sciences clients are subject to extensive government
regulation.  Generally, compliance with these regulations is the
responsibility of those clients.  However, several of our businesses
are themselves subject to the direct effect of government
regulation.  In addition, we may be liable under certain of our
customer contracts for the violation of government regulations by the applicable
customers to the extent those violations result from, or relate to, the services
we have performed for such customers.  We could be subject to a
variety of enforcement or private actions for our failure or the failure of our
clients to comply with such regulations.





Available
Information





We make
available on our website, located at www.inventivhealth.com, the following
filings as soon as reasonably practicable after they are electronically filed
with or furnished to the United States Securities and Exchange Commission
(“SEC”): our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and any amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934.  All such filings are available free of
charge.  Information found on our website should not be considered
part of this annual report on Form 10-K.






1




Item 1A.  Risk Factors




Risks
Related to Our Business





inVentiv
Health is a complex organization encompassing four segments, each with its own
particular risks and uncertainties.  A wide range of factors could
materially affect our financial results and the performance of our stock
price.  The factors affecting our operations include the
following:





The
rate of growth of gross domestic product in the U.S. has declined in the last
few quarters indicating that the U.S. economy is in a recession.





The U.S.
is in the most significant economic downturn in at least several
decades.  Sustained downturns or sluggishness in the U.S. economy
generally affect the markets in which we operate.  Customers in
certain of our businesses are reducing marketing expenditures, delaying
decisions on new marketing initiatives and/or shifting their outsourced service
activities to areas that represent lower margin business from inVentiv's
perspective.  The U.S. recession will likely continue to have a
significant adverse impact on our clients and our business for the next several
years.





Recent
disruptions in the credit markets may negatively impact our liquidity and our
ability to obtain financing, and may increase our financing costs.





We have a $50 million working capital
line under our secured credit facility that provides us with a source of
liquidity beyond cash generated from operations.  We also have an
unsecured line of credit with an affiliate of Bank of America, N.A., that
provides liquidity in respect of our holdings in the Columbia Strategic Cash
Portfolio.  See Note 5 to our consolidated financial statements in
Part II, Item 8 of this report.  If one of our lenders suffers
liquidity issues, we may be unable to access these anticipated sources of
liquidity if and when they are required.  The credit market turmoil
could negatively impact our ability to obtain additional sources of
financing.  An impairment of our access to credit facilities when
required could have a material adverse effect on our ability to execute our
operating strategy, and could also prevent us from executing our acquisition
strategy or taking advantage of other business expansion
opportunities.  Furthermore, to the extent the counterparties to our
interest rate swap agreements suffer liquidity issues, we could be exposed to
interest rate risk that is intended to be eliminated by our hedging
arrangements.





Certain
of our customer contracts contain fixed price components that are not subject to
adjustment in the short term and expose us to pricing risk.





Under the terms of certain of our
customer agreements, we charge clients on a fixed price basis based on our cost
estimates at the beginning of the contract term. During 2008, unanticipated
increases in the price of gasoline resulted in our bearing fuel costs under
certain of our contract sales representative agreements that exceeded initial
estimates for such costs. In addition, as a result of disruptions in the credit
markets, we expect the leasing rates under new leases for fleet vehicles
provided to our contract sales representatives to increase as a result of the
current disruptions in the credit market.  Although we seek to adjust
these costs as contracts are renewed, we are subject to pricing risk on fixed
cost items for the duration of the contracts under which they are
provided.





If the costs to us of providing fixed
priced items increases, we may be exposed to reduced profits, or losses, under
the relevant agreements, which could have a material adverse effect on our
consolidated financial condition and results of operations.





Our
revenues are dependent on expenditures by companies in the pharmaceutical and
life sciences industries, third party administrators, employee benefit plans,
employer groups, managing general underwriters and insurance carriers and
others, and a variety of factors could cause the overall levels of those
expenditures to decline.





The
revenues of our inVentiv Clinical, inVentiv Communications and inVentiv
Commercial divisions and Patient Outcomes are highly dependent on expenditures
by companies in the pharmaceutical industry (and, to a lesser extent, other life
sciences industries) for advertising, promotional, marketing and sales,
recruiting, clinical staffing, patient initiatives and compliance services. Any
decline in aggregate demand for these services could negatively affect these
businesses.  In addition to the current recessionary environment, the
following factors, among others, could cause such demand to
decline.





·
            Advertising,
      promotional, marketing and sales expenditures by pharmaceutical
      manufacturers have in the past been, and could in the future be,
      negatively impacted by, among other things, governmental reform or private
      market initiatives intended to reduce the cost of pharmaceutical products
      or by governmental, medical association or pharmaceutical industry
      initiatives designed to regulate the manner in which pharmaceutical
      manufacturers promote their
products.


·
            Consolidation
      in the pharmaceutical industry could negatively affect certain of our
      business units by reducing overall outsourced expenditures, particularly
      in the sales, marketing and staffing
areas.


·
            Companies
      may elect to perform advertising, promotional, marketing, sales,
      compliance and other services internally based on industry and
      company-specific factors such as the rate of new product development and
      FDA approval of those products, number of sales representatives employed
      internally in relation to demand for or the need to promote new and
      existing products and competition from other
  suppliers.


·
            Companies
      may elect to perform clinical tasks internally based on industry and
      company-specific factors such as the rate of new product development and
      FDA approval of those products, the number of clinical professionals
      employed internally in relation to the demand for or the need to develop
      new drug candidates, and competition from other
  suppliers.





AWAC has
not yet deeply penetrated the medical payor marketplace, particularly the third
party administrator marketplace. Furthermore, any decline in aggregate demand
for medical cost containment services could negatively affect AWAC's
business.  Consolidation among AWAC's customer base could negatively
affect AWAC by reducing overall outsourced expenditures in the medical cost
containment area.  Furthermore, companies may elect to perform medical
cost containment services internally based on industry and company-specific
factors, including competition from other suppliers.





Many
of the contracts under which we provide services are subject to termination on
short notice, which may make our revenues less predictable.





We
provide services to many of our most significant clients under contracts that
our clients may cancel on short notice (generally 10 to 120 days, depending on
the specific business unit).  In addition, many of our pharmaceutical
sales contracts provide our clients with the opportunity to internalize the
sales forces under contract.  Although we have been successful in a
number of cases in negotiating longer-term commitments and a non-cancelable
initial period for pharmaceutical sales contracts, we cannot be assured that
clients will renew relationships beyond the expiration date of existing
contracts in any of our business units.  Furthermore, while we have
been successful in originating new business opportunities and in replacing
revenues attributable to contracts that are terminated or not renewed, our stock
price may fluctuate significantly in response to announcements of contract
terminations or nonrenewals.





Inflation
may adversely affect our business operations in the future.





Given the current macroeconomic
environment, the U.S. government has recently entered into plans to provide a
monetary stimulus and a fiscal stimulus, to the U.S. economy. Such actions may
lead to inflationary conditions in our cost base, particularly resulting in an
increase in the commissions and compensation and benefits components of our cost
of services and SG&A expenses. This may harm our margins and profitability
if we are unable to increase prices or cut costs enough to offset the effects of
inflation in our cost base.





Substantial
defaults by our customers on our accounts receivable could have a significant
negative impact on our business, results of operations, financial condition or
liquidity.





A significant portion of our working
capital consists of accounts and unbilled receivable from
customers.  Certain customers, such as start-ups and undercapitalized
companies in the biotechnology industry, may experience difficulties in
obtaining capital given the current credit environment.  If customers
responsible for a significant amount of accounts and unbilled receivable were to
become insolvent or otherwise unable to pay for products and services, or were
to become unwilling or unable to make payments in a timely manner, our business,
consolidated results of operations, consolidated financial position or liquidity
could be materially and adversely affected.





In the
event of an economic or industry downturn, such downturn could have an adverse
effect on the servicing of these accounts receivable, which could result in
longer payment cycles, increased collection costs and defaults in excess of
management’s expectations, particularly in relation to smaller or more thinly
capitalized clients.  Without limitation, current recessionary economic
conditions in the U.S. and disruptions in the credit market could cause a delay
in collection or defaults, including as a result of declines in the
creditworthiness of our customers, business failures and increased conservatism
in our customers' cash management strategies.





We may experience further writedowns
of ourgoodwill,
intangiblesandinstruments and other losses related
to volatile and illiquid market conditions.





During
2008, we recorded a non-cash pre-tax goodwill and other intangible assets
impairment charge of approximately $268 million in accordance with Statement of
Financial Accounting Standards (SFAS) 142 and SFAS 144.  The non-cash
impairment charge was primarily related to adverse economic and equity market
conditions that caused a decrease in the current marketplace and related
multiples and our stock price as of December 31, 2008 compared to the test
performed as of June 30, 2008.





At
December 31, 2008, we had $10.4 million of marketable securities on our Balance
Sheet ($3.7 million disclosed in deposits and other assets). We recorded a $2.6
million impairment charge related to our marketable securities during 2008 as a
result of fluctuation in the value of our investment in the Columbia Strategic
Cash Portfolio (the "CSCP").  The CSCP maintained a net asset value of
$1 per unit until December 2007, after which the net asset value per unit
fluctuated, and will continue to fluctuate, based on changes in market values of
the securities held by the portfolio.  The process of liquidating
CSCP’s portfolio was initiated in December 2007 and is anticipated to continue
through 2009 and 2010.  Future impairment charges may result until the
fund is fully liquidated, depending on market conditions.





We
continue to have exposure to markets and products and as market conditions
continue to evolve, the fair value of our reporting units could further be
negatively affected.  The trading price of our common stock could
continue to decline based on general market conditions or factors specific to us
or the industries in which we operate.  In addition, recent market
volatility has made it extremely difficult to value certain of our
securities.  Subsequent valuations, in light of factors then
prevailing, may result in significant changes in the values of these securities
in future periods.  In addition, at the time of any sales and
settlements of these securities, the price we ultimately realize will depend on
the demand and liquidity in the market at that time and may be materially lower
than their current fair value.  Any of these factors could require us
to take further writedowns in the value of our goodwill, other intangibles and
securities portfolio, which may have an adverse effect on our results of
operations in future periods.





We are in the
process of integrating certain acquisitions and expect to make future
acquisitions, which will involve additional risks




For the
past several years, a significant component of our growth strategy has been the
addition through acquisitions of business units.  We have and will
continue to seek to address the need to offer additional services through
acquisitions of other companies, including the personnel such acquisitions may
bring to us, although we expect to be more selective and execute fewer
acquisitions going forward.




Our
acquisitions of PMG and PLS were completed during 2008.  Operational
and financial integration of the acquired businesses is not yet complete and we
may experience difficulties in completing the integration
processes.  Among other things, we are generally required to document
internal controls under Section 404 of the Sarbanes-Oxley Act for each of our
acquired business units by the end of the first fiscal year following the year
in which the acquisition occurs.  We may not be successful in
recognizing material weaknesses in internal controls over financial reporting
for our acquired businesses and may have difficulty remedying any such material
weaknesses on a timely basis.  More generally, we may experience
difficulties in the integration of personnel and technologies across diverse
business platforms.






Acquisitions
involve numerous risks in addition to integration risk, including the
following:




·
            diversion
      of management’s attention from normal daily operations of the
      business;




·
            insufficient
      revenues to offset increased expenses associated with
      acquisitions;




·
            assumption
      of liabilities and exposure to unforeseen liabilities of acquired
      companies, including liabilities for their failure to comply with
      healthcare and tax regulations;




·
            the
      potential loss of key customers or employees of the acquired companies;
      and




·
            difficulties
      integrating acquired personnel and distinct cultures into our
      business.




Acquisitions,
and related acquisition earnouts, may also cause us to deplete our cash reserves
and/or increase our leverage, and therefore increase the financial risk of our
capital structure; assume liabilities of the acquired businesses; record
goodwill and non-amortizable intangible assets that will be subject to
impairment testing and potential periodic impairment charges; incur amortization
expenses related to certain intangible assets; or become subject to
litigation.




Mergers and acquisitions of new
businesses are inherently risky, and no assurance can be given that our previous
or future acquisitions will be successful and will not materially and adversely
affect our business, operating results, or financial condition. Failure to
manage and successfully integrate acquisitions we make could harm our
operational and consolidated financial condition and results of operations in a
material way.





Our
future revenues may be affected by consolidation in the pharmaceutical
industry





Due to a
variety of factors in the pharmaceutical industry, our clients could potentially
merge with another company or be acquired.  A merger may result in a
consolidation of outsourced or marketing services where inVentiv services may no
longer be required by the client.  At the same time, a client merger
may present inVentiv an opportunity to expand its relationship with the client
and provide additional services.




We
may not be successful in managing our infrastructure and resources to support
continued growth.





Our
ability to grow also depends to a significant degree on our ability to
successfully leverage our existing infrastructure to perform services for our
clients, develop and successfully implement new sales channels for the services
we offer and to enhance and expand the range of services that we can deliver to
our customers.  We have historically maintained a relatively flat
management structure; as the sizes of our business units grow and the number of
our acquired business units increases, the breadth and depth of the
responsibilities of our senior management team has increased as
well.  Our growth will also depend on a number of other factors,
including our ability to:





·
            maintain
      the high quality of the services we provide to our
    customers;





·
            increase
      our penetration with existing
customers;





·
            recruit,
      motivate and retain qualified
personnel;





·
            economically
      train existing sales representatives and recruit new sales
      representatives; and





·
            implement
      operational and financial systems and additional management resources to
      operate efficiently and effectively regardless of market
      conditions.





We are
dependent on the proper functioning of our information systems in operating our
business.  Critical information systems used in daily operations
perform billing and accounts receivable functions. Additionally, we rely on our
information systems in managing our accounting and financial
reporting.  Our information systems are protected through physical and
software safeguards and we have backup remote processing
capabilities.  However, they are still vulnerable to fire, storm,
flood, power loss, telecommunications failures, physical or software break-ins
and similar events.  In the event that critical information systems
fail or are otherwise unavailable, these functions would have to be accomplished
manually, which could temporarily impact our ability to identify business
opportunities quickly, to maintain billing and clinical records reliably, to
bill for services efficiently and to maintain our accounting and financial
reporting accurately.





We cannot
assure you that we will be able to manage or expand our operations effectively
to address current or future demand and market conditions, or that we will be
able to do so without incurring increased costs in order to maintain appropriate
infrastructure and senior management capabilities.  If we are unable
to manage our infrastructure and resources effectively, our business,
consolidated financial condition and results of operations could be materially
and adversely affected.





We
employ sophisticated computer technology to deliver our services, and any
failure of or damage to this technology could impair our ability to conduct our
business.





We have
invested significantly in sophisticated and specialized computer technology and
have focused on the application of this technology to provide customized
solutions to meet many of our clients' needs.  We have also invested
significantly in sophisticated end-user databases and software that enable us to
market our clients' products to targeted markets.  We anticipate that
it will be necessary to continue to select, invest in and develop new and
enhanced technology and end-user databases on a timely basis in the future in
order to maintain our competitiveness.  In addition, our business is
dependent on our computer equipment and software systems, and the temporary or
permanent loss of this equipment or systems, through casualty or operating
malfunction, could have a material adverse effect on our consolidated financial
condition and results of operations.  Our property and business
interruption insurance may not adequately compensate us for all losses that we
may incur in any such event.  Changes in the technology environment or
our inability to update our technology to service clients could impact our
financial performance.





We
are subject to a high degree of government regulation.





We are
subject to a high degree of government regulation.  Significant
changes in these regulations, or our failure to comply with them, could impose
additional costs on us or otherwise negatively affect our
operations.  See the discussion under "Business – Government
Regulation" above.





Our services are subject to evolving
industry standards and rapid technological changes.





The
markets for our services are characterized by rapidly changing technology,
evolving industry standards and frequent introduction of new and enhanced
services.  To succeed, we must continue to enhance our existing
services; introduce new services on a timely and cost-effective basis to meet
evolving customer requirements; integrate new services with existing services;
achieve market acceptance for new services; and respond to emerging industry
standards and other technological changes.





We
may be adversely affected by customer concentration.





We have
no customers, individually, that accounted for in excess of 10% of our revenues
for the year ended December 31, 2008, and our largest customer during such year
accounted for 9% of revenues.  Our top 10 customers account for 50% of
our revenue.  If any large customer decreases or terminates its
relationship with us, our business and consolidated financial position and
results of operations could be materially adversely affected.





We
may lose or fail to attract and retain key employees and management
personnel.





Our key managerial and other employees
are among our most important assets. An important aspect of our competitiveness
is our ability to attract and retain key employees and management
personnel.  A significant aspect of our acquisition strategy is the
retention of key employees of target companies for significant periods of
time.  The loss of the services of any key executive for any reason
could have a material adverse effect upon the Company.





Compensation
for key employees and management personnel is an essential factor in attracting
and retaining them, and there can be no assurance that we will offer a level of
compensation sufficient to do so.  Equity-based compensation,
including compensation in the form of options and restricted stock, plays an
important role in our compensation of new and existing
employees.  Because of limitations on the number of shares available
for future grant under our equity incentive plan, we may be unable to meet the
compensation requirements of our key employees and management
personnel.  In addition, as a result of our adoption of SFAS 123R
effective January 1, 2006, equity-based compensation is reflected in our income
statement and has a negative impact on earnings.





We
may incur liability in connection with litigation.





We are subject to lawsuits,
investigations and claims arising out of the conduct of our business, including
those related to commercial transactions, contracts, government regulation and
employment matters.  Certain claims, suits and complaints have been or
may in the future be filed against us as described under "Legal Proceedings" in
Part I, Item 3 below.  Litigation is inherently uncertain and we
cannot assure you that we will not suffer a material, adverse effect as a
consequence of any pending or future claims.  Moreover, new or adverse
developments in existing litigation claims or legal proceedings involving us
could require us to establish or increase litigation reserves.





We have
been and may in the future become become a party to legal actions related to the
design and management of our service offerings, including, among others,
privacy-based actions and contract disputes.  Adheris was the subject
of a recently settled action (which settlement has not yet received final court
approval) asserting, among other claims, violation of the California
Confidentiality of Medical Information Act and has had asserted against it in
the past other claims based on purported violations of privacy statutes and
common law arising from its patient refill reminder programs.  PRS was
the subject of an indemnification claim based on a recently settled action
(which settlement has not yet received final court approval) asserting, among
other claims, violation of the Telephone Consumer Protection Act of 1991, as
amended by the Junk Fax Prevention Act of 2005.  Although it has not
been the subject of litigation to date, AWAC could become the subject of medical
malpractice claims based on the design and management of its service
offerings.  Adheris, PRS and AWAC each maintain errors and omissions
insurance and other traditional business coverage.  AWAC does not
insure for medical malpractice since it does not deem itself to be practicing
medicine.  Although we believe that all of our businesses are
adequately insured, certain types of claims, such as punitive damages, are not
covered by insurance.





We could face substantial product
liability claims in the event any of the pharmaceutical or other products we
have previously marketed or market now or may in the future market are alleged
to cause negative reactions or adverse side effects or in the event any of these
products causes injury, is alleged to be unsuitable for its intended purpose or
is alleged to be otherwise defective. We rely on contractual indemnification
provisions with our customers to protect us against certain product liability
related claims. There is no assurance that these provisions will be fully
enforceable or that they will provide adequate protection against claims
intended to be covered.





We could
face liability for drug samples that we distribute to physicians or for drug
samples that we dispense to patients which are alleged to be adulterated or
misbranded, to have been negligently dispensed, to cause negative reactions or
adverse side effects or in the event any of these products causes injury, is
alleged to be unsuitable for its intended purpose or is alleged to be otherwise
defective.




We
may not be able to comply with the requirements of our credit
facility.





On July 6, 2007, we entered into an
Amended and Restated Credit Agreement with UBS AG, Stamford Branch and
others.  The outstanding balance under this facility was approximately
$330 million as of the closing date under the facility, which is attributable to
a $330 million secured term loan component.  The Amended and Restated
Credit Agreement also provided for up to $20 million in additional term loans
("delayed draw term loans") to be advanced no later than January 6, 2008 which
we elected to not draw.  The agreement also provides a $50 million
revolving credit facility, of which $10 million is initially available for the
issuance of letters of credit, and a swingline facility.  The term
loan will mature on the seventh anniversary of the Amended and Restated Credit
Agreement, with scheduled quarterly amortization of 1% per year during years one
through six and 94% during year seven.  The revolving loans will
mature on the sixth anniversary of the Amended and Restated Credit
Agreement.  Amounts advanced under the credit facility must be prepaid
with a portion of our "Excess Cash Flow", as defined in the credit
agreement.  The credit facility contains numerous operating covenants
that have the effect of reducing management's discretion in operating our
businesses, including covenants limiting:





·
            the
      incurrence of indebtedness;





·
            the
      creation of liens on our assets;





·
            sale-leaseback
      transactions;





·
            repurchase
      of company shares;





·
            acquisitions;





·
            guarantees;





·
            payment
      of dividends; and





·
            fundamental
      changes and transactions with
affiliates.





The
Amended and Restated Credit Agreement also includes a financial covenant under
which inVentiv is required to maintain a total leverage ratio that does not
exceed, as of the last day of any four consecutive fiscal quarters, 4.0 to 1.0
through December 31, 2009 and 3.5 to 1.0 thereafter.  If we are unable
to comply with the requirements of the credit facility, our lenders could refuse
to advance additional funds to us and/or seek to enforce remedies against
us.  Any such developments would have a material adverse effect on
inVentiv.  As of the date of this report, we comply with the
requirements of our credit facility.





Our
future financial results may not be consistent with our guidance.





From time to time, we communicate to
the market guidance relating to our revenue, earnings per share and other
financial measures.  These statements are intended to provide metrics
against which to evaluate our performance, but they should not be understood as
predictions or assurances of our future performance.  Any downward
variance in operating results as compared to announced guidance can be expected
to result in a decline in our stock price.  Our ability to meet any
projected financial result milestone is subject to inherent risks and
uncertainties, and we caution investors against placing undue reliance on our
published guidance. See "Cautionary Statement Regarding Forward-Looking
Disclosure" above.




The
inability to generate sufficient cash flows to support operations and other
activities could prevent future growth and success.




Our
inability to generate sufficient cash flows to support capital expansion,
business acquisition plans and general operating activities could negatively
affect our operations and prevent our expansion into existing and new
markets.  Our ability to generate cash flows is dependent in part upon
obtaining necessary financing at favorable interest rates. Interest rate
fluctuations and other capital market conditions may prevent us from doing
so.




Risks Related to our Common
Stock




The
trading price of our common stock may be volatile, and you may not be able to
sell your shares at or above the price at which you acquire
them.





The trading price of our common stock
may fluctuate significantly.  Factors affecting the trading price of
our common stock include:





·
              variations
      in operating results;





·
              the
      gain or loss of significant customers or
  suppliers;





·
              announcements
      relating to our acquisition of other
businesses;





·
              changes
      in the estimates of our operating results or downward variances in
      operating results as compared to
guidance;





·
              changes
      in recommendations by any securities analysts that elect to follow our
      common stock; and





·
              changes
      in regulations that impact our service offerings;
  and





·
              market
      conditions in our industry, the industries of our customers and our
      suppliers and the economy as a
whole.





In
addition, if the market for health care stocks or the stock market in general
experiences a loss of investor confidence, the trading price of our common stock
could decline for reasons unrelated to our business, consolidated operating
results or consolidated financial condition.




If we fail to meet continued listing standards of the Nasdaq Global
Select Market, our common stock may be delisted which could have a material
adverse effect on the liquidity of our common
stock.




In order
for our securities to be eligible for continued listing on the Nasdaq Global
Select Market, we must remain in compliance with certain listing standards,
including corporate governance standards, specified shareholders’ equity and a
market price above $1.00 per share.   If we were to become
noncompliant with the Nasdaq Global Select Market’s continued listing
requirements, our common stock may be delisted which could have a material
adverse effect on the liquidity of our common stock.




Anti-takeover
provisions in our organizational documents make any change in control more
difficult.





Our
certificate of incorporation and by-laws contain provisions that may delay or
prevent a change in control, may discourage bids at a premium over the market
price of our common stock and may affect adversely the market price of our
common stock and the voting and other rights of the holders of our common
stock.  These provisions include:





·
              limitations
      on the ability of our shareholders to call a special meeting of
      shareholders;





·
              our
      ability to issue additional shares of our common stock without shareholder
      approval;





·
              our
      ability to issue preferred stock with voting or conversion rights that
      adversely affect the voting or other rights of holders of common stock
      without their approval;





·
              provisions
      that provide that vacancies on the board of directors, including any
      vacancy resulting from an expansion of the board, may be filled by a vote
      of the directors in office at the time of the vacancy;
  and





·
              advance
      notice requirements for raising matters of business or making nominations
      at shareholders’ meetings.





Our
acquisition activity may dilute your equity interest and negatively affect the
trading price of our common stock.





We have historically chosen to satisfy
a significant portion of the consideration paid for acquired businesses in the
form of shares of our common stock, including by reserving the right to satisfy
a portion of any contingent, or "earnout", consideration, by issuing additional
shares of our common stock.  The potential earnout obligations under
the terms of our completed acquisitions may be material individually or in the
aggregate.  Acquisitions we make in the future, and any earnout
consideration from completed acquisitions that we satisfy through the issuance
of our common stock, may significantly dilute your equity interest and may
negatively affect the trading price of our common stock.





A
substantial number of our securities are eligible for future sale and this could
affect the market price for our stock.





The market price of our common stock
could drop due to sales of a large number of shares of our common stock or the
perception that these sales could occur. As of February 13, 2009, we had
33,362,913 shares of common stock outstanding.  Of these shares, a
total of approximately 1.8 million shares were subject to contractual resale
restrictions under acquisition agreements and will become eligible for sale over
the next several years.  Shares issued in future acquisitions, and
shares issued in satisfaction of earnout obligations under completed
acquisitions, may add substantially to the number of shares available for future
sale.





In addition, as of February 13, 2009,
approximately 1,036,324 shares of our common stock were subject to outstanding
stock options.  Holders of our stock options are likely to exercise
them, if ever, at a time when we otherwise could obtain a price for the sale of
our securities that is higher than the exercise price per security of the
options or warrants.  This exercise, or the possibility of this
exercise, may reduce the price of our common stock.





Item
1B.Unresolved Staff
Comments




We have received no written comments
regarding our periodic or current reports from the Staff of the Securities and
Exchange Commission that were issued 180 days or more preceding the end of
our 2008 fiscal year and that remain unresolved.




Item 2.  Properties





As of
December 31, 2008, we leased 56 office facilities totaling 1,187,605 square
feet, including our principal executive offices located in Somerset, New
Jersey.  Eleven facilities totaling 99,147 square feet are leased by
the inVentiv Clinical segment, 29 facilities totaling 377,890 square feet are
leased by the inVentiv Communications segment and twelve facilities totaling
624,164 square feet are leased by the inVentiv Commercial segment, four
facilities totaling 86,404 square feet are leased by the inVentiv Patient
Outcomes segment.  We believe that our facilities are adequate for our
present and reasonably anticipated business requirements.





Item 3.  Legal
Proceedings.





Weisz v.
Albertsons, Inc.(San Diego Superior Court
Case No. GIC 830069):  This action was filed on May 17, 2004 in
San Diego Superior Court, California by Utility Consumer Action Network against
Albertsons, Inc. and its affiliated drug store chains and seventeen
pharmaceutical companies.  This complaint alleged, among other claims,
violation of the California Unfair Competition Law and the California
Confidentiality of Medical Information Act (“CMIA”) arising from the operation
of manufacturer-sponsored, pharmacy-based compliance programs similar to
Adheris’ refill reminder programs.  An amended complaint was filed on
November 4, 2004 adding Adheris as a defendant to the lawsuit.  A
subsequent amendment to the complaint substituted Plaintiff Kimberly Weisz
(“Plaintiff”) as the class representative to this purported class
action.





After several rounds of pleading
challenges to Plaintiff’s various renditions of the complaint, all but one
pharmaceutical manufacturing company, AstraZeneca, LP, were dismissed from the
case, leaving only Albertsons, Inc., Adheris, and AstraZeneca as the remaining
defendants (“Defendants”) in this action.  In the latest pleading
challenge to Plaintiff’s Fifth Amended Complaint, the remaining defendants were
successful in eliminating a number of claims, including fraud-based and breach
of privacy claims.  Defendants also successfully moved to strike
Plaintiff’s class allegations as improper.  The operative Sixth
Amended Complaint, which was filed on January 6, 2008, alleges five causes of
action against Defendants.  Only three of these claims – violation of
the CMIA, breach of fiduciary duty, and unjust enrichment – are alleged against
Adheris.





