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, 2007





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 [X] No [_]





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 statement
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, or a non-accelerated filer.  See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.  (Check one):





Large
accelerated filer
[X]                                                                           Accelerated
filer
[  ]                                                                Non-accelerated
filer [  ]





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 nonaffiliates of the
registrant was approximately $1,099,623,506.  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 25, 2008, there were 32,421,673 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, 2007 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 2007
Annual Meeting of Stockholders are incorporated by reference into Part III of
this Form 10-K.









TABLE
OF CONTENTS





Item
            Description
            PagePART
      I1
            Business
            31A
            Risk Factors
            101B
            Unresolved Staff Comments
            142
            Properties
            143
            Legal Proceedings
            144
            Submission of Matters to a Vote of Securities
      Holders
            14PART
      II5
            Market for the Registrant’s Common Equity, Related
      Stockholder Matters and Issuer Purchase of Equity
      Securities
            156
            Selected Financial Data
            167
            Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
            177A
            Quantitative and Qualitative Disclosures About Market
      Risk
            318
            Financial Statements and Supplementary
      Data
            329
            Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosures
            639A
            Controls and Procedures
            639B
            Other Information
            63PART
      III10
            Directors, Executive Officers and Corporate
      Governance
            6511
            Executive Compensation
            6512
            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
            6513
            Certain Relationships and Related Transactions, and Director
      Independence
            6514
            Principal Accounting Fees and Services
            65PART
      IV15
            Exhibits, Financial Statement
    Schedules
            66









CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE





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
      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
      strategy to address the need to offer additional services through
      acquisitions of other companies, including the personnel of such
      companies;





·
            our
      expectations regarding our pursuit of additional debt or equity sources to
      finance our internal growth initiatives or
  acquisitions;





·
            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
      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; 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:





·
            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 to fund our
      operations;




·
              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;




·
              the
      actual impact of the adoption of certain accounting
      standards;
  ·
                our
      ability to maintain technological advantages in a variety of functional
      areas, including sales force automation, electronic claims surveillance
      and patient compliance;
  ·
                    changes
      in trends in the healthcare and pharmaceutical industries or in
      pharmaceutical outsourcing;
and


·
                  our
      inability to determine the actual time at which the liquidation of the
      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 325 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 degree to 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.




Our strategy
relies on both internal growth and acquisitions to meet our growth
objectives.  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.




We seek out
acquisitions in order to fill strategic gaps, selectively strengthen existing
franchises, further strengthen and broaden our clinical, communications,
commercial and/or patient outcomes capabilities, add complementary client
relationships and bring on board additional management talent.  We
believe that our track record to-date in identifying, negotiating, closing and
integrating strategic, accretive acquisitions has been
successful.  Acquisitions contributed significantly to our
year-over-year growth for 2007.








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.  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 140 pharmaceutical and biotechnology
      clients, including 14 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 30,000 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
      five 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 PR
      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. ·
                Chamberlain
      is 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.  Revenues from our Y-Brand division are
      recognized and recorded on a fee-for-service basis, in accordance with the
      terms of the contracts.





·
            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:





o
            inVentiv Pharma Teams:
      inVentiv Pharma Teams provide 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
product specific training are both core competencies of inVentiv Selling
Solutions.





o
            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 human resources
      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.





o
            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.





o
            Regulatory Compliance
      Services: Through our PRS business unit, we provide independent
      oversight of the 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.





o
            Non-Personal Promotion:
      We provide warehousing, assembly, mailing, fulfillment, teleservices and
      eServices through our Promotech business unit.  Promotech
      maintains a newly expanded facility with over 62,000 square feet that
      includes an environmentally controlled, FDA and Drug Enforcement Agency
      (“DEA”) certified and PDMA compliant warehouse, office space and a
      64-station call center.





o
            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.





o
            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:





o
            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.





o
            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.





o
            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.





o
            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 adherence, patient
assistance and reimbursement, clinical educator teams and medical cost
containment and disease management.  This segment includes Adheris,
Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics Institute
and AWAC (acquired in July 2007).





·
            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.





Acquisitions
and Divestitures




Strategic
acquisitions are one core element of our business strategy.  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 significant
competitive advantage.   The following is a summary of our
acquisitions to date:




Acquisition
              Type
      of Business
              Segment
      (“inVentiv”)
              Headquarters
      Location
              Month
      AcquiredChandler
      Chicco Agency
              Public
      relations
              Communications
              New
      York
              July
      2007AWAC
              Medical
      cost containment and consulting solutions
              Patient
      Outcomes
              Georgia
              July
      2007Addison
      Whitney
              Branding
              Communications
              North
      Carolina
              June
      2007Strategyx
              Strategic
      consulting
              Commercial
              New
      Jersey
              June
      2007Ignite
      Health
              Interactive
      communications
              Communications
              California
              March
      2007Chamberlain
              Public
      relations
              Communications
              New
      York
              March
      2007MedConference
              Virtual
      event services
              Commercial
              Pennsylvania
              November
      2006DialogCoach
              Professional
      development and training
              Commercial
              Pennsylvania
              November
      2006JSAI
              Advertising
      and communications support
              Communications
              Ontario,
                Canada
              April
      2006Synergos
              Functional
      outsourcing
              Clinical
              Texas
              April
      2006Adheris
              Patient
      pharmaceutical compliance programs
              Patient
      Outcomes
              Massachusetts
              February
      2006inVentiv
      Communications, Inc.
              Advertising
      and communications support
              Communications
              Ohio
              October
      2005PRS
              Regulatory
      compliance services
              Commercial
              Pennsylvania
              August
      2005HHI
              Functional
      outsourcing
              Clinical
              Maryland
              November
      2004Smith
      Hanley
              Clinical
      staffing and recruiting
              Clinical
              Connecticut
              October
      2004Franklin
              Patient
      support programs
              Patient
      Outcomes
              New
      Jersey
              June
      2004
  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 2002
and 2003, we divested our European Contract Sales businesses. We have been
receiving payments subsequent to some of these divestitures based on the
subsequent earnings of the divested unit. For the years ended December 31, 2007,
2006 and 2005, we received approximately $0.5 million, $1.4 million
and  $1.7 million, respectively, mostly relating to the Germany based
contract sales organizations.





International
Operations




As part of
the acquisition of inVentiv Communications, Inc. in October 2005, we added that
company's United Kingdom-based operations.  As part of the acquisition
of CCA in July 2007, we added CCA’s operations in the United Kingdom and
France.  These units collectively provide advertising, marketing and
public relations services to clients throughout
Europe.    In April 2006, we acquired JSAI, a leading
healthcare marketing and communications agency in Canada.




In December
2007, we increased our investment interest from 44% to 85% in Liedler, a
provider of communication and marketing services for medical and pharmaceutical
products, located in Germany.  We accounted for Liedler as an equity
investment until the acquisition date, and then included its results in our
consolidated results thereafter.  We also have a 15% ownership
interest in Heart Reklambyra AB (“Heart”), an advertising agency located in
Sweden, which we account for by using the equity method of
accounting.  Neither investment is material to the overall
consolidated financial statements.




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 have any
equity interest in the affiliate, that help support our client needs in
additional international markets.




Clients




We provide
our services to leading pharmaceutical life sciences and healthcare
companies.  For the years ended December 31, 2007 and 2006, no clients
individually exceeded 10% of our total revenues, and we served over 325 unique
clients in 2007 and support over 850 client brands.  Approximately 51%
and 48% of our revenues in 2007 and 2006, respectively, were derived from our
ten largest clients, which for 2007, listed alphabetically, were as follows:
Allergan, Boehringer Ingelheim, Inc., Cephalon, Inc., Eli Lilly and Company,
Johnson and Johnson, Merck KGaA, 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 and 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 and 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 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 exclusively in professional clinical
      trials research personnel.  In functional outsourcing (or
      Contract Research Organizations), the competition ranges from numerous
      small specialty organizations to global CROs such as Innovex (Quintiles
      Transnational Corp.) 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, Innovex (Quintiles Transnational
      Corp.), 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.





·
            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.




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.  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 industries 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 325 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-Recongized Trade
      Names:  The Company recognizes 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.  inVentiv's focus on building a comprehensive
      suite of best-in-class service providers with strong marketplace awareness
      has been a key strategy in its 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 and safeguards 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, 2007, we employed approximately 5,700 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.  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 if Adheris's activities are determined to be non-compliant
and, depending 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.  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.




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") 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 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 is 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.










Item
1A. Risk
Factors




Risks
Related to Our Business




inVentiv
Health is a multi-faceted 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:





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 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 and support and compliance services. Any decline in aggregate
demand for these services could negatively affect these businesses.





·
            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.
We cannot assure you that our most significant clients will continue to do
business with us over the long term. If any of our significant clients elect to
cancel, convert or not renew their contracts, it could have a material adverse
effect on our consolidated financial condition and results of
operations.




We are in the
process of integrating a significant number of 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 that are accretive to
earnings.  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.  The current market for
acquisition targets in our industry is competitive, and we may not be successful
in continuing to identify, successfully bid for and complete acquisitions
necessary to achieve our operational and financial goals.




Our
acquisitions of Ignite, Chamberlain, Addison Whitney, Strategyx, CCA and AWAC
were completed during 2007.  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.





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, 2007, and our largest customer during such year
accounted for 9% of revenues.  Our top 10 customers account for 51% 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 and adversely
affected.





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 receivable from customers.
If customers responsible for a significant amount of accounts 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 affect 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.





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 the Company could require us to establish or increase litigation
reserves.




We have been
and may in the future 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 is the subject of a pending
action 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.  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 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
may not be able to comply with the requirements of our credit
facility.




On July 6,
2007, the Company 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;





·
            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.





We may experience further writedowns
of our financial instruments and other losses related to volatile and illiquid
market conditions.





At December
31, 2007, we had $45.3 million of marketable securities on our Balance Sheet
which have been classified as restricted. We recorded $0.8 million of impairment
related to our marketable securities in the fourth quarter of fiscal 2007 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 2008.  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 marketable securities could further deteriorate. 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 securities
portfolio, which may have an adverse effect on our results of operations in
future periods.





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, share repurchases 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.




If
our goodwill or indefinite-lived intangible assets become impaired, we may be
required to record a significant charge to earnings.




Under United
States generally accepted accounting principles, goodwill and indefinite-lived
intangible assets are not amortized but are reviewed for impairment on an annual
basis or more frequently whenever events or changes in circumstances indicate
that their carrying value may not be recoverable. We may be required to record a
significant charge to earnings in our financial statements during the period in
which any impairment of our goodwill or indefinite-lived intangible assets is
determined, resulting in an impact on our results of operations.




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





·
              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.







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
25, 2008, we had 32,421,673 shares of common stock outstanding.  Of
these shares, approximately 2.1 million shares, excluding shares held
in street names, were subject to contractual resale restrictions under
acquisition agreements (as well as resale restrictions under Rule 144) 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 22, 2007, approximately 2,192,521 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 its periodic or current reports from the
staff of the Securities and Exchange Commission that were issued 180 days
or more preceding the end of its 2007 fiscal year and that remain
unresolved.







Item 2.  Properties




As of December 31, 2007,
we leased 50 facilities totaling 986,578 square feet, including our principal
executive offices located in Somerset, New Jersey.  Eleven facilities
totaling 84,553 square feet are leased by the inVentiv Clinical segment, 22
facilities totaling 419,212 square feet are leased by the inVentiv
Communications segment, 13 facilities totaling 352,849 square feet are leased by
the inVentiv Commercial segment, three facilities totaling 73,964 square feet
are leased by the inVentiv Patient Outcomes segment and one facility with
approximately 56,000 square feet is leased by the Other (corporate) segment.
These leases expire at varying dates through 2025.  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.  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. Our insurer, AIG, is
defending this action under reservation of rights.




Indemnification
Claim. In January 2008, PRS received a demand for indemnification from
one of its customers relating to a lawsuit filed against the
customer.   The lawsuit seeks class action certification and
brings claims 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 bases its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS has declined to indemnify the customer and if claims are
asserted against PRS, PRS intends to defend such claims
vigorously.




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, 2007.





PART II





Item 5.  Market for the
Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase 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, 2007First
      Quarter
            $39.09
            $34.49Second
      Quarter
            $40.00
            $34.56Third
      Quarter
            $43.82
            $35.17Fourth
      Quarter
            $46.01
            $27.56High
            LowYear
      ended December 31, 2006First
      Quarter
            $33.22
            $23.91Second
      Quarter
            $32.67
            $26.77Third
      Quarter
            $32.70
            $26.99Fourth
      Quarter
            $35.35
            $27.19





On
February 25, 2008, there were approximately 320 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 2007, 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.







