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, 2009





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)












500
Atrium Drive; Somerset, New Jersey 08873


(Address
of Principal Executive Offices) (Zip Code)





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





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





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


(Title of Class)





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





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





Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [_]





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for shorter period that the registrant was required to submit and
post such files).    Yes [ ] No [X]





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





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





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





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








Based on
the closing sale price on the Nasdaq Global Select Market as of the last
business day of the registrant’s most recently completed second fiscal quarter,
the aggregate market value of the voting stock held by non affiliates of the
registrant was approximately $420,479,952.  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 18, 2010, there were 33,790,752 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, 2009, 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 2010
Annual Meeting of Stockholders are incorporated by reference into Part III of
this report.








TABLE
OF CONTENTS





Item
            DescriptionPART
      I1
            Business
            11A
            Risk Factors
            101B
            Unresolved Staff Comments
            172
            Properties
            173
            Legal Proceedings
            174
            Submission of Matters to a Vote of Securities
      Holders
            17PART II5
            Market for the Registrant’s Common Equity, Related
      Stockholder Matters and Issuer Purchases of Equity
      Securities
            186
            Selected Financial Data
            197
            Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
            20-357A
            Quantitative and Qualitative Disclosures About Market
      Risk
            358
            Financial Statements and Supplementary
    Data
            36-649
            Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
            649A
            Controls and Procedures
            649B
            Other Information
            65PART
      III10
            Directors, Executive Officers and Corporate
      Governance
            6611
            Executive Compensation
            6612
            Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
            6613
            Certain Relationships and Related Transactions, and
      Director Independence
            6614
            Principal Accounting Fees and
    Services
            66PART
      IV15
            Exhibits and Financial Statement
    Schedules
            66




















PART
I





Item 1.  Business.





Overview





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





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





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





Our
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.





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 segment reporting
guidance of the Financial Accounting Standards Board (“FASB”), which effective
July 2009, created the Accounting Standards Codification, (“ASC” or “the
codification”) for purposes of aggregating business units.  Financial
information about these segments for fiscal years 2009, 2008 and 2007 is
contained in “Note 18 – Segment Information” of the “Notes to Consolidated
Financial Statements” included in this report and is incorporated herein by this
reference.  The following is a detailed description of our four
operating segments:





inVentiv Clinical





inVentiv
Clinical provides professional resourcing and clinical research services to
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 full service late-stage clinical development and
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 (“Smith Hanley”), inVentiv
Clinical Solutions (“iCS”), and Paragon Rx (“Paragon”), which was acquired in
December 2009.  inVentiv Clinical's service offerings
include:




Clinical Staffing and
Recruiting.  We meet the staffing and recruiting needs of more
than 150 pharmaceutical and biotechnology clients, including 16 of the top 20
global pharmaceutical companies, for SASTM programmers, data managers,
statisticians, monitors and clinical research associates, study and project
managers, clinical trials coordinators, safety/regulatory staff, medical
writers, scientific and laboratory staff and other clinical
personnel.  Our clinical staffing services provide our clients with
flexibility in managing and executing clinical trials internally and allow them
to avoid the expense of hiring and training a full staff
internally.   We draw from a database of over 40,000 candidates
that is continually expanded through new recruiting techniques that include
search engines, job fairs, conferences and referral bonuses.
  Functional Outsourcing and
CRO Services.  We
provide a variety of functional outsourcing services as part of iCS including
data management, statistical analysis, medical writing and clinical operation
services through our dedicated facilities in Baltimore, Houston, Chicago and
Indiana. We have performed these services for over 700 clinical trial projects.
Our extensive contract staffing capabilities complement our functional and full
service outsourcing services through the identification of therapeutically and
technically aligned personnel that deliver a high-quality and flexible delivery
model that our clients require. This bi-disciplinary expertise enables us to set
up, manage and present solutions to help our pharmaceutical, biotech and medical
device clients move from the pre-clinical stage through the drug approval
process and into post-commercialization oversight. 
 Executive
Placement
  Risk
Evaluation & Mitigation Strategy(REMS) Design and
Implementation
  
 1


inVentiv Communications





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




Advertising and
Communications Support.  Advertising and communications support
services are delivered to pharmaceutical industry clients through six separate
agencies within our inVentiv Communications, Inc. subsidiary:


- 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.
- Jeffrey
  Simbrow Associates (“JSAI”) is a leading healthcare marketing and
  communications agency in Canada.
- Angela
  Liedler GmbH (“Liedler”), is a leading healthcare marketing and communications
  agency in Germany.