On February 8, 2009, the remaining
parties to the Weisz action entered into a Settlement Agreement and Release (the
"Weisz Settlement").  Under the terms of the Weisz Settlement, which
has been preliminarily approved by the court but remains subject to final court
approval after a fairness hearing, Adheris would agree to refrain from knowing
participation in any refill reminder programs, targeted mailings or
notifications regarding medical conditions of specific California residents
except those residents who have expressly opted in to the communication or as
otherwise permitted by California law.  Adheris currently does not
conduct significant business in California of the type encompassed by Weisz
Settlement.  It is expected that Adheris’ financial contribution to
the settlement in excess of its retention amount will be funded by
insurance.  Our insurer, AIG, is defending this action under
reservation of rights.





The hearing to consider final approval
of the Weisz Settlement is scheduled for June 5, 2009.  If the
settlement does not become final, Adheris intends to continue to defend this
action vigorously, and we do not believe that this action will have a material
adverse effect on our consolidated balance sheets, results of operations or cash
flows.  It is impossible to predict the outcome of litigation with
certainty, however, and there can be no assurance that an adverse result in this
proceeding would not have a potentially material adverse effect on our
consolidated balance sheets, results of operations or cash flows.





Indemnification
Claim.  In January 2008, PRS received a demand for
indemnification from one of its customers relating to a lawsuit filed against
the customer pursuant to the Telephone Consumer Protection Act of 1991, as
amended by the Junk Fax Prevention Act of 2005, 47 U.S.C. § 227, a state
consumer fraud statute and common law conversion; and seeks statutory and actual
damages allegedly caused by the sending of unsolicited fax advertisements
related to the customer’s product.  PRS assisted the customer in
sending the faxes in question, although the actual faxing was done by an
unaffiliated entity.  The customer based its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS agreed to indemnify the customer on the condition that PRS
and its appointed counsel would have control over the defense of this
matter.





Our insurer, Chubb Group, is defending
this action under reservation of rights.  In December 2008, the
parties to the action entered into a settlement agreement, which is subject to
Court approval and requires notification to various state attorneys
general.  The hearing to consider final approval of the settlement is
scheduled for June 10, 2009.  If the settlement agreement becomes
final, the amount to be paid to the settlement class in excess of the deductible
amount is expected to be funded by Chubb Group.  If the settlement
does not become final, PRS intends to continue to defend this action vigorously,
and  we do not believe that this action will have a material adverse
effect on our consolidated balance sheets, results of operations or cash
flows.  It is impossible to predict the outcome of litigation with
certainty, however, and there can be no assurance that an adverse result in this
proceeding would not have a potentially material adverse effect on our
consolidated balance sheets, results of operations or cash flows.





Other  We
are subject to lawsuits, investigations and claims arising out of the conduct of
our business, including those related to commercial transactions, contracts,
government regulation and employment matters.  Certain such claims
have been filed or are pending against us.  All such matters are of a
kind routinely experienced in our business and are consistent with our
historical experience.  We do not believe that any such routine action
will have a material adverse effect on us.





Item 4.  Submission of Matters to a Vote of
Securities Holders.





No
matters were submitted to a vote of security holders during the fourth quarter
of the year ended December 31, 2008.





2


PART II





Item 5.  Market for the
Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.





The
following table contains the high and low sales prices of our common stock
traded on the Nasdaq Global Select Market (ticker symbol “VTIV”) during the
periods indicated:





High
            
            
            LowYear
      ended December 31, 2008First
      Quarter
            
            $
            34.00
            
            
            $
            27.78Second
      Quarter
            
            $
            35.70
            
            
            $
            26.99Third
      Quarter
            
            $
            28.39
            
            
            $
            16.79Fourth
      Quarter
            
            $
            17.53
            
            
            $
            8.49High
            
            
            LowYear
      ended December 31, 2007First
      Quarter
            
            $
            39.09
            
            
            $
            34.49Second
      Quarter
            
            $
            40.00
            
            
            $
            34.56Third
      Quarter
            
            $
            43.82
            
            
            $
            35.17Fourth
      Quarter
            
            $
            46.01
            
            
            $
            27.56





On
February 13, 2009, there were approximately 281 record holders of our common
stock.  A substantially greater number of holders of our common stock
are “street name” or beneficial holders, whose shares are held of record by
banks, brokers and other financial institutions.





To date,
we have not declared cash dividends on our common stock and are currently
restricted from doing so under our credit agreement.  We do not
anticipate paying any cash dividends in the foreseeable future.





During the fourth quarter of 2008, we
did not repurchase any of our outstanding equity securities and, to our
knowledge, no “affiliated purchaser” of inVentiv repurchased any of our
outstanding securities.





The
transfer agent for our common stock is American Stock Transfer and Trust
Company, 6201 Fifteenth Avenue, Brooklyn, New York, 11219.




Information
with respect to securities authorized for issuance under equity compensation
plans is set forth in “Note 14 – Common Stock and Stock Incentive Plans” of the
“Notes to Consolidated Financial Statements” included in this Form 10-K and is
incorporated herein by this reference.






The
performance graph required by Regulation S-K Item 201(e) will be set forth in
our annual report to security holders for the fiscal year ended December 31,
2008 and is incorporated herein by this reference.




3


Item 6.  Selected Financial
Data.





SELECTED
FINANCIAL DATA





The
following table summarizes certain of our historical financial data and is
qualified in its entirety by reference to, and should be read in conjunction
with, our historical consolidated financial statements and related notes
included elsewhere in this Annual Report on Form 10-K.  Historical
financial information may not be indicative of our future
performance.  See also “Item 7-Management's Discussion and Analysis of
Financial Condition and Results of Operations”.





For
      the Years Ended December 31,2008
            
            
            2007
            
            
            2006
            
            
            2005
            
            
            2004(in
      thousands, except per share data)Revenues
            
            $
            1,119,812
            
            
            $
            977,300
            
            
            $
            766,245
            
            
            $
            556,312
            
            
            $
            352,184Impairment
      of goodwill and other intangible assets
            
            $
            (267,849
            )
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --(Loss)
      income from continuing operations
            
            $
            (128,685
            )
            
            $
            47,226
            
            
            $
            49,198
            
            
            $
            43,082
            
            
            $
            30,130Income
      from discontinued operations
            
            $
            664
            
            
            $
            258
            
            
            $
            2,037
            
            
            $
            781
            
            
            $
            1,002Net
      (loss) income
            
            $
            (128,021
            )
            
            $
            47,484
            
            
            $
            51,235
            
            
            $
            43,863
            
            
            $
            31,132Basic
      (losses) earnings per share:Continuing
      operations
            
            $
            (3.89
            )
            
            $
            1.50
            
            
            $
            1.69
            
            
            $
            1.60
            
            
            $
            1.26Discontinued
      operations
            
            $
            0.02
            
            
            $
            0.00
            
            
            $
            0.07
            
            
            $
            0.03
            
            
            $
            0.04Basic
      (losses) earnings per share
            
            $
            (3.87
            )
            
            $
            1.50
            
            
            $
            1.76
            
            
            $
            1.63
            
            
            $
            1.30Diluted
      (losses) earnings per share:Continuing
      operations
            
            $
            (3.89
            )
            
            $
            1.46
            
            
            $
            1.64
            
            
            $
            1.53
            
            
            $
            1.18Discontinued
      operations
            
            $
            0.02
            
            
            $
            0.01
            
            
            $
            0.06
            
            
            $
            0.03
            
            
            $
            0.04Diluted
      (losses) earnings per share
            
            $
            (3.87
            )
            
            $
            1.47
            
            
            $
            1.70
            
            
            $
            1.56
            
            
            $
            1.22Shares
      used in computing basic (losses) earnings per share
            
            
            33,043
            
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875
            
            
            
            23,951Shares
      used in computing diluted (losses) earnings per share
            
            
            33,043
            
            
            
            32,267
            
            
            
            30,058
            
            
            
            28,165
            
            
            
            25,437Balance
      sheet data:Total
      assets
            
            $
            973,116
            
            
            $
            1,110,856
            
            
            $
            771,054
            
            
            $
            583,894
            
            
            $
            287,452Long-term
      debt (a)
            
            $
            346,838
            
            
            $
            345,995
            
            
            $
            184,717
            
            
            $
            190,508
            
            
            $
            24,898Total
      equity
            
            $
            367,514
            
            
            $
            477,466
            
            
            $
            358,462
            
            
            $
            253,219
            
            
            $
            172,444





(a)
Long-term debt includes the non-current portion of our credit arrangement (for
2005-2008) and capital lease obligations (for all years), but excludes the
current portion of our credit agreement and capital lease
obligations.




4




ITEM 7. 
Management's Discussion and Analysis of Financial Condition and Results of
Operations.





This
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements, accompanying notes and other financial information included in this
Annual Report on Form 10-K.





Overview





inVentiv
Health Inc. (together with its subsidiaries, “inVentiv, ” “we,” "us," or "our")
is a leading provider of value-added services to the pharmaceutical, life
sciences and healthcare industries.  We support a broad range of
clinical development, communications and commercialization activities that are
critical to our customers' ability to complete the development of new drug
products and medical devices and successfully commercialize them.  In
addition, we provide medical cost containment services to payors in our patient
outcomes business.  Our goal is to assist our customers in meeting
their objectives by providing our services in each of our operational areas on a
flexible and cost-effective basis.  We provide services to over 350
client organizations, including all top 20 global pharmaceutical companies,
numerous emerging and specialty biotechnology companies and third party
administrators.





Our
service offerings reflect the changing needs of our clients as their products
move through the late-stage development and regulatory approval processes and
into product launch and then throughout the product lifecycle.  We
have established expertise and leadership in providing the services our clients
require at each of these stages of product development and commercialization and
seek to address their outsourced service needs on a comprehensive basis
throughout the product lifecycle.  For payors, we provide a variety of
services that enhance savings and improve patient outcomes including
opportunities to address billing errors, additional discounts and treatment
protocols for patients.





Business
Segments





We serve
our clients primarily through four business segments, which correspond to our
reporting segments for 2008:





·
            inVentiv
      Clinical, which provides professional resourcing and services to
      the pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management.   inVentiv
      Clinical consists of the Smith Hanley group of companies (which includes
      Smith Hanley Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”)
      and MedFocus), HHI Clinical & Statistical Research Services (“HHI”),
      and Synergos;




·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”), Chamberlain
      Communications Group, Inc. (“Chamberlain”), Addison Whitney, Angela
      Liedler GmbH (“Liedler”) and Chandler Chicco Agency
    (“CCA”);




·
            inVentiv
      Commercial, which consists of our outsourced sales and marketing
      teams, planning and analytics services, sample accountability services,
      marketing support services, professional development and training, and
      recruitment of sales representatives in the commercial services
      area.  This segment includes inVentiv Strategy & Analytics
      (including its Strategyx business unit acquired in June 2007) and inVentiv
      Selling Solutions, including Promotech Logistics Solutions LLC ("PLS"),
      acquired in December 2008; and




·
            inVentiv Patient
      Outcomes,  which
      provides services related to patient pharmaceutical compliance programs,
      patient support programs, clinical educator teams, medical cost
      containment and consulting solutions and patient relationship
      marketing.  This segment includes Adheris, Inc. (“Adheris”), The
      Franklin Group (“Franklin”), The Therapeutics Institute, AWAC (acquired in
      July 2007) and Patient Marketing Group, LLC (“PMG”) (acquired in August
      2008).




Outsourcing Trends and the Current
Economic Environment





Our
business as a whole, and of our inVentiv Clinical, inVentiv Commercial and
inVentiv Patient Outcomes segments in particular, is related significantly to
the degree to which pharmaceutical companies outsource services that have
traditionally been performed internally by fully integrated
manufacturers.  Current economic conditions in the U.S. and abroad
make it difficult for us to predict the near-term performance of our
businesses.  Although the pharmaceutical industry is generally
regarded as non-cyclical, the current recessionary environment has impacted and
can be expected to further impact virtually all economic activity in the United
States and abroad, including in the pharmaceutical and life sciences industry,
and is resulting in increased budget scrutiny and efforts to significantly
reduce expenditures in all areas of our clients' businesses.





During
2008, our inVentiv Communications division was affected by the tentativeness of
clients to make marketing spend decisions, and that trend appears to be
continuing, and perhaps deepening, during 2009 as evidenced by, among other
things, longer lead times by our clients in developing their marketing
budgets.  We believe that our clients are intently focused on their
short-term spending and cost-cutting efforts, and are continuing to look for
ways to streamline their operations.  Some clients are reducing
marketing expenditures through reducing the scopes of agency projects and
delaying decisions on new marketing initiatives.  The consequence,
which we anticipate (but cannot assure) will be short- to medium-term in nature,
is to shift the revenue opportunities for our inVentiv Communications division
away from supporting in-market products, where margins have traditionally been
the most attractive.  We also believe that client budgeting
constraints and reductions in overall pharmaceutical marketing expenditures may
impact our inVentiv Patient Outcomes division during 2009.  An
offsetting and longer-term positive trend for us, however, is that our clients
appear to be adopting clear strategies to outsource more of their pharmaceutical
marketing expenditures in lower cost and more flexible solutions consistent with
what inVentiv offers.





Management
is addressing the challenges of the current environment by taking steps to
reduce fixed costs and create more flexibility in our cost structure, maximize
and conserve strong cash flow and be in a position to pay down debt over
time.  Cost management strategies employed by management include
reducing fixed cost headcount; supplementing resources with talented flex time
employees who are willing to be employed on an as-needed basis; creating a
studio to manage project-based graphic design and production needs for agencies
across the Communications division, which will enable us to reduce overhead,
improve the quality and speed of service to our clients and reduce our
dependence on external vendors.  We believe that these steps will
allow inVentiv to provide competitive pricing to its clients and to improve
margins.





While the
current transformation in the pharmaceutical industry presents challenges to us,
it also presents opportunities.  Our client base is moving to more
extensive outsourcing of the services we provide.  Furthermore, the
industry's pipeline is strong, with 17% more compounds in phase III development
in 2008 as compared to 2007.   However, we also believe that,
even if the FDA approval rate does not appreciably improve over time, the number
of compounds awaiting approval will lead to increased overall outsourcing
expenditures.  As a result of our deep and long-standing relationships
with our clients, we believe that we are well positioned to capture these
opportunities.




Regulatory Uncertainty





Because most of our revenues are
generated by businesses involved in the commercialization of pharmaceutical
products, uncertainties surrounding the approval of our clients' pharmaceutical
products directly affect us.  The pace at which a pharmaceutical
product moves through the FDA approval process, and the application by the FDA
of standards and procedures related to clinical testing, manufacturing, labeling
claims and other matters are difficult to predict and may change over
time.  FDA non-approvals and delays in approval can significantly
impact revenue, particularly in the inVentiv Communications segment, because of
the relationship between the approval process and the amount and timing of
client marketing expenditures to support the affected pharmaceutical
products.




Although
delays in FDA approval rates have negatively impacted the pharmaceutical
industry, and indirectly inVentiv, the new product pipeline in the industry
remains strong, with many late-stage products awaiting FDA
approval.  Even if the FDA approval rate does not approve, we believe
that the number of products awaiting approval, and the requirement for
pharmaceutical manufacturers to support these products as they reach
commercialization, represents an opportunity over the medium to longer-term for
inVentiv to capture increasing levels of outsourced services
engagements.





Business
Strategy





Our
businesses have generated strong revenue growth for the past several
years.  Our internal revenue growth reflects our strong track record
in winning new business, which in turn is enhanced by our pursuit of
cross-servicing opportunities within and across our business
segments.  Our revenues are generally received under contracts with
limited terms and that can be terminated at the client’s option on short
notice.  We have been successful historically in obtaining increasing
amounts of repeat business from many of our clients and in expanding the scope
of the services we provide to them and thereby sustaining multi-year
relationships with many of our clients.  When relationships do not
renew, we have been successful in redeploying personnel quickly and
efficiently.





Strategic
acquisitions have historically been a core element of our business
strategy.  Acquisitions contributed significantly to our annual
revenue growth over the last few years.  We expect to be more
selective and execute fewer acquisitions going forward.  We will
continue to evaluate our strategic position and intend to make opportunistic
acquisitions that enable us to expand the scope of our service offerings and
drive shareholder value.





Our
acquisition activity adds complexity to the analysis of period-to-period
financial results and makes direct comparison of those financial results
difficult.  Our acquisitions are accounted for using purchase
accounting and the financial results of the acquired businesses are included in
our consolidated financial statements from their acquisitions
dates.  A prior year period that ended before an acquisition was
completed, however, will not include the corresponding financial results of the
acquired business.





During
2008, revenues from 2008 acquisitions totaled approximately $7 million, of which
$6 million was in our inVentiv Patient Outcomes segment and $1 million in our
inVentiv Commercial segment.  Revenues from 2007 acquisitions totaled
$82 million, of which $68 million was in our inVentiv Communications segment, $9
million in our inVentiv Patient Outcomes segment and $5 million in our inVentiv
Commercial segment.





5


Critical
Accounting Policies




Revenue
Recognition




The
following is a summary of our revenue recognition policy, based on the segment
and services we provide:




inVentiv
Clinical




·
            Clinical Staffing and
      Recruiting- Revenues are recognized and recorded when services are
      rendered.




·
            Functional
      Outsourcing- Revenues are recognized and recorded when milestones
      are achieved, in accordance with the terms of the
    contracts.




·
            Executive
      Placement- Revenues are recognized and recorded at the time a
      candidate begins full-time employment.  Any write-offs due to
      cancellations and/or billing adjustments historically have been
      insignificant.




inVentiv
Communications




·
            Advertising and
      Communication support- Revenues are recognized and recorded under
      the proportional performance method, by relating the actual hours of work
      performed to date to the current estimated total hours of the respective
      projects.  Any anticipated losses on projects are recognized
      when such losses are anticipated.  Time and production billings
      are billed as incurred for actual time and
  expenses.




·
            Public
      Relations- Revenues are recognized and recorded as time and
      production billings are billed as incurred for actual time and
      expenses.




·
            Branding-
      Revenues are recognized and recorded on a fee for service basis, in
      accordance with the terms of the contracts; and revenues for certain
      contracts are recorded based on completed contract
  method.




·
            Interactive
      Communications- Revenues are recognized and recorded under the
      proportional performance method based on services
    performed.




·
            Patient and Physician
      Education- Revenues are recognized and recorded using either the
      completed contract method or when milestones are achieved, depending on
      the terms of the specific
contracts.




inVentiv
Commercial




inVentiv Selling Solutions




·
            inVentiv Pharma
      Teams- Revenues and associated costs are recognized and recorded
      under pharmaceutical detailing contracts based on the number of physician
      calls made or the number of sales representatives
      utilized.  Most of our Sales and Marketing Teams’ contracts
      involve two phases, an “Implementation phase", formerly referred to as
      "Deployment phase", typically one to three months, in which we perform
      initial recruiting, training and preparation for deployment of the field
      force at the start of a new contract, and the “Deployment phase", formerly
      referred to as “Promotion phase”, in which our deployed field force
      actively promotes specified products for clients through face-to-face
      interactions with physicians or other targets  referred to as
      “detailing”.Our
      inVentiv Pharma Teams contracts specify a separate fee for the initial
      “Implementation phase” of a project.  We consider the
      implementation phase to be a separate and distinct earnings process and
      recognize the related revenues throughout the implementation phase, which
      typically spans a period of one to three months at the beginning of the
      first year of a contract.  We generally recognize revenue during
      the "Deployment phase" of our inVentiv Pharma Teams contracts on a
      straight-line basis based on the size of the deployed field
      force.  The accounting for the two phases is based on our
      analysis of Emerging Issues Task Force (“EITF”) Issue No. 00-21, Revenue Arrangements with
      Multiple Deliverables,in which we have concluded that the
      deployment and promotion phases are being sold separately and therefore
      qualify as separate units of accounting within the meaning of paragraph 9
      of EITF 00-21.Many
      of the product detailing contracts allow for additional periodic incentive
      fees to be earned once agreed upon performance benchmarks have been
      attained.  Revenue from incentive fees is recognized and
      recorded when we are reasonably assured that payment will be made, and is
      typically based upon verification through calculation of achievement,
      third party data or client verification.  Many contracts also
      stipulate penalties if agreed upon performance benchmarks have not been
      met.  These penalties are recognized upon verification of
      performance shortfalls.Non-refundable
      conversion fees are recognized and recorded as revenue when one of our
      sales professionals accepts a firm offer of permanent employment from a
      customer during the term of a
contract.




·
            Recruiting-
      Revenues are recognized based on placement of
  candidates.




·
            Professional
      Development and Training- Revenues are generally recognized and
      recorded as training courses are
completed.




·
            Regulatory Compliance
      Services- Regulatory compliance revenues for both fixed fees
      services and fees for specific compliance related services are recognized
      and recorded when monthly services are
  performed.




·
            Non-Personal
      Promotion- Revenues are recognized and recorded based on time
      incurred and fulfillment requirements in accordance with the terms of the
      contracts.




·
            Virtual Event
      Services- Revenues are recognized based on the frequency and upon
      completion of live events.




·
            Sales Force
      Automation/Data Analysis- A majority of revenues are recognized
      based on straight-line basis.  For certain analytics projects,
      revenues are recognized upon
completion.




inVentiv
Strategy and Analytics




·
            Planning and
      Analytics- Revenues for HPR generally include fixed fees, which are
      recognized and recorded when monthly services are performed based on the
      proportional performance method and when payment is reasonably
      assured.  HPR’s initial contracts typically range from one month
      to one year.  Revenues for additional services are recognized
      and recorded when the services are provided and payment is reasonably
      assured.




·
            Strategic
      Consulting- For most contracts, revenues are recognized and
      recorded on a fee for service basis, in accordance with the terms of the
      contracts.  Certain contracts are also recorded based on the
      proportional performance method.




·
            Product Access and
      Managed Market Support-Consulting fee revenues are recognized and
      recorded when services are rendered.  Other services are based
      on milestones.




·
            Consulting and
      Contract Marketing- Revenues are recognized and recorded on a fee
      for service basis, in accordance with the terms of the
      contracts.




inVentiv Patient
Outcomes




·
            Patient Pharmaceutical
      Compliance Programs- Revenues are mainly recognized based on the
      volume of correspondence sent to
patients.




·
            Patient Support
      Programs- Patient assistance programs revenues depend on the number
      of patients served and are recognized and recorded as each service is
      performed.




·
            Clinical Nurse
      Educators, On-Call Specialists, and Medical Science Liaison
      Programs- Revenue recognition is the same as inVentiv Pharma Teams,
      as the two services are similar in the business arrangement and fee
      structure.




·
            Medical Cost
      Containment and Consulting Solutions- The majority of revenues are
      recognized on a completed contract basis, based on an analysis of claims
      as a percentage of savings realized by our clients.  Certain
      services are performed on a fee-for-services basis and recognized when the
      service is rendered.




·
            Patient Relationship
      Marketing-  Revenues are recognized and recorded as time
      and production billings are billed as incurred for actual time and
      expenses.




General Revenue
Recognition




Reimbursable
Costs


Reimbursable
costs, including those relating to travel and out-of pocket expenses, sales
force bonuses tied to individual or product revenues, and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable
expenses is included in costs of services in the period in which such amounts
have been finalized.  In certain cases, based on our analysis of EITF
Issue No. 99-19, Reporting
Revenue Gross as a Principal versus Net as an Agent, and related
accounting literature, we may also record certain reimbursable transactions,
such as the placement of media advertisements where we act as an agent, as net
revenues.




Loss
Contracts


We
periodically analyze our contracts to determine the likelihood and amount of any
potential loss on a contract resulting from lower than anticipated product,
field force or other performance.  In the event that current
information illustrates a loss is likely to be incurred over the remaining life
of the contract, we accrue that loss at the time it becomes
probable.  We did not have any material loss contracts in 2008 or
2007.




Billing




Customers are invoiced according to
agreed upon billing terms.  Contracts that are invoiced prior to
performance of related services are recorded as client advances and unearned
revenue and are not recognized as revenues until earned, in accordance with our
revenue recognition policies.  Amounts earned for revenues recognized
before the agreed upon invoicing terms have been met are recorded as revenue and
included in unbilled services.  Upon billing, these amounts are
transferred to billed accounts receivable.




Goodwill
and Other Intangible Assets




Goodwill
and other indefinite-life intangibles are assessed for potential impairment
pursuant to the guidelines of SFAS No. 142, Goodwill and Other Intangible
Assets,on
an annual basis (at June 30) or when management determines that the carrying
value of goodwill or an indefinite-lived intangible asset may not be recoverable
based upon the existence of certain indicators of impairment.  We
applied aggregation criteria consistent with the definitions under SFAS 142, as
well as the related guidance in SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, for purposes of aggregating business
units in our goodwill impairment testing.  Goodwill is tested for
impairment at least annually using a two-step process that begins with an
estimation of the fair value of a reporting unit.  The first step is a
screen for potential impairment, and the second step measures the amount of
impairment, if any.  We calculate and compare the fair value of each
reporting unit to its carrying value.  If the carrying value exceeds
the fair value, an impairment loss will be recognized in an amount equal to the
difference.  If we deem the useful life to be no longer indefinite
after testing for impairment in accordance with the applicable rules stated
above, we amortize the intangible asset over its remaining estimated useful
life, following the pattern in which the expected benefits will be consumed or
otherwise used up and we continue to review for impairment on an annual
basis.




We
performed annual impairment tests as of June 30, 2008 and concluded that the
existing goodwill and indefinite lived intangible tradename balances were not
impaired.  In conjunction with the preparation, review and audit of
financial statements for our 2008 fiscal year, as a result of adverse economic
and equity market conditions that caused a decrease in the current marketplace
and related multiples and our stock price, we concluded that a triggering event
had occurred indicating potential impairment, and accordingly we performed an
impairment test of our goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets under SFAS No. 142, Goodwill and Other Intangible
Assets, and $30 million of definite-lived assets under SFAS No. 144,
Accounting for the Impairment
of or Disposal of Long-Lived Assets.





Claims
and Insurance Accruals





We
maintain self-insured retention limits for certain insurance
policies.  The liabilities associated with the risk we retain are
estimated in part based on historical experience, third-party actuarial
analysis, demographics, nature and severity, past experience and other
assumptions, which have been consistently applied.  The liabilities
for self-funded retention are included in claims and insurance reserves based on
claims incurred, with liabilities for unsettled claims and claims incurred but
not yet reported being actuarially determined with respect to workers’
compensation and auto liability claims and estimated based on management’s
evaluation of the nature and severity of individual claims and historical
experience with respect to all other liabilities.  A significant
number of these claims typically take several years to develop and even longer
to ultimately settle.  These estimates tend to be reasonably accurate
over time; however, the actual liabilities could vary materially from
management's estimates and assumptions regarding severity of claims, medical
cost inflation, as well as specific case facts can create short-term volatility
in estimates.  Management believes that these reserves are
adequate.




Income
Taxes





Deferred
tax assets and liabilities are determined based on the difference between the
financial reporting and the tax bases of assets and liabilities and are measured
using the tax rates and laws that are expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  A valuation allowance is established, when necessary, to
reduce deferred income tax assets to the amount that is more likely than not to
be realized.  Realization is dependent on generating sufficient
taxable income of a specific nature prior to the expiration of any loss
carryforwards or capital losses.  The asset may be reduced if
estimates of future taxable income during the carryforward period are
reduced.  In addition, we maintain reserves for certain tax items,
which are included in income taxes payable on our consolidated balance
sheet.  We periodically review these reserves to determine if
adjustments to these balances are necessary.




Derivative
Financial Instruments


We enter
into interest rate swap agreements to modify the interest rate characteristics
of our outstanding long-term debt.  At hedge inception, and at least
quarterly thereafter, we assess whether derivatives used to hedge transactions
are highly effective in offsetting changes in the cash flow of the hedged
item.  To the extent the instruments are considered to be effective,
changes in fair value are recorded as a component of other comprehensive income
(loss).  To the extent there is any hedge ineffectiveness, changes in
fair value relating to the ineffective portion are immediately recognized in
earnings (interest expense).   The fair values of our interest
rate swaps are obtained from dealer quotes.  These values represent
the estimated amount we would receive or pay to terminate the agreement taking
into consideration the difference between the contract rate of interest and
rates currently quoted for agreements of similar terms and
maturities.




Recent
Accounting Pronouncements




In
October 2008, the FASB issued Staff Position No. FSP FAS 157-3
“Determining the Fair Value of a Financial Asset When the Market for That Asset
Is Not Active” (FSP FAS 157-3) which amends FAS 157 to include
guidance on how to determine the fair value of a financial asset in an inactive
market and which is effective immediately on issuance, including prior periods
for which financial statements have not been issued.  The
implementation of FSP FAS 157-3 did not have a material impact on our
financial position and results of operations.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 162 ("SFAS 162"), “The Hierarchy of Generally
Accepted Accounting Principles.” SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP in the United States (the GAAP
hierarchy).  This Statement is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AICPA
Codification of Auditing Standards , AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting
Principles."  We do not believe that SFAS 162 will have a
material impact on our Consolidated Financial Statements.