Item
6.  SelectedFinancial 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 31,2007
            
            
            2006
            
            
            2005
            
            
            2004
            
            
            2003(in
      thousands, except per share data)Revenues
            
            $
            977,300
            
            
            $
            766,245
            
            
            $
            556,312
            
            
            $
            352,184
            
            
            $
            224,453Income
      from continuing operations
            
            $
            47,226
            
            
            $
            49,198
            
            
            $
            43,082
            
            
            $
            30,130
            
            
            $
            9,895Income
      (losses) from discontinued operations
            
            $
            258
            
            
            $
            2,037
            
            
            $
            781
            
            
            $
            1,002
            
            
            $
            (4,119
            )Net
      income
            
            $
            47,484
            
            
            $
            51,235
            
            
            $
            43,863
            
            
            $
            31,132
            
            
            $
            5,776Basic
      earnings (losses) per share:Continuing
      operations
            
            $
            1.50
            
            
            $
            1.69
            
            
            $
            1.60
            
            
            $
            1.26
            
            
            $
            0.43Discontinued
      operations
            
            $
            0.00
            
            
            $
            0.07
            
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            (0.18
            )Basic
      earnings per share
            
            $
            1.50
            
            
            $
            1.76
            
            
            $
            1.63
            
            
            $
            1.30
            
            
            $
            0.25Diluted
      earnings (losses) per share:Continuing
      operations
            
            $
            1.46
            
            
            $
            1.64
            
            
            $
            1.53
            
            
            $
            1.18
            
            
            $
            0.42Discontinued
      operations
            
            $
            0.01
            
            
            $
            0.06
            
            
            $
            0.03
            
            
            $
            0.04
            
            
            $
            (0.18
            )Diluted
      earnings per share
            
            $
            1.47
            
            
            $
            1.70
            
            
            $
            1.56
            
            
            $
            1.22
            
            
            $
            0.24Shares
      used in computing basic earnings (losses) per share
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875
            
            
            
            23,951
            
            
            
            22,919Shares
      used in computing diluted earnings (losses) per share
            
            
            32,267
            
            
            
            30,058
            
            
            
            28,165
            
            
            
            25,437
            
            
            
            23,801Balance
      sheet data:Total
      assets
            
            $
            1,110,856
            
            
            $
            771,054
            
            
            $
            583,894
            
            
            $
            287,452
            
            
            $
            180,708Long-term
      debt (a)
            
            $
            345,995
            
            
            $
            184,717
            
            
            $
            190,508
            
            
            $
            24,898
            
            
            $
            18,488Total
      equity
            
            $
            477,466
            
            
            $
            358,462
            
            
            $
            253,219
            
            
            $
            172,444
            
            
            $
            107,725





(a)
Long-term debt includes the non-current portion of our credit arrangement (for
2005-2007) and capital lease obligations (for all years), but excludes the
current portion of our credit agreement and capital lease
obligations.





Item
7. Management'sDiscussion 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 for the years ended December 31, 2007, 2006 and
2005.





Introduction




We currently
manage four operating segments based on the way management makes operating
decisions and assesses performance:





·
            inVentiv
      Clinical, which provides services related to permanent placement,
      clinical staffing,data collection
      and management and functional
outsourcing.





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





·
            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 and inVentiv Selling
  Solutions.





·
            inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease
management.




Our
non-operating segment "Other" encompasses the activities of the corporate
management group.




Our business
is heavily dependent on the willingness and propensity of our customers to seek
outsourced solutions for the services we provide.  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. Although large
contracts with these manufacturers remain an important component of our overall
business activity, there is a potential for margin contraction and the
termination of contracts resulting from downsizing and other cost control
measures by large pharmaceutical manufacturers.





We believe
that the increasing 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, rather than building significant infrastructure
internally.  We therefore target a broad spectrum of companies within
the pharmaceutical and life sciences industry in seeking to develop business
opportunities.





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 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, a “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.





·
            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.





·
            ClinicalNurse
      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.





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 2007, 2006
or 2005.





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 business 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 the goodwill and indefinite-lived
intangible asset 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, 2007 and concluded that the existing
goodwill and  indefinite-lived intangible tradename balances were not
impaired and continue to maintain this position as of December 31, 2007, based
on various factors, including updated forecasts and the current condition of the
Company.  As of December 31, 2007, we had goodwill of approximately
$383.7 million and other intangibles (net) of $281.1 million in the
Consolidated Balance Sheet.





Stock-based
Compensation




In
December 2004, the Financial Accounting Standards Board ("FASB") revised
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.  On April 14, 2005, the
SEC adopted a new rule amending the effective dates for SFAS 123R.  In
accordance with the new rule, the Company adopted the accounting provisions of
SFAS 123R as of January 1, 2006.




On
January 1, 2006, the Company adopted SFAS 123R using 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.




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 2007 and 2006 the volatility remains at a
range of 39-40%.  For the year ended December 31, 2007 the Company
elected to use the simplified method of determining the expected term as
permitted by SAB 107 and the range of the expected term remained unchanged at
5.5 to 6 years.  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 rates utilized for the years ended
December 31, 2007 and 2006 were 3.91% and 3.25%, respectively.





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




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.





Recent
Accounting Pronouncements




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 Company has evaluated the provisions of SFAS
159, did not elect early adoption of eligible assets and liabilities of SFAS 159
and does not expect the issuance of SFAS 159 to 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 Company has evaluated the provisions of SFAS 157 and
does not expect the issuance of SFAS 157 to 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, the Company has 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 the Company’s consolidated statements of operations, financial position, cash
flows, and other significant matters, such as debt covenants or the Company’s
normal business practices.











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 31,2007
            
            
            2006
            
            
            2005(in
      thousands, except for per share data)Revenues:
            
            
            
            
            Percentage*
            
            
            
            
            
            Percentage*
            
            
            
            
            
            Percentage
      *inVentiv
      Clinical
            
            $
            186,927
            
            
            
            19.1
            %
            
            $
            149,786
            
            
            
            19.5
            %
            
            $
            113,700
            
            
            
            20.4
            %inVentiv
      Communications
            
            
            289,113
            
            
            
            29.6
            %
            
            
            207,398
            
            
            
            27.1
            %
            
            
            46,426
            
            
            
            8.3
            %inVentiv
      Commercial
            
            
            400,786
            
            
            
            41.0
            %
            
            
            347,117
            
            
            
            45.3
            %
            
            
            370,278
            
            
            
            66.6
            %inVentiv
      Patient Outcomes
            
            
            100,474
            
            
            
            10.3
            %
            
            
            61,944
            
            
            
            8.1
            %
            
            
            25,908
            
            
            
            4.7
            %Total
      revenues
            
            
            977,300
            
            
            
            100.0
            %
            
            
            766,245
            
            
            
            100.0
            %
            
            
            556,312
            
            
            
            100.0
            %Cost
      of services:inVentiv
      Clinical
            
            
            127,492
            
            
            
            68.2
            %
            
            
            100,632
            
            
            
            67.2
            %
            
            
            75,177
            
            
            
            66.1
            %inVentiv
      Communications
            
            
            175,801
            
            
            
            60.8
            %
            
            
            131,991
            
            
            
            63.6
            %
            
            
            31,282
            
            
            
            67.4
            %inVentiv
      Commercial
            
            
            317,693
            
            
            
            79.3
            %
            
            
            271,651
            
            
            
            78.3
            %
            
            
            293,617
            
            
            
            79.3
            %inVentiv
      Patient Outcomes
            
            
            60,576
            
            
            
            60.3
            %
            
            
            42,475
            
            
            
            68.6
            %
            
            
            16,949
            
            
            
            65.4
            %Total
      cost of services
            
            
            681,562
            
            
            
            69.7
            %
            
            
            546,749
            
            
            
            71.4
            %
            
            
            417,025
            
            
            
            75.0
            %Selling,
      general and administrative expenses
            
            
            200,945
            
            
            
            20.6
            %
            
            
            141,418
            
            
            
            18.4
            %
            
            
            79,313
            
            
            
            14.3
            %Total
      operating income
            
            
            94,793
            
            
            
            9.7
            %
            
            
            78,078
            
            
            
            10.2
            %
            
            $
            59,974
            
            
            
            10.8
            %Interest
      expense
            
            
            (20,717
            )
            
            
            (2.1
            )%
            
            
            (11,361
            )
            
            
            (1.5
            )%
            
            
            (3,955
            )
            
            
            (0.7
            )%Interest
      income
            
            
            3,039
            
            
            
            0.3
            %
            
            
            2,694
            
            
            
            0.4
            %
            
            
            1,409
            
            
            
            0.3
            %Income
      from continuing operations before income taxprovision,
      minority interest in income of subsidiaryand
      income from equity investments
            
            
            77,115
            
            
            
            7.9
            %
            
            
            69,411
            
            
            
            9.1
            %
            
            
            57,428
            
            
            
            10.4
            %Income
      tax provision
            
            
            (29,401
            )
            
            
            (3.0
            )%
            
            
            (19,166
            )
            
            
            (2.5
            )%
            
            
            (14,229
            )
            
            
            (2.6
            )%Income
      from continuing operations before minority
              interest
      in income of subsidiary and income from
              equity
      investments
            
            
            47,714
            
            
            
            4.9
            %
            
            
            50,245
            
            
            
            6.6
            %
            
            
            43,199
            
            
            
            7.8
            %Minority
      interest in income of subsidiary
            
            
            (1,070
            )
            
            
            (0.1
            )%
            
            
            (1,207
            )
            
            
            (0.2
            )%
            
            
            (224
            )
            
            
            --Equity
      earnings in investments
            
            
            582
            
            
            
            --
            
            
            
            160
            
            
            
            --
            
            
            
            107
            
            
            
            --Income
      from continuing operations
            
            
            47,226
            
            
            
            4.8
            %
            
            
            49,198
            
            
            
            6.4
            %
            
            
            43,082
            
            
            
            7.8
            %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            258
            
            
            
            0.1
            %
            
            
            2,037
            
            
            
            0.3
            %
            
            
            781
            
            
            
            0.1
            %Income
      from discontinued operations
            
            
            258
            
            
            
            0.1
            %
            
            
            2,037
            
            
            
            0.3
            %
            
            
            781
            
            
            
            0.1
            %Net
      income
            
            $
            47,484
            
            
            
            4.9
            %
            
            $
            51,235
            
            
            
            6.7
            %
            
            $
            43,863
            
            
            
            7.9
            %Earnings
      per share:Continuing
      operations:Basic
            
            $
            1.50
            
            
            
            
            
            
            $
            1.69
            
            
            
            
            
            
            $
            1.60Diluted
            
            $
            1.46
            
            
            
            
            
            
            $
            1.64
            
            
            
            
            
            
            $
            1.53Discontinued
      operations:Basic
            
            $
            0.00
            
            
            
            
            
            
            $
            0.07
            
            
            
            
            
            
            $
            0.03Diluted
            
            $
            0.01
            
            
            
            
            
            
            $
            0.06
            
            
            
            
            
            
            $
            0.03Net
      income:Basic
            
            $
            1.50
            
            
            
            
            
            
            $
            1.76
            
            
            
            
            
            
            $
            1.63Diluted
            
            $
            1.47
            
            
            
            
            
            
            $
            1.70
            
            
            
            
            
            
            $
            1.56





* 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, 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, the Company 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 the
Company 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"): 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 3, Quantitative and Qualitative
Disclosures About Market Risk, the Company did not designate its 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 federal 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 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.




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, the Company has 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 the Company’s consolidated statements of operations, financial position, cash
flows, and other significant matters, such as debt covenants or the Company’s
normal business practices.




Net Income and
Earnings Per Share ("EPS"): 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.





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




Revenues:
Revenues increased by approximately $210 million, or 38%, to $766 million in the
year ended December 31, 2006, from $556 million in the year ended December 31,
2005.




inVentiv
Clinical’s revenues were $150 million during the year ended December 31, 2006,
an increase of $36 million compared to $114 million during  the year
ended December 31, 2005.  Revenues in the clinical staffing and
recruiting division were higher in 2006 predominantly due to increased placement
of clinical staffing personnel.  The clinical staffing and recruiting
division also typically experiences a decrease in personnel during the first
quarter of a year as clients may decide not to continue to employ these
temporary personnel.  This “falloff” was less significant in 2006 than
2005.  Finally, in April 2006, the Company acquired Synergos, which
complements the segment by strengthening the functional outsourcing
service.




inVentiv
Communications was established principally through the acquisitions
of  inVentiv Communications, Inc. (then known as inChord
Communications, Inc.) in October 2005 and JSAI in April 2006, and contributed
approximately $207 million of revenues during the year ended December 31, 2006,
versus approximately $46 million of revenue from the acquisition date of
inVentiv Communications, Inc. through December 31, 2005.  This segment
specializes in pharmaceutical advertising, branding and marketing.




Revenues in
our inVentiv Commercial business were $347 million, a decrease of $23 million or
6% from the $370 million in the same period in 2005.  This decrease
resulted primarily from anticipated wind-downs of certain contracts, and was
partially offset by additional revenue during 2006 from acquisitions, such as
PRS, which was acquired in August 2005, and MedConference and DialogCoach, which
were acquired during the fourth quarter of 2006.




inVentiv
Patient Outcomes’ revenues were $62 million during the year ended December 31,
2006, up $36 million from the year ended December 31, 2005.  Growth in
the segment was both organic as well as from the acquisition of Adheris in
February 2006.