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


- Chandler
  Chicco Agency (“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
  Communications Group, Inc. (“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.
  Interactive
Communications.ignite Health and Incendia Health Studios (collectively, “Ignite”)
specialize in medical advertising and interactive communications targeting
patients, caregivers and healthcare professionals.
  Patient and Physician
education. We provide education and communications services to build
advocacy for pharmaceutical and biotech brands.  Our Center for
Biomedical Continuing Education business unit is an accredited provider of
continuing patient and physician education for
physicians.






2







inVentiv Commercial





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




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




inVentiv Sales Teams:
  inVentiv Sales Teams provides outsourced product commercialization programs
  for prescription pharmaceutical and other life sciences
  products.  inVentiv Sales Teams maintains and operates one of the
  largest pharmaceutical outsourced sales organizations in the United States and
  Japan, 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 one-on-one meetings in
  physicians’ offices (known as product detailing) as the primary means of
  influencing prescription writing patterns and promoting their products.
  Recruiting qualified personnel and providing client and selling skills are
  core competencies of inVentiv Selling Solutions.
        Recruiting: To accomplish a
  coordinated recruiting effort, our regionally based recruiters coordinate
  through a national recruitment office that locates and hires potential sales
  representatives. Our in-house recruiting team adheres to selective hiring
  criteria and conducts detailed evaluations to ensure high quality of
  representation for our clients. inVentiv Selling Solutions’ recruiters
  maintain a fully automated database of qualified candidates for immediate
  hiring opportunities, and our website offers an online application for
  employment. We offer these recruitment services to clients as part of an
  integrated sales force recruitment, training and management program, as well
  as on a standalone basis.  inVentiv Selling Solutions hires a mix of
  full-time and flex-time representatives in order to accommodate the detailing
  level required by clients and enhance cost
efficiency.
        Professional Development and
  Training: We have one of the largest dedicated training facilities of
  its type in the U.S.  Topics such as sample accountability,
  negotiation tactics, personal writing skills, integrity selling, time and
  territory management, team productivity and pharma-manager leadership are
  covered extensively in order to prepare the representatives for their
  interactions with medical professionals.  We provide this training
  both for our own and for our clients' sales forces and training and
  development services are essential to maintaining and building our
  relationships with pharmaceutical companies.  Our training efforts
  are further enhanced through a proprietary voice-recognition software platform
  enabling remote training practices. These strengths are widely recognized as
  distinguishing inVentiv Selling Solutions from its
  competitors.
        Regulatory Compliance
  Services: We provide independent oversight of Prescription Drug
  Marketing Act (“PDMA”) and Office of Inspector General compliance to clients
  and to internal inVentiv Sales Teams.  Our expertise in PDMA
  compliance issues is nationally recognized.  We provide a number of
  processes, systems and services to help clients comply with federal and state
  regulations specific to sample accountability, including auditing of sample
  accountability compliance by field force professionals and “whole systems”
  sample accountability assessments.  We also license software
  solutions for the implementation of sophisticated PDMA compliance
  strategies.
        Non-Personal Promotion: We
  provide warehousing, assembly, mailing, fulfillment, teleservices and
  eServices through our Promotech business unit, which was augmented
  with the acquisition of Promotech Logistics Solutions LLC ("PLS") in December
  2008.  Promotech operates east coast and west coast divisions
  and maintains three facilities:  a facility in New Jersey with
  approximately 137,000 square feet and two facilities in Colorado totaling
  approximately 190,000 square feet.  Each of these facilities
  includes an environmentally controlled, FDA and Drug Enforcement Agency
  (“DEA”) certified and PDMA compliant warehouse and office
  space.  The west coast facility includes a 64-station call
  center.
        Virtual Event Services:
  MedConference is a leading provider of live and on-demand virtual event
  services to the pharmaceutical industry.  MedConference’s flagship
  service, MedConferenceLiveTM, creates and manages live and on-demand web events
  for the healthcare industry. MedConference’s turnkey package of reliable
  technology and full-support services provides a flexible, easy-to-use online
  communication platform for pharmaceutical companies, medical education
  providers, professional medical associations and others who need to deliver
  timely information to physicians and healthcare
  practitioners.
        Sales Force Automation/Data
  Analysis:OurTotal Data Solutions
  (“TDS”) business unit collects and analyzes sales force level data necessary
  to make marketing resource allocation decisions. Sales representatives are
  equipped with an industry-leading palm-top and laptop sales force automation
  system developed for inVentiv Selling Solutions.  This system
  enables our sales representatives to rapidly collect sales call and physician
  profiling information while in the field, which is compiled daily in a central
  data storage server. Our information processing system allows sales management
  teams to analyze data regularly, compare the results with targeted initiatives
  and historical data and make necessary adjustments to the sales
  strategy.  TDS supports inVentiv Sales Teams’ needs and also offers
  this sales force automation system on a standalone basis to
  clients.