In March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161
“Disclosures about Derivative Instruments and Hedging Activities an amendment of
FASB Statement No. 133”, which requires additional disclosures regarding a
company’s derivative instruments and hedging activities by requiring disclosure
of the fair values of derivative instruments and their gains and losses in a
tabular format.  It also requires disclosure of derivative features
that are credit risk–related as well as cross-referencing within the notes to
the financial statements to enable financial statement users to locate important
information about derivative instruments, financial performance, and cash flows.
SFAS 161 is effective for fiscal years beginning after November 15,
2008.  We are currently evaluating the impact of this standard on our
Consolidated Financial Statements.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS 141(R)”), which addresses the recognition and accounting for identifiable
assets acquired, liabilities assumed and noncontrolling interests in business
combinations. SFAS 141(R) also establishes expanded disclosure requirements for
business combinations. SFAS 141(R) will become effective January 1,
2009.  We are currently evaluating the impact of this standard on our
Consolidated Financial Statements; however, this is mainly dependent on the
timing, nature and extent of our acquisitions consummated after January 1,
2009.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”),
which addresses the accounting and reporting framework for minority interests by
a parent company.  SFAS 160 also addresses disclosure requirements to
distinguish between interests of the parent and interests of the noncontrolling
owners of a subsidiary. SFAS 160 will become effective January 1,
2009.  We are currently evaluating the impact of this standard on our
Consolidated Financial Statements.





In
February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.SFAS No. 159 provides companies with an option to report
selected financial assets and liabilities at fair value.  This
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. Early adoption is permitted as of the beginning
of a fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.  The implementation
of SFAS 159 did not have a material effect on our
consolidated balance sheets, results of operations and cash flows.
 
 In
September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements".  SFAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value
measurements.  The provisions of SFAS 157 are effective for the fiscal
year beginning January 1, 2008.  The implementation of SFAS
157 did not have a material effect on our consolidated balance sheets,
results of operations and cash flows.


In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin (“SAB”) No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Current Year Misstatements. SAB No.
108 requires analysis of misstatements using both an income statement (rollover)
approach and a balance sheet (iron curtain) approach in assessing materiality
and provides for a one-time cumulative effect transition adjustment. SAB
No. 108 is effective for our 2006 annual financial
statements.  The adoption of SAB No. 108 did not have a material
impact on our consolidated results of operations or consolidated financial
position.





In July
2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109.  FIN 48
clarifies the accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the
consolidated financial statements.  FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 applies to all tax
positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes
(“FASB No. 109”).  FIN 48 is effective for fiscal years beginning
after December 15, 2006; as such, we adopted FIN 48 as of January 1, 2007,
as required.  Differences between the amounts recognized in the
consolidated financial statements prior to the adoption of FIN 48 and the
amounts reported after adoption are accounted for as a cumulative-effect
adjustment recorded to the beginning balance of retained
earnings.  The adoption of FIN 48 did not have a material impact on
our consolidated statements of operations, financial position, cash flows, and
other significant matters, such as debt covenants or our normal business
practices.




6




Results
of Operations
  The
following sets forth, for the periods indicated, certain components of our
operating earnings, including such data stated as a percentage of
revenues:
 
 For
      the Years Ended December 31,2008
              
              
              2007
              
              
              2006(in
      thousands, except for per share data)Revenues:
              
              
              
              
              Percentage*
              
              
              
              
              
              Percentage*
              
              
              
              
              
              Percentage
      *inVentiv
      Clinical
              
              $
              216,934
              
              
              
              19.4
              %
              
              $
              186,927
              
              
              
              19.1
              %
              
              $
              149,786
              
              
              
              19.5
              %inVentiv
      Communications
              
              
              341,887
              
              
              
              30.5
              %
              
              
              289,113
              
              
              
              29.6
              %
              
              
              207,398
              
              
              
              27.1
              %inVentiv
      Commercial
              
              
              435,066
              
              
              
              38.9
              %
              
              
              400,786
              
              
              
              41.0
              %
              
              
              347,117
              
              
              
              45.3
              %inVentiv
      Patient Outcomes
              
              
              125,925
              
              
              
              11.2
              %
              
              
              100,474
              
              
              
              10.3
              %
              
              
              61,944
              
              
              
              8.1
              %Total
      revenues
              
              
              1,119,812
              
              
              
              100.0
              %
              
              
              977,300
              
              
              
              100.0
              %
              
              
              766,245
              
              
              
              100.0
              %Cost
      of services:inVentiv
      Clinical
              
              
              149,531
              
              
              
              68.9
              %
              
              
              127,492
              
              
              
              68.2
              %
              
              
              100,632
              
              
              
              67.2
              %inVentiv
      Communications
              
              
              199,160
              
              
              
              58.3
              %
              
              
              175,801
              
              
              
              60.8
              %
              
              
              131,991
              
              
              
              63.6
              %inVentiv
      Commercial
              
              
              347,611
              
              
              
              79.9
              %
              
              
              317,693
              
              
              
              79.3
              %
              
              
              271,651
              
              
              
              78.3
              %inVentiv
      Patient Outcomes
              
              
              76,140
              
              
              
              60.5
              %
              
              
              60,576
              
              
              
              60.3
              %
              
              
              42,475
              
              
              
              68.6
              %Total
      cost of services
              
              
              772,442
              
              
              
              69.0
              %
              
              
              681,562
              
              
              
              69.7
              %
              
              
              546,749
              
              
              
              71.4
              %Selling,
      general and administrative expenses:inVentiv
      Clinical
              
              
              50,617
              
              
              
              23.3
              %
              
              
              45,223
              
              
              
              24.2
              %
              
              
              37,593
              
              
              
              25.1
              %inVentiv
      Communications
              
              
              99,186
              
              
              
              29.0
              %
              
              
              71,329
              
              
              
              24.7
              %
              
              
              49,201
              
              
              
              23.7
              %inVentiv
      Commercial
              
              
              43,288
              
              
              
              10.0
              %
              
              
              45,505
              
              
              
              11.4
              %
              
              
              29,628
              
              
              
              8.5
              %inVentiv
      Patient Outcomes
              
              
              26,940
              
              
              
              21.4
              %
              
              
              21,638
              
              
              
              21.5
              %
              
              
              12,293
              
              
              
              19.8
              %Other
              
              
              21,653
              
              
              
              --
              
              
              
              17,250
              
              
              
              --
              
              
              
              12,703
              
              
              
              --Total
      Selling, general and administrative expenses:
              
              
              241,684
              
              
              
              21.6
              %
              
              
              200,945
              
              
              
              20.6
              %
              
              
              141,418
              
              
              
              18.4
              %Impairment
      of goodwill and other intangible assets
              
              
              267,849
              
              
              
              23.9
              %
              
              
              --
              
              
              
              
              
              
              
              --Total
      operating (loss) income
              
              
              (162,163
              )
              
              
              (14.5
              )%
              
              
              94,793
              
              
              
              9.7
              %
              
              
              78,078
              
              
              
              10.2
              %Interest
      expense
              
              
              (25,464
              )
              
              
              (2.3
              )%
              
              
              (20,717
              )
              
              
              (2.1
              )%
              
              
              (11,361
              )
              
              
              (1.5
              )%Interest
      income
              
              
              1,983
              
              
              
              0.2
              %
              
              
              3,039
              
              
              
              0.3
              %
              
              
              2,694
              
              
              
              0.4
              %(Loss)
      income from continuing operations before income tax provision, minority
      interest in income of subsidiary and income from equity
      investments
              
              
              (185,644
              )
              
              
              (16.6
              )%
              
              
              77,115
              
              
              
              7.9
              %
              
              
              69,411
              
              
              
              9.1
              %Income
      tax benefit (provision)
              
              
              58,207
              
              
              
              5.2
              %
              
              
              (29,401
              )
              
              
              (3.0
              )%
              
              
              (19,166
              )
              
              
              (2.5
              )%(Loss)
      income from continuing operations before minority interest in income of
      subsidiary and income from equity investments
              
              
              (127,437
              )
              
              
              (11.4
              )%
              
              
              47,714
              
              
              
              4.9
              %
              
              
              50,245
              
              
              
              6.6
              %Minority
      interest in income of subsidiary
              
              
              (1,146
              )
              
              
              (0.1
              )%
              
              
              (1,070
              )
              
              
              (0.1
              )%
              
              
              (1,207
              )
              
              
              (0.2
              )%Equity
      (losses) earnings in investments
              
              
              (102
              )
              
              
              --
              
              
              
              582
              
              
              
              --
              
              
              
              160
              
              
              
              --(Loss)
      income from continuing operations
              
              
              (128,685
              )
              
              
              (11.5
              )%
              
              
              47,226
              
              
              
              4.8
              %
              
              
              49,198
              
              
              
              6.4
              %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
              
              
              664
              
              
              
              0.1
              %
              
              
              258
              
              
              
              0.1
              %
              
              
              2,037
              
              
              
              0.3
              %Income
      from discontinued operations
              
              
              664
              
              
              
              0.1
              %
              
              
              258
              
              
              
              0.1
              %
              
              
              2,037
              
              
              
              0.3
              %Net
      (loss) income
              
              $
              (128,021
              )
              
              
              (11.4
              )%
              
              $
              47,484
              
              
              
              4.9
              %
              
              $
              51,235
              
              
              
              6.7
              %(Loss)
      earnings per share:Continuing
      operations:Basic
              
              $
              (3.89
              )
              
              
              
              
              
              $
              1.50
              
              
              
              
              
              
              $
              1.69Diluted
              
              $
              (3.89
              )
              
              
              
              
              
              $
              1.46
              
              
              
              
              
              
              $
              1.64Discontinued
      operations:Basic
              
              $
              0.02
              
              
              
              
              
              
              $
              0.00
              
              
              
              
              
              
              $
              0.07Diluted
              
              $
              0.02
              
              
              
              
              
              
              $
              0.01
              
              
              
              
              
              
              $
              0.06Net
      (loss) income:Basic
              
              $
              (3.87
              )
              
              
              
              
              
              $
              1.50
              
              
              
              
              
              
              $
              1.76Diluted
              
              $
              (3.87
              )
              
              
              
              
              
              $
              1.47
              
              
              
              
              
              
              $
              1.70
  *Cost of services is expressed
as a percentage of segment revenue.  All other line items are
displayed as a percentage of total revenues.




Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007




Revenues:Revenues increased by
approximately $143 million, or 15%, to $1.12 billion during 2008, from $977
million during 2007.  Net revenues increased by approximately $155
million, or 19%, to $952 million during 2008, from $797 million during
2007.  During the year ended December 31, 2008, revenues related to
acquisitions consummated during 2008 approximated $7 million from our inVentiv
Patient Outcomes and inVentiv Commercial segments. Revenues from 2007
acquisitions totaled $82 million in our inVentiv Communications segment,
inVentiv Patient Outcomes segment and inVentiv Commercial
segment.




inVentiv
Clinical’s revenues were $217 million during 2008, an increase of $30 million,
or 16%, compared to $187 million during 2007.  Revenues in inVentiv
Clinical were higher in 2008 predominantly due to expansion of our inVentiv
Clinical Solutions Group with new client wins, in addition to expansion of our
dedicated team with a large top 20 Client.  Our staffing group had a modest
increase for the year.




inVentiv
Communications’ revenues were $342 million during 2008, an increase of $53
million, or 18%, from 2007.  inVentiv Communications’ revenues
accounted for 31% of total inVentiv revenues during 2008.  Revenues
from acquisition growth represented 96% of this increase.  The
remainder of this variance mainly relates to recent business wins in various
advertising and communications’ agencies.




inVentiv
Commercial’s revenues were $435 million during 2008, an increase of $34 million,
or 8%, from 2007.  Approximately 7% of the increase related to
acquisition growth, with the remainder relating to new business wins and
expansion of its embedded teams, which more than offset revenues from contracts
that wound down in the ordinary course.




inVentiv
Patient Outcomes’ revenues were $126 million during 2008, up $26 million from
2007.  Revenues from acquisition growth represented 57% of this
increase, with the remainder relating to organic growth from Adheris and
TTI.  The inVentiv Patient Outcomes segment, which was formed in
August 2007, more closely links our various patient-oriented business units,
including Adheris, which was formerly reported in the Communications’ segment,
Franklin’s patient assistance and reimbursement offerings, which was formerly
reported in the Commercial segment, The Therapeutics Institute’s clinical
education services which was formerly reported in the Commercial segment, AWAC
and PMG.




Cost of
Services:  Cost of services increased by approximately $90
million or 13%, to $772 million for 2008 from $682 million in
2007.  Cost of services decreased slightly as a percentage of revenues
from 70% in 2007 to 69% in 2008.




inVentiv
Clinical’s cost of services increased by approximately $23 million, or 18%, to
$150 million during 2008 from $127 million during 2007.  Cost of
services as a percentage of revenues slightly increased from 68% during 2007 to
69% during 2008 mainly due to inVentiv Clinical Solutions’ headcount additions
to support the increased wins related to our Solutions business and our
dedicated team.




inVentiv
Communications’ cost of services increased by approximately $23 million, or 13%,
to $199 million during 2008 from $176 million during 2007.  Cost of
services as a percentage of revenues decreased from 61% in 2007 to 58% in 2008,
mainly due to increased contribution of higher gross margins from newly-acquired
businesses, such as CCA.




inVentiv
Commercial’s cost of services increased by approximately $30 million, or 9%, to
$348 million during 2008 from $318 million during 2007.  Cost of
services as a percentage of revenues slightly increased from 79% during 2007 to
80% during 2008.  The increase in the cost of sales percentage was
driven by the increase in limited scope sales force services, including the
embedded program with a top 20 pharmaceutical company.




inVentiv
Patient Outcomes’ cost of services increased by approximately $15 million, or
25%, to $76 million during 2008 from $61 million during 2007, mainly due to
increased business at Adheris, Franklin and AWAC as well as the acquisition of
PMG, as mentioned above.




Selling, General
and Administrative ("SG&A"):  SG&A expenses, which also
encompasses the activities of the corporate management group, increased by
approximately $41 million, or 20%, to $242 million in 2008 from $201 million
2007, mainly due to additional acquisitions in 2007 and 2008.




SG&A
expenses at inVentiv Clinical was approximately $51 million in 2008, compared to
$45 million in 2007.  The $6 million increase in Clinical’s SG&A
is related to an expansion of our Business Development effort and additional
costs as it relates to the growth of our Solutions and Teams businesses,
specifically costs related to supporting initiatives in IT, Accounting, Quality
Assurance and Project Management.




SG&A
expenses at inVentiv Communications increased $28 million to $99 million in
2008.  2007 acquisitions contributed to the majority of this
increase.




SG&A
expenses at inVentiv Commercial decreased by approximately $3 million to $43
million during 2008 from 2007.  The majority of this decrease was due
to a receivables reserve recorded during the second quarter of 2007 relating to
a client that declared Chapter 11 bankruptcy.  This decrease was
slightly offset by a general increase in compensation across the Commercial
business.




SG&A
expenses at inVentiv Patient Outcomes increased by $5 million to $27 million
during 2008, mainly due to the additions of AWAC and PMG over the last two
years.




Other
SG&A increased by approximately 29%, or $5 million from 2007 to
2008.  This increase relates to annual increases in equity and
non-equity compensation expense from the previous year, inclusive of changes
resulting from additional corporate personnel transferring from the operating
units; and $2.6 million of other than temporary impairment of marketable
securities.  See Liquidity and Capital Resources section for further
discussion on other than temporary impairment of marketable
securities.




Impairment of
Goodwill and Other Intangible Assets:In conjunction with the
preparation, review and audit of financial statements for our 2008 fiscal year,
as a result of adverse equity market conditions that caused a decrease in the
current market multiples and our stock price, we concluded that a triggering
event had occurred indicating potential impairment, and accordingly performed an
impairment test of our goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets under SFAS No. 142, Goodwill
and Other Intangible Assets, and $30 million of definite-lived assets under SFAS
No. 144, Accounting for the
Impairment of or Disposal of Long-Lived Assets.




Interest
Expense:Interest expense increased to approximately $25
million in 2008 from 2007.  The difference was due to higher interest
on the additional $166 million borrowed under our amended credit agreement
entered into in July 2007, as more fully explained in Liquidity and Capital
Resources.




Provision for
Income Taxes:  Our 2008 annual effective tax rate was 31.1%,
which includes an 8% rate reduction relating to the impairment of $268 million
of goodwill and other intangible assets.  Our 2007 annual effective
tax rate was 38.4%, including a first quarter 2007 tax benefit of approximately
$1.0 million related to the net tax benefit of state tax
reserves.




Our
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which we do business and is subject to
taxation.  Our effective tax rate could fluctuate due to changes in
earnings between operating entities and related tax jurisdictions, or due to the
potential tax impact arising from previous divestitures.




Net (Loss) Income
and Earnings Per Share ("EPS"): inVentiv’s net loss
decreased by approximately $175 million to a net loss of $128 million during
2008 when compared to 2007, and earnings per share decreased to $(3.87) per
share in 2008 from $1.47 per share during 2007.  The aforementioned
impairment charge, which did not affect inVentiv’s current operations, liquidity
or cash position, contributed to the loss in 2008.




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




Revenues:Revenues increased by approximately
$211 million, or 28%, to $977 million during 2007, from $766 million during
2006.  Net revenues increased by approximately $165 million, or 26%,
to $797 million during 2007, from $632 million during 2006.


inVentiv
Clinical’s revenues were $187 million during 2007, an increase of $37 million,
or 25%, compared to $150 million during 2006.  Revenues in inVentiv
Clinical were higher in 2007 predominantly due to increased placement of
temporary personnel and new business wins to provide functional outsourcing
services.  Also, in April 2006, we acquired Synergos, which
complements the segment by strengthening the functional outsourcing
service.




inVentiv
Communications’ revenues were $289 million during 2007, an increase of $82
million, or 39%, from 2006.  inVentiv Communications’ revenues
accounted for 30% of total inVentiv revenues during
2007.  Approximately $70 million of this increase relates to
incremental revenue relating to the timing of the 2007 acquisitions of Ignite,
Chamberlain, Addison Whitney and CCA, and the 2006 acquisition of
JSAI.  The remainder of this variance mainly relates to recent
business wins in various advertising and communications’ agencies.




inVentiv
Commercial’s revenues were $401 million during 2007, an increase of $54 million,
or 15%, from 2006.  Most of the variance relates to new business wins,
which more than offset revenues from contracts that wound down in the ordinary
course.  The remaining increase predominately relates to the
acquisition of Medconference, DialogCoach, and Strategyx.




inVentiv
Patient Outcomes’ revenues were $100 million during 2007, up $38 million from
2006.  Growth in the segment was both organic as well as from the
addition of AWAC. The inVentiv Patient Outcomes segment, which was formed in
August 2007, more closely links our various patient-oriented business units,
including Adheris, which was formerly reported in the Communications’ segment,
Franklin’s patient assistance and reimbursement offerings, which was formerly
reported in the Commercial segment, The Therapeutics Institute’s clinical
education services which was formerly reported in the Commercial segment, and
AWAC, which we acquired in July 2007.




Cost of
Services: Cost of services increased by approximately $135 million or
25%, to $682 million for 2007 from $547 million in 2006.  Cost of
services decreased as a percentage of revenues from 71% in 2006 to 70% in
2007.




inVentiv
Clinical’s cost of services increased by approximately $26 million, or 26%, to
$127 million during 2007 from $101 million during 2006.  Cost of
services as a percentage of revenues slightly increased from 67% during 2006 to
68% during 2007 as we made infrastructure investments in preparation for a
material functional outsourcing win with a top 20 pharmaceutical
company.




inVentiv
Communications’ cost of services increased by approximately $44 million, or 33%,
to $176 million during 2007 from $132 million during 2006.  Cost of
services as a percentage of revenues decreased from 64% in 2006 to 61% in 2007,
mainly due to the addition of higher margin businesses in 2007.




inVentiv
Commercial’s cost of services increased by approximately $46 million, or 17%, to
$318 million during 2007 from $272 million during 2006.  Cost of
services as a percentage of revenues slightly increased from 78% during 2006 to
79% during 2007.  The increase in the cost of sales percentage was
driven by the increase in limited scope sales force services, including the new
on-boarding program with a top 20 pharmaceutical company.




inVentiv
Patient Outcomes’ cost of services increased by approximately $19 million, or
45%, to $61 million during 2007 from $42 million during 2006, mainly due to
increased business at Adheris and Franklin as well as the acquisition of AWAC,
as mentioned above.




Selling, General
and Administrative: SG&A expenses, which also encompasses the
activities of the corporate management group, increased by approximately $60
million, or 43%, to $201 million in 2007 from $141 million 2006, mainly due to
additional acquisitions in 2006 and 2007.




SG&A
expenses at inVentiv Clinical was approximately $45 million in 2007, compared to
$38 million in 2006 due to increased selling expense and commissions from
additional business; additional staffing requirements; and SG&A expense from
Synergos, which was acquired on April 1, 2006.




SG&A
expenses at inVentiv Communications increased $22 million to $71 million in
2007.  New acquisitions contributed to the majority of this
increase.




SG&A
expenses at inVentiv Commercial increased by approximately $16 million to $46
million during 2007 from 2006.  Approximately 50% of this increase was
due to recording a receivables reserve relating to two accounts, including a
client that declared Chapter 11 bankruptcy subsequent to the end of the second
quarter of 2007.  We have previously never had a collections issue as
a result of client bankruptcy, with virtually all of our clients having
excellent payment histories, and do not believe the circumstances giving rise to
these receivables reserves are likely to reoccur in future
periods.  SG&A also increased due to annual increases in equity
and non-equity compensation, and SG&A from the new inVentiv Commercial
divisions acquired during the fourth quarter of 2006 and second quarter of
2007.




SG&A
expenses at inVentiv Patient Outcomes increased by $10 million to $22 million
during 2007, mainly due to the additions of Adheris and AWAC over the last two
years.




Other
SG&A increased by approximately 36%, or $5 million from 2006 to
2007.   This increase mainly relates to $2.1 million of
additional stock compensation expense and $0.8 million of other than
temporary impairment of marketable securities. See Liquidity and Capital
Resources section for further discussion on other than temporary impairment of
marketable securities.




Interest
Expense:Interest expense almost doubled to approximately $21
million in 2007 from 2006.  Approximately $6 million of the difference
was due to higher interest on the additional $166 million borrowed under our
amended credit agreement entered into in July 2007, as more fully explained in
Liquidity and Capital
Resources.  In addition, as mentioned in Item 7a, Quantitative and Qualitative
Disclosures About Market Risk, we did not designate our initial hedge for
hedge accounting until July 2006, which resulted in a $2.1 million net reduction
to interest expense relating to the mark-to-market adjustment during the 2006
versus $1.2 million of interest expense due to the financing element embedded in
the interest rate swap during 2007.




Provision for
Income Taxes:  In March 2007, we recognized a tax benefit of
approximately $1.0 million related to the net tax benefits of state tax
reserves.  Including these tax benefits, our annual effective tax rate
was 38.4% in 2007.




In June
2006, we recognized a tax benefit of approximately $9.1 million related to net
operating losses associated with a previously-divested unit, as management
determined that it is more likely than not that this deferred tax asset will be
realized.  Including these tax benefits, our annual effective tax rate
was 28.0% in 2006.




Our
current effective tax rate is based on earnings in the tax jurisdictions in
which we do business and is subject to taxation.  Our effective tax
rate could fluctuate due to changes in earnings between operating entities and
related tax jurisdictions, or due to the potential tax impact arising from
previous divestitures.




In July
2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109.  FIN 48
clarifies the accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the
consolidated financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 applies to all tax
positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes
(“FASB No. 109”).  FIN 48 is effective for fiscal years beginning
after December 15, 2006; as such, we adopted FIN 48 as of January 1, 2007, as
required.  Differences between the amounts recognized in the
consolidated financial statements prior to the adoption of FIN 48 and the
amounts reported after adoption are accounted for as a cumulative-effect
adjustment recorded to the beginning balance of retained
earnings.  The adoption of FIN 48 did not have a material impact on
our consolidated statements of operations, financial position, cash flows, and
other significant matters, such as debt covenants or our normal business
practices.




Net Income and
Earnings Per Share: inVentiv’s net income
decreased by approximately $4 million to $47 million during 2007 when compared
to the same period in 2006, and diluted earnings per share decreased to $1.47
per share in 2007 from $1.70 per share during the 2006.  However,
excluding the impact of the increase in the uncollectible receivable reserve
during the second quarter of 2007 and the distinct tax benefits in 2007 and
2006, overall EPS and net income increased over the respective periods, driven
by increased wins and new acquisitions.




Liquidity
and Capital Resources





At
December 31, 2008, we had $90 million of unrestricted cash and equivalents, an
increase of $39 million from December 31, 2007.  For the year ended
December 31, 2007 compared to 2008, cash provided by operations increased by $28
million from $59 million to $87 million.  Cash used in investing
activities decreased from $246 million to $28 million for the year ended
December 31, 2007 and 2008, respectively.  Cash from financing
activities decreased from a source of $159 million to a use of $18 million over
the same comparative periods.





Cash
provided by operations was $87 million during the year ended December 31, 2008,
while cash provided by operations was $59 million in the year ended December 31,
2007.  The increase was primarily due to the improved collections and
timing of unbilled services across our segments in 2008 as compared to
2007.  In 2008, we focused more on strengthening our collections
process as the credit environment has worsened.





Cash used
in investing activities decreased by $218 million from $246 million to $28
million for the years ended December 31, 2007 and 2008,
respectively.  We paid $170 million for the 2007 acquisitions of
Ignite, Chamberlain, Strategyx, Addison Whitney, Advogent, CCA and AWAC, while
spending $26 million for the 2008 acquisitions of PMG and PLS and post-closing
adjustments from our 2007 acquisitions.  We also paid $24 million in
acquisition earnouts in 2007, while paying $22 million in acquisition earnouts
in 2008.  In 2008, we liquidated approximately $32 million of
marketable securities from CSCP into cash as further described in Item
1A.  Finally, our capital expenditures increased by $7 million due to
the inclusion of 2007 acquisitions for a full year in 2008 and the investment in
technology to support back office functions.





Cash from
financing activities decreased from a source of $159 million in 2007 to a use of
$18 million in 2007, mainly due to our Amended and Restated Credit Agreement,
resulting in a $166 million net cash inflow during 2007, as more fully described
below.  In addition, stock option exercise proceeds and related excess
tax benefits were lower by $12 million in 2008 as a result of dramatically lower
stock prices in 2008, as evidenced by the summary of historical stock prices in
Item 5.





Our principal external source of
liquidity is our syndicated, secured credit agreement, which we entered into
with UBS AG, Stamford Branch, and others in connection with the inVentiv
Communications, Inc. acquisition.  On July 6, 2007, we amended this
credit facility and in connection therewith entered into an Amended and Restated
Credit Agreement with UBS AG, Stamford Branch and the other lenders party to the
credit facility.  The key features of the Amended and Restated Credit
Agreement are as follows:




·
            A
      $330 million term loan facility was made available to inVentiv in a single
      drawing, which was used to:




·
            refinance
      the existing October 2005 credit facility, which had a remaining balance
      of  $164 million, and




·
            fund
      the acquisitions of CCA and AWAC and pay the fees associated with the
      amended credit facility, with the balance retained by inVentiv as working
      capital.




The
credit agreement also included up to $20 million in additional term loans
(“delayed draw term loans”) that was to be advanced no later than January 6,
2007.  We elected not to draw additional amounts under the
agreement.  The agreement also contains a $50 million revolving credit
facility, of which $10 million is available for the issuance of letters of
credit (of which $7 million has been used) and a swingline
facility.  The term loan will mature on the seventh anniversary of the
Amended and Restated Credit Agreement, with scheduled amortization of 1% per
year during years one through six and 94% during year seven.  The
revolving loans will mature on the sixth anniversary of the Amended and Restated
Credit Agreement.





·
            Amounts
      advanced under the credit agreement must be prepaid with a percentage,
      determined based on a leverage test set forth in the credit agreement, of
      Excess Cash Flow (as defined in the credit agreement) and the proceeds of
      certain non-ordinary course asset sales and certain issuances of debt
      obligations and 50% of certain issuances of equity securities of inVentiv
      and its subsidiaries, subject to certain exceptions.  We may
      elect to prepay the loans, in whole or in part at any time, in certain
      minimum principal amounts, without penalty or premium (other than normal
      LIBOR break funding costs).  Amounts borrowed under the Amended
      and Restated Credit Agreement in respect of term loans (including delayed
      draw term loans) that are repaid or prepaid may not be
      reborrowed.  Amounts borrowed under the Amended and Restated
      Credit Agreement in respect of revolving loans may be paid or prepaid and
      reborrowed.




·
            Interest
      on the loans accrue, at our election, at either (1) the Alternate Base
      Rate (which is the greater of UBS’s prime rate and federal funds effective
      rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest periods
      determined at our option of 1, 2, 3 or 6 months (or, if the affected
      lenders agree, 9 months), in each case plus a spread based on the type of
      loan and method of interest rate determination
  elected.