Cost of
Services:Cost
of services increased by approximately $130 million or 31%, to $547 million for
the year ended December 31, 2006 from $417 million in the year ended December
31, 2005. Cost of services decreased as a percentage of revenues to 71% from 75%
in the year ended December 31, 2006 and 2005, respectively, mainly due to
increased acquisitions that are contributing higher margins than the historical
Commercial business.  Overall cost of services increased due to
increased revenue over the same period; in addition, cost of services increased
due to $2.4 million of share-based compensation expense not recorded in prior
years.  On January 1, 2006, inVentiv adopted the provisions of
Statement of Financial Accounting Standards No. 123 (Revised 2004) (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.  In prior periods, inVentiv recorded compensation expense for
unvested restricted shares over the applicable vesting
periods.  Starting in January 2006, as a result of adopting SFAS 123R,
inVentiv has also recorded compensation expense for its stock
options.  For further details on the new accounting policy, see "--
Critical Accounting Policies" above.




inVentiv
Clinical’s cost of services increased by approximately $26 million, or 35%, to
$101 million during the year ended December 31, 2006 from $75 million during the
year ended December 31, 2005.  Cost of services as a percentage of
revenues increased from 66% during the year ended December 31, 2005 to 67%
during the same period in 2006.




inVentiv
Communications was acquired starting in October 2005 and incurred approximately
$132 million of cost of sales during the year ended December 31,
2006.  Cost of services was $31 million from the inVentiv
Communications, Inc. acquisition date through December 31, 2005.  Cost
of sales was 64% of this segment’s revenues in 2006 and 67% for
2005.  This segment specializes in pharmaceutical advertising,
branding and marketing.  Pursuant to the acquisition of inVentiv
Communications, Inc., the Company assumed a $7.5 million existing incentive plan
liability (out of a potential $15 million liability) on inVentiv Communications,
Inc.’s  balance sheet relating to certain performance thresholds of
the segment over a three-year period from 2005 through 2007.  The
Company has monitored these performance thresholds on a quarterly
basis.  At December 31, 2006, as a result of new business and a
strengthened outlook for inVentiv Communications, Inc.’s business during 2007,
management felt it was appropriate to record an additional $3.5 million (of
which $1.2 million is recorded in cost of services and $2.3 million is recorded
in SG&A) of the potential $15 million liability since the likelihood of
achieving the next threshold was probable and the amount was estimable, pursuant
to SFAS No. 5, Accounting for
Contingencies.




Cost of
services at inVentiv Commercial decreased by approximately $22 million, or 7%,
to $272 million in the year ended December 31, 2006 from $294 million in the
year ended December 31, 2005, mainly due to the decrease in
revenues.  Cost of services was 78% of inVentiv Commercial revenue in
the year ended December 31, 2006, compared to 79% in the year ended December 31,
2005, mainly due to increased compensation expense in 2006 for unvested shares
as discussed above.




inVentiv
Patient Outcomes cost of services increased by approximately $25 million, or
147%, to $42 million during the year ended December 31, 2006 from $17 million
during the year ended December 31, 2005, mainly due to the acquisition of
Adheris and increased organic business at Franklin, as mentioned
above.




SG&A:
SG&A expenses increased by approximately $62 million, or 78%, to $141
million from $79 million in the year ended December 31, 2006 and 2005,
respectively.  This increase was primarily due to SG&A expenses at
inVentiv Communications, Inc., which was acquired in October 2005, and
additional SG&A from acquisitions consummated in 2006; increased
compensation levels in 2006 versus 2005; and $5.1 million of share-based
compensation expense, which was new in 2006, as described above in the cost of
services section.




SG&A
expenses at inVentiv Clinical was approximately $38 million in 2006, compared to
$29 million during 2005 due to increased selling expense and commissions from
additional business; additional staffing requirements; SG&A expense from
Synergos, which was acquired on April 1, 2006; and increased compensation
expense relating to the adoption of SFAS 123R.




SG&A
expenses at inVentiv Communications, which was acquired in October 2005, was
approximately $49 million for the year ended December 31, 2006, and $10 million
for the period in 2005 subsequent to the acquisition. As described in the cost
of services’ section, the Company recorded an additional $3.5 million (of which
$1.2 million is recorded in cost of services and $2.3 million is recorded in
SG&A) of potential $15.0 million in liabilities relating to certain
performance thresholds of the segment over a three-year period.  See
above for further details.




SG&A
expenses at inVentiv Commercial increased by approximately $3 million, or 9%, to
$30 million in the year ended December 31, 2006 from $27 million incurred in the
year ended December 31, 2005.  This increase was mainly due to the
increased compensation expense attributable to the adoption of SFAS 123R this
year, and additional SG&A from new acquisitions during the fourth quarter of
2006.




SG&A
expenses at inVentiv Patient Outcomes increased by $10 million to $12 million
during the year ended December 31, 2006, mainly due to the acquisitions of
Adheris.




Other
SG&A was approximately $13 million for the year ended December 31, 2006, an
increase of approximately $2 million or 18% from $11 million for the year ended
December 31, 2005.  Almost all of this increase was related to
increases in stock-based compensation expense in 2006, as described
above.




Provision for Income
Taxes: 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.




In March
2005, we recognized a tax benefit of approximately $1.6 million primarily
related to prior period tax contingencies, which are no longer
required.  During the third quarter of 2005, we recorded a tax benefit
of approximately $6.7 million primarily related to the reversal of a previously
recorded valuation allowance as we determined an additional portion of its
deferred tax asset was more likely than not expected to be
realized.  Including these tax benefits, our annual effective tax rate
was 24.8% in 2005.




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.




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, to create a
single model to address accounting for uncertainty in tax
positions.  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, the Company will adopt 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 should be accounted for as a
cumulative-effect adjustment recorded to the beginning balance of retained
earnings.   We conducted an internal review of its uncertain tax
positions resulting from the adoption of FIN 48.  The adoption of FIN
48 is not expected to have a material impact on our consolidated results of
operations, financial position and cash flows.




Discontinued
Operations:  For the year ended December 31, 2006 and 2005,
earnings from discontinued operations, net of taxes, were approximately $2.0
million and $0.8 million, respectively.  The gains on disposals of
discontinued operations mainly consisted of contingency payments due from our
previously-divested Germany-based unit.  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.




Net Income and
EPS: inVentiv’s
net income increased by approximately 16% to $51 million, from net income of $44
million in the year ended December 31, 2006 and 2005,
respectively.  Diluted earnings per share increased to earnings of
$1.70 per share for the 2006 from earnings of $1.56 per share for 2005. 
Operating results were higher due to increased results in inVentiv
Communications and the new acquisitions, offset by stock-based compensation
expense recorded as a result of adopting SFAS 123R.  Earnings per
share were also affected because of approximately 1.9 million additional shares
outstanding in 2006 over 2005.







Liquidity and Capital Resources




At December
31, 2007, we had $51 million of unrestricted cash and equivalents, a decrease of
$29 million from December 31, 2006.  For the year ended December 31,
2006 compared to 2007, cash provided by operations decreased by $27 million from
$86 million to $59 million.  Cash used in investing activities
increased from $70 million to $246 million for the year ended December 31, 2006
and 2007, respectively.  Cash from financing activities increased from
a use of $9 million to a source of $159 million over the same comparative
periods.




Cash provided
by operations was $59 million during the year ended December 31, 2007, while
cash provided by operations was $86 million in the year ended December 31,
2006.  This decrease was, in large part, due to the timing of certain
payments in the Commercial and Clinical segments, as well as timing of
acquisition-related liabilities and our derivative instruments, which are now in
an out-of market position as opposed to the in-the market position in 2006 due
to changes in the interest rates over these respective periods.  The
derivative instruments are expected to zero at the end of the respective
derivative instrument agreements, as further explained in Note 11.




Cash used in
investing activities increased by $176 million from $70 million to $246 million
for the years ended December 31, 2006 and 2007, respectively.  The
Company paid $61 million for the 2006 acquisitions of Adheris, JSAI, Synergos,
MedConference and DialogCoach, while spending $170 million for the 2007
acquisitions of Ignite, Chamberlain, Strategyx, Addison Whitney, Advogent, CCA,
AWAC and Liedler.   The Company also paid $8 million in
acquisition earnouts in 2006, while paying $24 million in acquisition earnouts
in 2007.  As of December 31, 2007, the Company had $45 million
invested in the Columbia Strategic Cash Portfolio ("CSCP"), which is classified
as restricted cash and marketable securities on the December 31, 2007 Balance
Sheet.  During December 2007, the Company recorded $0.8 million
relating to an impairment of the Company's investment in CSCP, which held
certain complex asset-backed securities.  As of February 27, 2008, the
CSCP balance was approximately $30 million as a result of some liquidation of
the portfolio.  The remaining funds are considered short-term in
nature and are expected to be distributed over the next six to 12
months.  With the liquidity issues experienced in global credit and
capital markets, the CSCP experienced losses, partially due to the subprime
market crisis.




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 2008.  Future impairment charges may
result depending on market conditions until the fund is fully liquidated. The
$0.8 million impairment charge 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 us to separately borrow up to the current balance remaining in
the CSCP, which, at the date of agreement, was approximately $30
million.  We have not borrowed any funds under this credit
facility.  The Blue Ridge facility provides for multiple draw downs
from time to time until maturity, which shall be the later of the day following
the redemption of all of our shares of the CSCP and December 1,
2008.  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.




Cash from
financing activities increased from a use of $9 million to a source of $159
million over the same comparative periods, mainly due to the Company’s Amended
and Restated Credit Agreement, resulting in a $166 million net cash inflow, as
more fully described below.




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 new
      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,
2008.  The Company 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, 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 2005, 2006 and 2007 acquisitions include earn-out 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)
            
            $
            457,841
            
            
            $
            24,725
            
            
            $
            49,448
            
            
            $
            48,570
            
            
            $
            335,098
            
            
            $
            --Capital
      lease obligations (b)
            
            
            42,523
            
            
            
            19,489
            
            
            
            19,726
            
            
            
            3,308
            
            
            
            --
            
            
            
            --Operating
      leases (c)
            
            
            90,048
            
            
            
            18,458
            
            
            
            29,437
            
            
            
            21,224
            
            
            
            20,929
            
            
            
            --Acquisition-related
      incentive (d)
            
            
            9,503
            
            
            
            9,503
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Unrecognized
      tax benefits (e)
            
            
            9,023
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            9,023Total
    obligations
            
            $
            608,938
            
            
            $
            72,175
            
            
            $
            98,611
            
            
            $
            73,102
            
            
            $
            356,027
            
            
            $
            9,023








(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, 2007 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)
            The
      former stockholders of inVentiv Communications, Inc. are contractually
      obligated to reimburse us for $5.0 million of this
  amount.


(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 earn-out 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 2007, 2006 or 2005.





Off-Balance
Sheet Arrangements




As of
December 31, 2007, we did not have any off-balance-sheet arrangements, as
defined in Item 303(a)(4)(ii) of SEC Regulation S-K.





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




Long-Term
Debt Exposure




At December
31, 2007, we had $328.4 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, 2007, 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 at inception to apply a fixed
interest rate against the original 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.  At inception, and
at least quarterly thereafter, we assess whether derivatives used to hedge
transactions are highly effective in offsetting changes in the interest cash
flows of the hedged item. To the extent the derivatives instruments are highly
effective hedges, the change in fair value of the effective portion is 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).


From October
2005 to July 2006, we 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 values
of the interest rate swaps were obtained from dealer quotes.  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, Accounting for Derivative
Instruments and Hedging Activities.  We employed the dollar
offset method to assess effectiveness by performing a shock test 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 will decline to zero at maturity,
the $2.9 million of fair value will be recognized in earnings over the remaining
life of the swap as part of the ineffectiveness calculation.  During
the year-ended December 31, 2007, the fair market value of the original
derivative asset decreased by $2.1 million to a derivative liability of
approximately $1.0 million.  Approximately $1.2 million was recorded
as interest expense, attributable to the financing component embedded within the
interest rate swap, while the remaining $0.9 million ($0.6 million, net of
taxes) was recorded as a decrease 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 when our original 2005 three-year
interest rate swap arrangement described above expires.  At hedge
inception, we employed the dollar offset method by performing a shock test 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 original derivative.  As
a result of the hypothetical derivative method, there was no ineffectiveness for
the period ended December 31, 2007, and as a result, $10.3 million ($6.1
million, net of taxes) was recorded as a decrease to Other Comprehensive Income
and an increase to the swap liability, recorded as Other non-current liabilities
in our Consolidated Balance Sheet as of December 31, 2007.




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, 2007, the accumulated other comprehensive earnings related to
foreign currency translations was approximately $0.8 million.  Foreign
currency transaction gains and (losses) are included in the results of
operations and are not material.





Item 8. Financial Statements and
Supplementary Data.