3
 
 inVentiv Advance
Insights. inVentiv Advance Insights encompasses our seven practice areas
mainly, focused on strategic and tactical planning:
  Market Research
  Practice:  This practice area provides clients with insight
  through its' qualitative and quantitative research capabilities with
  physicians, payors, and patients.  Drawing from the industry's
  largest database across these three stakeholder groups, the practice is able
  to conduct research at any point across a product's lifecycle.  The
  practice also offers unique syndicated studies in the vision care marketplace
  and on sales force promotional metrics.
              Commercial Analytics
  Practice: This practice area develops and implements advanced data
  analysis to support client decision making within pharmaceutical and
  biotechnology companies. The practice combines leading edge technology with
  advanced statistical techniques to deliver strategic and tactical insight that
  help pharmaceutical executives maximize their return on investment for
  promotional resources.
              Healthcare Strategies
  Practice:  This practice area is a consultancy specializing
  in pharmaceutical new product planning and marketing. Seasoned professionals
  bring clients proven strategic, procedural and operational expertise across
  the product lifecycle.  Examples of typical engagements include
  commercial assessments, portfolio analyses, strategic brand planning, and
  lifecycle planning.
              Marketing Partners
  Practice:  This practice area is composed of seasoned
  industry professionals who are experts in commercialization planning and plan
  implementation.  These individuals are contracted with clients to
  provide an outsourced resource to fill functional positions within a client's
  new product planning or brand management departments.  These
  resources provide clients with a flexible staffing solution, while being able
  to quickly assimilate with a client’s organization and deliver immediate
  results.
              Managed Markets Access
  Practice: This practice area has expertise in helping clients develop
  sound strategies and tactical plans that optimize access to a clients' product
  in managed markets, trade distribution channels, Medicaid, Medicare, and other
  State and Federal outlets.  The practice also provides clients with
  outsourced account directors and reimbursement
  specialists.
              Biotech/Specialty Managed Markets
  Practice:  This practice area is composed of experts in
  biotech and specialty products, and the associated challenges these products
  face in the managed markets and distribution arenas.  Similar to the
  Managed Markets Access practice, this practice deploys its' deep expertise to
  help clients optimize product access through sound strategies and tactical
  plans.
              Integrated Commercialization
  Practice:  This practice area is charged with creating and
  delivering innovative, high value client offerings built upon and powered by
  inVentiv’s capabilities and designed to drive revenue opportunities for
  inVentiv Advance Insights and inVentiv Health.  This practice
  recently launched FlightPath®, the inVentiv Health platform to help clients
  with commercialization planning and plan
  implementation.  FlightPath® is driven by the deep subject matter
  expertise within inVentiv Advance Insights and across inVentiv
  Health.  This unique platform provides an integrated and seamless
  approach to strategy development, detailed tactical planning, and
  implementation across inVentiv
  Health.