·
            The
      Amended and Restated Credit Agreement contains, among other things,
      conditions precedent, representations and warranties, covenants and events
      of default customary for facilities of this type. Such covenants include
      certain limitations on indebtedness, liens, sale-leaseback transactions,
      guarantees, fundamental changes, dividends and transactions with
      affiliates.  The Amended and Restated Credit Agreement also
      includes a financial covenant under which inVentiv is required to maintain
      a total leverage ratio that does not exceed, as of the last day of any
      four consecutive fiscal quarters, 4.0 to 1.0 through December 31, 2009 and
      3.5 to 1.0 thereafter.




Effective October 2005, we entered into
a three-year swap arrangement for $175 million to hedge against the original
$175 million loan arrangement entered into to facilitate the acquisition of
inVentiv Communications, Inc.  As more fully described in Part II,
Item 7A below, effective September 6, 2007, we entered into a five-year swap
arrangement for $165 million to hedge against the additional credit exposure
under the Amended and Restated Credit Agreement.





We
believe that our cash and equivalents, cash to be provided by operations and
available credit under our credit facility will be sufficient to fund our
current operating requirements over the next 12 months.  However, we
cannot assure you that these sources of liquidity will be sufficient to fund all
internal growth initiatives, investments and acquisition activities that we may
wish to pursue.  If we pursue significant internal growth initiatives
or if we wish to acquire additional businesses in transactions that include cash
payments as part of the purchase price, we may pursue additional debt or equity
sources to finance such transactions and activities, depending on market
conditions.  The acquisition agreements entered into in connection
with our 2006, 2007 and 2008 acquisitions generally include earnout provisions
pursuant to which the sellers will become entitled to additional consideration,
which may be material, if the acquired businesses achieve specified performance
measurements.  See Note 3 to our consolidated financial statements
included in Part II, Item 8 of this Annual Report on Form 10-K.





Commitments
and Contractual Obligations


A summary
of our current contractual obligations and commercial commitments is as
follows:





(Amounts
      in thousands)
            
            
            
            
            Amounts
      Due InContractual Obligations
            
            Total
      Obligation
            
            
            Less
      than 1 Year
            
            
            1 –
      3 years
            
            
            3 -5
      years
            
            
            More
      than 5 years
            
            
            OtherLong
      term debt obligations (a)
            
            
            433,116
            
            
            
            24,834
            
            
            
            49,009
            
            
            
            200,305
            
            
            
            158,968
            
            
            
            --Capital
      lease obligations (b)
            
            
            40,565
            
            
            
            14,328
            
            
            
            22,914
            
            
            
            3,323
            
            
            
            --
            
            
            
            --Operating
      leases (c)
            
            
            140,917
            
            
            
            22,289
            
            
            
            38,009
            
            
            
            27,538
            
            
            
            53,081
            
            
            
            --Acquisition-related
      incentive (d)
            
            
            2,153
            
            
            
            2,153
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Unrecognized
      tax benefits (e)
            
            
            7,881
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            7,881Total
    obligations
            
            
            624,632
            
            
            
            63,604
            
            
            
            109,932
            
            
            
            231,166
            
            
            
            212,049
            
            
            
            7,881






(a)
            These
      future commitments represent the principal and interest payments under the
      $330 million term loan under our credit facility.(b)
            These
      future commitments include interest and management fees, which are not
      recorded on the Consolidated Balance Sheet as of December 31, 2008 but
      will be recorded as incurred.




(c)
            Operating
      leases include facility lease obligations in which the lease agreement may
      expire during the five-year period, but are expected to continue on a
      monthly basis beyond the lease term, as provided for in the leasing
      arrangements.




(d)
            This
      liability to the former stockholders of inVentiv Communications, Inc. is
      included in accrued payroll, accounts payable and accrued expenses on our
      December 31, 2008 consolidated balance
sheet.




(e)
            The
      timing of future cash outflows associated with these unrecognized tax
      benefits is highly uncertain and accordingly have been excluded from this
      table.




The
acquisition agreements entered into in connection with all of our acquisitions
include earnout provisions pursuant to which the sellers will become entitled to
additional consideration, which may be material, if the acquired businesses
achieve specified performance measurements.  See note 3 to our
consolidated financial statements included in Part II, Item 8 of this Annual
Report on Form 10-K.




Effect
of Inflation




Because
of the relatively low level of inflation experienced in the United States,
inflation did not have a material impact on our consolidated results of
operations for 2008, 2007 or 2006, except for fluctuations in gas prices in
2008.




Off-Balance
Sheet Arrangements




As of
December 31, 2008, we did not have any off-balance-sheet arrangements, as
defined in Item 303(a) (4)(ii) of SEC Regulation S-K.





7


Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk.





Long-Term Debt Exposure





At
December 31, 2008, we had $325.1 million debt outstanding under our secured term
loan as described in “Liquidity and Capital Resources” in Item 7
above.  We will incur variable interest expense with respect to our
outstanding loan.  This interest rate risk may be partially offset by
our derivative financial instrument, as described below.  Based on our
debt obligation outstanding at December 31, 2008, a hypothetical increase or
decrease of 10% in the variable interest rate would have an immaterial effect on
interest expense due to the fixed rate associated with the derivative financial
instrument.





Derivative
Financial Instrument





Effective
October 2005,we entered into an amortizing three-year interest rate swap
arrangement with a notional amount of $175 million to fix the interest rate on
the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc.  We entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  From October 2005 to July 2006, we did
not designate our original swap arrangement for hedge accounting and recorded an
approximate $2.9 million reduction to interest expense relating to the
mark-to-market adjustment, and a corresponding derivative asset for
approximately $2.9 million, which was recorded in Deposits and Other Assets on
the Consolidated Balance Sheet.  The fair value of the swaps represent
the estimated amount we would receive or pay to terminate the agreement taking
into consideration the difference between the contract rate of interest and
rates currently quoted for agreements of similar terms and
maturities.





On July
17, 2006, we formally designated the interest rate swap as a cash flow hedge
pursuant to SFAS No. 133.  We employed the dollar offset method to
assess effectiveness by performing a sensitivity analysis and utilized the
hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement with an inception date of July 17,
2006.  The hypothetical swap had a fair value of zero on the date of
designation and the hedging swap had a fair value of $2.9 million on the date of
designation.  As the swap fair value declined to zero at maturity,
which was December 31, 2008, the $2.9 million of fair value was recognized in
earnings over the remaining life of the swap as part of the ineffectiveness
calculation.  During the year ended December 31, 2008, the fair market
value of the original derivative asset increased from a liability of
approximately $1.0 million to the maturity value of $0.  Approximately
$1.1 million was recorded as interest expense, attributable to the financing
component embedded within the interest rate swap, while $2.1 million ($1.2
million, net of taxes) was recorded as an increase to Other Comprehensive
Income.





On
September 6, 2007, we entered into a new amortizing five-year interest rate swap
arrangement with a notional amount of $165 million at hedge inception, with an
accretive notional amount increase to $325 million effective December 31, 2008
to hedge the total outstanding debt notional, as our original 2005 three-year
interest rate swap arrangement described above expired.  At hedge
inception, we employed the dollar offset method by performing a sensitivity
analysis to assess effectiveness and utilized the hypothetical derivative method
under DIG Issue G7 to measure ineffectiveness.  The hypothetical
derivative contains the same terms and conditions as the debt
agreement.  As a result of the hypothetical derivative method, there
was no ineffectiveness for the period ended December 31, 2008, and accordingly,
$20.5 million ($12.2 million, net of taxes) was recorded as a decrease to Other
Comprehensive Income and an increase to other non-current liabilities on our
Consolidated Balance Sheet.  This change in Other Comprehensive Income
includes the $4.8 million credit value adjustment as discussed in Note
10.





Foreign Currency Exchange Rate
Exposure





We are
not currently affected by foreign currency exchange rate exposure, except for
any fluctuations in the foreign bank accounts remaining from the divestitures of
our European business units, from continuing operations of our UK, France and
Canadian subsidiaries and equity investments and minority interests in our
foreign business units, which are not material to our consolidated financial
statements.  Our treatment of foreign subsidiaries is consistent with
the guidelines set forth in SFAS 52, Foreign Currency
Translations.  The financial statements of our subsidiaries
expressed in foreign currencies are translated from the respective functional
currencies to U.S. Dollars, with results of operations and cash flows translated
at average exchange rates during the period, and assets and liabilities
translated at end of the period exchange rates.  At December 31, 2008,
the accumulated other comprehensive losses related to foreign currency
translations was approximately $2.6 million.  Foreign currency
transaction gains and (losses) are included in the results of operations and are
not material.





8


Item 8.  Financial Statements and
Supplementary Data.





INDEX
TO FINANCIAL STATEMENTS





Report
      of ManagementReport
      of Independent Registered Public Accounting FirmConsolidated
      Balance Sheets as of December 31, 2008 and 2007Consolidated
      Statements of Operations for the years ended December 31, 2008, 2007 and
      2006Consolidated
      Statements of Stockholders' Equity for the years ended December 31, 2008,
      2007 and 2006Consolidated
      Statements of Cash Flows for the years ended December 31, 2008, 2007 and
      2006Notes
      to Consolidated Financial Statements





9




REPORT OF
MANAGEMENT






Management's
Report on Financial Statements






Our
management is responsible for the preparation, integrity and fair presentation
of information in our consolidated financial statements, including estimates and
judgments.  The consolidated financial statements presented in this
report have been prepared in accordance with accounting principles generally
accepted in the United States of America.  Our management believes the
consolidated financial statements and other financial information included in
this report fairly present, in all material respects, our consolidated financial
condition, consolidated results of operations and consolidated cash flows as of
and for the periods presented in this report. The consolidated financial
statements have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report, which is included
herein.




Management's
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining an adequate system of
internal control over financial reporting.  Our system of internal
control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America.




Our
internal control over financial reporting includes those policies and procedures
that:




·
            pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect our transactions and dispositions of our
      assets;





·
            provide
      reasonable assurance that our transactions are recorded as necessary to
      permit preparation of our consolidated financial statements in accordance
      with accounting principles generally accepted in the United States of
      America, and that our receipts and expenditures are being made only in
      accordance with authorizations of our management and our directors;
      and





·
            provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of our assets that could
      have a material effect on the consolidated financial
      statements.





Our
management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that our internal control over financial reporting will prevent
or detect all error and all fraud.  A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met.  The design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their
costs.  Further, because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, within the company have been
detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because
of simple error or mistake.  Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls.  The design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.  Projections
of any evaluation of controls effectiveness to future periods are subject to
risks.  Over time, controls may become inadequate because of changes
in conditions or deterioration in the degree of compliance with policies or
procedures.  Our system contains self monitoring mechanisms, and
actions are taken to correct deficiencies as they are identified.





Our
management conducted an evaluation of the effectiveness of the system of
internal control over financial reporting based on the framework in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Our assessment excludes the PMG and Promotech
Logistics Solutions businesses we acquired in 2008 as allowed under the rules
and clarifications provided by the Securities and Exchange Commission and the
Public Company Accounting Oversight Board (United States).  The
financial statements of these acquired businesses constitute 2% and 1% of total
assets and revenues, respectively, of the consolidated financial statement
amounts as of and for the year ended December 31, 2008.  Based on this
evaluation, our management concluded that our system of internal control over
financial reporting was effective as of December 31,
2008.  Deloitte & Touche LLP has issued its report, which is
part of its report set forth below, on our management's assessment of the
effectiveness of our internal control over financial reporting.





Deloitte & Touche
LLP
















10




REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM












We have
audited the accompanying consolidated balance sheets of inVentiv Health, Inc.
and subsidiaries (the "Company") as of December 31, 2008 and 2007, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2008. Our audits
also included the financial statement schedule listed in the Index at Item 15
(a).  We also have audited the Company's internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. As described in Management’s Report on Internal
Control Over Financial Reporting, management excluded from their assessment the
internal control over financial reporting at Patient Marketing Group (“PMG”) and
Promotech Logistics Solutions (“PLS”) which were acquired in 2008, and whose
financial statements reflect total assets and revenues constituting 2.21% and
0.61% of the related consolidated financial statement as of and for the year
ended December 31, 2008. Accordingly, our audit did not include the internal
control over financial reporting at the aforementioned PMG and
PLS.  The Company's management is responsible for these financial
statements and financial statement schedules, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an
opinion on these financial statements and financial statement schedules and an
opinion on the Company's internal control over financial reporting based on our
audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.  We believe
that our audits provide a reasonable basis for our opinions.
  A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.
  Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of inVentiv Health, Inc. and
subsidiaries as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2008, in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.  Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2008, based on the criteria established in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.
  Parsippany
New Jersey
    February
27, 2009
  
 11




INVENTIV
HEALTH, INC.


CONSOLIDATED
BALANCE SHEETS


(in
thousands, except share amounts)





December
      31,2008
            
            
            2007ASSETSCurrent
      assets:Cash
      and equivalents
            
            $
            90,463
            
            
            $
            50,973Restricted
      cash and marketable securities
            
            
            8,069
            
            
            
            47,164Accounts
      receivable, net of allowances for doubtful accounts of $4,787 and $3,098
      atDecember
      31, 2008 and 2007, respectively
            
            
            158,689
            
            
            
            162,198Unbilled
      services
            
            
            86,390
            
            
            
            89,384Prepaid
      expenses and other current assets
            
            
            16,880
            
            
            
            19,836Current
      tax assets
            
            
            595
            
            
            
            --Current
      deferred tax assets
            
            
            9,198
            
            
            
            4,279Total
      current assets
            
            
            370,284
            
            
            
            373,834Property
      and equipment, net
            
            
            63,382
            
            
            
            54,740Investments
      in affiliates
            
            
            1,423
            
            
            
            309Goodwill
            
            
            215,526
            
            
            
            383,714Other
      intangibles, net
            
            
            226,509
            
            
            
            281,122Non-current
      deferred tax assets
            
            
            75,172
            
            
            
            --Deposits
      and other assets
            
            
            20,820
            
            
            
            17,137Total
      assets
            
            $
            973,116
            
            
            $
            1,110,856LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
            
            $
            13,417
            
            
            $
            17,464Current
      portion of long-term debt
            
            
            4,279
            
            
            
            3,300Accrued
      payroll, accounts payable and accrued expenses
            
            
            129,009
            
            
            
            138,708Current
      income tax liabilities
            
            
            2,736
            
            
            
            6,814Client
      advances and unearned revenue
            
            
            57,223
            
            
            
            76,696Total
      current liabilities
            
            
            206,664
            
            
            
            242,982Capital
      lease obligations, net of current portion
            
            
            25,010
            
            
            
            20,945Long-term
      debt
            
            
            321,828
            
            
            
            325,050Non-current
      income tax liabilities
            
            
            5,636
            
            
            
            7,323Deferred
      tax liabilities
            
            
            --
            
            
            
            13,164Other
      non-current liabilities
            
            
            46,334
            
            
            
            23,766Total
      liabilities
            
            
            605,472
            
            
            
            633,230Commitments
      and contingenciesMinority
      interests
            
            
            130
            
            
            
            160Stockholders’
      Equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atDecember
      31, 2008 and 2007, respectively
            
            
            --
            
            
            
            --Common
      stock, $.001 par value, 50,000,000 shares authorized; 33,272,543 and
      32,325,109Shares
      issued and outstanding at December 31, 2008 and 2007,
      respectively
            
            
            33
            
            
            
            32Additional
      paid-in-capital
            
            
            394,560
            
            
            
            362,116Accumulated
      other comprehensive losses
            
            
            (20,869
            )
            
            
            (6,493
            )Accumulated
      (deficit) earnings
            
            
            (6,210
            )
            
            
            121,811Total
      stockholders’ equity
            
            
            367,514
            
            
            
            477,466Total
      liabilities and stockholders’ equity
            
            $
            973,116
            
            
            $
            1,110,856





The
accompanying notes are an integral part of these consolidated financial
statements.





12


INVENTIV
HEALTH, INC.





CONSOLIDATED
STATEMENTS OF OPERATIONS


(in
thousands, except per share amounts)





For
      the Years Ended December 31,2008
            
            
            2007
            
            
            2006Net
      Revenues
            
            $
            951,656
            
            
            $
            796,659
            
            
            $
            631,620Reimbursable
      out-of-pockets
            
            
            168,156
            
            
            
            180,641
            
            
            
            134,625Revenues
            
            
            1,119,812
            
            
            
            977,300
            
            
            
            766,245Operating
      expenses:Cost
      of services
            
            
            598,465
            
            
            
            498,106
            
            
            
            410,184Reimbursed
      out-of-pocket expenses
            
            
            173,977
            
            
            
            183,456
            
            
            
            136,565Selling,
      general and administrative expenses
            
            
            241,684
            
            
            
            200,945
            
            
            
            141,418Impairment
      of goodwill and other intangible assets
            
            
            267,849
            
            
            
            --
            
            
            
            --Total
      operating expenses
            
            
            1,281,975
            
            
            
            882,507
            
            
            
            688,167Operating
      (loss) income
            
            
            (162,163
            )
            
            
            94,793
            
            
            
            78,078Interest
      expense
            
            
            (25,464
            )
            
            
            (20,717
            )
            
            
            (11,361
            )Interest
      income
            
            
            1,983
            
            
            
            3,039
            
            
            
            2,694(Loss)
      income from continuing operations before income tax provision, minority
      interest in income of subsidiary and income from equity
      investments
            
            
            (185,644
            )
            
            
            77,115
            
            
            
            69,411Income
      tax benefit (provision)
            
            
            58,207
            
            
            
            (29,401
            )
            
            
            (19,166
            )(Loss)
      income from continuing operations before minority interest in income of
      subsidiary and income from equity investments
            
            
            (127,437
            )
            
            
            47,714
            
            
            
            50,245Minority
      interest in income of subsidiary
            
            
            (1,146
            )
            
            
            (1,070
            )
            
            
            (1,207
            )(Loss)
      income from equity investments
            
            
            (102
            )
            
            
            582
            
            
            
            160(Loss)
      income from continuing operations
            
            
            (128,685
            )
            
            
            47,226
            
            
            
            49,198Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of tax benefit (expense)
      of
              $73,
      $(131) and $749 for the years ended December 31, 2008, 2007 and 2006,
      respectively
            
            
            664
            
            
            
            258
            
            
            
            2,037Income
      from discontinued operations
            
            
            664
            
            
            
            258
            
            
            
            2,037Net
      (loss) income
            
            $
            (128,021
            )
            
            $
            47,484
            
            
            $
            51,235(Loss)
      earnings per share:Continuing
      operations:Basic
            
            $
            (3.89
            )
            
            $
            1.50
            
            
            $
            1.69Diluted
            
            $
            (3.89
            )
            
            $
            1.46
            
            
            $
            1.64Discontinued
      operations:Basic
            
            $
            0.02
            
            
            $
            0.00
            
            
            $
            0.07Diluted
            
            $
            0.02
            
            
            $
            0.01
            
            
            $
            0.06Net
      (loss) income:Basic
            
            $
            (3.87
            )
            
            $
            1.50
            
            
            $
            1.76Diluted
            
            $
            (3.87
            )
            
            $
            1.47
            
            
            $
            1.70Weighted
      average common shares outstanding:Basic
            
            
            33,043
            
            
            
            31,578
            
            
            
            29,159Diluted
            
            
            33,043
            
            
            
            32,267
            
            
            
            30,058





The
accompanying notes are an integral part of these consolidated financial
statements.





13


INVENTIV
HEALTH, INC.





CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


For
the years ended December 31, 2008, 2007 and 2006


(in
thousands)


Common
      Stock
            Additional
      Paid-In
              Capital
            Accumulated
      earnings
              (deficit)
            Deferred
      Compen-
              Sation
            Compre-hensive
              Income
              (Losses)
            Accumulated
      Other Comprehen-sive Income (Losses)
            TotalBalance
      at December 31, 2005
            28
            $233,441
            $23,092
            $(3,563)
            
            $221
            $253,219Net
      income
            --
            --
            51,235
            --
            $51,235
            --
            51,235Foreign
      currency translation
              Adjustment
            --
            --
            --
            --
            225
            225
            225Net
      change in effective portion of derivative, net of taxes
            --
            --
            --
            --
            (672)
            (672)
            (672)$50,788Reclassification
      of unvested restricted shares to additional paid in
capital
            --
            (3,563)
            --
            3,563
            
            --
            --Vesting
      of restricted shares
            --
            3,089
            --
            --
            
            --
            3,089Withhold
      shares for taxes
            --
            (190)
            --
            --
            
            --
            (190)Consultant
      compensation
            --
            728
            --
            --
            
            --
            728Exercise
      of stock options
            1
            6,525
            --
            --
            
            --
            6,526Stock
      option expense
            --
            4,450
            --
            --
            
            --
            4,450Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            --
            8,959
            --
            --
            
            --
            8,959Issuance
      of shares in connection with acquisitions
            1
            30,892
            --
            --
            
            --
            30,893Balance
      at December 31, 2006
            30
            284,331
            74,327
            --
            
            (226)
            358,462Net
      income
            
            
            47,484
            
            47,484
            
            47,484Foreign
      currency translation
              Adjustment
            
            
            
            
            396
            396
            396Net
      change in effective portion of derivative, net of taxes
            
            
            
            
            (6,663)
            (6,663)
            (6,663)41,217Vesting
      of restricted shares
            
            5,222
            
            
            
            
            5,222Withhold
      shares for taxes
            
            (873)
            
            
            
            
            (873)Consultant
      compensation
            
            796
            
            
            
            
            796Exercise
      of stock options
            1
            6,908
            
            
            
            
            6,909Stock
      option expense
            
            4,494
            
            
            
            
            4,494Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            
            8,066
            
            
            
            
            8,066Issuance
      of shares in connection with acquisitions
            1
            53,172
            
            
            
            
            53,173Balance
      at December 31, 2007
            32
            362,116
            121,811
            --
            
            (6,493)
            477,466Net
      loss
            
            
            (128,021)
            
            (128,021)
            
            (128,021)Foreign
      currency translation
              Adjustment
            
            
            
            
            (3,445)
            (3,445)
            (3,445)Net
      change in effective portion of derivative, net of taxes
            
            
            
            
            (10,931)
            (10,931)
            (10,931)(142,397)Vesting
      of restricted shares
            
            6,832
            
            
            
            
            6,832Withhold
      shares for taxes
            
            (1,111)
            
            
            
            
            (1,111)Consultant
      compensation
            
            127
            
            
            
            
            127Exercise
      of stock options
            
            2,387
            
            
            
            
            2,387Stock
      option expense
            
            3,752
            
            
            
            
            3,752Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            
            387
            
            
            
            
            387Issuance
      of shares in connection with acquisitions
            1
            18,920
            
            
            
            
            18,921Other
            
            1,150
            
            
            
            
            1,150Balance
      at December 31, 2008
            33
            $394,560
            ($6,210)
            
            
            $(20,869)
            $367,514





The
accompanying notes are an integral part of these consolidated financial
statements.





14


INVENTIV
HEALTH, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(in
thousands)





For
      the Years EndedDecember
      31,2008
            
            
            2007
            
            
            2006Cash
      flows from operating activities:Net
      (loss) income
            
            $
            (128,021
            )
            
            $
            47,484
            
            
            $
            51,235Income
      from discontinued operations
            
            
            (664
            )
            
            
            (258
            )
            
            
            (2,037
            )(Loss)
      income from continuing operations
            
            
            (128,685
            )
            
            
            47,226
            
            
            
            49,198Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
            
            
            20,870
            
            
            
            18,169
            
            
            
            15,130Amortization
            
            
            15,118
            
            
            
            10,939
            
            
            
            5,610Loss
      (income) from equity investments
            
            
            102
            
            
            
            (582
            )
            
            
            (160
            )Minority
      interest in income of subsidiary
            
            
            1,146
            
            
            
            1,070
            
            
            
            1,207Fair
      market value adjustment on derivative financial instrument
            
            
            1,121
            
            
            
            1,218
            
            
            
            (2,069
            )Deferred
      taxes
            
            
            (93,255
            )
            
            
            (6,384
            )
            
            
            13,379Impairment
      of goodwill and other intangible assets
            
            
            267,849
            
            
            
            --
            
            
            
            --Impairment
      of marketable securities
            
            
            2,561
            
            
            
            841
            
            
            
            --Stock
      compensation expense
            
            
            10,584
            
            
            
            9,716
            
            
            
            7,539Tax
      benefit from stock option exercises and vesting of restricted
      shares
            
            
            3,225
            
            
            
            9,801
            
            
            
            9,831Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
            
            
            7,097
            
            
            
            (12,765
            )
            
            
            2,257Unbilled
      services
            
            
            4,585
            
            
            
            (10,508
            )
            
            
            (32,576
            )Prepaid
      expenses and other current assets
            
            
            3,399
            
            
            
            (8,673
            )
            
            
            (197
            )Accrued
      payroll, accounts payable and accrued expenses
            
            
            (10,300
            )
            
            
            (3,472
            )
            
            
            7,154Net
      tax liabilities
            
            
            (9,200
            )
            
            
            10,928
            
            
            
            (6,754
            )Client
      advances and unearned revenue
            
            
            (19,782
            )
            
            
            3,186
            
            
            
            21,715Excess
      tax benefits from stock based compensation
            
            
            (252
            )
            
            
            (7,928
            )
            
            
            (8,641
            )Other
            
            
            10,234
            
            
            
            (3,893
            )
            
            
            2,403Net
      cash provided by continuing operations
            
            
            86,417
            
            
            
            58,889
            
            
            
            85,026Net
      cash provided by (used in) discontinued operations
            
            
            508
            
            
            
            (221
            )
            
            
            624Net
      cash provided by operating activities
            
            
            86,925
            
            
            
            58,668
            
            
            
            85,650Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
            
            
            524
            
            
            
            (46,343
            )
            
            
            3,828Investment
      in cash value of life insurance policies
            
            
            270
            
            
            
            (2,440
            )
            
            
            (2,911
            )Investment
      in marketable securities
            
            
            32,286
            
            
            
            --
            
            
            
            --Cash
      paid for acquisitions, net of cash acquired
            
            
            (25,506
            )
            
            
            (169,739
            )
            
            
            (61,461
            )Acquisition
      earnout cash payments
            
            
            (22,126
            )
            
            
            (23,556
            )
            
            
            (8,267
            )Investment
      in affiliates
            
            
            (1,203
            )
            
            
            37
            
            
            
            267Purchases
      of property and equipment
            
            
            (17,449
            )
            
            
            (10,446
            )
            
            
            (6,704
            )Proceeds
      from manufacturers rebates on leased vehicles
            
            
            5,453
            
            
            
            5,574
            
            
            
            3,630Net
      cash used in continuing operations
            
            
            (27,751
            )
            
            
            (246,913
            )
            
            
            (71,618
            )Net
      cash provided by discontinued operations
            
            
            156
            
            
            
            479
            
            
            
            1,413Net
      cash used in investing activities
            
            
            (27,595
            )
            
            
            (246,434
            )
            
            
            (70,205
            )Cash
      flows from financing activities:Borrowings
      on credit agreement
            
            
            --
            
            
            
            166,250
            
            
            
            --Borrowings
      on line of credit
            
            
            948
            
            
            
            --
            
            
            
            --Repayments
      on credit agreement
            
            
            (3,191
            )
            
            
            (2,484
            )
            
            
            (9,979
            )Repayments
      of capital lease obligations
            
            
            (15,685
            )
            
            
            (15,538
            )
            
            
            (12,948
            )Fees
      to establish credit agreement
            
            
            --
            
            
            
            (2,154
            )
            
            
            --Withholding
      shares for taxes
            
            
            (1,111
            )
            
            
            (873
            )
            
            
            (190
            )Proceeds
      from exercise of stock options
            
            
            2,387
            
            
            
            6,908
            
            
            
            6,525Excess
      tax benefits from stock-based compensation
            
            
            252
            
            
            
            7,928
            
            
            
            8,641Distributions
      to minority interests in affiliated partnership
            
            
            (1,178
            )
            
            
            (1,216
            )
            
            
            (1,087
            )Net
      cash (used in) provided by continuing operations
            
            
            (17,578
            )
            
            
            158,821
            
            
            
            (9,038
            )Net
      cash provided by discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --Net
      cash (used in) provided by financing activities
            
            
            (17,578
            )
            
            
            158,821
            
            
            
            (9,038
            )Effect
      of exchange rate changes
            
            
            (2,262
            )
            
            
            83
            
            
            
            326Net
      increase (decrease) in cash and equivalents
            
            
            39,490
            
            
            
            (28,862
            )
            
            
            6,733Cash
      and equivalents, beginning of year
            
            
            50,973
            
            
            
            79,835
            
            
            
            73,102Cash
      and equivalents, end of year
            
            $
            90,463
            
            
            $
            50,973
            
            
            $
            79,835Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            23,610
            
            
            $
            19,549
            
            
            $
            12,798Cash
      paid for income taxes
            
            $
            33,076
            
            
            $
            17,972
            
            
            $
            8,077Supplemental
      disclosure of non-cash activities:Vehicles
      acquired through capital lease agreements
            
            $
            18,475
            
            
            $
            13,532
            
            
            $
            21,871Stock
      issuance related to acquisitions
            
            $
            18,921
            
            
            $
            53,173
            
            
            $
            30,893





The
accompanying notes are an integral part of these consolidated financial
statements.