INDEX
TO FINANCIAL STATEMENTS





PageReport of Management
            33Report of Independent Registered Public Accounting
      Firm
            34Consolidated Balance Sheets as of December 31, 2007
      and 2006
            35Consolidated Statements of Operations for the years ended
      December 31, 2007, 2006 and 2005
            36Consolidated Statements of Stockholders' Equity for the
      years ended December 31, 2007, 2006, and 2005
            37Consolidated Statements of Cash Flows for the years ended
      December 31, 2007, 2006, and 2005
            38Notes to Consolidated Financial
    Statements
            40










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 Ignite, Chamberlain,
Strategyx, Addison Whitney, CCA, Liedler and AWAC businesses we acquired in 2007
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 23% and 8% of total assets and revenues, respectively, of the
consolidated financial statement amounts as of and for the year ended December
31, 2007.  Based on this evaluation, our management concluded that our
system of internal control over financial reporting was effective as of December
31, 2007. 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.





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





Board of
Directors and Stockholders of inVentiv Health, Inc.


Somerset,
New Jersey





We have
audited the accompanying consolidated balance sheets of inVentiv Health, Inc.
and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31,
2007.  Our audits also included the financial statement schedules
listed in the Index at Item 15 (a).  We also have audited management's
assessment, included in the accompanying Management's Report on Internal
Control Over Financial Reporting, that the Company maintained effective
internal control over financial reporting as of December 31, 2007, 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 Ignite, Chamberlain,
Strategyx, Addison Whitney, CCA, Liedler and AWAC which were acquired in 2007,
and whose financial statements reflect total assets and revenues constituting
23% and 8% of the related consolidated financial statement amounts as of and for
the year ended December 31, 2007.  Accordingly, our audit did not
include the internal control over financial reporting at the aforementioned
Ignite, Chamberlain, Strategyx, Addison Whitney, CCA, Liedler and
AWAC.  The Company's management is responsible for these consolidated
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 consolidated financial
statements and financial statement schedule, an opinion on management's
assessment, and an opinion on the effectiveness of 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
consolidated financial statements are free of material misstatement and whether
effective internal control over financial reporting was maintained in all
material respects. Our audit of the consolidated financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
consolidated financial statement presentation. Our audit of internal control
over financial reporting included obtaining an understanding of internal control
over financial reporting, evaluating management's assessment, testing and
evaluating the design and operating effectiveness of internal control, and
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 consolidated financial position of inVentiv
Health, Inc. as of December 31, 2007 and 2006, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2007, in conformity with accounting principles generally
accepted in the United States of America.  Also, in our opinion, such
financial statement schedules, when considered in relation to basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.  Also, in our opinion,
management's assessment that the Company maintained effective internal control
over financial reporting as of December 31, 2007, is fairly stated, in all
material respects, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2007, based on the criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.








/s/ Deloitte &
Touche LLP


Parsippany,
New Jersey


February 28, 2008












INVENTIV
HEALTH, INC.


CONSOLIDATED BALANCE SHEETS


(in
thousands, except share amounts)





December
      31,2007
            
            
            2006ASSETSCurrent
      assets:Cash
      and equivalents
            
            $
            50,973
            
            
            $
            79,835Restricted
      cash and marketable securities
            
            
            47,164
            
            
            
            50Accounts
      receivable, net of allowances for doubtful accounts of $3,098 and $3,583
      atDecember
      31, 2007 and 2006, respectively
            
            
            162,198
            
            
            
            124,283Unbilled
      services
            
            
            89,384
            
            
            
            75,691Prepaid
      expenses and other current assets
            
            
            19,836
            
            
            
            8,524Current
      deferred tax assets
            
            
            4,279
            
            
            
            834Total
      current assets
            
            
            373,834
            
            
            
            289,217Property
      and equipment, net
            
            
            54,740
            
            
            
            43,380Equity
      investments
            
            
            309
            
            
            
            5,076Goodwill
            
            
            383,714
            
            
            
            266,827Other
      intangibles, net
            
            
            281,122
            
            
            
            152,637Deposits
      and other assets
            
            
            17,137
            
            
            
            13,917Total
      assets
            
            $
            1,110,856
            
            
            $
            771,054LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
            
            $
            17,464
            
            
            $
            11,708Current
      portion of long-term debt
            
            
            3,300
            
            
            
            1,667Accrued
      payroll, accounts payable and accrued expenses
            
            
            138,708
            
            
            
            123,175Current
      income tax liabilities
            
            
            6,814
            
            
            
            1,475Client
      advances and unearned revenue
            
            
            76,696
            
            
            
            64,508Total
      current liabilities
            
            
            242,982
            
            
            
            202,533Capital
      lease obligations, net of current portion
            
            
            20,945
            
            
            
            21,800Long-term
      debt
            
            
            325,050
            
            
            
            162,917Non-current
      income tax liabilities
            
            
            7,323
            
            
            
            --Deferred
      tax liabilities
            
            
            13,164
            
            
            
            6,756Other
      non-current liabilities
            
            
            23,766
            
            
            
            18,471Total
      liabilities
            
            
            633,230
            
            
            
            412,477Commitments
      and contingenciesMinority
      interests
            
            
            160
            
            
            
            115Stockholders’
      Equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atDecember
      31, 2007 and 2006, respectively
            
            
            --
            
            
            
            --Common
      stock, $.001 par value, 50,000,000 shares authorized; 32,325,109 and
      29,975,710Shares
      issued and outstanding at December 31, 2007 and 2006,
      respectively
            
            
            32
            
            
            
            30Additional
      paid-in-capital
            
            
            362,116
            
            
            
            284,331Accumulated
      other comprehensive losses
            
            
            (6,493
            )
            
            
            (226
            )Accumulated
      earnings
            
            
            121,811
            
            
            
            74,327Total
      stockholders’ equity
            
            
            477,466
            
            
            
            358,462Total
      liabilities and stockholders’ equity
            
            $
            1,110,856
            
            
            $
            771,054





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





INVENTIV
HEALTH, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS


(in
thousands, except per share amounts)





For
      the Years Ended December 31,2007
            
            
            2006
            
            
            2005Net
      Revenues
            
            $
            796,659
            
            
            $
            631,620
            
            
            $
            467,013Reimbursable
      out-of-pockets
            
            
            180,641
            
            
            
            134,625
            
            
            
            89,299Revenues
            
            
            977,300
            
            
            
            766,245
            
            
            
            556,312Operating
      expenses:Cost
      of services
            
            
            498,106
            
            
            
            410,184
            
            
            
            327,648Reimbursed
      out-of-pocket expenses
            
            
            183,456
            
            
            
            136,565
            
            
            
            89,377Selling,
      general and administrative expenses
            
            
            200,945
            
            
            
            141,418
            
            
            
            79,313Total
      operating expenses
            
            
            882,507
            
            
            
            688,167
            
            
            
            496,338Operating
      income
            
            
            94,793
            
            
            
            78,078
            
            
            
            59,974Interest
      expense
            
            
            (20,717
            )
            
            
            (11,361
            )
            
            
            (3,955
            )Interest
      income
            
            
            3,039
            
            
            
            2,694
            
            
            
            1,409Income
      from continuing operations before income tax provision, minority interest
      in
              income
      of subsidiary and income from equity investments
            
            
            77,115
            
            
            
            69,411
            
            
            
            57,428Income
      tax provision
            
            
            (29,401
            )
            
            
            (19,166
            )
            
            
            (14,229
            )Income
      from continuing operations before minority interest in income of
      subsidiary and
              income
      from equity investments
            
            
            47,714
            
            
            
            50,245
            
            
            
            43,199Minority
      interest in income of subsidiary
            
            
            (1,070
            )
            
            
            (1,207
            )
            
            
            (224
            )Income
      from equity investments
            
            
            582
            
            
            
            160
            
            
            
            107Income
      from continuing operations
            
            
            47,226
            
            
            
            49,198
            
            
            
            43,082Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of tax (expense) benefit
      of
              $(131),
      $749 and ($442) for the years ended December 31, 2007, 2006 and 2005,
      respectively
            
            
            258
            
            
            
            2,037
            
            
            
            781Income
      from discontinued operations
            
            
            258
            
            
            
            2,037
            
            
            
            781Net
      income
            
            $
            47,484
            
            
            $
            51,235
            
            
            $
            43,863Earnings
      per share:Continuing
      operations:Basic
            
            $
            1.50
            
            
            $
            1.69
            
            
            $
            1.60Diluted
            
            $
            1.46
            
            
            $
            1.64
            
            
            $
            1.53Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.07
            
            
            $
            0.03Diluted
            
            $
            0.01
            
            
            $
            0.06
            
            
            $
            0.03Net
      income:Basic
            
            $
            1.50
            
            
            $
            1.76
            
            
            $
            1.63Diluted
            
            $
            1.47
            
            
            $
            1.70
            
            
            $
            1.56Weighted
      average common shares outstanding:Basic
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875Diluted
            
            
            32,267
            
            
            
            30,058
            
            
            
            28,165





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





INVENTIV
HEALTH, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


For
the years ended December 31, 2007, 2006 and 2005


(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 January 1, 2005
            $26
            $193,061
            $(20,543)
            $(420)
            
            $320
            172,444Net
      income
            --
            --
            43,863
            --
            $43,863
            --
            43,863Foreign
      currency translation
              Adjustment
            --
            --
            --
            --
            (99)
            (99)
            (99)$43,764Vesting
      of restricted shares
            --
            --
            --
            694
            
            --
            694Compensation
      expense
            --
            435
            --
            --
            
            --
            435Exercise
      of stock options
            1
            6,831
            --
            --
            
            --
            6,832Issuance
      of restricted shares
            --
            3,858
            --
            (3,858)
            
            --
            --Cancellation
      of restricted shares
            --
            (21)
            --
            21
            
            --
            --Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            --
            9,772
            --
            --
            
            --
            9,772Issuance
      of shares in connection with acquisitions
            1
            19,505
            --
            --
            
            --
            19,506Cash
      distribution TSP
            --
            --
            (228)
            --
            
            --
            (228)Balance
      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)
            $477,466








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





INVENTIV
HEALTH, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)





For
      the Years EndedDecember
      31,2007
            
            
            2006
            
            
            2005Cash
      flows from operating activities:Net
      income
            
            $
            47,484
            
            
            $
            51,235
            
            
            $
            43,863Income
      from discontinued operations
            
            
            (258
            )
            
            
            (2,037
            )
            
            
            (781
            )Income
      from continuing operations
            
            
            47,226
            
            
            
            49,198
            
            
            $
            43,082Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
            
            
            18,169
            
            
            
            15,130
            
            
            
            15,491Amortization
            
            
            10,939
            
            
            
            5,610
            
            
            
            1,934Income
      from equity investments
            
            
            (582
            )
            
            
            (160
            )
            
            
            (107
            )Minority
      interest in income of subsidiary
            
            
            1,070
            
            
            
            1,207
            
            
            
            224Fair
      market value adjustment on derivative financial instrument
            
            
            1,218
            
            
            
            (2,069
            )
            
            
            (269
            )Deferred
      taxes
            
            
            (6,384
            )
            
            
            13,379
            
            
            
            4,352Impairment
      of marketable securities
            
            
            841
            
            
            
            --
            
            
            
            --Stock
      compensation expense
            
            
            9,716
            
            
            
            7,539
            
            
            
            694Tax
      benefit from stock option exercises and vesting of restricted
      shares
            
            
            9,801
            
            
            
            9,831
            
            
            
            9,772Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
            
            
            (12,765
            )
            
            
            2,257
            
            
            
            (20,204
            )Unbilled
      services
            
            
            (10,508
            )
            
            
            (32,576
            )
            
            
            10,348Prepaid
      expenses and other current assets
            
            
            (8,673
            )
            
            
            (197
            )
            
            
            6,521Accrued
      payroll, accounts payable and accrued expenses
            
            
            (3,472
            )
            
            
            7,154
            
            
            
            (6,401
            )Net
      tax liabilities
            
            
            10,928
            
            
            
            (6,754
            )
            
            
            (4,754
            )Client
      advances and unearned revenue
            
            
            3,186
            
            
            
            21,715
            
            
            
            (8,186
            )Excess
      tax benefits from stock based compensation
            
            
            (7,928
            )
            
            
            (8,641
            )
            
            
            --Other
            
            
            (3,893
            )
            
            
            2,403
            
            
            
            3,757Net
      cash provided by continuing operations
            
            
            58,889
            
            
            
            85,026
            
            
            
            56,254Net
      cash (used in) provided by discontinued operations
            
            
            (221
            )
            
            
            624
            
            
            
            (951
            )Net
      cash provided by operating activities
            
            
            58,668
            
            
            
            85,650
            
            
            
            55,303Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
            
            
            (46,343
            )
            
            
            3,828
            
            
            
            (1,332
            )Investment
      in cash value of life insurance policies
            
            
            (2,440
            )
            
            
            (2,911
            )
            
            
            (1,382
            )Cash
      paid for acquisitions, net of cash acquired
            
            
            (169,739
            )
            
            
            (61,461
            )
            