inVentiv Patient Outcomes





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




- Patient Pharmaceutical
  Compliance Programs. Through Adheris, we provide a variety of patient
  support services with a proven history of improving medication adherence
  across nearly every chronic therapeutic category.  By partnering
  with pharmacies and pharmaceutical manufacturers 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
  and web-based programs.
- Clinical Nurse Educators,
  On-Call Specialists, and Medical Science Liaison
  Programs:  TTI 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, risk assessment, wellness programs and
  pre-certification.
- Patient
  Relationship Marketing.We design, develop and implement
  patient relationship marketing services through our PMG business unit.PMG's range of capabilities includes
  direct-to-patient strategy, patient research and insights mining, relationship
  marketing campaigns, online promotion, interactive tools and provider
  integration.



4


Acquisitions





Strategic
acquisitions have been a core element of our business strategy since
2004.  While acquisitions have contributed meaningfully to our annual
growth during this period, we expect to execute fewer acquisitions going
forward.  We will continue to evaluate our strategic position and
intend to make opportunistic acquisitions that enable us to expand the scope of
our service offerings and drive shareholder value.





The
following is a summary of our acquisitions over the last three
years.  See Note 3 to our consolidated financial statements included
in Part II, Item 8 of this report for more information regarding these
acquisitions.





Acquisition
            Type of Business
            Segment
            Headquarters
      Location
            Month AcquiredParagon
            Risk
      evaluation & mitigation strategy
            inVentiv
      Clinical
            Delaware
            December
      2009PLS
            Sample
      fulfillment, direct mail and document imaging
            inVentiv
      Commercial
            New
      Jersey
            December
      2008PMG
            Patient
      relationship marketing
            inVentiv
      Patient Outcomes
            New
      Jersey
            August
      2008CCA
            Public
      relations
            inVentiv
      Communications
            New
      York
            July
      2007AWAC
            Medical
      cost containment services
            inVentiv
      Patient Outcomes
            Georgia
            July
      2007Addison
      Whitney
            Global
      branding consultancy
            inVentiv
      Communications
            North
      Carolina
            June
      2007Strategyx
            Strategic
      consulting
            inVentiv
      Commercial
            New
      Jersey
            June
      2007Ignite
            Interactive
      communications agency
            inVentiv
      Communications
            California
            March
      2007Chamberlain
            Public
      relations
            inVentiv
      Communications
            New
      York
            March
      2007








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





The
financial results of our acquired businesses are included in our consolidated
financial statements from their acquisition dates.  The periods prior
to an acquisition being completed do not include the corresponding financial
results of the acquired business.








5


International
Operations





The
following is a summary of our non-U.S. operations:





Division
            Location
            Percent
      OwnershipinVentiv
      Communications
            United
      Kingdom
            100%France
            100%Canada
            100%Germany
      (Liedler)
            100%Japan
      (Admed)
            19.9%Italy
            37.5%Germany
      (Haas and Health)
            19.9%Sweden
            15%Mexico
            100%inVentiv
      Clinical
            Brazil
            100%India
            100%inVentiv
      Commercial
            Japan
            100%Canada
            100%Puerto
      Rico
            100%





We have
an option to acquire an additional 60.1% of Haas and Health within 90 days
following calendar year 2010, and the remaining 20% for a period of 90 days
following the third anniversary of the acquisition of the 60.1% equity interest,
which occurred in December 2008.








Foreign
operations are accounted for using the functional currency of the country where
the business is located, translated to US dollars in the inVentiv Health, Inc.
consolidated financial statements.  These investments are accounted
for using various methods depending on ownership percent and control. For
investments below the 20% threshold where inVentiv does not have significant
influence, these are maintained on the cost method.  For investment
ownership that is between 20% and 50%, or in cases where a lower ownership
percentage is owned but where we exercise significant influence, we use the
equity method of accounting. For investments where we own greater than 50%
and exercise significant influence over the entities, financial results are
consolidated in our financial statements. Although the financial results of our
international operations are immaterial to the financial statements as a whole,
their existence is an important component of our continued global approach and
marketing strategy with our clients.