15




INVENTIV HEALTH, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS





1.  Organization
and Business:





inVentiv
Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
leading provider of value-added services to the pharmaceutical and life sciences
industries.  The Company supports a broad range of clinical
development, communications and commercialization activities that are critical
to its customers' ability to complete the development of new drug products and
medical devices and successfully bring them to market.  The Company’s
goal is to assist its customers in meeting their objectives in each of its
operational areas by providing our services on a flexible and cost-effective
basis that permits the Company to provide discrete service offerings in focused
areas as well as integrated multidisciplinary solutions.  The Company
provides services to over 350 client organizations, including all top 20 global
pharmaceutical companies and numerous emerging and specialty biotechnology
companies.





The
Company’s service offerings reflect the changing needs of its clients as their
products move through the late-stage development and regulatory approval
processes and into product launch.  The Company has established
expertise and leadership in providing the services its clients require at each
of these stages of product development and commercialization and seek to address
their outsourced service needs on a comprehensive basis throughout the product
life cycle through both standalone and integrated solutions.





Business
Segments





The
Company currently serves its clients primarily through four business segments,
which correspond to its reporting segments for 2008:





·
            inVentiv
      Clinical, which provides professional resourcing and services to
      the pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management. inVentiv Clinical consists
      of the Smith Hanley group of companies (which includes Smith Hanley
      Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”) and MedFocus),
      HHI Clinical & Statistical Research Services (“HHI”), and
      Synergos;




·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”), Chamberlain
      Communications Group, Inc. (“Chamberlain”), Addison Whitney and Chandler
      Chicco Agency (“CCA”);




·
            inVentiv
      Commercial, which consists of our outsourced sales and marketing
      teams, planning and analytics services, sample accountability services,
      marketing support services, professional development and training, and
      recruitment of sales representatives in the commercial services
      area.  This segment includes inVentiv Strategy
      & Analytics (including its Strategyx business unit acquired in June
      2007), inVentiv Selling Solutions and inVentiv's Promotech sample
      management business, which was augmented with the acquisition of Promotech
      Logistics Solutions LLC ("PLS") in December 2008;
    and




·
            inVentiv
      Patient Outcomes, which provides services related to patient
      pharmaceutical compliance programs, patient support programs, clinical
      educator teams, medical cost containment and consulting solutions and
      patient relationship marketing.  This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute, AWAC (acquired in July 2007) and Patient Marketing Group, LLC
      (“PMG”) (acquired in August 2008).




The
Company’s services are designed to develop, execute and monitor strategic and
tactical sales and marketing plans and programs for the promotion of
pharmaceutical, biotechnology and other life sciences products.  For third
party administrators and other payors, the Company provides a variety of
services that enhance savings and improve patient outcomes, including
opportunities to address billing errors, additional discounts and treatment
protocols for patients.




2.  Summary
of Significant Accounting Policies:





Basis
of Presentation





The
consolidated financial statements include the accounts of inVentiv Health, Inc.,
its wholly owned subsidiaries and its 53% owned subsidiary, Taylor Search
Partners (“TSP”), which was acquired in conjunction with the acquisition of
inVentiv Communications, Inc.  Our continuing operations consist
primarily of four business segments: inVentiv Clinical, inVentiv Communications,
inVentiv Commercial and inVentiv Patient Outcomes.  All significant
intercompany transactions have been eliminated in consolidation.  The
Company increased its investment interest from 44% to 85% in Angela Liedler GmbH
(“Liedler”), a service provider of communication and marketing tools for
technical, medical and pharmaceutical products, located in
Germany.  The Company accounted for Liedler as an equity investment
until the acquisition date, and then included its results in our consolidated
results thereafter.





As a
result of the acquisition of inVentiv Communications, Inc., the Company has a
15% ownership interest in Heart Reklambyra AB (“Heart”), an advertising agency
located in Sweden, which is accounted for by using the equity method of
accounting.





Cash
and Equivalents





Cash and
equivalents are comprised principally of amounts in operating accounts, money
market investments and other short-term instruments.  These accounts
are stated at cost, which approximates market value, and have original
maturities of three months or less.  See Note 5 for a description of
restricted cash balances and marketable securities.





Revenue
Recognition





The
following is a summary of the Company’s revenue recognition policy, based on the
segment and services the Company provides:





inVentiv
Clinical





·
            Clinical Staffing and
      Recruiting- Revenues are recognized and recorded when services are
      rendered.





·
            Functional
      Outsourcing- Revenues are recognized and recorded when milestones
      are achieved, in accordance with the terms of the
    contracts.





·
            Executive
      Placement- Revenues are recognized and recorded at the time a
      candidate begins full-time employment.  Any write-offs due to
      cancellations and/or billing adjustments historically have been
      insignificant.





inVentiv
Communications





·
            Advertising and
      Communication support- Revenues are recognized and recorded under
      the proportional performance method, by relating the actual hours of work
      performed to date to the current estimated total hours of the respective
      projects.  Any anticipated losses on projects are recognized
      when such losses are anticipated.  Time and production billings
      are billed as incurred for actual time and
  expenses.





·
            Public
      Relations- Revenues are recognized and recorded as time and
      production billings are billed as incurred for actual time and
      expenses.





·
            Branding-
      Revenues are recognized and recorded on a fee for service basis, in
      accordance with the terms of the contracts; and revenues for certain
      contracts are recorded based on completed contract
  method.





·
            Interactive
      Communications- Revenues are recognized and recorded under the
      proportional performance method based on services
    performed.





·
            Patient and Physician
      Education- Revenues are recognized and recorded using either the
      completed contract method or when milestones are achieved, depending on
      the terms of the specific
contracts.





16





INVENTIV HEALTH, INC.
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


inVentiv
Commercial




inVentiv Selling Solutions




·
            inVentiv Pharma
      Teams- Revenues and associated costs are recognized and recorded
      under pharmaceutical detailing contracts based on the number of physician
      calls made or the number of sales representatives
      utilized.  Most of our Sales and Marketing Teams’ contracts
      involve two phases, an “Implementation phase", formerly referred to as
      "Deployment phase", typically one to three months, in which we perform
      initial recruiting, training and preparation for deployment of the field
      force at the start of a new contract, and the “Deployment phase", formerly
      referred to as “Promotion phase”, in which our deployed field force
      actively promotes specified products for clients through face-to-face
      interactions with physicians or other targets  referred to as
      “detailing”.




Our
inVentiv Pharma Teams contracts specify a separate fee for the initial
“Implementation phase” of a project.  We consider the implementation
phase to be a separate and distinct earnings process and recognize the related
revenues throughout the implementation phase, which typically spans a period of
one to three months at the beginning of the first year of a
contract.  We generally recognize revenue during the "Deployment
phase" of our inVentiv Pharma Teams contracts on a straight-line basis based on
the size of the deployed field force.  The accounting for the two
phases is based on our analysis of Emerging Issues Task Force (“EITF”) Issue No.
00-21, Revenue Arrangements
with Multiple Deliverables,in which we have concluded that the
deployment and promotion phases are being sold separately and therefore qualify
as separate units of accounting within the meaning of paragraph 9 of EITF
00-21.




Many of
the product detailing contracts allow for additional periodic incentive fees to
be earned once agreed upon performance benchmarks have been
attained.  Revenue from incentive fees is recognized and recorded when
we are reasonably assured that payment will be made, and is typically based upon
verification through calculation of achievement, third party data or client
verification.  Many contracts also stipulate penalties if agreed upon
performance benchmarks have not been met.  These penalties are
recognized upon verification of performance shortfalls.




Non-refundable
conversion fees are recognized and recorded as revenue when one of our sales
professionals accepts a firm offer of permanent employment from a customer
during the term of a contract.




·
            Recruiting-
      Revenues are recognized based on placement of
  candidates.




·
            Professional
      Development and Training- Revenues are generally recognized and
      recorded as training courses are
completed.




·
            Regulatory Compliance
      Services- Regulatory compliance revenues for both fixed fees
      services and fees for specific compliance related services are recognized
      and recorded when monthly services are
  performed.




·
            Non-Personal
      Promotion- Revenues are recognized and recorded based on time
      incurred and fulfillment requirements in accordance with the terms of the
      contracts.




·
            Virtual Event
      Services- Revenues are recognized based on the frequency and upon
      completion of live events.




·
            Sales Force
      Automation/Data Analysis- A majority of revenues are recognized
      based on straight-line basis.  For certain analytics projects,
      revenues are recognized upon
completion.




inVentiv
Strategy and Analytics




·
            Planning and
      Analytics- Revenues for HPR generally include fixed fees, which are
      recognized and recorded when monthly services are performed based on the
      proportional performance method and when payment is reasonably
      assured.  HPR’s initial contracts typically range from one month
      to one year.  Revenues for additional services are recognized
      and recorded when the services are provided and payment is reasonably
      assured.




·
            Strategic
      Consulting- For most contracts, revenues are recognized and
      recorded on a fee for service basis, in accordance with the terms of the
      contracts.  Certain contracts are also recorded based on the
      proportional performance method.




·
            Product Access and
      Managed Market Support-Consulting fee revenues are recognized and
      recorded when services are rendered.  Other services are based
      on milestones.




·
            Consulting and
      Contract Marketing- Revenues are recognized and recorded on a fee
      for service basis, in accordance with the terms of the
      contracts.




inVentiv Patient
Outcomes




·
            Patient Pharmaceutical
      Compliance Programs- Revenues are mainly recognized based on the
      volume of correspondence sent to
patients.




·
            Patient Support
      Programs- Patient assistance programs revenues depend on the number
      of patients served and are recognized and recorded as each service is
      performed.




·
            Clinical Nurse
      Educators, On-Call Specialists, and Medical Science Liaison
      Programs- Revenue recognition is the same as inVentiv Pharma Teams,
      as the two services are similar in the business arrangement and fee
      structure.




·
            Medical Cost
      Containment and Consulting Solutions- The majority of revenues are
      recognized on a completed contract basis, based on an analysis of claims
      as a percentage of savings realized by our clients.  Certain
      services are performed on a fee-for-services basis and recognized when the
      service is rendered.




·
            Patient Relationship
      Marketing-  Revenues are recognized and recorded as time
      and production billings are billed as incurred for actual time and
      expenses.





General Revenue
Recognition





Reimbursable
Costs


Reimbursable
costs, including those relating to travel and out-of pocket expenses, sales
force bonuses tied to individual or product revenues, and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable
expenses is included in costs of services in the period in which such amounts
have been finalized.  In certain cases, based on the Company’s
analysis of EITF Issue No. 99-19, Reporting Revenue Gross as a
Principal versus Net as an Agent, and related accounting literature, the
Company may also record certain reimbursable transactions, such as the placement
of media advertisements where the Company acts as an agent, as net
revenues.





Loss
Contracts


The
Company periodically analyzes its contracts to determine the likelihood and
amount of any potential loss on a contract resulting from lower than anticipated
product, field force or other performance.  In the event that current
information illustrates a loss is likely to be incurred over the remaining life
of the contract, the Company accrues that loss at the time it becomes
probable.  The Company did not have any material loss contracts in
2008 or 2007.





Billing


Customers
are invoiced according to agreed upon billing terms.  Contracts that
are invoiced prior to performance of related services are recorded as client
advances and unearned revenue and are not recognized as revenues until earned,
in accordance with our revenue recognition policies.  Amounts earned
for revenues recognized before the agreed upon invoicing terms have been met are
recorded as revenue and included in unbilled services. Upon billing, these
amounts are transferred to billed accounts receivable.





Receivables





Receivables
consist of amounts billed and currently due from customers and unbilled amounts
which have been earned but not yet billed.  With the exception of
amounts relating to certain contracts with pre-determined billing intervals, all
amounts that are unbilled at the end of each monthly period are billed during
the immediately succeeding monthly period.





Property
and Equipment





Property
and equipment is stated at cost.  The Company depreciates furniture,
fixtures and office equipment on a straight-line basis over three to seven
years; computer equipment over two to five years; leasehold improvements over
the shorter of the term of the lease or the estimated useful lives of the
improvements.  The Company amortizes the cost of vehicles under
capital leases on a straight-line basis over the term of the lease.





Goodwill
and Other Intangible Assets





Goodwill
and other indefinite-life intangibles are assessed for potential impairment
pursuant to the guidelines of Statement of Financial Accounting Standards
(“SFAS”) No. 142, Goodwill and
Other Intangible Assets,on an annual basis (at
June 30) or when management determines that the carrying value of goodwill or an
indefinite-lived intangible asset may not be recoverable based upon the
existence of certain indicators of impairment.  The Company applied
aggregation criteria consistent with the definitions under SFAS 142 as well as
the related guidance in SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information for purposes of aggregating the
Company’s reporting units in goodwill impairment testing.  Goodwill is
tested for impairment at least annually using a two-step process that begins
with an estimation of the fair value of a reporting unit.  The first
step screens for potential impairment, and the second step measures the amount
of impairment, if any.  The Company calculates the fair value of each
reporting unit and compares this to its carrying value.  If the
carrying value exceeds the fair value, an impairment loss will be recognized in
an amount equal to the difference. If the Company deems the useful life to be no
longer indefinite after testing for impairment in accordance with the applicable
rules stated above, the Company amortizes the intangible asset over its
remaining estimated useful life, following the pattern in which the expected
benefits will be consumed or otherwise used up and the Company continues to
review for impairment on an annual basis.





The
Company performed annual impairment tests as of June 30, 2008 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired.  During the fourth quarter of 2008, as a result of
adverse equity market conditions that caused a decrease in the current market
multiples and the company’s stock price, the Company concluded that a triggering
event had occurred indicating potential impairment, and accordingly performed an
impairment test of its goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million ,
including $238 million of indefinite-lived assets and $30 million of
definite-lived assets under SFAS No. 144, Accounting for the Impairment of or
Disposal of Long-Lived Assets.  See Note 7 for further details
of these noncash goodwill and intangibles impairment charges.





Impairment
of Long-Lived Assets





SFAS No.
144establishes
accounting standards for the impairment of long-lived assets.  The
Company reviews its long-lived assets, including property and equipment, for
impairment whenever events or circumstances indicate that the carrying amount of
an asset may not be recoverable.  Events or circumstances that would
result in an impairment review primarily include operations reporting sustained
losses or a significant change in the use of an asset. An impairment loss would
be recognized based on the amount by which the carrying value of the asset
exceeds its fair value.  As explained above, the Company performed an
impairment test of its goodwill and intangible assets as of December 31, 2008,
and recorded $30 million of pre-tax noncash impairment of certain definite-lived
intangible assets.  There were no material impairment losses in 2007
or 2006.





Claims
and Insurance Accruals





The
Company maintains self-insured retention limits for certain insurance
policies.  The liabilities associated with the risk retained by us are
estimated in part based on historical experience, third-party actuarial
analysis, demographics, nature and severity, past experience and other
assumptions, which have been consistently applied.  The liabilities
for self-funded retention are included in claims and insurance reserves based on
claims incurred, with liabilities for unsettled claims and claims incurred but
not yet reported being actuarially determined with respect to workers’
compensation and auto liability claims and with respect to all other
liabilities, estimated based on management’s evaluation of the nature and
severity of individual claims and historical experience.  However,
these estimated accruals could be significantly affected if the Company’s actual
costs differ from these assumptions.  A significant number of these
claims typically take several years to develop and even longer to ultimately
settle.  These estimates tend to be reasonably accurate over time;
however, assumptions regarding severity of claims, medical cost inflation, as
well as specific case facts can create short-term volatility in
estimates.





Earnings
(Loss) Per Share (“EPS”)





Basic net
earnings per share excludes the effect of potentially dilutive securities and is
computed by dividing earnings attributable to common shareholders by the
weighted average number of common shares outstanding during the
period.  Diluted earnings per share reflect the potential dilution
that could occur if securities or other instruments to issue common stock were
exercised or converted into common stock.  Potentially dilutive
securities are excluded from the computation of diluted earnings per share when
their inclusion would be antidilutive.  A summary of the computation
of basic and diluted earnings per share from continuing operations is as
follows:





Year
      Ended December 31,2008
            
            
            2007
            
            
            2006(in
      thousands, except per share data)Basic EPS from Continuing Operations
      Computation(Loss)
      income from continuing operations
            
            $
            (128,685
            )
            
            $
            47,226
            
            
            $
            49,198Weighted
      average number of common shares outstanding
            
            
            33,043
            
            
            
            31,578
            
            
            
            29,159Basic
      EPS from continuing operations
            
            $
            (3.89
            )
            
            $
            1.50
            
            
            $
            1.69Diluted EPS from Continuing Operations
      Computation(Loss)
      income from continuing operations
            
            $
            (128,685
            )
            
            $
            47,226
            
            
            $
            49,198Adjustments
            
            
            --
            
            
            
            --
            
            
            
            --Adjusted
      income from continuing operations
            
            $
            (128,685
            )
            
            $
            47,226
            
            
            $
            49,198Weighted
      average number of common shares outstanding
            
            
            33,043
            
            
            
            31,578
            
            
            
            29,159Stock
      options (1)
            
            
            n/a
            
            
            
            497
            
            
            
            780Restricted
      awards (2)
            
            
            n/a
            
            
            
            192
            
            
            
            119Total
      diluted common shares outstanding
            
            
            33,043
            
            
            
            32,267
            
            
            
            30,058Diluted
      EPS from continuing operations
            
            $
            (3.89
            )
            
            $
            1.46
            
            
            $
            1.64





(1)
            For
      the years ended December 31, 2008, December 31, 2007 and December 31,
      2006, 271,227 shares, 145,510 shares and 362,479 shares, respectively,
      were excluded from the calculation of diluted EPS due to the fact that the
      shares are considered anti-dilutive because the number of potential
      buyback shares is greater than the number of weighted shares
      outstanding.


(2)
            For
      the years ended December 31, 2008, December 31, 2007 and December 31,
      2006, 767,679 shares, negligible shares and 7,336 shares, respectively,
      were excluded from the calculation of diluted EPS due to the fact that the
      shares are considered anti-dilutive because the number of potential
      buyback shares is greater than the number of weighted shares
      outstanding.





Income
Taxes





Deferred
tax assets and liabilities are determined based on the difference between the
financial reporting and the tax bases of assets and liabilities and are measured
using the tax rates and laws that are expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. A valuation allowance is established, when necessary, to reduce
deferred income tax assets to the amount that is more likely than not to be
realized.  Realization is dependent on generating sufficient taxable
income of a specific nature prior to the expiration of any loss carryforwards or
capital losses.  The asset may be reduced if estimates of future
taxable income during the carryforward period are reduced. In addition, the
Company maintains reserves for certain tax items, which are included in income
taxes payable on its consolidated balance sheet.  The Company
periodically reviews these reserves to determine if adjustments to these
balances are necessary.





Foreign
Currency Translations





The
Company is not currently affected by foreign currency exchange rate exposure,
except for any fluctuations in the foreign bank accounts remaining from the
divestitures of our European business units,from continuing operations of
our UK, France and Canadian subsidiaries and equity investments and minority
interests in its foreign business units, which are not material to its
consolidated financial statements.  The Company’s treatment of foreign
subsidiaries is consistent with the guidelines set forth in SFAS 52, Foreign Currency
Translations.  The financial statements of the Company’s
subsidiaries expressed in foreign currencies are translated from the respective
functional currencies to U.S. Dollars, with results of operations and cash flows
translated at average exchange rates during the period, and assets and
liabilities translated at end of the period exchange rates.  At
December 31, 2008, the accumulated other comprehensive losses related to foreign
currency translations was approximately $2.6 million.  Foreign
currency transaction gains and (losses) are included in the results of
operations and are not material.





Use
of Estimates





The
consolidated financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America.  The
consolidated financial statements include certain amounts that are based on
management's best estimates and judgments.  Estimates are used in
determining items such as revenue recognition, reserves for accounts receivable,
certain assumptions related to goodwill and intangible assets, deferred tax
valuation, fair value of marketable securities, claims and insurance accruals,
derivative financial instruments, stock based compensation and amounts recorded
for contingencies and other reserves.  Because of the uncertainty
inherent in such estimates, actual results may differ from these
estimates.  The Company is not aware of reasonably likely events or
circumstances that would result in different amounts being reported that would
have a material impact on its consolidated results of operations or consolidated
financial condition.





Fair
Value of Liquid Financial Instruments





The
carrying amount of our cash and cash equivalents, accounts receivable, unbilled
services and accounts payable approximate fair value because of the relatively
short maturity of these instruments.





Derivative
Financial Instruments





The
Company enters into interest rate swap agreements to modify the interest rate
characteristics of our outstanding long-term debt.  At hedge
inception, and at least quarterly thereafter, the Company assesses whether
derivatives used to hedge transactions are highly effective in offsetting
changes in the cash flow of the hedged item.  To the extent the
instruments are considered to be effective, changes in fair value are recorded
as a component of other comprehensive income (loss).  To the extent
there is any hedge ineffectiveness, changes in fair value relating to the
ineffective portion are immediately recognized in earnings (interest
expense).  The fair values of the Company’s interest rate swaps are
obtained from dealer quotes.  These values represent the estimated
amount the Company would receive or pay to terminate the agreement taking into
consideration the difference between the contract rate of interest and rates
currently quoted for agreements of similar terms and maturities.





Concentration
of Credit Risk





Financial
instruments that potentially subject us to concentration of credit risk consist
of accounts receivable and unbilled services.  The Company places its
investments in highly rated financial institutions, U.S. Treasury bills, money
market accounts, investment grade short-term debt instruments.  The
Company is subject to credit exposure to the extent the Company maintains cash
balances at one institution in excess of the Federal Depository Insurance
Company limit of $250,000.  Its receivables are concentrated with its
major pharmaceutical clients.  The Company does not require collateral
or other security to support clients' receivables.





Accounting
for Stock Options




The
Company follows SFAS No. 123 (“SFAS 123R”), Share-Based Payment, which
establishes accounting for share-based awards exchanged for employee services
and requires companies to expense the estimated fair value of these awards over
the requisite employee service period.





The Company uses the modified
prospective application method, as permitted under SFAS 123R, which requires
measurement of compensation cost of all stock-based awards at fair value on the
date of grant and recognition of compensation over the service periods for
awards expected to vest.  Under this method, compensation cost in 2006
includes the portion vesting in the period for (1) all stock-based awards
granted prior to, but not vested as of, January 1, 2006, based on the grant date
fair value estimated in accordance with the original provisions of SFAS No. 123,
Accounting for Stock-Based
Compensation (“SFAS 123”), and (2) all stock-based awards granted
subsequent to January 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS 123R.  The Company will
recognize the cost of all employee stock awards on a straight-line basis over
their respective vesting periods, net of estimated
forfeitures.  Accordingly, prior periods amounts have not been
restated.  Under this method, the Company is required to record
compensation expense for all awards granted after the date of adoption and for
the unvested portion of previously granted awards that remain outstanding at the
date of adoption.




The
adoption of SFAS 123R resulted in stock-based compensation expense for the years
ended December 31, 2008 and 2007 of  $10.6 million and $9.7 million,
respectively, of which $2.3 million and $2.4 million, respectively, were
recorded in cost of services and $8.3 million and $7.3 million recorded as
Selling, General and Administrative expenses (“SG&A”),
respectively.  The stock-based compensation expense caused (loss)
income before income tax provision, minority interest in income of subsidiary
and income from equity investments to decrease by $10.6 million and $9.7 million
for the years ended December 31, 2008 and 2007, respectively, net (loss) income
to (increase) decrease by $7.3 million and $5.7 million for the years ended
December 31, 2008 and 2007, respectively, and basic and diluted earnings per
share to decrease by $0.22 and $0.18 per share for the years ended December 31,
2008 and 2007, respectively.





Cash
provided by financing activities increased by $0.3 million and $7.9 million for
the years ended December 31, 2008 and 2007, respectively, related to excess tax
benefits from the exercise of stock-based awards.





As of
January 1, 2008, the Company adopted SAB 110 revision to SAB topic 14 for
determining the expected term and the range of the expected term remained
unchanged at 5.5 to 6 years as previously reported under SAB 107.




Recent
Accounting Pronouncements




In
October 2008, the FASB issued Staff Position No. FSP FAS 157-3 “Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active” (FSP FAS 157-3) which amends FAS 157 to include guidance on how to
determine the fair value of a financial asset in an inactive market and which is
effective immediately on issuance, including prior periods for which financial
statements have not been issued.  The implementation of FSP
FAS 157-3 did not have a material impact on the Company’s financial
position and results of operations.





In May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 162 ("SFAS 162"), “The Hierarchy of Generally
Accepted Accounting Principles.” SFAS 162 identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP in the United States (the GAAP
hierarchy).  This Statement is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AICPA
Codification of Auditing Standards, AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting
Principles."  The Company does not believe that SFAS 162 will
have a material impact on its Consolidated Financial
Statements.





In March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161
“Disclosures about Derivative Instruments and Hedging Activities an amendment of
FASB Statement No. 133”, which requires additional disclosures regarding a
company’s derivative instruments and hedging activities by requiring disclosure
of the fair values of derivative instruments and their gains and losses in a
tabular format. It also requires disclosure of derivative features that are
credit risk–related as well as cross-referencing within the notes to the
financial statements to enable financial statement users to locate important
information about derivative instruments, financial performance, and cash flows.
SFAS 161 is effective for fiscal years beginning after November 15,
2008.  The Company is currently evaluating the impact of this standard
on its Consolidated Financial Statements.





In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS
141(R)”), which addresses the recognition and accounting for identifiable assets
acquired, liabilities assumed and noncontrolling interests in business
combinations. SFAS 141(R) also establishes expanded disclosure requirements for
business combinations. SFAS 141(R) will become effective January 1,
2009.  We are currently evaluating the impact of this standard on our
Consolidated Financial Statements; however, this is mainly dependent on the
timing, nature and extent of our acquisitions consummated after January 1,
2009.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”),
which addresses the accounting and reporting framework for minority interests by
a parent company.  SFAS 160 also addresses disclosure requirements to
distinguish between interests of the parent and interests of the noncontrolling
owners of a subsidiary. SFAS 160 will become effective January 1,
2009.  We are currently evaluating the impact of this standard on our
Consolidated Financial Statements.





In
February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.SFAS No. 159 provides companies with an option to report
selected financial assets and liabilities at fair value.  This
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. Early adoption is permitted as of the beginning
of a fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.  The implementation
of SFAS 159 did not have a material effect on our
consolidated balance sheets, results of operations and cash flows.





In
September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements".  SFAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value
measurements.  The provisions of SFAS 157 are effective for the fiscal
year beginning January 1, 2008.  The implementation of SFAS
157 did not have a material effect on our consolidated balance sheets,
results of operations and cash flows.





In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin (“SAB”) No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Current Year Misstatements. SAB No.
108 requires analysis of misstatements using both an income statement (rollover)
approach and a balance sheet (iron curtain) approach in assessing materiality
and provides for a one-time cumulative effect transition adjustment. SAB No. 108
is effective for our 2006 annual financial statements.  The adoption
of SAB No. 108 did not have a material impact on our consolidated results of
operations or consolidated financial position.





In July
2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109.  FIN 48
clarifies the accounting for income taxes by prescribing the minimum recognition
threshold a tax position is required to meet before being recognized in the
consolidated financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties, accounting
in interim periods, disclosure and transition. FIN 48 applies to all tax
positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes
(“FASB No. 109”).  FIN 48 is effective for fiscal years beginning
after December 15, 2006; as such, we adopted FIN 48 as of January 1, 2007, as
required.  Differences between the amounts recognized in the
consolidated financial statements prior to the adoption of FIN 48 and the
amounts reported after adoption are accounted for as a cumulative-effect
adjustment recorded to the beginning balance of retained
earnings.  The adoption of FIN 48 did not have a material impact on
our consolidated statements of operations, financial position, cash flows, and
other significant matters, such as debt covenants or our normal business
practices.





3.  Acquisitions:





Acquisitions
are accounted for using purchase accounting, including SFAS No. 141, Business Combinations, (“SFAS
No. 141”) and the financial results of the acquired businesses are included in
the Company’s financial statements from their acquisitions dates.  If
a business is acquired subsequent to a reporting period, but prior to the
issuance of the Company’s financial statements, it is disclosed in the notes to
the consolidated financial statements.  earnout payments from
acquisitions are generally accrued at the end of an earnout period in
conjunction with the preparation of the Company’s quarterly financial statements
when the acquired company’s results are reviewed, as more fully described
below.  The terms of the acquisition agreements generally include
multiple earnout periods or a multi-year earnout period.  Except for
inVentiv Communications, Inc., pro forma financial information was not required
to be disclosed under the Securities and Exchange Commission’s Regulation S-X
for the following acquisitions because none of the specific thresholds were met
as they were not material to the consolidated operations of the Company at the
time of acquisition.