            
            (187,002
            )Acquisition
      earn-out payments
            
            
            (23,556
            )
            
            
            (8,267
            )
            
            
            (5,181
            )Equity
      investments
            
            
            37
            
            
            
            267
            
            
            
            (115
            )Purchases
      of property and equipment
            
            
            (10,446
            )
            
            
            (6,704
            )
            
            
            (5,936
            )Proceeds
      from manufacturers rebates on leased vehicles
            
            
            5,574
            
            
            
            3,630
            
            
            
            3,093Net
      cash used in continuing operations
            
            
            (246,913
            )
            
            
            (71,618
            )
            
            
            (197,855
            )Net
      cash provided by discontinued operations
            
            
            479
            
            
            
            1,413
            
            
            
            1,732Net
      cash used in investing activities
            
            
            (246,434
            )
            
            
            (70,205
            )
            
            
            (196,123
            )Cash
      flows from financing activities:Borrowings
      on credit agreement
            
            
            166,250
            
            
            
            --
            
            
            
            175,000Repayments
      on credit agreement
            
            
            (2,484
            )
            
            
            (9,979
            )
            
            
            (437
            )Repayments
      of capital lease obligations
            
            
            (15,538
            )
            
            
            (12,948
            )
            
            
            (14,624
            )Fees
      to establish credit agreement
            
            
            (2,154
            )
            
            
            --
            
            
            
            (3,330
            )Withholding
      shares for taxes
            
            
            (873
            )
            
            
            (190
            )
            
            
            --Proceeds
      from exercise of stock options
            
            
            6,908
            
            
            
            6,525
            
            
            
            6,831Excess
      tax benefits from stock-based compensation
            
            
            7,928
            
            
            
            8,641
            
            
            
            --Distributions
      to minority interests in affiliated partnership
            
            
            (1,216
            )
            
            
            (1,087
            )
            
            
            (228
            )Net
      cash provided by (used in) continuing operations
            
            
            158,821
            
            
            
            (9,038
            )
            
            
            163,212Net
      cash provided by discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --Net
      cash provided by (used in) financing activities
            
            
            158,821
            
            
            
            (9,038
            )
            
            
            163,212Effect
      of exchange rate changes
            
            
            83
            
            
            
            326
            
            
            
            (99
            )Net
      (decrease) increase in cash and equivalents
            
            
            (28,862
            )
            
            
            6,733
            
            
            
            22,293Cash
      and equivalents, beginning of year
            
            
            79,835
            
            
            
            73,102
            
            
            
            50,809Cash
      and equivalents, end of year
            
            $
            50,973
            
            
            $
            79,835
            
            
            $
            73,102Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            19,549
            
            
            $
            12,798
            
            
            $
            4,090Cash
      paid for income taxes
            
            $
            17,972
            
            
            $
            8,077
            
            
            $
            5,296Supplemental
      disclosure of non-cash activities:Vehicles
      acquired through capital lease agreements
            
            $
            13,532
            
            
            $
            21,871
            
            
            $
            10,845Stock
      issuance related to acquisitions
            
            $
            53,173
            
            
            $
            30,893
            
            
            $
            19,506








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





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 325 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





Certain
balances in segment reporting have been reclassified to conform to the current
segment reporting structure.  In August 2007, the Company added a
fourth operating segment, inVentiv Patient Outcomes, for financial reporting
purposes.  This new segment more closely links the Company's various
patient-oriented business units.  The Company also realigned some of
its divisions to reflect the new segment reporting, which is reflected in the
Company's consolidated balance sheets as of December 31, 2007 and December 31,
2006, the consolidated income statements of the Company for the years ended
December 31, 2007, 2006 and 2005 and the consolidated cash flows for the years
ended December 31, 2007, 2006 and 2005.  See Note 18, Segment Information, for
further details.





The
Company currently serves its clients primarily through four business segments,
which correspond to its reporting segments for 2007:





·
            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, LLP
      ("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”) (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).





·
            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.  This segment includes inVentiv Strategy
      & Analytics and inVentiv Selling
  Solutions.





·
            inVentiv Patient
      Outcomes, whichprovides services
      related to patient adherence, patient assistance and reimbursement,
      clinical educator teams and medical cost containment and disease
      management.  This segment includes Adheris, Inc. (“Adheris”),
      The Franklin Group (“Franklin”), The Therapeutics Institute (“TTI”) and
      AWAC LLC ("AWAC").





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.  In
December 2007, 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 footnote 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.








inVentiv
Commercial





·
            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, a “deployment phase”, typically 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 “Promotion phase”
      in which our deployed field force actively promotes specified products for
      clients through face-to-face interactions with physicians referred to as
      “detailing”.





Our
inVentiv Pharma Teams contracts specify a separate fee for the initial
“deployment phase” of a project.  We consider the deployment phase to
be a separate and distinct earnings process and recognize the related revenues
throughout the deployment phase, which typically spans a period of two to three
months at the beginning of the first year of a contract.  We generally
recognize revenue during the “promotion 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- Majority of revenues are recognized based
      on straight-line basis.  For certain analytics projects,
      revenues are recognized upon
completion.





·
            Planning and
      Analytics- Revenues for Health Products Research ("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.





·
            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
      Educator Programs- Revenues are mainly recognized based on a
      straight line basis based on the size of the nurse
      team.  Certain contracts are recognized on a fee-for-service
      basis as services are rendered.





·
            Medical Cost
      Containment and Consulting Solutions- The majority of revenues are
      mainly 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.








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
2007, 2006 or 2005.





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 the goodwill and
indefinite-lived intangible asset 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, 2007 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired and continue to maintain this position as of December 31, 2007,
based on various factors, including updated forecasts and the current condition
of the Company.  As of December 31, 2007, the Company had goodwill of
approximately $383.7 million and other intangibles (net) of $281.1 million
in the Consolidated Balance Sheet.





Impairment
of Long-Lived Assets





SFAS No.
144,Accounting for the Impairment or
Disposal of Long-Lived Assets,establishes 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.  There were no impairment losses in 2007, 2006 or
2005.





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
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 31,2007
            
            
            2006
            
            
            2005(in
      thousands, except per share data)Basic EPS from Continuing Operations
      ComputationIncome
      from continuing operations
            
            $
            47,226
            
            
            $
            49,198
            
            
            $
            43,082Weighted
      average number of common shares outstanding
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875Basic
      EPS from continuing operations
            
            $
            1.50
            
            
            $
            1.69
            
            
            $
            1.60Diluted EPS from Continuing Operations
      ComputationIncome
      from continuing operations
            
            $
            47,226
            
            
            $
            49,198
            
            
            $
            43,082Adjustments
            
            
            --
            
            
            
            --
            
            
            
            --Adjusted
      income from continuing operations
            
            $
            47,226
            
            
            $
            49,198
            
            
            $
            43,082Weighted
      average number of common shares outstanding
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875Stock
      options (1)
            
            
            497
            
            
            
            780
            
            
            
            1,265Restricted
      awards (2)
            
            
            192
            
            
            
            119
            
            
            
            25Total
      diluted common shares outstanding
            
            
            32,267
            
            
            
            30,058
            
            
            
            28,165Diluted
      EPS from continuing operations
            
            $
            1.46
            
            
            $
            1.64
            
            
            $
            1.53





(1)
            For
      the years ended December 31, 2007, December 31, 2006 and December 31,
      2005, 145,510 shares, 362,479 shares and 55,911 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, 2007, December 31, 2006 and December 31,
      2005, negligible shares, 7,336 shares and 9,770 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, 2007, the accumulated other comprehensive earnings related to
foreign currency translations was approximately $0.8 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 $100,000. 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




In
December 2004, the FASB revised 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.  On April 14, 2005, the
SEC adopted a new rule amending the effective dates for SFAS 123R.  In
accordance with the new rule, the Company adopted the accounting provisions of
SFAS 123R as of January 1, 2006.




On
January 1, 2006, the Company adopted SFAS 123R using 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, 2007 and 2006 of $9.7 million and $7.5 million, respectively, of
which $2.4 million for both years were recorded in cost of services and $7.3
million and $5.1 million recorded as Selling, General and Administrative
expenses (“SG&A”), respectively.  The stock-based compensation
expense caused income before income tax provision, minority interest in income
of subsidiary and income from equity investments to decrease by $9.7 million and
$7.5 million for the years ended December 31, 2007 and 2006, respectively, net
income to decrease by $5.7 million and $4.5 million for the years ended December
31, 2007 and 2006, respectively, and basic and diluted earnings per share to
decrease by $0.18 per share and $0.15 per share for the years ended December 31,
2007 and 2006, respectively.




Cash provided
by financing activities increased by $7.9 million and $8.6 million for the years
ended December 31, 2007 and 2006, respectively, related to excess tax benefits
from the exercise of stock-based awards.




On
November 10, 2005, the FASB issued FASB Staff Position No. 123R-3, Transition Election Related to
Accounting for Tax Effects of Share-Based Payment Awards.  The
Company has elected to adopt the alternative transition method provided in this
FASB Staff Position for calculating the tax effects of share-based compensation
pursuant to SFAS 123R. The alternative transition method includes a simplified
method to establish the beginning balance of the additional paid-in capital pool
(APIC pool) related to the tax effects of employee share-based compensation,
which is available to absorb tax deficiencies recognized subsequent to the
adoption of SFAS 123R.




In March
2005, the SEC issued SAB No. 107 (“SAB 107”) that provides additional guidance
in applying the provisions of SFAS No. 123 (revised 2004), Share-Based Payment(“SFAS
No. 123R”). SFAS No. 123R requires that compensation cost relating to
share-based payment transactions be recognized in the financial statements based
on the fair value of the equity or liability instruments issued. SFAS No. 123R
covers a wide range of share-based compensation arrangements, including share
options, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans. SAB 107 describes the SEC staff's
expectations in determining the assumptions that underlie fair value estimates
and discusses the interaction of SFAS No. 123R with certain existing SEC
guidance.  For the year ended December 31, 2007, the company has
elected to use the simplified method of determining the expected term as
permitted by SAB 107.







Recent
Accounting Pronouncements




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, the 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 Company has evaluated the provisions of SFAS
159, did not elect early adoption of eligible assets and liabilities of SFAS 159
and does not expect the issuance of SFAS 159 to 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 Company has evaluated the provisions of SFAS 157 and
does not expect the issuance of SFAS 157 to 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 the Company’s 2006 annual financial
statements.  The adoption of SAB No. 108 did not have a material
impact on our consolidated balance sheets, results of operations or cash
flows.




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, the Company has 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 the Company’s consolidated statements of operations, financial position, cash
flows, and other significant matters, such as debt covenants or the Company’s
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.  Earn-out payments from
acquisitions are generally accrued at the end of an earn-out 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 earn-out 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.




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 which have yet to be finalized.  The Company will be
obligated to make certain earn-out payments, which may be material, contingent
on CCA’s performance measurements during 2007 through 2010.  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 were included in the consolidated financial statements within
the inVentiv Communications’ segment from the acquisition date to December 31,
2007.




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 which have yet to be finalized.  The Company will be
obligated to make certain earn-out 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 were included in the
consolidated financial statements within the inVentiv Patient Outcomes segment
from the acquisition date to December 31, 2007.




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
which have yet to be finalized.  The Company will be obligated to make
certain earn-out 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 were included in
the consolidated financial statements within the inVentiv Communications’
segment from the acquisition date to December 31, 2007.




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 which have yet to be finalized.  The Company will be
obligated to make certain earn-out 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 were included in the
consolidated financial statements within the inVentiv Commercial segment from
the acquisition date to December 31, 2007.




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 which have yet to be
finalized.  The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Ignite's performance measurements
during 2007 through 2010.  Ignite is based in Irvine, California, and
specializes in medical advertising and interactive communications targeting
patients and caregivers. Ignite’s financial results were included in the
consolidated financial statements within the inVentiv Communications segment
from the acquisition date to December 31, 2007.




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 which have yet to be
finalized.  The Company will be obligated to make certain earn-out
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 were included in the consolidated financial statements within
the Communications’ segment from the acquisition date to December 31,
2007.




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 will be obligated to make
certain earn-out payments, which may be material, 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 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 will be
obligated to make certain earn-out payments, which may be material, contingent
on DialogCoach's performance measurements during 2006 through
2008.  DialogCoach did not achieve the initial earnout threshold for
2006 and 2007 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 will be
obligated to make certain earn-out payments, which may be material, 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.  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 earn-out
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, and the cash portion of approximately $1.1 million was paid in 2007;
the remaining stock portion will be issued once certain contractual restrictions
have been met.  The results of JSAI have been reflected in the
inVentiv Communications segment from 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 earn-out 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.   The portion adjusted in the subsequent year mainly
relates to the finalization of the earn-out for the previous year, as allowed
under the contract.  The amount accrued at December 31, 2007 for the
2007 earnout was approximately $15.3 million in cash and stock.  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 8.  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 will be obligated to
make certain earn-out payments, which may be material, 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.  The portions
adjusted in the subsequent years mainly relate to the finalization of the
earn-outs for the previous years, as allowed under the contract.  The
amount accrued at December 31, 2007 for the 2007 earnout was approximately $21.8
million in cash and stock.   The results of inVentiv
Communications, Inc. have been reflected in the inVentiv Communications segment
since the date of acquisition.