Clients





We
provide our services mainly to leading pharmaceutical and life sciences
companies, healthcare companies and third party administrators
(“TPA’s”).  For the years ended December 31, 2009 and 2008, no client
individually exceeded 10% of our total revenues, and we served over 350 unique
clients in 2009, while supporting over 850 client
brands.  Approximately 55% and 50% of our revenues in 2009 and 2008,
respectively, were derived from our ten largest clients, which for 2009, listed
alphabetically, were as follows: Allergan, Inc., Bristol Myers Squibb Company,
Cephalon, Inc., Eli Lilly and Company, Johnson and Johnson, Merck and Company,
Inc., Novartis Pharmaceuticals, Inc., Pfizer, Inc., the Roche Group, and
sanofi-aventis Group.





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





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





6


Competition





We
operate in highly competitive industries.  Our competitors include a
variety of vendors providing services to the pharmaceutical, life sciences and
healthcare industries, and TPA’s, 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 Smith Hanley temporary staffing business include ClinForce (a
  division of Cross Country Healthcare, Inc.), Managed Clinical Solutions (a
  division of ICON), ASG, Advanced Clinical Services, RPS, i3Pharma Resourcingand
  Kforce Inc.  Primary competitors in the permanent placement area
  include numerous smaller specialty permanent placement groups which compete
  with us, as well as to some degree larger national firms such as Korn/Ferry
  International, Russell Reynolds Associates and Heidrick & Struggles
  International, Inc.; however we are one of the only national firms that
  specializes primarily in professional clinical trials research
  personnel.  In functional outsourcing and CRO services, the
  competition ranges from small specialty organizations to global CROs such as
  Quintiles Transnational Corp. (“Quintiles”) or Covance Inc.
- inVentiv
  Communications:  Marketing and communications services is a
  relatively fragmented and competitive market.  Our Communications
  Services group competes with the healthcare offerings of the five large global
  advertising holding companies, which include WPP Group PLC, Omnicom Group
  Inc., Publicis Groupe S.A., IPG and Havas.  In addition, we compete
  with a large number of smaller specialized agencies that have focused either
  on a therapeutic area or a particular service
  offering.
- inVentiv
  Commercial:  The majority of sales teams are currently
  managed internally by our clients, and we to some degree “compete” with our
  clients' alternative choices of managing their needs internally or
  co-promoting with another pharmaceutical company.  In addition, a
  small number of providers comprise the market for outsourced sales teams, and
  we believe that inVentiv, Quintiles, Professional Detailing, Inc. and Publicis
  Groupe S.A. combined account for the majority of the U.S. outsourced sales
  team market share. The rest of the industry is fragmented, with a number of
  small providers focused on niche services.  One or more of our large
  competitors in the outsourced sales team market could become significant
  competitors with regard to the other services we offer by either developing
  additional capabilities or acquiring these capabilities.  For
  Advance Insights, our competitors include IMS Health, TargetRx, ZS Associates,
  Campbell Alliance, the large consulting companies and smaller specialized
  shops.
- inVentiv Patient
  Outcomes:  Adheris’ offerings compete with several third
  party companies that implement adherence programs , including Catalina Health
  Resources, SDI, ATEB, 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.  Franklin competes with several other
  service companies and reimbursement specialists, including Express Scripts and
  the Lash Group.  TTI competes with Innovex (a division of Quintiles) and
  several other specialty nurse educator companies.  AWAC participates in
  the payor cost containment, disease management, medical pre-certification,
  wellness services and medical data services marketplaces. While there are few,
  if any competitors that provide AWAC’s breadth of services, each of these
  marketplaces are highly fragmented, supporting multiple
  competitors.   Among the competitors for PMG are large, and smaller
  specialized, communications
agencies.