Promotech Logistics Solutions –In December 2008, the Company completed the acquisition of the net assets
of Promotech Logistics Solutions for approximately $7.2 million in cash,
including certain post-closing adjustments and direct acquisition costs, yet to
be finalized.  There are no earnout provisions related to this
acquisition.  Promotech Logistics Solutions is headquartered in New
Jersey and provides non-personal promotion services, similar to our existing
Promotech group.  Promotech Logistics Solutions’ financial results
have been reflected in the inVentiv Commercial segment since the date of its
acquisition.





PMG -In August 2008, the
Company completed the acquisition of the net assets of PMG for approximately
$15.2 million in cash, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earnout payments, which may be material, contingent on PMG’s performance
measurements during 2008 and 2009.  PMG is headquartered in New Jersey
and is a leading provider of patient relationship marketing
services.  PMG’s financial results have been reflected in the inVentiv
Patient Outcomes segment since the date of its acquisition.





CCA -In July 2007, the
Company completed the acquisition of CCA, for approximately $69.1 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earnout payments, which may be material, contingent on CCA’s performance
measurements during 2007 through 2010.  The amount accrued at December
31, 2008 for the 2008 earnout was approximately $25.9 million.  CCA is
headquartered in New York and is one of the largest healthcare-focused public
relations firms in the world.  CCA includes agencies organized and
operating in the United States, the United Kingdom and France.  CCA’s
financial results have been reflected in the inVentiv Communications’ segment
since the date of its acquisition.





AWAC -In July 2007, the
Company completed the acquisition of AWAC for approximately $76.3 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earnout payments, which may be material, contingent on AWAC’s performance
measurements during 2007 through 2010.  AWAC is based in Georgia and
is a leading provider of proprietary IT-driven cost containment and medical
consulting solutions to third party administrators, ERISA self-funded plans,
fully insured plans, employer groups, managing general underwriters and
insurance carriers.  The AWAC acquisition included the business assets
of AWAC.MD, Inc. as well as Innovative Health Strategies, Inc. and iProcert,
LLC, which were acquired as entities.  Innovative Health Strategies,
Inc. and iProcert, LLC were subsequently dissolved and their business operations
consolidated with the AWAC.MD business operations.  AWAC’s financial
results have been reflected in the inVentiv Patient Outcomes segment since the
date of its acquisition.





Addison Whitney-In June 2007, the Company
completed the acquisition of the net assets of Addison Whitney, Inc. for
approximately $18.3 million in cash and stock, including certain post-closing
adjustments and direct acquisition costs.  The Company will be
obligated to make certain earnout payments, which may be material, contingent on
Addison Whitney’s performance measurements during 2007 through
2010.  Addison Whitney is based in North Carolina, and specializes in
global branding consultancy that focuses on creating unique corporate and
product brands.  Addison Whitney’s financial results have been
reflected in the inVentiv Communications’ segment since the date of its
acquisition.





Strategyx-In June 2007, the Company
completed the acquisition of Strategyx for approximately $9.9 million in cash
and stock, including certain post-closing adjustments and direct acquisition
costs.  The Company will be obligated to make certain earnout
payments, which may be material, contingent on Strategyx’s performance
measurements during 2007 through 2010.  Strategyx is based in
Somerville, New Jersey, and specializes in global strategic
consulting.  Strategyx’s financial results have been reflected in the
inVentiv Commercial segment since the date of its acquisition.





Ignite-In March 2007, the Company
completed the acquisition of the assets of ignite comm.net and Incendia Health,
Inc. (including its Incendia Health Studios brand of services, which is now
operated as a division of Ignite) for approximately $21.2 million in cash and
stock, including certain post-closing adjustments and direct acquisition
costs.  The Company will be obligated to make certain earnout
payments, which may be material, contingent on Ignite's performance measurements
during 2007 through 2010.  For the 12-month period ended March 31,
2008, approximately $6.3 million of cash and stock was accrued, of which
approximately $6.2 million was paid during the third quarter of
2008.  Ignite is based in Irvine, California and specializes in
medical advertising and interactive communications targeting patients and
caregivers.  Ignite’s financial results have been reflected in the
inVentiv Communications segment since the date of its acquisition.





Chamberlain-In March 2007, the Company
completed the acquisition of Chamberlain for approximately $14.7 million in cash
and stock, including certain post-closing adjustments and direct acquisition
costs.  The Company will be obligated to make certain earnout payments,
which may be material, contingent on Chamberlain's performance measurements
during 2007 through 2009.  Chamberlain is based in New York, and
specializes in public relations in the healthcare industry. Chamberlain’s
financial results have been reflected in the inVentiv Communications segment
since the date of its acquisition.





MedConference-In November 2006, the
Company completed the acquisition of the net assets of The Maxwell Group, Inc.
and its MedConference brand of services (“MedConference”) for approximately $8.1
million in cash and stock, including certain post-closing adjustments and direct
acquisition costs.  MedConference, based in Norristown, PA, was
founded in 1989 and is a leading provider of live and on-demand virtual event
services to the pharmaceutical industry.  The Company was obligated to
make certain earnout payments, contingent on MedConference's performance
measurements during 2006 through 2008.  The amount accrued at December
31, 2006, and paid in 2007, with respect to MedConference for the 2006 earnout
was approximately $1.6 million in cash and stock.  MedConference did
not achieve the initial earnout threshold for 2007 and 2008 and thus, no amount
was accrued.  The results of MedConference have been reflected in the
inVentiv Commercial segment since the date of its acquisition.





DialogCoach-In November 2006, the
Company completed the acquisition of the net assets of American Speakers
Education Research and Training, L.L.C. and DialogCoach LLC (collectively,
“DialogCoach”) for approximately $5.7 million in cash and stock, including
certain post-closing adjustments and direct acquisition
costs.  DialogCoach, based in Coopersburg, PA, is an education and
training company focused on customized solutions in specialty markets and
building training and educational programs.  The Company was obligated
to make certain earnout payments, contingent on DialogCoach's performance
measurements during 2006 through 2008.  DialogCoach did not achieve
the initial earnout threshold for 2006, 2007 and 2008 and thus, no amount was
accrued.  The results of DialogCoach have been reflected in the
inVentiv Commercial segment since the date of its acquisition.





Synergos-In April 2006, the Company
acquired the net assets of Synergos for approximately $6.4 million in cash and
stock, including certain post-closing adjustments and direct acquisition
costs.  Synergos, based in The Woodlands, Texas, is a focused clinical
services provider with expertise in clinical trial management services,
particularly project management and monitoring. The Company was obligated to
make certain earnout payments, contingent on Synergos’s performance measurements
during 2006 and 2007.  The amount accrued at December 31, 2006, and
paid in 2007, with respect to Synergos for the 2006 earnout, was approximately
$0.8 million in cash and stock.  The amount accrued at December 31, 2007
for the 2007 earnout was approximately $0.9 million in cash and stock, which was
paid in May 2008.  The results of Synergos have been reflected in the
inVentiv Clinical segment from the date of its acquisition.





JSAI-In April 2006, the Company
acquired JSAI for approximately $8.8 million in cash and stock, including
certain post-closing adjustments and direct acquisition costs.  JSAI
is Canada's leading healthcare marketing and communications agency.  The
Company will be obligated to make certain earnout payments, which may be
material, contingent on JSAI’s performance measurements during the 12-month
periods ending March 31, 2007, 2008 and 2009.  The amount due with
respect to JSAI for the 12-month period ended March 31, 2007 was approximately
$2.8 million in cash and stock, which the Company accrued at March 31, 2007, of
which the cash portion was paid in 2007 and stock portion was paid in 2008 once
certain contractual restrictions were met.  JSAI did not achieve the
initial earnout threshold for the 12-month period ended March 31, 2008 and thus,
no amount was accrued.  The results of JSAI have been reflected in the
inVentiv Communications segment since the date of its acquisition.





Adheris-In February 2006, the
Company acquired Adheris for approximately $69.9 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  Adheris is a Massachusetts-based industry leader in the area
of patient compliance and persistency programs.  The Company will be
obligated to make certain earnout payments, which may be material, contingent on
Adheris's performance measurements during 2006 through
2008.  Adheris’s 2006 earnout of approximately $7.7 million in cash
and stock, of which $7.9 million was accrued at December 31, 2006, was paid in
2007.  Adheris’ 2007 earnout of approximately $15.1 million in cash
and stock, of which $15.3 million was accrued at December 31, 2007, was paid in
2008.  The amount accrued at December 31, 2008 for the 2008 earnout
was approximately $12.3 million.  The portions adjusted in the
subsequent years mainly relate to the finalization of the earnout for the
previous years, as allowed under the contract.  The results of Adheris
were reflected in the inVentiv Communications segment from the date of its
acquisition until June 30, 2007.  Adheris was transferred from the
inVentiv Communications segment to the inVentiv Patient Outcomes segment
following the acquisition of AWAC and the concomitant revision of our segment
reporting analysis.





inVentiv Communications,
Inc.-In October 2005, the Company
acquired all of the outstanding capital stock of inVentiv Communications, Inc.
(then known as inChord Communications, Inc.) for approximately $196.8 million of
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  To help finance the transaction, the Company
entered into a Credit Agreement, dated October 5, 2005, which was amended and
restated on July 6, 2007, as more fully described in Note 11.  The
Company acquired inVentiv Communications, Inc. to vastly expand its service
portfolio in the marketing and communications arena, expand its market position
in the pharmaceutical services market and achieve cross-selling opportunities by
leveraging its existing businesses.  The Company was obligated to make
certain earnout payments, contingent on inVentiv Communications, Inc.’s
performance measurements from 2005 through 2007.  inVentiv
Communications, Inc.’s 2005 earnout of approximately $3.8 million in cash and
stock, of which $3.6 million was accrued at December 31, 2005, was paid in
2006.  inVentiv Communications, Inc.’s 2006 earnout of approximately
$24.7 million in cash and stock, of which $25.0 million was accrued for at
December 31, 2006, was paid in 2007.  inVentiv Communications, Inc.’s
2007 earnout was approximately $21.8 million in cash and stock, which was
accrued at December 31, 2007, of which $18.5 million was paid in 2008 and $2.4
million remains accrued at December 31, 2008.  The portions adjusted
in the subsequent years mainly relate to the finalization of the earnouts for
the previous years, as allowed under the contract.  The results of
inVentiv Communications, Inc. have been reflected in the inVentiv Communications
segment since the date of acquisition.





4.  Significant
Clients:





During the years ended December 31,
2008 and 2007, the Company had no clients that accounted for more than 10%,
individually, of the Company's total revenues across its inVentiv Clinical,
inVentiv Communications, inVentiv Commercial and inVentiv Patient Outcomes
segments.





5.  Restricted
Cash and Marketable Securities:





As of December 31, 2008 and December
31, 2007, there were approximately $1.3 million and $1.7 million of restricted
cash, respectively, of which $0.4 million relates to outstanding letters of
credit, to support the security deposits relating to the New York, Washington
D.C, California and London offices, which are reflected in the inVentiv
Communications segment.  The beneficiaries have not drawn on the $0.4
million letters of credit.  As this cash has been pledged as
collateral, it is restricted from use for general purposes and has been
classified in restricted cash and marketable securities at December 31, 2008 and
December 31, 2007.





The
Company receives cash advances from its clients as funding for specific projects
and engagements.  These funds are deposited into segregated bank
accounts and used solely for purposes relating to the designated
projects.  Although these funds are not held subject to formal escrow
agreements, the Company considers these funds to be restricted and has
classified these balances accordingly.  Cash held in such segregated
bank accounts totaled approximately $0.1 million and $0.2 million held in escrow
on behalf of clients and was included in restricted cash and marketable
securities at December 31, 2008 and December 31, 2007,
respectively.




As of
December 31, 2008 and December 31, 2007, the Company had $10.0 million and $45.3
million, respectively, invested in the Columbia Strategic Cash Portfolio
(“CSCP”).  Based on an update provided by CSCP for December 31, 2008,
the Company has recorded $3.7 million of the $10.0 million balance as
long-term.  The $3.7 million is classified as deposits and other
assets on the December 31, 2008 Consolidated Balance Sheet, which is expected to
be distributed after 2009.  As the majority of the Company’s recorded
balances in the CSCP continue to be short-term in nature, $6.3 million and $45.3
million, respectively,  are classified as restricted cash and
marketable securities on the December 31, 2008 and December 31, 2007
Consolidated Balance Sheets.  During the years ended December 31, 2008
and December 31, 2007, the Company recorded $2.6 million and $0.8 million,
respectively, relating to impairments of the Company's investment in the CSCP,
which held certain asset-backed securities.  Subsequent to December
31, 2008, the value of the CSCP may materially change depending on market
conditions.  Consistent with the Company's investment policy
guidelines, the majority of CSCP investments had AAA/Aaa credit ratings at the
time of purchase.




The CSCP
maintained a net asset value of $1 per unit until December 2007, after which the
net asset value per unit fluctuated, and will continue to fluctuate, based on
changes in market values of the securities held by the portfolio.  The
process of liquidating CSCP’s portfolio was initiated in December 2007 and is
anticipated to continue through 2009.  Future impairment charges may
result depending on market conditions until the fund is fully liquidated. The
$3.4 million cumulative impairment charge through December 31, 2008 does not
have a material impact on the company's liquidity or financial
flexibility.




On
February 27, 2008, we entered into an unsecured credit facility (the “Blue Ridge
facility”) with Blue Ridge Investments, L.L.C., an affiliate of Bank of America,
N.A., to allow the Company to separately borrow up to the current balance
remaining in the CSCP.   We have not borrowed any funds under
this credit facility.  The Blue Ridge facility provides for multiple
drawdowns from time to time until maturity, which shall be the earlier of the
day following the redemption of all of our shares of the CSCP and July 1,
2009.  The outstanding balance under the facility may not (subject to
limited exceptions) exceed our account value in the CSCP, and distributions from
the CSCP must be applied to reduce the outstanding principal balance under the
facility.  Amounts borrowed bear interest at the one-month LIBOR rate
plus 0.35% per annum, fluctuating daily.





6.  Property
and Equipment, net:





Property
and equipment consist of the following:





As
      of December 31,2008
            
            
            2007(in
      thousands)Land
            
            $
            ---
            
            
            $
            ---Buildings
      and leasehold improvements
            
            
            15,479
            
            
            
            12,352Computer
      equipment and software
            
            
            35,676
            
            
            
            28,072Vehicles
            
            
            32,252
            
            
            
            37,638Furniture
      and fixtures
            
            
            12,783
            
            
            
            6,74196,190
            
            
            
            84,803Accumulated
      depreciation
            
            
            (32,808
            )
            
            
            (30,063
            )$
            63,382
            
            
            $
            54,740





The
vehicles have been recorded under the provisions of a capital
lease.  The inVentiv Commercial segment has entered into a lease
agreement to provide fleets of automobiles for sales representatives for certain
client engagements.





Depreciation
expense of property and equipment totaled $20.9 million, $18.2 million, and
$15.1 million in 2008, 2007 and 2006, respectively. In 2008, 2007 and 2006
inVentiv recorded $11.2 million, $10.5 million and $8.7 million of depreciation,
respectively, on vehicles under capital lease.





7.  Goodwill and Other Intangible
Assets:





Goodwill
consists of the following:




(in
      thousands)
            
            inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalBalance
      as of January 1, 2007
            
            $
            55,742
            
            
            $
            112,928
            
            
            $
            40,366
            
            
            $
            57,791
            
            
            
            --
            
            
            $
            266,827Goodwill
      acquired during the year
            
            
            12
            
            
            
            53,674
            
            
            
            5,141
            
            
            
            16,656
            
            
            
            --
            
            
            
            75,483Goodwill
      through contingent consideration(1)
            
            
            1,190
            
            
            
            24,356
            
            
            
            266
            
            
            
            15,592
            
            
            
            --
            
            
            
            41,404Balance
      as of January 1, 2008
            
            $
            56,944
            
            
            $
            190,958
            
            
            $
            45,773
            
            
            $
            90,039
            
            
            
            --
            
            
            $
            383,714Goodwill
      acquired during the year
            
            
            --
            
            
            
            --
            
            
            
            1,561
            
            
            
            5,202
            
            
            
            --
            
            
            
            6,763Goodwill
      through contingent consideration(1)
            
            
            32
            
            
            
            31,127
            
            
            
            --
            
            
            
            12,153
            
            
            
            
            
            
            
            43,312Goodwill
      allocation (2)
            
            
            --
            
            
            
            (6,674
            )
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (6,674
            )Other
      adjustments
            
            
            186
            
            
            
            863
            (4)
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,049Impairment
      losses(3)
            
            
            (41,344
            )
            
            
            (112,667
            )
            
            
            --
            
            
            
            (58,627
            )
            
            
            --
            
            
            
            (212,638
            )Balance
      as of December 31, 2008
            
            $
            15,818
            
            
            $
            103,607
            
            
            $
            47,334
            
            
            $
            48,767
            
            
            
            --
            
            
            $
            215,526





(1)
            The
      contingent consideration represents adjustments relating to the
      finalization of the earnouts for the twelve months ended December 31and
      March 31 of each year. (see Note 3)


(2)
            The
      entire amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the Liedler acquisition, which
      was acquired on December 28, 2007.  Under SFAS 141, if a
      business combination is consummated toward the end of an acquiring
      enterprise's fiscal year or the acquired enterprise is very large or
      unusually complex, the acquiring enterprise may not be able to obtain some
      of the data required to complete the allocation of the cost of the
      purchased enterprise for inclusion in its next annual financial
      report.  As discussed in Part 2, Item 8 of our Annual Report on
      Form 10-K, since Liedler was acquired on December 28, 2007, the valuation
      was not completed by the time the 2007 10-K was
  filed.


(3)
            these
      amounts relate to the respective reporting unit noncash impairment charges
      of goodwill as a result of the interim impairment tests the Company
      performed at December 31, 2008.  The fair value of each
      reporting unit was estimated using the expected present value of future
      cash flows.


(4)
            This
      amount relates to a tax adjustment on the Chamberlain acquisition
      accounted for under EITF 93-7 Uncertainties Related to Income Taxes in a
      Purchase Business Combination.








Other intangible assets, by class,
consist of the following:




December
      31, 2008
              
              
              December
      31, 2007(in
      thousands)
              
              
              
              
              Accumulated
              
              
              
              
              
              
              
              
              AccumulatedGross
              
              
              Amortization
              
              
              Net
              
              
              Gross
              
              
              Amortization
              
              
              NetCustomer
      relationships
              
              $
              113,896
              
              
              $
              (27,177
              )
              
              $
              86,719
              
              
              $
              105,537
              
              
              $
              (15,946
              )
              
              $
              89,591Technology
              
              
              14,168
              
              
              
              (4,497
              )
              
              
              9,671
              
              
              
              37,940
              
              
              
              (1,714
              )
              
              
              36,226Noncompete
      agreement
              
              
              1,506
              
              
              
              (911
              )
              
              
              595
              
              
              
              880
              
              
              
              (617
              )
              
              
              263Tradenames
      subject to amortization
              
              
              2,275
              
              
              
              (790
              )
              
              
              1,485
              
              
              
              1,211
              
              
              
              (277
              )
              
              
              934Other
              
              
              1,232
              
              
              
              (683
              )
              
              
              549
              
              
              
              1,234
              
              
              
              (386
              )
              
              
              848Total
      definite-life intangibles
              
              
              133,077
              
              
              
              (34,058
              )
              
              
              99,019
              
              
              
              146,802
              
              
              
              (18,940
              )
              
              
              127,862Tradenames
      not subject to amortization (1)
              
              
              127,490
              
              
              
              --
              
              
              
              127,490
              
              
              
              153,260
              
              
              
              --
              
              
              
              153,260Total
      other intangibles (2)
              
              $
              260,567
              
              
              $
              (34,058
              )
              
              $
              226,509
              
              
              $
              300,062
              
              
              $
              (18,940
              )
              
              $
              281,122




(1)
            These
      indefinite-life tradenames arose primarily from acquisitions where the
      brand names of the entities acquired are very strong and
      longstanding.  These tradenames are also supported annually in
      the Company’s impairment test for goodwill and tradenames conducted in
      June of every year and the interim impairment test performed at December
      31, 2008.


(2)
            The
      decrease in total gross other intangibles is primarily related to the
      noncash impairment charge the Company incurred for both definite and
      indefinite lived intangibles.  The impaired identifiable
      intangible assets, were primarily from decreases in the fair value of our
      technology and indefinite-lived tradenames in our inVentiv Communications,
      inVentiv Commercial and inVentiv Patient Outcomes segments.  The
      fair value of intangible assets was estimated using the expected present
      value of future cash flows.





The Company has the following
identifiable intangible assets:





Intangible asset
            
            Amount
              (in
      thousands)
            
            
            Weighted
      average amortization periodTradename
            
            $
            129,765
            
            
            
            (1
            )Customer
      relationships
            
            
            113,896
            
            
            10.7
      yearsTechnology
            
            
            14,168
            
            
            14.3
      yearsNoncompete
      agreement
            
            
            1,506
            
            
            4.5
      yearsOther
            
            
            1,232
            
            
            4.5
      yearsTotal
            
            $
            260,567





(1)
            $2.3
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 4.8
  years.





Amortization expense, based on
intangibles subject to amortization held at December 31, 2008, is expected to be
$12.5 million in 2009, $12.0 million in 2010, $11.7 million in 2011, $11.5
million in 2012, $10.2 million in 2013 and $41.1 million
thereafter.





As
discussed in Note 2, the Company performed annual impairment tests as of June
30, 2008 and concluded that the existing goodwill and indefinite lived
intangible tradename balances were not impaired.  During the fourth
quarter of 2008, as a result of adverse equity market conditions that caused a
decrease in the current market multiples and the company’s stock price, the
Company concluded that a triggering event had occurred indicating potential
impairment, and accordingly performed an impairment test of its goodwill and
other intangible assets at December 31, 2008.  The Company employed
the income valuation approach based on discounted cash flows and the market
approach.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets under SFAS No. 142, Goodwill and Other Intangible
Assets, and $30 million of definite-lived assets under SFAS No. 144,
Accounting for the Impairment
of or Disposal of Long-Lived Assets,The $268 million was recorded as
impairment of goodwill and other intangibles assets on the Company’s
consolidated statements of operations.





8.  Debt:




On July
6, 2007, the Company entered into an Amended and Restated Credit Agreement (“the
Credit Agreement”) with UBS AG, Stamford Branch and others. The Credit Agreement
provides for a secured term loan of $330 million which was made available to
inVentiv in a single drawing, up to $20 million in additional term loans
("delayed draw term loans") that was to be advanced no later than January 6,
2008, which we elected not to draw, a $50 million revolving credit facility, of
which $10 million is available for the issuance of letters of credit, and a
swingline facility.  The Credit Agreement was used to:




·
            amend
      the existing October 2005 credit facility, with a remaining balance of
      $164 million, and




·
            enter
      into a new $166 million loan to help fund the acquisitions of Chandler
      Chicco Agency and AWAC, and pay the fees associated with the new credit
      facility, with the balance retained by inVentiv as working
      capital.




The term
loan will mature on the seventh anniversary of the Credit Agreement, with
scheduled quarterly amortization of 1% per year during years one through six and
94% during year seven.  The delayed draw term loans will mature on the
seventh anniversary of the Credit Agreement, with scheduled quarterly
amortization of 0.25% per quarter and the balance becoming due on such seventh
anniversary.  The revolving loans will mature on the sixth anniversary
of the Credit Agreement. Amounts advanced under the Credit Agreement must be
prepaid with a percentage, determined based on a leverage test set forth in the
Credit Agreement, of Excess Cash Flow (as defined in the Credit Agreement) and
the proceeds of certain non-ordinary course asset sales, certain issuances of
debt obligations and 50% of certain issuances of equity securities of inVentiv
and its subsidiaries, subject to certain exceptions. inVentiv may elect to
prepay the loans, in whole or in part at any time, in certain minimum principal
amounts, without penalty or premium (other than normal LIBOR break funding
costs).  Amounts borrowed under the Credit Agreement in respect of
term loans (including delayed draw term loans) that are repaid or prepaid may
not be reborrowed.  Amounts borrowed under the Credit Agreement in
respect of revolving loans may be paid or prepaid and reborrowed.




Interest
on the loans will accrue, at inVentiv's election, at either (1) the Alternate
Base Rate (which is the greater of UBS's prime rate and federal funds effective
rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest periods
determined at inVentiv's option of 1, 2, 3 or 6 months (or, if the affected
lenders agree, 9 months), in each case plus a spread based equal to 0.75% for
Alternate Base Rate loans and 1.75% for Adjusted LIBOR Rate loans.




The
Credit Agreement contains, among other things, conditions precedent,
representations and warranties, covenants and events of default customary for
facilities of this type.  Such covenants include certain limitations
on indebtedness, liens, sale-leaseback transactions, guarantees, fundamental
changes, dividends and transactions with affiliates.  The Credit
Agreement also includes a financial covenant under which inVentiv is required to
maintain a total leverage ratio that does not exceed, as of the last day of any
four consecutive fiscal quarters, 4.0 to 1.0 through December 31, 2009 and 3.5
to 1.0 thereafter.




Under
certain conditions, the lending commitments under the Credit Agreement may be
terminated by the lenders and amounts outstanding under the Credit Agreement may
be accelerated.  Such events of default include failure to pay any
principal, interest or other amounts when due, failure to comply with covenants,
breach of representations or warranties in any material respect, non-payment or
acceleration of other material debt of inVentiv and its subsidiaries,
bankruptcy, insolvency, material judgments rendered against inVentiv or certain
of its subsidiaries or a 40% change of control of inVentiv, subject to various
exceptions and notice, cure and grace periods.




The
Company has the intent and ability to choose the three-month LIBOR base rate for
the duration of the term of the Credit Agreement.  The three-month
LIBOR base rate as of December 31, 2008 and December 31, 2007 was 1.43% and
4.70%, respectively.  As disclosed in Note 12, the Company has a $325
million derivative financial instrument to hedge against the new $330 million
term loan facility.




The
Company accounts for amendments to its revolving credit facility under the
provisions of EITF Issue No. 8-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 8-14), and its
term loan under the provisions of EITF Issue No. 6-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 6-19).  In
amending its revolving credit facility, deferred financing costs are being
amortized over the term of the new arrangement since the borrowing capacity
increased in the new loan, per the guidance in EITF 98-14.  In
connection with an amendment of our existing $164 million term loan, under the
terms of EITF 96-19, bank and any third-party fees were deferred and amortized
over the term of the Credit Agreement since the old and new debt instruments
were not substantially different.  The unamortized portion of the
deferred financing costs were approximately $3.9 million and $4.3 million and
are included in Deposits and Other Assets on the balance sheet as of December
31, 2008 and December 31, 2007, respectively.





The
following table displays the required future commitment of the Company’s
debt:





Years
      Ending December 31,2009
            
            $
            4,2792010
            
            
            3,3292011
            
            
            3,3172012
            
            
            3,3172013
            
            
            156,765Thereafter
            
            
            155,100Total
      minimum payments
            
            $
            326,107





9.  Accrued
Payroll, Accounts Payable and Accrued Expenses:





Accrued
payroll, accounts payable and accrued expenses consist of the
following:





December
      31,2008
            
            
            2007(in
      thousands)Accrued
      payroll and related employee benefits
            
            
            38,733
            
            
            $
            29,676Accounts
      payable
            
            
            10,421
            
            
            
            17,873Accrued
      media liability
            
            
            9,415
            
            
            
            8,509Accrued
      insurance
            
            
            9,912
            
            
            
            6,709Accrued
      commissions
            
            
            6,185
            
            
            
            5,013Accrued
      professional fees
            
            
            4,403
            
            
            
            2,867Accrued
      meeting fees
            
            
            770
            
            
            
            836Contingent
      consideration from acquisitions
            
            
            40,875
            
            
            
            52,862Accrued
      expenses
            
            
            8,295
            
            
            
            14,363$
            129,009
            
            
            $
            138,708





10.           Fair
Value Measurement




As
discussed in Note 2, the Company adopted SFAS 157 on January 1, 2008, which
among other things, requires enhanced disclosures about assets and liabilities
measured at fair value. Our adoption of SFAS 157 was limited to financial assets
and liabilities, which primarily relate to our marketable securities, deferred
compensation plan and derivative contracts.




We
utilize the market approach to measure fair value for our financial assets and
liabilities.  The market approach uses prices and other relevant
information generated by market transactions involving identical or comparable
assets or liabilities.