PRS - In
August 2005, the Company acquired the net assets of PRS, a provider of
compliance management and marketing support services based in Horsham,
Pennsylvania.  PRS specializes in pharmaceutical sample management and
compliance services; its operations are similar in nature to the business of
Franklin, which was acquired in June 2004.  The closing consideration
for the transaction was approximately $13.6 million in cash and stock, including
certain post-closing adjustments and direct acquisition costs.  The
Company was obligated to make certain earn-out payments contingent on PRS’s
performance measurements in 2005 and 2006.  The amount due with
respect to PRS for 2005 was approximately $0.3 million, which was accrued for as
of December 31, 2005 and paid in April 2006.  PRS’ 2006 earnout of
approximately $2.0 million in cash and stock, of which $1.7 million was accrued
at December 31, 2006, was paid in 2007. The portion adjusted in the subsequent
year mainly relates to the finalization of the earn-out for the previous year,
as allowed under the contract.  The results of PRS have been reflected
in the inVentiv Commercial segment since the date of acquisition.








4.  Significant
Clients:




During the
years ended December 31, 2007 and 2006, 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 part of
the acquisition of CCA, there were approximately $1.7 million of restricted
cash, of which $0.3 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 now reflected in the inVentiv Communications
segment.  The beneficiary has not drawn on the $0.3 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, 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 $0.2 million and $0.1
million held in escrow on behalf of clients and was included in restricted cash
and marketable securities at December 31, 2007 and 2006,
respectively.




As of
December 31, 2007, the Company had $45.3 million invested in the CSCP, which is
classified as restricted cash and marketable securities on the December 31, 2007
Balance Sheet.  During December 2007, the Company recorded $0.8
million relating to an impairment of the Company's investment in the Columbia
Strategic Cash Portfolio (“CSCP”), which held certain complex asset-backed
securities.  As of February 27, 2008, the CSCP balance was
approximately $30 million as a result of some liquidation of the
portfolio.  The remaining funds are considered short-term in nature
and are expected to be distributed over the next six to 12
months.  Consistent with the company's investment policy guidelines,
the vast majority of CSCP investments held by the company had AAA/Aaa credit
ratings at the time of purchase. With the liquidity issues experienced in global
credit and capital markets, the CSCP experienced losses, partially due to the
subprime market crisis.




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 2008.  Future impairment charges may
result depending on market conditions until the fund is fully liquidated. The
$0.8 million impairment charge 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
draw downs from time to time until maturity, which shall be the later of the day
following the redemption of all of our shares of the CSCP and December 1,
2008.  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 31,2007
              2006(in
      thousands)Land
              $---
              $---Buildings
      and leasehold improvements
              12,352
              7,513Computer
      equipment and software
              28,072
              23,061Vehicles
              37,638
              35,965Furniture
      and fixtures
              6,741
              4,74384,803
              71,282Accumulated
      depreciation
              (30,063)
              (27,902)$54,740
              $43,380




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 $18.2 million, $15.1 million and $15.5
million in 2007, 2006 and 2005, respectively. In 2006, 2005, and 2004 inVentiv
recorded $10.5 million, $8.7 million and $10.5 million of depreciation,
respectively, on vehicles under capital lease.





7.  Goodwill and Other Intangible
Assets:





Goodwill
consists of the following:





(in
      thousands)
            
            January
      1,
              2007
            
            
            Acquisitions
            
            
            Contingent(1)
      Consideration
            
            
            December
      31,
              2007inVentiv
      Clinical
            
            $
            55,742
            
            
            $
            12
            
            
            $
            1,190
            
            
            $
            56,944inVentiv
      Communications
            
            
            112,928
            
            
            
            53,674
            (2)
            
            
            24,356
            
            
            
            190,958inVentiv
      Commercial
            
            
            40,366
            
            
            
            5,141
            
            
            
            266
            
            
            
            45,773inVentiv
      Patient Outcomes
            
            
            57,791
            
            
            
            16,656
            
            
            
            15,592
            
            
            
            90,039Total
            
            $
            266,827
            
            
            $
            75,483
            
            
            $
            41,404
            
            
            $
            383,714




(1)
            The
      contingent consideration represents adjustments relating to the
      finalization of the 2006 earnouts as well as 2007 earnouts that are
      subject to finalization. (see Note 3 for further
  details).


(2)
            The
      Company has not yet finalized the valuation of the Liedler acquisition,
      which was completed on December 28, 2007.  Under SFAS 141, if a
      business combination is consummated toward the end of an acquiring
      enterprise's fiscal year, 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.  The Company expects to complete the valuation and
      allocate the goodwill to identifiable intangibles prior to June 30,
      2008.





Other intangible assets consist of the
following:





December
      31, 2007
            
            December
      31, 2006(in
      thousands)
            
            Accumulated
            
            
            
            AccumulatedGross
            Amortization
            Net
            
            Gross
            Amortization
            NetCustomer
      relationships
            $105,537
            $(15,946)
            $89,591
            
            $59,987
            $(7,240)
            $52,747Technology
            37,940
            (1,714)
            36,226
            
            2,340
            (119)
            2,221Noncompete
      agreement
            880
            (617)
            263
            
            880
            (372)
            508Tradenames
      subject to amortization
            1,211
            (277)
            934
            
            911
            (66)
            845Other
            1,234
            (386)
            848
            
            260
            (204)
            56Total
      definite-life intangibles
            146,802
            (18,940)
            127,862
            
            64,378
            (8,001)
            56,377Tradenames
      not subject to amortization (1)
            153,260
            --
            153,260
            
            96,260
            --
            96,260Total
      other intangibles (2)
            $300,062
            $(18,940)
            $281,122
            
            $160,638
            $(8,001)
            $152,637





(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.


(2)
            The
      $139.4 million increase in total gross other intangibles arises from 2007
      acquisitions.





The Company’s acquisitions have
resulted in approximately $363.1 million of goodwill and the following gross
intangible assets:





(in
      thousands)
              
              
              Intangible
      asset
            
            Amount
            
            
            Weighted
      average amortization periodTradename
            
            $
            154,471
            
            
            
            (1
            )Customer
      relationships
            
            
            105,537
            
            
            10.8
      yearsTechnology
            
            
            37,940
            
            
            14.5
      yearsNoncompete
      agreement
            
            
            880
            
            
            4.1
      yearsOther
            
            
            974
            
            
            3.5
      yearsTotal
            
            $
            299,802
            
            
            
            (2
            )





(1)
            $1.2
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 5.3
  years.


(2)
            Excludes
      $0.3 million of a definite-life intangible asset established prior to the
      2004-2007 acquisitions.




Amortization
expense, based on intangibles subject to amortization held at December 31, 2007,
is expected to be $13.9 million in 2008, $13.5 million in 2009, $13.1 million in
2010, $12.6 million in 2011, $12.2 million in 2012 and $62.6 million
thereafter.




As more fully
described in Note 2, the Company performed its annual impairment tests as of
June 30, 2007 and concluded that the existing goodwill and indefinite lived
intangible tradename balances were not impaired and continue to maintain this
position as of December 31, 2007, based on various factors, including updated
forecasts and the current condition of the Company.





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 may be advanced no later than January 6, 2008,
which we elected to not draw, a $50 million revolving credit facility, of which
$10 million is available for the issuance of letters of credit, and a swingline
facilty.  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 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  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, 2007 and December 31, 2006 was 4.70% and 5.36%,
respectively.  As disclosed in Note 11, the Company has two derivative
financial instruments, totaling $330 million, 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. 98-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 98-14), and
its term loan under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 96-19). 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 $4.3 million and $2.7 million
and are included in Deposits and Other Assets on the balance sheet as of
December 31, 2007 and 2006, respectively.




The following
table displays the required future commitment of the principal payment on the
loan:





Years
      Ending December 31,2008
            
            $
            3,3002009
            
            
            3,3002010
            
            
            3,3002011
            
            
            3,3002012
            
            
            3,300Thereafter
            
            
            311,850Total
      minimum payments
            
            $
            328,350





9.  Accrued
Payroll, Accounts Payable and Accrued Expenses:




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





December
      31,2007
            
            
            2006(in
      thousands)Accrued
      payroll and related employee benefits
            
            $
            31,187
            
            
            $
            28,411Accounts
      payable
            
            
            17,873
            
            
            
            11,867Accrued
      media liability
            
            
            8,509
            
            
            
            10,632Accrued
      insurance
            
            
            5,198
            
            
            
            4,604Accrued
      commissions
            
            
            5,013
            
            
            
            4,359Accrued
      professional fees
            
            
            2,867
            
            
            
            2,597Accrued
      meeting fees
            
            
            836
            
            
            
            1,154Contingent
      consideration from acquisitions
            
            
            52,862
            
            
            
            44,049Accrued
      expenses
            
            
            14,363
            
            
            
            15,502$
            138,708
            
            
            $
            123,175








10.
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, 2007 (in thousands):





Years
      Ending December 31,2008
            
            $
            18,4582009
            
            
            16,0532010
            
            
            13,3842011
            
            
            12,4222012
            
            
            8,802Thereafter
            
            
            20,929Total
      minimum lease payments
            
            $
            90,048




Rental
expense charged to operations was approximately $13.0 million, $8.7 million and
$5.6 million for the years ended December 31, 2007, 2006 and 2005,
respectively.  In February 2003, the Company started to receive
sublease payments for one of its facilities, which was formerly occupied by one
of its divested units.  In 2007, 2006 and 2005, approximately $1.5
million, $1.5 million and $0.9 million, respectively, of sublease income was
received and offset against the obligation. The Company expects to collect
an additional $0.4 million through the contract expiration in March
2008.




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, 2007 (in thousands):





(a)Years
      Ending December 31,2008
            
            $
            19,4892009
            
            
            11,6942010
            
            
            8,0322011
            
            
            3,3012012
            
            
            7Total
      minimum lease payments
            
            
            42,523Amount
      representing interest and
              management
      fees
            
            
            (4,114
            )38,409Current
      portion
            
            
            (17,464
            )Non-current
      lease obligations
            
            $
            20,945





(a)These future commitments include
interest and management fees, which are not recorded on the Consolidated Balance
Sheet as of December 31, 2007 but will be recorded as
incurred.





11.  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
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.  At inception, and at least quarterly
thereafter, the Company assesses whether derivatives used to hedge transactions
are highly effective in offsetting changes in the interest cash flows of the
hedged item. To the extent the derivatives instruments are highly effective
hedges, the change in fair value of the effective portion is 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).




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 values
of the interest rate swaps were obtained from dealer quotes.  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, Accounting for Derivative
Instruments and Hedging Activities.  The Company employed the
dollar offset method to assess effectiveness by performing a shock test 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 will decline to zero at maturity,
the $2.9 million of fair value will be recognized in earnings over the remaining
life of the swap as part of the ineffectiveness calculation.  During
the year-ended December 31, 2007, the fair market value of the original
derivative asset decreased by $2.1 million to a derivative liability of
approximately $1.0 million.  Approximately $1.2 million was recorded
as interest expense, attributable to the financing component embedded within the
interest rate swap, while the remaining $0.9 million ($0.6 million, net of
taxes) was recorded as a decrease 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 when the Company’s original 2005
three-year interest rate swap arrangement described above expires.  At
hedge inception, the Company employed the dollar offset method by performing a
shock test 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 original
derivative.  As a result of the hypothetical derivative method, there
was no ineffectiveness for the period ended December 31, 2007, and as a result,
$10.3 million ($6.1 million, net of taxes) was recorded as a decrease to Other
Comprehensive Income and an increase to the swap liability, recorded as Other
non-current liabilities in the Company’s Consolidated Balance Sheet as of
December 31, 2007.  Based on
current assumptions regarding the interest rate environment and other market
conditions at December 31, 2007, 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 $2.9 million, of
which $1.5 million will be included as part of our fixed interest on the loan
for 2008.




12.  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. Alberstons, 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.  Adheris intends to continue to defend this action
vigorously, and the Company does 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 our consolidated balance sheets, results of operations or cash
flows.




Our insurer,
AIG, is defending this action under reservation of rights.




Indemnification
Claim.  In January 2008, PRS received a demand for indemnification
from one of its customers relating to a lawsuit filed against the
customer.   The lawsuit seeks class action certification and
brings claims 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 bases its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS has declined to indemnify the customer and if claims are
asserted against PRS, PRS intends to defend such claims
vigorously.




Other
Claims.  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.