7


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 player in healthcare advertising, public relations and
  communications.  inVentiv Clinical, through its Smith Hanley
  business units, 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 Sales Teams is the leading provider of
  outsourced product detailing services in the pharmaceutical
  industry.  inVentiv Patient Outcomes is a leader in proprietary
  patient compliance programs and assistance.  Our business units have
  extensive experience and proven track records that support our business
  development efforts.
- Comprehensive Service
  Offering:  We are one of the largest providers of services to
  the pharmaceutical and life sciences industry in the U.S. and offer among the
  broadest range of services.  These are important factors to our
  clients and potential clients, many of whom prefer to work with organizations
  that can provide a comprehensive suite of complementary services and have a
  proven track record of execution.
- Broad and Diversified
  Client Base:  In addition to serving most of the largest
  pharmaceutical companies, we also serve a large number of mid-size and smaller
  biotechnology and life sciences companies.  As each of these
  companies uses our services, our relationship is expanded and the opportunity
  to cross-sell our services increases.  Our client base of over 350
  pharmaceutical and biotechnology clients is broad and diversified, and with
  many of these clients we have maintained long-term relationships that help us
  in continuing to win new business.
- Well-Recognized Trade
  Names:  We recognize that the established trade names with a
  long history possess a powerful and enduring nature that transcends general
  trade name recognition.  One of the most valuable assets to inVentiv
  is the trade names of many of our business units.  These names are a
  competitive advantage in the marketplace because they generate a favorable
  customer perception in brand name recognition in the pharmaceutical, life
  sciences and healthcare industries.  Our focus on building a
  comprehensive suite of best-in-class service providers with strong marketplace
  awareness has been a key strategy in our acquisitions.  A few
  examples of our strong brand names in their respective
  marketplaces include Smith Hanley, GSW Worldwide, Palio, Chandler
  Chicco, Chamberlain, Ignite, Adheris and
  AWAC.
- Proprietary Software
  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.  Our patient
  compliance offerings rely on a broad network of retail pharmacies and our use
  of proprietary technologies to effectively manage the large amount of
  underlying data in a timely and targeted manner.  Our medical cost
  containment business unit utilizes an electronic claims surveillance system to
  monitor medical claims data, prescriptions and pre-certification records,
  which are then reviewed by our expert physicians and case
  managers.
- Experienced Management
  Team:  Our management team includes executives with
  substantial expertise in pharmaceutical and healthcare services, as well as
  substantial background within pharmaceutical companies themselves, including
  managing pharmaceutical sales forces, establishing sales and marketing
  strategies, and product management industry experience.  The team
  also has extensive experience in the areas of outsourced staffing, permanent
  placement and executive search services.  We believe our mix of
  senior management with pharmaceutical and healthcare services experience,
  entrepreneurial talent and strategic perspective is unique in the
  industry.

Seasonality





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





Employees





At
December 31, 2009, we employed approximately 6,400 people in our
operations.  Many aspects of our business are very labor intensive and
the turnover rate of employees in our industry, and in corresponding segments of
the pharmaceutical industry, is generally high, particularly with respect to
sales force employees.  We believe our turnover rate is comparable to
that of other outsourced service organizations and that turnover in our contract
sales and communications businesses is comparable to turnover in internal
pharmaceutical sales and marketing departments.  We have no collective
bargaining agreements covering any of our employees and are unaware of any
current efforts or plans to organize any of our employees.  We believe
that our relations with our employees are satisfactory.





Government
Regulation





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





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





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





8


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





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





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





Available
Information





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


9


Item 1A.  Risk
Factors




Risks
Related to Our Business





inVentiv
Health is a multifaceted 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:





10
  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.
 