SFAS 157
includes a fair value hierarchy that is intended to increase consistency and
comparability in fair value measurements and related disclosures.  The
fair value hierarchy is based on inputs to valuation techniques that are used to
measure fair value that are either observable or
unobservable.  Observable inputs reflect assumptions market
participants would use in pricing an asset or liability based on market data
obtained from independent sources while unobservable inputs reflect a reporting
entity’s pricing based upon their own market assumptions.  The fair
value hierarchy consists of the following three levels:







Level 1
            
            -
            
            Inputs
      are quoted prices in active markets for identical assets or
      liabilities.Level 2
            
            -
            
            Inputs
      are quoted prices for similar assets or liabilities in an active market,
      quoted prices for identical or similar assets or liabilities in markets
      that are not active, inputs other than quoted prices that are observable
      and market-corroborated inputs which are derived principally from or
      corroborated by observable market data.Level 3
            
            -
            
            Inputs
      are derived from valuation techniques in which one or more significant
      inputs or value drivers are
unobservable.






The
following table represents the Company’s assets and liabilities measured at fair
value on a recurring basis as of December 31, 2008 and the basis for that
measurement:








(in
      thousands)
            Total
      Fair Value Measurement December 31, 2008
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            Significant
      Other Observable Inputs
              (Level
      2)
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            $10,416
            $417
            --
            $9,999
      (1)Deferred
      Compensation
              Plan
      Assets
            6,691
            --
            6,691
            --TOTAL
      ASSETS
            $17,107
            $417
            $6,691
            $9,999LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            $6,762
            --
            $6,762
            --Derivative
      Liabilities
            30,783
            --
            --
            30,783TOTAL
      LIABILITIES
            $37,545
            $--
            $6,762
            $30,783





(1) – As
described in Note 5, the Level 3 marketable securities balance of $10.0 million
includes $6.3 million classified as restricted cash and marketable securities
and $3.7 million as deposits and other assets, respectively, on the Company’s
December 31, 2008 Balance Sheet.




As
mentioned in Note 12 below, as a result of recent market conditions, the Company
updated its valuation of its five-year interest rate derivative as of December
31, 2008, resulting in a credit value adjustment of $4.8 million to the
derivative liability, of which $1.4 million was recorded as of September 30,
2008, with a corresponding offset to Other Comprehensive Income as a result of
cash flow hedge accounting (see Note 12).  This valuation, which
involved current and future probability-adjusted risk factors, included inputs
derived from valuation techniques in which one or more significant inputs were
unobservable, thus changing the classification from a Level 2 input to a Level 3
input.  The significant inputs in this valuation included credit
market spread, estimated exposure and company and counterparty default
risk.





As a
result of the decrease in available investment prices from September 30, 2008 to
December 31, 2008 due to market conditions, the Company changed its
classification of marketable securities from a Level 2 input to a Level 3
input.  The Company incurred a $2.6 million impairment charge during
2008, of which $2.0 million was in the fourth quarter of 2008 and primarily
related to the lack of liquidity and resulting distressed values of investments
in the marketplace.  These factors resulted in a significant
percentage of the securities within CSCP that required unobservable inputs,
which was not materially present through September 30, 2008.  These
significant inputs included interest rate curves, credit curves and
creditworthiness of the counterparty.  There were no changes to the
presentation of the CSCP in the consolidated financial statements as a result of
the Level 2 input to Level 3 input change.





The
following is a rollforward of the Level 3 liability through December 31,
2008:





Fair
      Value Measurements(in
      thousands)
            Using
      Significant Unobservable Inputs (Level 3)ASSETS
            CSCPBalance
      at January 1, 2008
            $--Included
      in earnings (or changes in net assets)
            --Included
      in other comprehensive income
            --Purchases,
      issuances and settlements
            --Transfers
      in and/or out of Level 3
            9,999Balance
      at December 31, 2008
            $9,999LIABILITIES
            DerivativeBalance
      at January 1, 2008
            $--Included
      in earnings (or changes in net assets)
            --Included
      in other comprehensive income
            --Purchases,
      issuances and settlements
            --Transfers
      in and/or out of Level 3
            10,491Balance
      at September 30, 2008
            10,491Included
      in earnings (or changes in net asset)Included
      in other comprehensive income
            12,058Purchases,
      issuances and settlementDeferred
      tax impact of other comprehensive income
            8,234Transfers
      in and/or out of LevelBalance
      at December 31, 2008
            $30,783





11.
Leases:





The
Company leases certain facilities, office equipment and other assets under
non-cancelable operating leases. The operating leases are expensed on a
straight-line basis and may include certain renewal options and escalation
clauses.





The
following is a schedule of future minimum lease payments for these operating
leases at December 31, 2008 (in thousands):





Years
      Ending December 31,2009
            
            $
            22,2892010
            
            
            20,5712011
            
            
            17,4382012
            
            
            15,5772013
            
            
            11,961Thereafter
            
            
            53,081Total
      minimum lease payments
            
            $
            140,917





Rental
expense charged to operations was approximately $19.0 million, $13.0 million and
$8.7 million for the years ended December 31, 2008, 2007 and 2006,
respectively.





The
Company also has commitments under capital leases.  The following is a
schedule of future minimum lease payments for these capital leases at December
31, 2008 (in thousands):





(a)Years
      Ending December 31,2009
            
            $
            14,3282010
            
            
            13,1522011
            
            
            9,7622012
            
            
            3,3052013
            
            
            18Total
      minimum lease payments
            
            
            40,565Amount
      representing interest and
              management
      fees
            
            
            (2,138
            )38,427Current
      portion
            
            
            (13,417
            )Non-current
      lease obligations
            
            $
            25,010





(a) These
future commitments include interest and management fees, which are not recorded
on the Consolidated Balance Sheet as of December 31, 2008 but will be recorded
as incurred.





12.  Derivative
Financial Instruments:




SFAS No.
133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”),
as amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities.  It requires the recording of
all derivatives as either assets or liabilities on the balance sheet measured at
estimated fair value and the recognition of the unrealized gains and
losses.  We record the fair market value of our derivatives as other
assets and other liabilities within our consolidated balance
sheet.  Derivatives that are not part of hedge relationships are
recorded at fair market value on our Consolidated Balance Sheet with the
offsetting adjustment to interest expense on our Consolidated Income
Statement.  For hedge relationships designated as cash flow hedges
under SFAS 133, changes in fair value of the effective portion of a designated
cash flow hedge are recorded to other comprehensive income or loss; the
ineffective portion is recorded to interest expense in our consolidated income
statement.




We enter
into interest rate swaps to manage interest rate risk associated with variable
rate debt.





Effective
October 2005, the Company entered into an amortizing three-year interest rate
swap arrangement with a notional amount of $175 million to fix the interest rate
on the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc.  The Company entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  From October 2005 to July 2006, the
Company did not designate its original swap arrangement for hedge accounting and
recorded an approximate $2.9 million reduction to interest expense relating to
the mark-to-market adjustment, and a corresponding derivative asset for
approximately $2.9 million, which was recorded in Deposits and Other Assets on
the Consolidated Balance Sheet.  The fair value of the swaps represent
the estimated amount the Company would receive or pay to terminate the agreement
taking into consideration the difference between the contract rate of interest
and rates currently quoted for agreements of similar terms and
maturities.





On July
17, 2006, the Company formally designated the interest rate swap as a cash flow
hedge pursuant to SFAS No. 133.  The Company employed the dollar
offset method to assess effectiveness by performing a sensitivity analysis and
utilized the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement with an inception date of July 17,
2006.  The hypothetical swap had a fair value of zero on the date of
designation and the hedging swap had a fair value of $2.9 million on the date of
designation.  As the swap fair value declined to zero at maturity,
which was December 31, 2008, the $2.9 million of fair value was recognized in
earnings over the remaining life of the swap as part of the ineffectiveness
calculation.  During the year ended December 31, 2008, the fair market
value of the original derivative asset increased from a liability of
approximately $1.0 million to the maturity value of $0.  Approximately
$1.1 million was recorded as interest expense, attributable to the financing
component embedded within the interest rate swap, while $2.1 million ($1.2
million, net of taxes) was recorded as an increase to Other Comprehensive
Income.





On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount increase to $325 million effective December
31, 2008 to hedge the total outstanding debt notional, as the Company’s original
2005 three-year interest rate swap arrangement described above
expired.  At hedge inception, the Company employed the dollar offset
method by performing a sensitivity analysis to assess effectiveness and utilized
the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  As a result of the hypothetical
derivative method, there was no ineffectiveness for the period ended December
31, 2008, and accordingly, $20.5 million ($12.2 million, net of taxes) was
recorded as a decrease to Other Comprehensive Income and an increase to other
non-current liabilities on the Company’s Consolidated Balance
Sheet.  This change in Other Comprehensive Income includes the $4.8
million credit value adjustment as discussed in Note 10.





Based on
current assumptions regarding the interest rate environment and other market
conditions at December 31, 2008, the estimated amount of accumulated other
comprehensive income that is expected to be reclassified into interest expense
under our hedge relationships within the next 12 months is $11.9
million.





13.  Commitments
and Contingencies:





The
Company is subject to lawsuits, investigations and claims arising out of the
conduct of its business, including those related to commercial transactions,
contracts, government regulation and employment matters. Certain claims, suits
and complaints have been filed or are pending against the Company.  We
do not believe that any action will have a material adverse effect on
us.





Weisz
v. Albertsons, Inc.(San Diego Superior Court
Case No. GIC 830069):  This action was filed on May 17, 2004 in
San Diego Superior Court, California by Utility Consumer Action Network against
Albertsons, Inc. and its affiliated drug store chains and seventeen
pharmaceutical companies.  This complaint alleged, among other claims,
violation of the California Unfair Competition Law and the California
Confidentiality of Medical Information Act (“CMIA”) arising from the operation
of manufacturer-sponsored, pharmacy-based compliance programs similar to
Adheris’ refill reminder programs.  An amended complaint was filed on
November 4, 2004 adding Adheris as a defendant to the lawsuit.  A
subsequent amendment to the complaint substituted Plaintiff Kimberly Weisz
(“Plaintiff”) as the class representative to this purported class
action.





After several rounds of pleading
challenges to Plaintiff’s various renditions of the complaint, all but one
pharmaceutical manufacturing company, AstraZeneca, LP, were dismissed from the
case, leaving only Albertsons, Inc., Adheris, and AstraZeneca as the remaining
defendants (“Defendants”) in this action.  In the latest pleading
challenge to Plaintiff’s Fifth Amended Complaint, the remaining defendants were
successful in eliminating a number of claims, including fraud-based and breach
of privacy claims.  Defendants also successfully moved to strike
Plaintiff’s class allegations as improper.  The operative Sixth
Amended Complaint, which was filed on January 6, 2008, alleges five causes of
action against Defendants.  Only three of these claims – violation of
the CMIA, breach of fiduciary duty, and unjust enrichment – are alleged against
Adheris.





On February 8, 2009, the remaining
parties to the Weisz action entered into a Settlement Agreement and Release (the
"Weisz Settlement").  Under the terms of the Weisz Settlement, which
has been preliminarily approved by the court but remains subject to final court
approval after a fairness hearing, Adheris would agree to refrain from knowing
participation in any refill reminder programs, targeted mailings or
notifications regarding medical conditions of specific California residents
except those residents who have expressly opted in to the communication or as
otherwise permitted by California law.  Adheris currently does not
conduct significant business in California of the type encompassed by Weisz
Settlement.  It is expected that Adheris’ financial contribution to
the settlement in excess of its retention amount will be funded by
insurance.  Our insurer, AIG, is defending this action under
reservation of rights.





The hearing to consider final approval
of the Weisz Settlement is scheduled for June 5, 2009.  If the
settlement does not become final, Adheris intends to continue to defend this
action vigorously, and we do not believe that this action will have a material
adverse effect on our consolidated balance sheets, results of operations or cash
flows.  It is impossible to predict the outcome of litigation with
certainty, however, and there can be no assurance that an adverse result in this
proceeding would not have a potentially material adverse effect on our
consolidated balance sheets, results of operations or cash flows.





Indemnification
Claim.  In January 2008, PRS received a demand for
indemnification from one of its customers relating to a lawsuit filed against
the customer pursuant to the Telephone Consumer Protection Act of 1991, as
amended by the Junk Fax Prevention Act of 2005, 47 U.S.C. § 227, a state
consumer fraud statute and common law conversion; and seeks statutory and actual
damages allegedly caused by the sending of unsolicited fax advertisements
related to the customer’s product.  PRS assisted the customer in
sending the faxes in question, although the actual faxing was done by an
unaffiliated entity.  The customer based its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS agreed to indemnify the customer on the condition that PRS
and its appointed counsel would have control over the defense of this
matter.





The Company's insurer, Chubb Group, is
defending this action under reservation of rights.  In December 2008,
the parties to the action entered into a settlement agreement, which is subject
to Court approval and requires notification to various state attorneys
general.  The hearing to consider final approval of the settlement is
scheduled for June 10, 2009.  If the settlement agreement becomes
final, the amount to be paid to the settlement class in excess of the deductible
amount is expected to be funded by Chubb Group.  If the settlement
does not become final, PRS intends to continue to defend this action vigorously,
and the Company does do not believe that this action will have a material
adverse effect on its consolidated balance sheets, results of operations or cash
flows.  It is impossible to predict the outcome of litigation with
certainty, however, and there can be no assurance that an adverse result in this
proceeding would not have a potentially material adverse effect on the Company's
consolidated balance sheets, results of operations or cash flows.





Other  We
are subject to lawsuits, investigations and claims arising out of the conduct of
our business, including those related to commercial transactions, contracts,
government regulation and employment matters.  Certain such claims
have been filed or are pending against us.  All such matters are of a
kind routinely experienced in our business and are consistent with our
historical experience.  We do not believe that any such routine action
will have a material adverse effect on us.




14.  Common
Stock and Stock Incentive Plans:





The
Company’s 2006 Stock Incentive Plan (“Stock Plan” or “LTIP”) authorizes
incentive stock options, nonqualified stock options, restricted stock awards,
restricted stock units and stock appreciation rights ("SARs”).  Prior
to the adoption of the LTIP, the Company was authorized to grant equity
incentive awards under its 1999 Stock Incentive Plan (together with the LTIP,
the "Equity incentive Plans"), which was terminated at the time the LTIP was
adopted.  The aggregate number of unissued shares of the Company’s
common stock that may be issued under the Stock Plan is 1.5 million
shares.





The
exercise price of options granted under the Stock Plan may not be less than 100%
of the fair market value per share of the Company’s common stock on the date of
the option grant. The vesting and other provisions of the options are determined
by the Compensation Committee of the Company’s Board of Directors.





The
following table summarizes stock option activity under the Company’s equity
incentive plans for the years ended December 31, 2008, 2007 and 2006 (in
thousands, except per share amounts):





Shares
            Weighted
      Average Exercise Price
            Weighted
      Average Remaining Contractual Term (in years)
            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2006
            2,971
            $10.47
            6.32
            $39,401Granted
      and assumed
            366
            26.34Exercised
            (971)
            6.72Forfeited/expired/cancelled
            (172)
            14.75Outstanding
      at December 31, 2006
            2,194
            $14.43
            7.24
            $45,900Granted
      and assumed
            172
            35.75Exercised
            (783)
            8.82Forfeited/expired/cancelled
            (77)
            21.20Outstanding
      at December 31, 2007
            1,506
            $19.43
            6.86
            $18,121Granted
      and assumed
            261
            31.37Exercised
            (173)
            13.82Forfeited/expired/cancelled
            (95)
            19.21Outstanding
      at December 31, 2008
            1,499
            $22.18
            6.52
            $1,014Vested
      and expected to vest at December 31, 2008
            1,449
            $21.87
            6.45
            $1,014Options
      exercisable at December 31, 2006
            1,246
            $9.82
            6.41
            $31,813Options
      exercisable at December 31, 2007
            853
            $14.59
            5.99
            $13,963Options
      exercisable at December 31, 2008
            935
            $17.13
            5.44
            $1,014




The
weighted-average grant-date fair value of stock options granted was $12.82,
$16.62 and $13.02 at December 31, 2008, 2007 and 2006,
respectively.   The total intrinsic value of options exercised
during the years ended December 31, 2008, 2007 and 2006, was $2.4 million, $6.9
million and $6.5 million, respectively.  As of December 31, 2008 and
2007, there was approximately $4.6 million and $6.6 million of total
unrecognized compensation cost related to nonvested share-based compensation
arrangements granted; that cost is expected to be recognized over a weighted
average of 2.5 years and 2.2 years, respectively.




The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled $1.1 million, $8.0 million and $9.2
million for the years ended December 31, 2008, 2007 and 2006,
respectively.




Options
outstanding and exercisable at December 31, 2008 had exercise price ranges and
weighted average remaining contractual lives of:





Outstanding Options
            Exercisable OptionsExercise
      Price Range
            Numbers
      of Options
            Weighted
      Average Exercise Price
            Weighted
      Average
              Remaining
      Life
              (years)
            Number
      of Options
            Weighted
      Average
              Exercise
      Price$1.66
            To
            $8.06
            150,424
            $6.25
            1.79
            150,424
            $6.25$8.45
            To
            $15.48
            98,416
            $10.02
            5.06
            98,416
            $10.02$15.96
            To
            $15.96
            250,000
            $15.96
            5.73
            250,000
            $15.96$16.89
            To
            $17.75
            185,053
            $17.26
            5.74
            185,053
            $17.26$18.20
            To
            $26.76
            198,623
            $24.92
            6.80
            111,874
            $24.95$26.77
            To
            $26.77
            180,000
            $26.77
            7.45
            90,000
            $26.77$28.66
            To
            $31.45
            124,882
            $29.73
            8.99
            10,368
            $30.64$32.55
            To
            $32.55
            156,891
            $32.55
            9.05
            --
            --$35.01
            To
            $35.01
            96,822
            $35.01
            8.06
            24,213
            $35.01$37.21
            To
            $37.21
            57,914
            $37.21
            8.50
            14,479
            $37.211,499,025
            
            
            934,827





Assumptions





The fair
value of each option grant is estimated on the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:





2008
            2007
            2006Expected
      life of option
            6
      yrs
            6
      yrs
            5.5-6
      yrsRisk-free
      interest rate
            3.06%
            4.81%
            4.90%Expected
      volatility
            37%
            40%
            45%Expected
      dividend yield
            0.00%
            0.00%
            0.00%





With the adoption of SFAS 123R in 2006,
the Company has limited its issuance of stock options to senior executives,
while granting restricted shares to employees at various
levels.  During the fourth quarter of 2005, prior to the adoption of
SFAS 123R, management analyzed its expected volatility and expected life of
stock options and concluded that the expected volatility for options granted
during the fourth quarter of 2005 should be 45% and the expected life of the
options granted should range between 5.5 and 6.0 years, depending on the
grantee’s employee status.  The Company analyzed historical trends in
these variables on a quarterly basis; during 2008 and 2007 the volatility
remains at a range of 36%-40%.  As of January 1, 2008, the Company
adopted SAB 110 revision to SAB topic 14 for determining the expected term and
the range of the expected term remained unchanged at 5.5 to 6 years as
previously reported under SAB 107.  The Company continues to base the
estimate of risk-free rate on the U.S. Treasury yield curve in effect at the
time of grant. The Company has never paid cash dividends, does not currently
intend to pay cash dividends, and has certain restrictions under its credit
facility to pay dividends and thus has assumed a 0% dividend
yield.  These conclusions were based on several factors, including
past company history, current and future trends, comparable benchmarked data and
other key metrics.




As part of the requirements of SFAS
123R, the Company is required to estimate potential forfeitures of stock grants
and adjust compensation cost recorded accordingly.  The forfeiture
rate was estimated based on historical forfeitures.  The estimate of
forfeitures will be adjusted over the requisite service period to the extent
that actual forfeitures differ, or are expected to differ, from such estimates.
Changes in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact the amount of
stock compensation expense to be recognized in future periods.  The
forfeiture rate utilized in 2008, 2007 and 2006 was 6.58%, 3.91% and
3.25%.


A summary
of the status and changes of the Company’s nonvested shares related to our
equity incentive plan is presented below:





(in
      thousands, except per share amounts)
            Shares
            Weighted
      Average Grant-Date Fair ValueNonvested
      at January 1, 2006
            208
            $20.31Granted
            401
            $26.33Released
            (62)
            $20.66Forfeited
            (27)
            $24.67Nonvested
      at December 31, 2006
            520
            $24.66Granted
            271
            $35.37Released
            (134)
            $22.96Forfeited
            (61)
            $27.94Nonvested
      at December 31, 2007
            596
            $29.41Granted
            318
            $30.13Released
            (198)
            $27.55Forfeited
            (49)
            $29.17Nonvested
      at December 31, 2008
            667
            $30.30




As of
December 31, 2008 and 2007, there was approximately $12.6 million and $12.4
million, respectively, of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Stock Plan;
that cost is expected to be recognized over a weighted average of 2.5 years and
2.8 years, respectively. The total fair value of shares vested during the years
ended December 31, 2008, 2007 and 2006 were $5.7 million, $4.9 million and $1.8
million, respectively.




15.  Benefit
Plans:





inVentiv
Health, Inc. and certain of its subsidiaries maintain a defined contribution
benefit plans.  Costs incurred by the Company related to this plan
amounted to approximately $3.7 million, $3.0 million and $2.2 million for 2008,
2007 and 2006, respectively.





On
November 22, 2004, the Company adopted the Ventiv Health, Inc. Deferred
Compensation Plan (the “Plan”), which was approved by its Board of Directors.
The Plan provides eligible management and other highly compensated employees
with the opportunity to defer, on a pre-tax basis, their salary, bonus, and
other specified cash compensation and to receive the deferred amounts, together
with a deemed investment return (positive or negative), either at a
pre-determined time in the future or upon termination of employment with
inVentiv Health, Inc. or an affiliated employer participating in the
Plan.  The compensation deferrals were initiated in
2005.  The deferred compensation liability of approximately $6.8
million was included in other liabilities in our Consolidated Balance Sheets as
of December 31, 2008 and 2007, respectively.    The Plan
does not provide for the payment of above-market interest to
participants.





To assist
in the funding of the Plan obligation, we participate in a corporate-owned life
insurance program in a rabbi trust whereby it purchases life insurance policies
covering the lives of certain employees, with inVentiv Health, Inc. named as
beneficiary.  Rabbi trusts are grantor trusts generally set up to fund
compensation for a select group of management or highly paid
executives.  The cash value of the life insurance policy as of
December 31, 2008 and 2007 were approximately $5.1 million and $5.4 million,
respectively and are currently classified in Deposits and other assets on our
Consolidated Balance Sheets.  In addition, approximately $1.6 million
and $1.4 million as of December 31, 2008 and 2007, respectively, were invested
in mutual funds and classified in other current assets on our Consolidated
Balance Sheets.





16.  Income
Taxes:





Our
income tax provision included the following components:





For
      the Years EndedDecember
      31,2008
            
            
            2007
            
            
            2006(in
      thousands)Current:U.S.—Federal
            
            $
            27,376
            
            
            $
            25,979
            
            
            $
            22,900U.S.—State
      and local
            
            
            3,325
            
            
            
            2,164
            
            
            
            2,811Foreign
            
            
            2
            
            
            
            433
            
            
            
            837$
            30,703
            
            
            $
            28,576
            
            
            $
            26,548Deferred:U.S.—Federal
            
            $
            (77,567
            )
            
            $
            788
            
            
            $
            (7,183
            )U.S.—State
      and local
            
            
            (11,343
            )
            
            
            37
            
            
            
            (77
            )Foreign
            
            
            0
            
            
            
            0
            
            
            
            (122
            )(88,910
            )
            
            $
            825
            
            
            $
            (7,382
            )Income
      tax provision
            
            $
            (58,207
            )
            
            $
            29,401
            
            
            $
            19,166





The
provision for taxes on net income differs from the amount computed by applying
the U.S. federal income tax rate as a result of the following:





For
      the Years EndedDecember
      31,2008
            2007
            2006Taxes
      at statutory U.S. federal income tax rate
            35.0%
            35.0%
            35.0%Foreign
      tax differences
            0.0
            0.1
            1.0State
      and local income taxes, net of federal tax benefit
            4.3
            2.9
            4.5Establish/(release)
      of valuation allowance/ Utilization of net operating losses / Other tax
      benefits
            0.2
            (0.4)
            (13.1)Impairment
      of intangible assets
            (8.0)
            0.0
            0.0Other
      permanent differences
            (0.3)
            0.8
            0.6Effective
      tax rate
            31.1%
            38.4%
            28.0%








Deferred
income taxes are recorded based upon differences between the financial statement
and tax bases of assets and liabilities. As of December 31, 2008 and 2007, the
deferred tax assets and liabilities consisted of the following:





As
      of December 31,2008
            
            
            2007Current
      Deferred Tax Assets:
            
            (in
      thousands)Accrued
      expenses
            
            $
            10,487
            
            
            $
            5,501Deferred
      rent
            
            
            134
            
            
            
            191Net
      operating loss carry forwards
            
            
            0
            
            
            
            779Deferred
      revenue
            
            
            268
            
            
            
            229Allowance
      for doubtful accounts
            
            
            1,314
            
            
            
            532Other
            
            
            321
            
            
            
            232Subtotal
            
            
            12,524
            
            
            
            7,464








Non-Current
Deferred Tax Assets:


Deferred
      Compensation
            
            
            9,965
            
            
            
            7,568Fair
      market value adjustment
            
            
            12,517
            
            
            
            5,014Intangible
      Assets
            
            
            57,438
            
            
            
            0NOL
      & FTC carry forwards
            
            
            3,628
            
            
            
            4,423Fixed
      Assets
            
            
            7,764
            
            
            
            7,076Other
            
            
            850
            
            
            
            964Subtotal
            
            
            92,162
            
            
            
            25,045Gross
      Deferred Tax Assets
            
            
            104,686
            
            
            
            32,509Current Deferred Tax
      Liabilities:Accrued
      Expenses
            
            
            (571
            )
            
            
            (1,707
            )Other
            
            
            (2,354
            )
            
            
            (344
            )Subtotal
            
            
            (2,925
            )
            
            
            (2,051
            )Non-Current
      Deferred Tax Liabilities:Property
      and Equipment
            
            
            (9,081
            )
            
            
            (6,330
            )Intangible
      Assets
            
            
            (3,260
            )
            
            
            (27,275
            )Other
            
            
            (697
            )
            
            
            (895
            )Subtotal
            
            
            (13,038
            )
            
            
            (34,500
            )Gross
      Deferred Tax Liabilities
            
            
            (15,963
            )
            
            
            (36,551
            )Valuation
      Allowance
            
            
            (4,353
            )
            
            
            (4,843
            )Net
      Deferred Tax Assets/(Liabilities)
            
            $
            84,370
            
            
            $
            (8,885
            )




During 2008, the impairment of $268.7
million of intangible assets resulted in an increase of approximately $88.2
million to deferred tax assets.  This item is disclosed net of U.S.
deferred tax liabilities related to intangible assets of $30.8 million resulting
in a net deferred tax asset of $57.4 million.  It is management’s
belief that it is more likely than not that the deferred tax asset will be
realized in the future.  Reversal of the deferred tax assets will
occur in varying amounts beginning in 2009 and continuing through
2023.





As of December 31, 2007 the Company had
a deferred tax asset of $0.7 million relating to a capital tax loss
carryover.  Management believed that it was more likely than not that
the associated deferred tax asset would not be realized in the future, and a
valuation allowance of $0.7 million was recorded.  During 2008, the
Company determined that $0.8 million of the capital loss carryover would be
utilized during December 31, 2008, and the remainder would expire in
2008.  Due to the expiration of the credit, the deferred tax asset and
valuation reserve were reversed.





As of
December 31, 2008 a deferred tax asset in the amount of $0.2 existed relating to
state net operating loss carry forwards.  A valuation allowance has
been recorded against the state net operating loss carryovers as management
believes it is more likely than not that the associated deferred tax asset will
not be realized in the future.  The gross amount of the state net
operating losses is approximately $3.6 million and expires in varying amounts
beginning in 2009 and continuing through 2026.





The
Company does not provide for federal income taxes or tax benefits relating to
the undistributed earnings or losses of its foreign subsidiaries that are
controlled foreign corporations.  It is the Company’s belief that such
earnings will be indefinitely reinvested in the companies that produced
them.  At December 31, 2008, the Company has not provided federal
income taxes on approximately $4.6 million of earnings of foreign
subsidiaries.  If these earnings were remitted as dividends, the
Company would be subject to U.S. income taxes and certain foreign withholding
taxes.  The Company has determined that it is not practical to compute
a deferred tax liability related to these earnings.





The
Company adopted the provisions FIN 48 on January 1, 2007.  The
adoption of FIN 48 did not have a material impact on the Company’s consolidated
balance sheet, results of operations or cash flows. The amounts of unrecognized
tax benefit were $6.3 million as of January 1, 2008 and $5.3 million as of
December 31, 2008. Included in this balance were positions that, if recognized,
would affect the effective tax rate by $1.0 million as of January 1, 2008 and
$0.9 million as of December 31, 2008.