Acquistion-Related
Incentive Plan. Pursuant to the acquisition of inVentiv Communications,
Inc., the Company assumed a $7.5 million existing incentive plan liability (out
of a potential $15.0 million liability) on inVentiv Communications, Inc.’s
balance sheet relating to certain performance thresholds of the segment over a
three-year period from 2005 through 2007. The first $5.0 million of this
obligation is to be paid by or for the account of the former shareholders of
inVentiv Communications, Inc.; as such, this amount was recorded as a short-term
receivable from the former shareholders.  The Company has monitored these
performance thresholds on a quarterly basis.  At December 31, 2006, as
a result of new business and the strengthened outlook for inVentiv
Communications, Inc.’s business during 2006, management felt it was appropriate
to record an additional $3.5 million (of which $1.2 million is recorded in cost
of services and $2.3 million is recorded in SG&A) of the potential $15
million liability since the likelihood of achieving the next threshold is
probable and the amount is estimable, pursuant to SFAS No. 5, Accounting for
Contingencies.  Effective December 31, 2007, the Company revised
certain aspects of the Acquisition-Related Incentive Plan (see Item 9B, "Other
Information," and Exhibit 10.20).  At December 31, 2007, the Company
reversed approximately $1.5 million of the $11.0 million accrual based on
inVentiv Communications, Inc.,’s final results of the three-year performance
period from 2005 to 2007.






13.  Common
Stock and Stock Incentive Plans:




The Company’s
2006 Stock Incentive Plan (“Stock Plan”) authorizes incentive stock options,
nonqualified stock options, restricted stock awards, restricted stock units and
stock appreciation rights ("SARs”). The aggregate number of shares of the
Company’s common stock that may be issued under the Stock Plan upon exercise of
options, SARs or in the form of restricted stock is 9.1 million
shares.  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.


As of
December 31, 2007, the Company had shares reserved for potential future issuance
under the Stock Plan of 2,065,741.




The following
table summarizes stock option activity under the Company’s equity incentive
plans for the years ended December 31, 2007, 2006 and 2005 (in thousands, except
per share amounts):





Shares
            Weighted
      Average Exercise Price
            Weighted
      Average Remaining Contractual Term (in years)
            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2005
            4,208
            $8.39
            6.70
            $50,149Granted
      and assumed
            175
            24.41Exercised
            (1,282)
            5.33Forfeited/expired/cancelled
            (130)
            12.54Outstanding
      at December 31, 2005
            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
            $18,121Vested
      and expected to vest at December 31, 2007
            1,432
            $19.09
            6.80
            $17,680Options
      exercisable at December 31, 2005
            1,470
            $7.82
            5.43
            $23,239Options
      exercisable at December 31, 2006
            1,246
            $9.82
            6.41
            $31,813Options
      exercisable at December 31, 2007
            853
            $14.59
            5.99
            $13,963




The
weighted-average grant-date fair value of stock options granted was $16.62,
$13.02 and $13.24 at December 31, 2007, 2006 and 2005,
respectively.   The total intrinsic value of options exercised
during the years ended December 31, 2007, 2006 and 2005, was $6.9 million, $6.5
million and $6.8 million, respectively.  As of December 31, 2007 and
2006, there was approximately $6.6 million and $8.9 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 2.2 years and 2.4 years, respectively.




The actual
tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled $8.0 million, $9.2 million and $9.7
million for the years ended December 31, 2007, 2006 and 2005,
respectively.




Options
outstanding and exercisable at December 31, 2007 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$1.48
            To
            $8.06
            182,699
            $5.45
            3.18
            182,699
            $5.45$8.45
            To
            $15.48
            126,440
            $9.78
            6.00
            109,201
            $9.23$15.96
            To
            $15.96
            300,000
            $15.96
            6.73
            250,000
            $15.96$16.89
            To
            $17.25
            175,202
            $17.09
            6.53
            99,000
            $17.08$17.57
            To
            $22.87
            151,561
            $18.12
            6.60
            96,937
            $17.90$23.70
            To
            $26.76
            208,250
            $25.47
            7.89
            68,313
            $25.84$26.77
            To
            $26.77
            180,000
            $26.77
            8.45
            45,000
            $26.77$30.64
            To
            $30.64
            24,588
            $30.64
            8.64
            1,800
            $30.64$35.01
            To
            $35.01
            98,851
            $35.01
            9.06
            --
            $--$37.21
            To
            $37.21
            57,914
            $37.21
            9.50
            --
            $--1,505,505
            
            
            852,950





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:





2007
            2006
            2005Expected
      life of option
            6
      yrs
            5.5-6
      yrs
            4.78
      yrsRisk-free
      interest rate
            4.81%
            4.90%
            4.27%Expected
      volatility
            40%
            45%
            63.62%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 2007 and 2006 the volatility
remains at a range of 39-40%.  For the year ended December 31, 2007
the Company elected to use the simplified method of determining the expected
term as permitted by SAB 107 and the range of the expected term remained
unchanged at 5.5 to 6 years.  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 2007 and 2006 was
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, 2005
            28
            $15.70Granted
            186
            $20.70Released
            (5)
            $8.45Forfeited
            (1)
            $19.88Nonvested
      at December 31, 2005
            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
            $29.41




As of
December 31, 2007 and 2006, there was approximately $12.4 million and $9.2
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 2.8 years and
3.3 years, respectively. The total fair value of shares vested during the years
ended December 31, 2007, 2006 and 2005 were $4.9 million, $1.8 million and $0.1
million, respectively.




14.  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 $3.0 million, $2.2 million and $1.1 million for 2007,
2006 and 2005, 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 and $4.2 million were included in other
non-current liabilities in our Consolidated Balance Sheets as of December 31,
2007 and 2006, 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, 2007 and 2006 were approximately $5.4 million and $2.9 million,
respectively and are currently classified in Deposits and other assets on our
Consolidated Balance Sheets.  In addition, approximately $1.4 million
and $1.1 million as of December 31, 2007 and 2006, respectively, were invested
in mutual funds and classified in other current assets on our Consolidated
Balance Sheets.








15.  Income
Taxes:




Our income
tax provision included the following components:





For
      the Years EndedDecember
      31,2007
            
            
            2006
            
            
            2005(in
      thousands)Current:U.S.—Federal
            
            $
            25,979
            
            
            $
            22,900
            
            
            $
            10,854U.S.—State
      and local
            
            
            2,164
            
            
            
            2,811
            
            
            
            1,721Foreign
            
            
            433
            
            
            
            837
            
            
            
            --$
            28,576
            
            
            $
            26,548
            
            
            $
            12,575Deferred:U.S.—Federal
            
            $
            788
            
            
            $
            (7,183
            )
            
            $
            1,739U.S.—State
      and local
            
            
            37
            
            
            
            (77
            )
            
            
            (85
            )Foreign
            
            
            0
            
            
            
            (122
            )
            
            
            --$
            825
            
            
            $
            (7,382
            )
            
            $
            1,654Income
      tax provision
            
            $
            29,401
            
            
            $
            19,166
            
            
            $
            14,229




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
      31,2007
            
            
            2006
            
            
            2005Taxes
      at statutory U.S. federal income tax rate
            
            
            35.0
            %
            
            
            35.0
            %
            
            
            35.0
            %Foreign
      tax differences
            
            
            0.1
            
            
            
            1.0
            
            
            
            --State
      and local income taxes, net of federal tax benefit
            
            
            2.9
            
            
            
            4.5
            
            
            
            4.6Release
      of valuation allowance/ Utilization of net operating losses / other tax
      benefits
            
            
            (0.4
            )
            
            
            (13.1
            )
            
            
            (15.3
            )Other
      permanent differences
            
            
            0.8
            
            
            
            0.6
            
            
            
            0.5Effective
      tax rate
            
            
            38.4
            %
            
            
            28.0
            %
            
            
            24.8
            %




In June 2006,
the Company 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 was more likely than not that this deferred tax asset would
be realized.




Deferred
income taxes are recorded based upon differences between the financial statement
and tax bases of assets and liabilities. As of December 31, 2007 and 2006, the
deferred tax assets and liabilities consisted of the following:





As
      of December 31,2007
            
            
            2006Current Deferred Tax
      Assets:
            
            (in
      thousands)Accrued
      expenses
            
            $
            5,501
            
            
            $
            3,200Deferred
      rent
            
            
            191
            
            
            
            410Net
      operating loss carryforwards
            
            
            779
            
            
            
            136Deferred
      revenue
            
            
            229
            
            
            
            377Allowance
      for doubtful accounts
            
            
            532
            
            
            
            298Other
            
            
            232
            
            
            
            300Subtotal
            
            
            7,464
            
            
            
            4,721






Non-Current Deferred Tax
Assets:Deferred
      Compensation
            
            
            7,568
            
            
            
            3,128Fair
      market value adjustment
            
            
            5,014
            
            
            
            493Net
      Operating Loss & Foreign Tax Credit carryforwards
            
            
            4,423
            
            
            
            2,827Fixed
      Assets
            
            
            7,076
            
            
            
            6,152Other
            
            
            964
            
            
            
            195Subtotal
            
            
            25,045
            
            
            
            12,795Gross
      Deferred Tax Assets
            
            
            32,509
            
            
            
            17,516Current Deferred Tax
      Liabilities:Accrued
      Expenses
            
            
            (1,707
            )
            
            
            (2,595
            )Other
            
            
            (344
            )
            
            
            (584
            )Subtotal
            
            
            (2,051
            )
            
            
            (3,179
            )Non-Current
      Deferred Tax Liabilities:Property
      and Equipment
            
            
            (6,330
            )
            
            
            (4,688
            )Intangible
      Assets
            
            
            (27,275
            )
            
            
            (11,402
            )Other
            
            
            (895
            )
            
            
            (1,541
            )Subtotal
            
            
            (34,500
            )
            
            
            (17,631
            )Gross
      Deferred Tax Liabilities
            
            
            (36,551
            )
            
            
            (20,810
            )Valuation
      Allowance
            
            
            (4,843
            )
            
            
            (2,628
            )Net
      Deferred Tax Liabilities
            
            $
            (8,885
            )
            
            $
            (5,922
            )







During 2006,
the Company re-evaluated its Federal income tax net operating loss carryforward
position reported for financial statement purposes and concluded that it was
probable that the Federal income tax net operating loss would be fully utilized
in 2006.  The Company determined that the deferred tax asset recorded
for the Federal income tax net operating loss carryforward of $15.8 million and
an offsetting valuation allowance of $9.1 million  reported for
financial statement purposes were no longer required.  Accordingly,
the Company reversed the December 31, 2005 balances which resulted in a balance
sheet reclassification with no income statement tax effect, other than the
reversal of approximately $9.1 million of valuation allowance as discussed
above.




A capital tax
loss carryover in the amount of approximately $2.1 million and $2.1 million
existed at December 31, 2007 and December 31, 2006, respectively, and will
expire in 2008.  A valuation allowance has been recorded against the
capital loss carryovers as management believes it is more likely than not that
the associated deferred tax asset will not be realized in the
future.




During 2006,
a deferred tax asset in the amount of $2.3 million was established primarily
related to state net operating loss carryforwards.  A valuation
allowance of $1.9 million was recorded in 2006 against a portion of the state
net operating loss carryforwards as management believed it was more likely than
not that the associated deferred tax asset would not be realized in the
future.  During 2007, the Company determined that state net operating
loss carryforwards, that previously had a valuation allowance, would be realized
and the benefit was reflected accordingly.  The gross amount of the
state net operating losses is approximately $13.8 million and expires in varying
amounts beginning in 2008 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.  It is
the Company’s belief that such earnings will be indefinitely reinvested in the
companies that produced them.  At December 31, 2007, the Company has
not provided federal income taxes on approximately $1.0 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 of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (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 amount of unrecognized
tax benefit was $2.5 million as of January 1, 2007 and $6.3 million as of
December 31, 2007. Included in this balance were positions that, if recognized,
would affect the effective tax rate by $1.6 million as of January 1, 2007 and
$1.0 million as of December 31, 2007.





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








Unrecognized
      tax benefits balance at January 1, 2007
            
            $
            2.5Increase
      in tax positions for prior years
            
            
            0Decreases
      in tax positions for prior years
            
            
            (0.6
            )Increase
      in tax positions for current year
            
            
            4.8Settlements
            
            
            (0.3
            )Lapse of
      statute of limitations
            
            
            (0.1
            )Unrecognized
      tax benefits balance at December 31, 2007
            
            $
            6.3




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, 2007 and December 31, 2007 was $1.2 million
and $2.7 million respectively.


The Company
or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal income tax examinations for years
before 2004 and generally, is no longer subject to state and local income tax
examinations by tax authorities for years before 2003.




Management
has concluded that it is reasonably possible that the unrecognized tax benefits
will decrease by approximately $1.1 million within the next 12
months.  The decrease is primarily related to additional federal and
state taxes that may be settled or have expiring statutes of
limitations.





16.  Discontinued
Operations:




For the years
ended December 31, 2007, 2006 and 2005, income from discontinued operations, net
of taxes, were $0.3 million, $2.0 million and $0.8 million,
respectively.  For the years ended December 31, 2007, 2006 and 2005,
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.