 Our
revenues are highly dependent on expenditures by companies in the pharmaceutical
industry (and, to a lesser extent, other life sciences industries) for
advertising, promotional, marketing and sales, recruiting, clinical staffing,
patient initiatives and compliance services. Any decline in aggregate demand for
these services could negatively affect these businesses.  In addition
to the current recessionary environment, the following factors, among others,
could cause such demand to decline.
  ·
              Advertising,
      promotional, marketing and sales expenditures by pharmaceutical
      manufacturers have in the past been, and could in the future be,
      negatively impacted by, among other things, governmental reform or private
      market initiatives intended to reduce the cost of pharmaceutical products
      or by governmental, medical association or pharmaceutical industry
      initiatives designed to regulate the manner in which pharmaceutical
      manufacturers promote their
products.
 ·
              Consolidation
      in the pharmaceutical industry could negatively affect certain of our
      business units by reducing overall outsourced expenditures, particularly
      in the sales, marketing and staffing
areas.
 ·
              Companies
      may elect to perform advertising, promotional, marketing, sales,
      compliance and other services internally based on industry and
      company-specific factors such as the rate of new product development and
      FDA approval of those products, number of sales representatives employed
      internally in relation to demand for or the need to promote new and
      existing products and competition from other
  suppliers.
 ·
              Companies
      may elect to perform clinical tasks internally based on industry and
      company-specific factors such as the rate of new product development and
      FDA approval of those products, the number of clinical professionals
      employed internally in relation to the demand for or the need to develop
      new drug candidates, and competition from other
  suppliers.
  AWAC
has not yet deeply penetrated the medical payor marketplace, particularly the
third party administrator marketplace. Furthermore, any decline in aggregate
demand for medical cost containment services could negatively affect AWAC's
business.  Consolidation among AWAC's customer base could negatively
affect AWAC by reducing overall outsourced expenditures in the medical cost
containment area.  Furthermore, companies may elect to perform medical
cost containment services internally based on industry and company-specific
factors, including competition from other suppliers.
 
 Many
of the contracts under which we provide services are subject to termination on
short notice, which may make our revenues less predictable.
 
 We
provide services to many of our most significant clients under contracts that
our clients may cancel on short notice (generally 10 to 120 days, depending on
the specific business unit).  In addition, many of our pharmaceutical
sales contracts provide our clients with the opportunity to internalize the
sales forces under contract.  Although we have been successful in a
number of cases in negotiating longer-term commitments and a non-cancelable
initial period for pharmaceutical sales contracts, we cannot be assured that
clients will renew relationships beyond the expiration date of existing
contracts in any of our business units.  Furthermore, while we have
been successful in originating new business opportunities and in replacing
revenues attributable to contracts that are terminated or not renewed, our stock
price may fluctuate significantly in response to announcements of contract
terminations or nonrenewals.
 
 Substantial
defaults by our customers on our accounts receivable could have a significant
negative impact on our business, results of operations, financial condition or
liquidity.
 A
significant portion of our working capital consists of accounts and unbilled
receivable from customers.  Certain customers, such as start-ups and
undercapitalized companies in the biotechnology industry, may experience
difficulties in obtaining capital given the current credit
environment.  If customers responsible for a significant amount of
accounts and unbilled receivable were to become insolvent or otherwise unable to
pay for products and services, or were to become unwilling or unable to make
payments in a timely manner, our business, consolidated results of operations,
consolidated financial position or liquidity could be materially and adversely
affected.
  In
the event of an economic or industry downturn, such downturn could have an
adverse effect on the servicing of these accounts receivable, which could result
in longer payment cycles, increased collection costs and defaults in excess of
management’s expectations, particularly in relation to smaller or more thinly
capitalized clients.  Without limitation, current recessionary
economic conditions in the U.S. and disruptions in the credit market could cause
a delay in collection or defaults, including as a result of declines in the
creditworthiness of our customers, business failures and increased conservatism
in our customers' cash management strategies.
 
 
 Pricing pressures
on pharmaceutical manufacturers from future health care reform initiatives or
from changes in the reimbursement policies of third party payers may negatively
impact our business.
 