A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows (in millions):





Unrecognized
      tax benefits balance at January 1, 2008
            $6.3Increase
      in tax positions for prior years
            --Decreases
      in tax positions for prior years
            (0.4)Increase
      in tax positions for current year
            0.2Settlements
            (0.1)Lapse
      of statute of limitations
            (0.7)Unrecognized
      tax benefits balance at December 31, 2008
            $5.3





The
Company recognizes potential interest and penalties related to unrecognized tax
benefits in income tax expense.  The total amount of accrued interest
and penalties recorded as of January 1, 2008 and December 31, 2008 was $2.7
million and 2.6 million respectively.





The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, various states and foreign jurisdictions.  The Company
is no longer subject to U.S. federal income tax examinations for years before
2005 and generally, is no longer subject to state and local income tax
examinations by tax authorities for years before 2004.




Management
has concluded that it is reasonably possible that the unrecognized tax benefits
will decrease by approximately $1.2 million within the next 12
months.  The decrease is primarily related to additional federal and
state taxes that have expiring statutes of limitations.





17.  Discontinued
Operations:




For the
years ended December 31, 2008, 2007 and 2006, income from discontinued
operations, net of taxes, were $0.7 million, $0.3 million and $2.0 million,
respectively.  For the years ended December 31, 2008, 2007 and 2006,
income from discontinued operations, net of taxes, mainly consisted of
contingency payments due from our previously divested Germany based
operations.   In addition, approximately $1.2 million of tax
liability was reversed since the receivership of the previously-divested
France-based unit was finalized during the fourth quarter of 2006.




18.  Related
Parties:





inVentiv
Communications’ leases its current headquarters facility in Westerville, Ohio
from Lexington MLP Westerville L.P.  Prior to May 15, 2007, this
facility was partially owned by R. Blane Walter, the Company’s CEO (who is also
a member of the Board of Directors), his brothers and other current employees of
inVentiv Communications.  The term of the lease is fifteen years, and
expires on September 30, 2015.





Several inVentiv business units
provided services to Cardinal Health, Inc. (“Cardinal”) during
2008.  Revenues generated for services provided to Cardinal totaled
approximately $475,000 and $760,000 for 2008 and 2007,
respectively.  Robert Walter, who is the father of R. Blane Walter,
our CEO, served as Executive Chairman, and subsequently as an Executive
Director, of Cardinal during 2007 and 2008.  R. Blane Walter and his
immediate family members (including Robert Walter) and related trusts own
approximately 3% of the outstanding capital stock of Cardinal.  All
transactions between the Company and Cardinal were on arms'-length terms and
were negotiated without the involvement of any members of the Walter
family.





inVentiv's
Promotech business unit purchased warehouse consulting and procurement services
from South Atlantic Systems ("SAS") during 2007. These contractual arrangements
with SAS have been completed for 2008 and provided for total payments of
approximately $0.8 million. Mark Teixeira, who is the brother-in-law of David
Bassin, our Chief Financial Officer, is the General Manager for South Atlantic
Systems and was granted an 11.6% equity interest in SAS as of December 31,
2007.





19.  Segment
Information:





The
Company currently manages four operating segments: inVentiv Clinical, inVentiv
Communications, inVentiv Commercial and inVentiv Patient Outcomes, and its
non-operating reportable segment, “Other”, which is based on the way management
makes operating decisions and assesses performance.  As mentioned in
Note 1, the Company added the inVentiv Patient Outcomes segment after the
acquisition of AWAC, realigned certain existing divisions, and has reclassified
its segment reporting to conform to the current segment structure in accordance
with SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information.  The
following represents the Company’s reportable segments as of December 31,
2008:





·
            inVentiv
      Clinical, which provides services related to permanent placement,
      clinical staffing, data collection and management and functional service
      provision primarily in support of pharmaceutical clinical
      development.





·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.





·
            inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.





·
            inVentiv Patient
      Outcomes, which provides services related to patient pharmaceutical
      compliance programs, patient support programs, clinical educator teams,
      medical cost containment and consulting solutions and patient relationship
      marketing.





·
            Other, which
      encompasses the activities of the corporate management
    group.





The
following segment information has been prepared as if our Patient Outcomes
segment and the segment realignment described above had been in effect from
January 1, 2006:





For the
year ended December 31, 2008 (in thousands):








inVentiv
              Clinical
            
            
            inVentiv
              Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            217,103
            
            
            $
            343,198
            
            
            $
            453,961
            
            
            $
            125,927
            
            
            
            --
            
            
            $
            1,140,189Less:
      Intersegment revenues
            
            
            (169
            )
            
            
            (1,311
            )
            
            
            (18,895
            )
            
            
            (2
            )
            
            
            --
            
            
            
            (20,377
            )Reported
      Revenues
            
            $
            216,934
            
            
            $
            341,887
            
            
            $
            435,066
            
            
            $
            125,925
            
            
            
            
            
            
            $
            1,119,812Depreciation
      and amortization
            
            
            2,251
            
            
            
            10,271
            
            
            
            17,836
            
            
            
            5,586
            
            
            
            44
            
            
            
            35,988Interest
      expense
            
            
            110
            
            
            
            144
            
            
            
            1,419
            
            
            
            3
            
            
            
            23,788
            
            
            
            25,464Interest
      income
            
            
            82
            
            
            
            579
            
            
            
            --
            
            
            
            38
            
            
            
            1,284
            
            
            
            1,983Impairment
      of Goodwill and Other Intangible Assets
            
            
            41,344
            
            
            
            135,601
            
            
            
            4,037
            
            
            
            86,867
            
            
            
            --
            
            
            
            267,849Segment
      (loss) income (1)
            
            $
            (24,585
            )
            
            $
            (91,624
            )
            
            $
            38,709
            
            
            $
            (63,987
            )
            
            $
            (44,157
            )
            
            $
            (185,644
            )




For the
year ended December 31, 2007 (in thousands):




inVentiv
              Clinical
            
            
            inVentiv
              Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            187,240
            
            
            $
            290,408
            
            
            $
            410,825
            
            
            $
            100,474
            
            
            $
            --
            
            
            $
            988,947Less:
      Intersegment revenues
            
            
            (313
            )
            
            
            (1,295
            )
            
            
            (10,039
            )
            
            
            --
            
            
            
            --
            
            
            
            (11,647
            )Reported
      Revenues
            
            $
            186,927
            
            
            $
            289,113
            
            
            $
            400,786
            
            
            $
            100,474
            
            
            $
            --
            
            
            $
            977,300Depreciation
      and amortization
            
            
            1,886
            
            
            
            7,167
            
            
            
            16,401
            
            
            
            3,597
            
            
            
            57
            
            
            
            29,108Interest
      expense
            
            
            --
            
            
            
            41
            
            
            
            2,229
            
            
            
            5
            
            
            
            18,442
            
            
            
            20,717Interest
      income
            
            
            93
            
            
            
            782
            
            
            
            94
            
            
            
            99
            
            
            
            1,971
            
            
            
            3,039Segment
      income (loss) (1)
            
            $
            14,306
            
            
            $
            42,725
            
            
            $
            35,452
            
            
            $
            18,352
            
            
            $
            (33,720
            )
            
            $
            77,115




For the
year ended December 31, 2006 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
              Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            150,317
            
            
            $
            208,406
            
            
            $
            351,647
            
            
            $
            61,944
            
            
            $
            --
            
            
            $
            772,314Less:  Intersegment
      revenues
            
            
            531
            
            
            
            1,008
            
            
            
            4,530
            
            
            
            --
            
            
            
            --
            
            
            
            6,069Reported
      Revenues
            
            
            149,786
            
            
            
            207,398
            
            
            
            347,117
            
            
            
            61,944
            
            
            
            --
            
            
            
            766,245Depreciation
      and amortization
            
            
            1,527
            
            
            
            3,619
            
            
            
            13,673
            
            
            
            1,833
            
            
            
            88
            
            
            
            20,740Interest
      expense
            
            
            --
            
            
            
            90
            
            
            
            1,781
            
            
            
            5
            
            
            
            9,485
            
            
            
            11,361Interest
      income
            
            
            61
            
            
            
            569
            
            
            
            33
            
            
            
            120
            
            
            
            1,911
            
            
            
            2,694Segment
      income (loss)(1)
            
            
            11,623
            
            
            
            26,685
            
            
            
            44,088
            
            
            
            7,291
            
            
            
            (20,276
            )
            
            
            69,411




(1) Income
from continuing operations before income tax provision, minority interest in
income of subsidiary and income from equity investments








(in
      thousands)
            
            December
      31,2008
            
            
            2007Total
      Assets:inVentiv
      Clinical
            
            
            97,162
            
            
            $
            127,426inVentiv
      Communications
            
            
            377,123
            
            
            
            513,079inVentiv
      Commercial
            
            
            205,910
            
            
            
            183,787inVentiv
      Patient Outcomes
            
            
            134,355
            
            
            
            198,141Other
            
            
            158,566
            
            
            
            88,423Total
      assets
            
            $
            973,116
            
            
            $
            1,110,856






17




INVENTIV HEALTH,
INC.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS





20.  Selected
Quarterly Financial Data (unaudited, in thousands):





The
following table summarizes financial data by quarter for inVentiv for 2008 and
2007.





2008
      Quarter EndedMarch
      31
            
            
            June
      30
            
            
            Sept.
      30
            
            
            Dec.
      31
            
            
            Total(in
      thousands, except per share amounts)Revenues
            
            $
            262,321
            
            
            $
            285,042
            
            
            $
            289,173
            
            
            $
            283,276
            
            
            $
            1,119,812Gross
      profit
            
            
            82,048
            
            
            
            87,306
            
            
            
            87,097
            
            
            
            90,919
            
            
            
            347,370Income
      (loss) from continuing operations
            
            
            8,032
            
            
            
            13,075
            
            
            
            13,326
            
            
            
            (163,118
            )
            
            
            (128,685
            )Income
      (loss) from discontinued operations
            
            
            12
            
            
            
            94
            
            
            
            (3
            )
            
            
            561
            
            
            
            664Net
      income (loss)
            
            
            8,044
            
            
            
            13,169
            
            
            
            13,323
            
            
            
            (162,557
            )
            
            
            (128,021
            )Earnings
      (losses) per share (a)Continuing
      operations:Basic
            
            $
            0.25
            
            
            $
            0.40
            
            
            $
            0.40
            
            
            $
            (4.94
            )
            
            $
            (3.89
            )Diluted
            
            $
            0.24
            
            
            $
            0.39
            
            
            $
            0.40
            
            
            $
            (4.92
            )
            
            $
            (3.89
            )Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.02Diluted
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.02Net
      income (loss):Basic
            
            $
            0.25
            
            
            $
            0.40
            
            
            $
            0.40
            
            
            $
            (4.92
            )
            
            $
            (3.87
            )Diluted
            
            $
            0.24
            
            
            $
            0.39
            
            
            $
            0.40
            
            
            $
            (4.90
            )
            
            $
            (3.87
            )





2007
      Quarter EndedMarch
      31
            
            
            June
      30
            
            
            Sept.
      30
            
            
            Dec.
      31
            
            
            Total
      (a)(in
      thousands, except per share amounts)Revenues
            
            $
            221,955
            
            
            $
            232,434
            
            
            $
            254,913
            
            
            $
            267,998
            
            
            $
            977,300Gross
      profit
            
            
            59,127
            
            
            
            69,560
            
            
            
            80,361
            
            
            
            86,690
            
            
            
            295,738Income
      from continuing operations
            
            
            10,384
            
            
            
            7,165
            
            
            
            14,134
            
            
            
            15,543
            
            
            
            47,226Income
      from discontinued operations
            
            
            86
            
            
            
            92
            
            
            
            90
            
            
            
            (10
            )
            
            
            258Net
      income
            
            
            10,470
            
            
            
            7,257
            
            
            
            14,224
            
            
            
            15,533
            
            
            
            47,484Earnings
      per share (a)Continuing
      operations:Basic
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            0.44
            
            
            $
            0.48
            
            
            $
            1.50Diluted
            
            $
            0.33
            
            
            $
            0.22
            
            
            $
            0.43
            
            
            $
            0.47
            
            
            $
            1.46Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00Diluted
            
            $
            0.01
            
            
            $
            0.01
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.01Net
      income (losses):Basic
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            0.44
            
            
            $
            0.48
            
            
            $
            1.50Diluted
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            0.43
            
            
            $
            0.47
            
            
            $
            1.47





(a)  The sum
of the net earnings per share do not add up to the full year amount due to
rounding and because the quarterly calculations are based on varying numbers of
shares outstanding.





18








SCHEDULE
II VALUATION AND QUALIFYING ACCOUNTS


YEARS
ENDED DECEMBER 31, 2008, 2007 and 2006


(in
thousands)





Additions
            
            
            DeductionsBalance
      at
              Beginning
              Of
      Year
            
            
            Charged
      to Cost and Expense
            
            
            Charged
      to other Accounts (1)
            
            
            from
      Reserve for Purpose for which Reserve was Created
            
            
            Balance
      at End
              Of
      YearAllowances
      for Doubtful Accounts:Year
      ended December 31, 2008
            
            $
            3,098
            
            
            $
            4,622
            
            
            $
            109
            
            
            $
            3,042
            
            
            $
            4,787Year
      ended December 31, 2007
            
            $
            3,583
            
            
            $
            9,311
            
            
            $
            865
            
            
            $
            10,661
            
            
            $
            3,098Year
      ended December 31, 2006
            
            $
            3,979
            
            
            $
            2,257
            
            
            $
            145
            
            
            $
            2,798
            
            
            $
            3,583


(1)
Reserves acquired through acquisitions.








Item 9.Changes in and
Disagreements with Accountants on Accounting and Financial
Disclosure.




None.




Item 9A.  Controls and
Procedures.




Attached
as exhibits to this Form 10-K are certifications of inVentiv's Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), which are required in
accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended
(the Exchange Act). This “Controls and Procedures” section includes information
concerning the controls and controls evaluation referred to in the
certifications. Part II, Item 8 of this Form 10-K sets forth the report of
Deloitte & Touche LLP, our independent registered public accounting firm,
regarding its audit of inVentiv’s internal control over financial reporting and
of management’s assessment of internal control over financial reporting set
forth below in this section. This section should be read in conjunction with the
certifications and the Deloitte & Touche report for a more complete
understanding of the topics presented.




Evaluation
of Disclosure Controls and Procedures




An
evaluation was performed under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)),
as of the end of the period covered by this annual report on Form
10-K.    Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of December 31,
2008, our disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed in our Exchange Act reports
is recorded, processed, summarized and reported within the time periods
specified by the Securities and Exchange Commission and that material
information relating to us and our consolidated subsidiaries is made known to
management, including the Chief Executive Officer and Chief Financial Officer
during the period when our periodic reports are being
prepared.   Our quarterly evaluation of Disclosure Controls
includes an evaluation of some components of our internal control over financial
reporting, and internal control over financial reporting is also separately
evaluated on an annual basis for purposes of providing management's annual
report on internal control over financial reporting.






Our
management, including the Chief Executive Officer and the Chief Financial
Officer, does not expect that our Disclosure Controls will prevent or detect all
error and all fraud. A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, within the company have been detected.
These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions. Projections of any evaluation of controls effectiveness to
future periods are subject to risks.




Changes
in Internal Control Over Financial Reporting




Based on
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
there has been no change in our internal control over financial reporting during
our last fiscal quarter identified in connection with that evaluation, that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.




Management’s
Report on Internal Control over Financial Reporting




Management's
assessment that we maintained effective internal control over financial
reporting as of December 31, 2008, based on criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission is included under the caption Management's Report on Internal
Control Over Financial Reporting, in Part II, Item 8 of this Annual
Report on Form 10-K.







Item 9B.  Other
Information.







None






19





PART III





Our
Code of Business Conduct and Ethics is available within the Investor
Relations/Corporate Governance portion of our website at www.inventivhealth.com. 
We intend to disclose on our website information concerning any future
amendments to our waivers under the Code as permitted by Item 5.05 of Form
8-K.




The
remaining information required by Items 10, 11, 12, 13 and 14 of Form 10-K will
be set forth in our Proxy Statement (to be filed within 120 days after our
fiscal year ended December 31, 2008) relating to the 2009 Annual Meeting of
Stockholders and is incorporated by reference herein.





20


PART IV





Item 15.  Exhibits andFinancial Statement
Schedules.





(a)           1. The following Consolidated
Financial Statements of inVentiv Health, Inc. are filed under “Item 8. Financial
Statements and Supplementary Data.”





Consolidated
Balance Sheets as of December 31, 2008 and 2007.





Consolidated
Statements of Operations for the years ended December 31, 2008, 2007 and
2006.





Consolidated
Statements of Stockholders' Equity for the years ended December 31, 2008, 2007
and 2006.





Consolidated
Statements of Cash Flows for the years ended December 31, 2008, 2007 and
2006.





Notes to
Consolidated Financial Statements





2. The following financial statement
schedule is filed under “Item 8. Financial Statements and Supplementary
Data.”





Schedule
II--Valuation and Qualifying Accounts





All other
schedules are omitted because they are not applicable or are not required under
Regulation S-X.





3. The following exhibits are filed
herewith or are incorporated herein by reference, as
indicated.





(b)


Exhibit
              Description3.1
              Amended
      and Restated Certificate of Incorporation of the Registrant (filed as
      Exhibit 3.1 to the Registrant's Form 10 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *3.1.1
              Certificate
      of Amendment to Certificate of Incorporation of the Registrant (filed as
      Exhibit 3.1.1 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *3.2
              Amended
      and Restated By-Laws of the Registrant (filed as Exhibit 3.1 to the
      Registrant's Current Report on Form 8-K filed December 18, 2006).
      *3.2.2
              Amendment
      to Amended and Restated By-Laws (filed as Exhibit 3.2.2 to the
      Registrant’s Current Report on Form 8-K filed June 16, 2008 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended).*4.1
              Specimen
      form of certificate representing the Registrant’s common stock (filed as
      Exhibit 4.1 to the Registrant's Form 10 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *10.4.5
              inVentiv
      Health, Inc. 2006 Long-Term Incentive Plan. (filed as Exhibit 10.21 to the
      Registrant's Current Report on Form 8-K filed June 19, 2006 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.4.8
              Form
      of Director Stock Option Award Notice. (filed as Exhibit 10.4.8 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended December
      31, 2006 filed with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.9
              Form
      of Director Restricted Stock Award Notice. (filed as Exhibit 10.4.9 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended December
      31, 2006 filed with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.10
              Form
      of Executive Officer Restricted Stock Award Notice. (filed as Exhibit
      10.4.10 to the Registrant's Current Report on Form 8-K filed January 23,
      2008 with the Securities and Exchange Commission under the Securities Act
      of 1934, as amended). *†10.4.11
              Form
      of Executive Officer Stock Option Award Notice. (filed as Exhibit 10.4.11
      to the Registrant's Current Report on Form 8-K filed January 23, 2008 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.4.12
              Form
      of Executive Officer/Chairman Restricted Stock Award Notice. (filed as
      Exhibit 10.4.12 to the Registrant's Current Report on Form 8-K filed
      January 23, 2008 with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.13
              Form
      of Executive Officer/Chairman Stock Option Award Notice. (filed as Exhibit
      10.4.13 to the Registrant's Current Report on Form 8-K filed January 23,
      2008 with the Securities and Exchange Commission under the Securities Act
      of 1934, as amended). *†10.4.14
              Form
      of Executive Officer Restricted Stock Award Notice. (filed as Exhibit 10.1
      to the Registrant's Current Report on Form 8-K filed February 3, 2009 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.4.15
              Form
      of Executive Officer Stock Option Award Notice. (filed as Exhibit 10.2 to
      the Registrant's Current Report on Form 8-K filed February 3, 2009 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.5
              Employment
      Agreement, dated May 9, 2006 by and between Eran Broshy and the Registrant
      (filed as Exhibit 10.21 to the Registrant's Quarterly Report on Form 10-Q
      for the three months ended March 31, 2006 filed with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.5.1
              Amendment
      dated February 23, 2007 to Employment Agreement, dated May 9, 2006, by and
      between Eran Broshy and the Registrant (filed as Exhibit 10.5.1 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2006 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *†10.5.2
              Employment
      Agreement, dated June 11, 2008 by and between Eran Broshy and the
      Registrant
                (filed
      as Exhibit 10.5.2 to the Registrant’s Quarterly Report on Form 10-for the
      three months ended June 30, 2008 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.9
              Employment
      Agreement, dated August 13, 2001 by and between John R. Emery and the
      Registrant
                (filed
      as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2001 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.9.1
              Amendment
      dated January 1, 2004 to Employment Agreement, dated August 13, 2001, by
      and between John R. Emery and the Registrant  (filed as Exhibit
      10.9.1 to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 2003 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *†10.11
              Employment
      Agreement, dated April 8, 2002 by and between Terrell Herring and the
      Registrant
                (filed
      as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2002 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended). *
    †10.11.1
              Amendment
      dated January 1, 2004 to Employment Agreement, dated April 8, 2002, by and
      between Terrell Herring and the Registrant (filed as Exhibit 10.11.1 to
      the Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2003 filed with the Securities and Exchange Commission under
      the Securities Act of 1934, as amended). *†10.11.2
              Amendment
      to Employment Agreement dated June 15, 2004 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.2 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.3
              Amendment
      to Employment Agreement dated October 18, 2004 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.3 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.4
              Amendment
      to Employment Agreement dated January 23, 2006 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.4 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.5
              Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated May
      7, 2007 between the Registrant and Terrell Herring (filed as Exhibit
      10.11.5 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended March 31, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.11.6
              Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated
      August 6, 2007 between the Registrant and Terrell Herring (filed as
      Exhibit 10.11.6 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended June 30, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.12
              Asset
      Purchase Agreement dated as of September 21, 2004 among the Registrant,
      Smith Hanley Holding Corporation and the other parties thereto (filed as
      Exhibit 2.1 to the Registrant's Form 8-K/A filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended, on
      December 29,  2004). * #10.13
              The
      Registrant 2005 Deferred Compensation Plan (filed as Exhibit 10.1 to the
      Registrant's Form 8-K filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended, on November 29, 2004).
      *†10.14
              Asset
      Purchase Agreement dated as of November 19, 2004 among the Registrant,
      HHI, L.L.C. and the other parties thereto  (filed as Exhibit
      10.14 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended March 31, 2005 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#10.15
              Asset
      Purchase Agreement dated as of August 5, 2005 among the Registrant,
      Pharmaceutical Resource Solutions LLC and the other parties thereto (filed
      as Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended September 30, 2005 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *#10.16
              Acquisition
      Agreement dated September 6, 2005 by and among inChord Communications,
      Inc., the shareholders of inChord Communications, Inc., the Registrant and
      Accordion Holding Corporation (filed as Exhibit 2.1 to the Registrant's
      Current Report on Form 8-K filed October 11, 2006 with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *10.17
              Form
      of Indemnification Agreement entered into with each executive officer and
      director of Ventiv (filed as Exhibit 10.1 to the Registrant's Current
      Report on Form 8-K filed October 11, 2006 with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.18
              Employment
      Agreement dated as of September 6, 2005 between inChord Communications,
      Inc. and R. Blane Walter (filed as Exhibit 10.2 to the Registrant's
      Current Report on Form 8-K filed October 11, 2006 with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.18.1
              Employment
      Agreement dated as of August 7, 2007 between the Registrant and R. Blane
      Walter (filed as Exhibit 10.18.1 to the Registrant's Quarterly Report on
      Form 10-Q for the three months ended June 30, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.18.2
              Employment
      Agreement dated June 3, 2008 between the Registrant and R. Blane Walter
      (filed as Exhibit 10.18.2 to the Registrant’s Current Report on Form 8-K
      filed June 4, 2008 with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended).*†10.19
              Credit
      Agreement dated as of October 5, 2005 among the Registrant, the Subsidiary
      Guarantors, the lenders party thereto, UBS Securities LLC, as bookmanager,
      as joint lead arranger, and as documentation agent, UBS Loan Finance LLC,
      as swingline lender, UBS AG, Stamford Branch, as issuing bank, as
      administrative agent for the Lenders and as collateral agent, Banc of
      America Securities LLC, as joint lead arranger, and Bank of America, N.A.,
      as syndication agent (filed as Exhibit 10.3 to the Registrant's Current
      Report on Form 8-K filed October 11, 2006 with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
  *10.20
              Amended
      and Restated Acquisition-Related Incentive Plan  (filed as
      Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2001 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#†10.21
              Employment
      Agreement dated January 1, 2003 between the Registrant and David Bassin
      (filed as Exhibit 10.21 to the Registrant's Quarterly Report on Form 10-Q
      for the three months ended March 31, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.21.1
              Amendment
      to Employment Agreement dated January 1, 2003 between the Registrant and
      David Bassin (filed as Exhibit 10.21.1 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.21.2
              Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated May
      11, 2007 between the Registrant and David Bassin (filed as Exhibit 10.21.2
      to the Registrant's Quarterly Report on Form 10-Q for the three months
      ended March 31, 2007 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *†10.21.3
              Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated
      August 6, 2007 between the Registrant and David Bassin (filed as Exhibit
      10.21.3 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended June 30, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.22
              Amended
      and Restated Credit Agreement dated as of October 5, 2005 among the
      Registrant, the Subsidiary Guarantors, the lenders party thereto, UBS
      Securities LLC, as bookmanager, as joint lead arranger, and as
      documentation agent, UBS Loan Finance LLC, as swingline lender, UBS AG,
      Stamford Branch, as issuing bank, as administrative agent for the Lenders
      and as collateral agent, Banc of America Securities LLC, as joint lead
      arranger, and Bank of America, N.A., as syndication agent (filed as
      Exhibit 10.22 to the Registrant's Current Report on Form 8-K filed July
      12, 2007 with the Securities and Exchange Commission under the Securities
      Act of 1934, as amended). *10.23
              Purchase
      Agreement dated as of July 6, 2007 among Chandler Chicco Agency, LLC,
      (“CCA NY”), BioSector 2 LLC, the members of the Companies listed on
      Schedule I thereto, the Registrant and Chandler Chicco LLC (filed as
      Exhibit 10.23 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended September 30, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *#10.24
              Purchase
      Agreement dated as of July 6, 2007 by and among, Innovative Health
      Strategies, Inc. (f/k/a IHS of SC, Inc.) (“IHS”), AWAC.MD, Inc. (“AWAC”),
      iProcert, LLC (“iProcert”, and together with IHS and AWAC, the
      “Companies”), the shareholders and members of the Companies listed on
      Schedule I thereto, the Registrant and AWAC LLC. (filed as Exhibit 10.24
      to the Registrant's Quarterly Report on Form 10-Q for the three months
      ended September 30, 2007 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *#10.25
              Second
      Amended and Restated Acquisition-Related Incentive Plan (filed as Exhibit
      10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#†10.26
              Letter
      Agreement dated February 27, 2008 by and between Blue Ridge Investments,
      L.L.C. and inVentiv Health, Inc., as amended by letter amendment dated May
      7, 2008 (filed as Exhibit 10.26 to the Registrant’s Quarterly Report on
      Form 10-Q for the three months ended March 31, 2008 filed with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended).*21.1
              Subsidiaries
      of inVentiv Health, Inc.23
              Consent
      of Deloitte & Touche LLP.31.1
              Chief
      Executive Officer’s Certification Pursuant to Rule 13a-14(a) of the
      Exchange Act.31.2
              Chief
      Financial Officer’s Certification Pursuant to Rule 13a-14(a) of the
      Exchange Act.32.1
              Chief
      Executive Officer's Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
              Chief
      Financial Officer's Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
  *
Incorporated by reference.
 # Certain
portions omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the
Securities and Exchange Commission.
 †
Management contract or compensatory plan or arrangement.
   21


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





INVENTIV
HEALTH, INC.






inVentiv Health,
      Inc.February
      27, 2009
              By:
              /s/ David S. BassinDavid
      S. BassinChief
      Financial Officer and Secretary







Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.





Signature
            Title
            Date/s/
      ERAN BROSHY
            Executive
      Chairman of the Board
            February
      27, 2009Eran
      Broshy
            Director/s/
      DAVID S BASSIN
            Chief
      Financial Officer
            February
      27, 2009David
      S Bassin
            (Principal
      Financial Officer and Principal Accounting Officer)/s/
      BLANE WALTER
            Chief
      Executive Officer
            February
      27, 2009Blane
      Walter
            (Principal
      Executive Officer and Director)/s/
      TERRELL G. HERRING
            President
      and COO
            February
      27, 2009Terrell
      G. Herring
            (Director)/s/
      MARK E.
      JENNINGS
            Director
            February
      27, 2009Mark
      E.Jennings/s/
      PER G.H.
      LOFBERG
            Director
            February
      27, 2009Per
      G.H. Lofberg/s/
      A. CLAYTON PERFALL
            Director
            February
      27, 2009A.
      Clayton Perfall/s/
      DR. CRAIG SAXTON
            Director
            February
      27, 2009Dr.
      Craig Saxton