17.  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 President (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 2007.  Payments to Cardinal totaled approximately $680,000 for
2007.  Robert Walter, who is the father of R. Blane Walter, our
President, served as Executive Chairman, and subsequently as an Executive
Director, of Cardinal during 2007.  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. The contractual arrangements
with SAS, which will continue to be performed during 2008, provide for total
expected payments of approximately $800,000.  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.  The transactions between the Company and
SAS were on arms'-length terms and were negotiated without Mr. Bassin's
involvement.





18.  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 2, 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,
2007:





·
            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 adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease
management.





·
            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, 2005:





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





For the
year ended December 31, 2005 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
              Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            113,717
            
            
            $
            46,601
            
            
            $
            370,944
            
            
            $
            25,908
            
            
            $
            --
            
            
            $
            557,170Less:  Intersegment
      revenues
            
            
            17
            
            
            
            175
            
            
            
            666
            
            
            
            --
            
            
            
            --
            
            
            
            858Reported
      Revenues
            
            
            113,700
            
            
            
            46,426
            
            
            
            370,278
            
            
            
            25,908
            
            
            
            --
            
            
            
            556,312Depreciation
      and amortization
            
            
            1,241
            
            
            
            680
            
            
            
            15,093
            
            
            
            326
            
            
            
            85
            
            
            
            17,425Interest
      expense
            
            
            --
            
            
            
            19
            
            
            
            1,275
            
            
            
            --
            
            
            
            2,661
            
            
            
            3,955Interest
      income
            
            
            35
            
            
            
            42
            
            
            
            119
            
            
            
            --
            
            
            
            1,213
            
            
            
            1,409Segment
      income (loss)(1)
            
            $
            9,563
            
            
            $
            5,142
            
            
            $
            48,352
            
            
            $
            6,454
            
            
            $
            (12,083
            )
            
            $
            57,428




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




(in
      thousands)
            
            December
      31,2007
            
            
            2006Total
      Assets:inVentiv
      Clinical
            
            $
            127,426
            
            
            $
            105,253inVentiv
      Communications
            
            
            513,079
            
            
            
            324,399inVentiv
      Commercial
            
            
            183,787
            
            
            
            172,260inVentiv
      Patient Outcomes
            
            
            198,141
            
            
            
            105,175Other
            
            
            88,423
            
            
            
            63,967Total
      assets
            
            $
            1,110,856
            
            
            $
            771,054


.


INVENTIV
HEALTH, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


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





The
following table summarizes financial data by quarter for inVentiv for 2007 and
2006.





2007
      Quarter Ended (b)March
      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
      (loss) from discontinued operations
            
            
            86
            
            
            
            92
            
            
            
            90
            
            
            
            (10
            )
            
            
            258Net
      income
            
            
            10,470
            
            
            
            7,257
            
            
            
            14,224
            
            
            
            15,533
            
            
            
            47,484Earnings
      (losses) 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:Basic
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            0.44
            
            
            $
            0.48
            
            
            $
            1.50Diluted
            
            $
            0.34
            
            
            $
            0.23
            
            
            $
            0.43
            
            
            $
            0.47
            
            
            $
            1.47





2006
      Quarter Ended (b)March
      31
            
            
            June
      30
            
            
            Sept.
      30
            
            
            Dec.
      31
            
            
            Total
      (a)(in
      thousands, except per share amounts)Revenues
            
            $
            173,677
            
            
            $
            182,979
            
            
            $
            197,780
            
            
            $
            211,809
            
            
            $
            766,245Gross
      profit
            
            
            48,869
            
            
            
            55,119
            
            
            
            56,372
            
            
            
            59,136
            
            
            
            219,496Income
      from continuing operations
            
            
            10,143
            
            
            
            19,864
            
            
            
            10,195
            
            
            
            8,996
            
            
            
            49,198Income
      from discontinued operations
            
            
            105
            
            
            
            1,115
            
            
            
            49
            
            
            
            768
            
            
            
            2,037Net
      income
            
            
            10,248
            
            
            
            20,979
            
            
            
            10,244
            
            
            
            9,764
            
            
            
            51,235Earnings
      per share (a)Continuing
      operations:Basic
            
            $
            0.36
            
            
            $
            0.68
            
            
            $
            0.35
            
            
            $
            0.30
            
            
            $
            1.69Diluted
            
            $
            0.35
            
            
            $
            0.66
            
            
            $
            0.34
            
            
            $
            0.29
            
            
            $
            1.64Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.04
            
            
            $
            0.00
            
            
            $
            0.03
            
            
            $
            0.07Diluted
            
            $
            0.00
            
            
            $
            0.03
            
            
            $
            0.00
            
            
            $
            0.03
            
            
            $
            0.06Net
      income (losses):Basic
            
            $
            0.36
            
            
            $
            0.72
            
            
            $
            0.35
            
            
            $
            0.33
            
            
            $
            1.76Diluted
            
            $
            0.35
            
            
            $
            0.69
            
            
            $
            0.34
            
            
            $
            0.32
            
            
            $
            1.70





(a)
                limitations
      on the ability of our shareholders to call a special meeting of
      shareholders;
 (b)
                    limitations
      on the ability of our shareholders to call a special meeting of
      shareholders;











SCHEDULE
II VALUATION AND QUALIFYING ACCOUNTS


YEARS
ENDED DECEMBER 31, 2007, 2006 and 2005


(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, 2007
            
            $
            3,583
            
            
            $
            9,311
            
            
            $
            865
            
            
            $
            10,661
            
            
            $
            3,098Year
      ended December 31, 2006
            
            $
            3,979
            
            
            $
            2,257
            
            
            $
            145
            
            
            $
            2,798
            
            
            $
            3,583Year
      ended December 31, 2005
            
            $
            1,980
            
            
            $
            1,404
            
            
            $
            2,039
            
            
            $
            1,444
            
            
            $
            3,979


(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, 2007
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.






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, 2007, 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.





Other
Than Temporary Impairment





On
December 10, 2007, the Company determined that an impairment charge was required
to be recorded related to the Company's investment in the Columbia Strategic
Cash Portfolio (“CSCP”) of which $0.8 million was subsequently recorded, as
discussed in further detail in Management's Discussion and Analysis of Financial
Position and Results of Operations.  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 fluctuation in
the CSCP's net asset value was attributable to losses experienced by CSCP on its
investment portfolio that are partially due to the subprime market
crisis.  As of December 31, 2007, the Company had $46.1 million of
principal invested in the CSCP.





Future
impairment charges may be recorded depending on market conditions but the
Company is unable to estimate such additional impairment charges, if
any.  All such impairment charges reflect a decrease in cash
equivalents.  The $0.8 million impairment charge does not have a
material impact on the company's liquidity or financial
flexibility.




Amendment
to Code of Business Conduct and Ethics


On February
27, 2008, our Board of Directors approved an amendment to our Code of Business
Conduct and Ethics (the "Code").  The effects of the amendment are (a)
(i) to permit executive officers (as well as directors, as previously provided)
to contact the Audit Committee directly, rather than the Chief Financial
Officer, with regard to ethical, compliance or disclosure matters and (ii) to
provide that our Chief Executive Officer, Chief Financial Officer and Audit
Committee have authority to interpret the Code in cases of ambiguity while
retaining the authority of our Board of Directors to approve any amendments or
waivers and (b) with respect to the Conflict of Interest policy included in the
Code, (i) to provided a definition of "family members" consistent with the
definition used in our Related Person Transaction Policy, (ii) permit conflicts
of interest transactions to be reported by the director, executive officer or employee who has the
conflicting interest and/or the business unit or function/department leader
responsible for the potential transaction or relationship, (iii) to clarify the scope of the transactions subject
to the policy, (iv) to require material conflict of interest transactions
involving a director or executive officer to be approved solely by our Audit
Committee and not by our Chief Financial Officer, (v) to provide that
inadvertent transactions, such as may occur when a director, executive officer
or employee has a financial interest in the contract counterparty that is not
recognized at the time a transaction is originated, are not subject to the
advance approval requirement of the Code but that upon discovery, the Company shall evaluate all options, including but
not limited to ratification, termination or amendment of the transaction or
relationship, (vi) to clarify that the
Chief Financial Officer or Audit Committee may determine that a transaction or
relationship disclosed pursuant to th policy, or the financial or other interest
of a director, officer or employee therein, is not material and therefore is not
within the scope of thepolicyand (vii) to provide that conflict of
interest transactions that are above the $120,000 threshold for Related Person
Transactions and involve a director or executive officer will be handled solely
in accordance with our Related Person Transactions Policy.
   Simultaneously, our Related Person
Transaction Policy was amended to provide for (i) approval thereunder of ongoing
transactions or relationships and (ii) pre-approval of categories of Related
Person Transactions, in each case subject to such precautionary procedures as
the Audit Committee deems appropriate.








Amendment to Cash Bonus
Plan.




On February
28, 2008, the Compensation Committee of our Board of Directors approved an
amendment to our Cash Bonus Plan.  The amendment harmonizes the Cash
Bonus Plan with Blane Walter's employment agreement by providing for a
75%-of-base-salary target bonus and 150%-of-base-salary maximum bonus for Mr.
Walter.




Incurrence of a Direct Financial
Obligation.




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. We have not borrowed any funds under this credit facility.  The
Blue Ridge facility provides for multiple draw downs from time to time until
maturity, which shall be the later of the day following the redemption of all of
our shares of the CSCP and December 1, 2008.  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.




Amendment of Acquisition-Related
Incentive Plan; Issuance of Unregistered Shares.




On
February 27, 2008, our Board of Directors approved an amendment to the
Acquisition-Related Incentive Plan adopted by inVentiv Communications, Inc.
(formerly inChord Communications, Inc.) prior to our acquisition of that
business in October 2005.  The amendment to the Acquisition-Related
Incentive Plan modifies the determination of awards under the plan for plan
participants who remained employed by us at December 31, 2007 and permits any
incremental amounts to be paid on a deferred basis by January 1,
2009.




Certain Equity
Issuances


As of February 21, 2008, in connection
with the payment of the earnout obligation for 2007 under the purchase agreement
relating to our acquisition of Adheris, we issued for the accounts of the former
shareholders of Adheris a total of 236,292 unregistered shares of common
stock.
 
 As of February 27, 2008, in connection
with the payment of the earnout obligation for 2007 under the purchase agreement
relating to our acquisition of inVentiv Communications, Inc. (formerly known as
inChord Communications, Inc.), we issued for the accounts of the former
shareholders of inVentiv Communications, Inc. a total of 265,447 unregistered
shares of common stock, of which 126,011 are currently held in
escrow.




As permitted
by the terms of  our Acquisition-Related Incentive Plan, we have elected to
satisfy a portion of the awards under the plan by issuing unregisterd shares of
common stock.  An aggregate of 117,206unregistered shares were issued as of February 27, 2008 for such
purpose.




The common
stock issuances described above were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended.  In each
case, there was no general solicitation or advertising and the number of
recipients of such unregistered shares was limited and/or such recipients were
sophisticated.











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, 2007) relating to the 2008 Annual Meeting of Stockholders and
is incorporated by reference herein.











PART IV





Item 15.  Exhibits and Financial 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, 2007 and 2006





Consolidated
Statements of Operations for the years ended December 31, 2007, 2006 and
2005.





Consolidated
Statements of Stockholders' Equity for the years ended December 31, 2007, 2006
and 2005.





Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and
2005.





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
    Registrant3.2
              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).
      *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). *10.5
              Employment
      Agreement, dated May 9, 2006 by and between Eran Broshy and inVentiv
      Health, Inc. (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.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). *10.19
              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, 2007filed 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.
  #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 Act31.2
              Chief
      Financial Officer’s Certification Pursuant to Rule 13a-14(a) of the
      Exchange Act32.1
              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 200232.2
              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.



















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.




By:
              /s/ DAVID
      S. BASSINDavid
      S. BassinChief
      Financial Officer and SecretaryFebruary
      29, 2008








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
            Chief
      Executive Officer and Director
            February
      29, 2008Eran
      Broshy
            (Chairman
      of the Board and Principal Executive Officer)/s/
      DAVID S BASSIN
            Chief
      Financial Officer
            February
      29, 2008David
      S Bassin
            (Principal
      Financial Officer and Principal Accounting Officer)/s/
      BLANE WALTER
            President,
      inVentiv Health
            February
      29, 2008Blane
      Walter
            (Director)/s/
      TERRELL G. HERRING
            COO,
      inVentiv Health and President and CEO, inVentiv Commercial
            February
      29, 2008Terrell
      G. Herring
            (Director)/s/
      JOHN R. HARRIS
            Director
            February
      29, 2008John
      R. Harris/s/
      MARK E.
      JENNINGS
            Director
            February
      29, 2008Mark
      E.Jennings/s/
      PER G.H.
      LOFBERG
            Director
            February
      29, 2008Per
      G.H. Lofberg/s/
      A. CLAYTON PERFALL
            Director
            February
      29, 2008A.
      Clayton Perfall/s/
      DR. CRAIG SAXTON
            Director
            February
      29, 2008Dr.
      Craig Saxton