 Most
of our revenues are generated from customers whose businesses are involved in
the manufacture and commercialization of pharmaceutical
products.  Sales of pharmaceutical products are dependent, in large
part, on the availability and extent of reimbursement from government health
administration authorities, private health insurers and other
organizations.  Changes in government regulations or private
third-party payors’ reimbursement policies may reduce reimbursement for
pharmaceutical products and adversely affect demand for our services, resulting
in a material adverse impact on our revenues and
profitability.
  Recent
legislative activity in the United States related to healthcare reform, at both
the federal and state levels, raises significant uncertainties for all
businesses and could have a material adverse effect on inVentiv and its
customers.  Congress is considering legislation to reform the U.S.
healthcare system by reducing the number of uninsured and underinsured
individuals and making other changes. Similar reform movements have occurred in
Europe and Asia.  While healthcare reform may increase the number of
patients who have insurance coverage for pharmaceutical products, it may also
include changes that adversely affect our clients' business, including by
limiting reimbursement for pharmaceutical products, increasing rebates required
from manufacturers whose drugs are covered by Medicare and Medicaid programs,
facilitating the importation of lower-cost prescription drugs that are marketed
outside the United States or by other means.  This could adversely
affect research and development and commercialization expenditures by
pharmaceutical and biotechnology companies which could in turn decrease the size
and profitability of the business opportunities available to us in both the
United States and abroad.  In addition, new laws or regulations may
create a risk of liability or otherwise increase our costs.  The
pricing of certain services provided by inVentiv Patient Outcomes is potentially
subject to reasonableness review under recently enacted federal stimulus
legislation.
  Managed
care organizations continue to seek price discounts and, in some cases, to
impose restrictions on the coverage of particular drugs.  Government
efforts to reduce Medicaid expenses may lead to increased use of managed care
organizations by Medicaid programs. This may result in managed care
organizations influencing prescription decisions for a larger segment of the
population and a corresponding constraint on prices and reimbursement for
pharmaceutical products.
  
  11
  We are in the
process of integrating certain acquisitions and expect to make future
acquisitions, which will involve additional risks
   For
the past several years, a significant component of our growth strategy has been
the addition through acquisitions of business units.  We have and will
continue to seek to address the need to offer additional services through
acquisitions of other companies, including the personnel such acquisitions may
bring to us, although we expect to execute fewer acquisitions going
forward.
   Operational
and financial integration of our acquired businesses are 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; incur income statement
fluctuations due to future period changes in earnouts for companies acquired
after the adoption of ASC 805 updated guidance for acquisitions on January 1,
2009;  or become subject to litigation.
  Mergers
and acquisitions of new businesses are inherently risky, and no assurance can be
given that our previous or future acquisitions will be successful and will not
materially and adversely affect our business, operating results, or financial
condition. Failure to manage and successfully integrate acquisitions we make
could harm our operational and consolidated financial condition and results of
operations in a material way.
  Our
future revenues may be affected by consolidation in the pharmaceutical
industry
  Due
to a variety of factors in the pharmaceutical industry, our clients could
potentially merge with another company or be acquired.  A merger may
result in a consolidation of outsourced or marketing services where inVentiv
services may no longer be required by the client.  At the same time, a
client merger may present inVentiv an opportunity to expand its relationship
with the client and provide additional services.
  We
have experienced an increased rate of medical reimbursement claims during 2009,
and if the increased rate of claims is sustained or increases, our business
could be adversely affected.
  We
are largely self-insured for employee healthcare benefits other than
catastrophic coverage.  During 2009, we have experienced higher than
anticipated costs of providing employee healthcare
benefits.  Specifically, we have experienced higher occurrences of
individually large medical and prescription drug claims.  Although we
believe that employees may be incurring higher medical claims as a result of
current economic conditions, we have not been able to directly determine the
reason for the increased claims rate.  If the increased claims rate is
sustained or increases, it could materially and adversely impact on our
financial condition and results of operations.
  We
are dependent on vendors providing goods and services that are critical to
certain of our business units, and if such vendors were to cease providing goods
and services to us for any reason, we might have difficulty replacing
them.
  We
are dependent on third party vendors for components of the services provided to
customers by some of our business units.  Certain of these vendors are
sole source vendors or have high switching costs associated with
them.  If any such vendor were to fail to provide goods and services
to us on a timely basis, the corresponding client services provided by our
business units could be interrupted.  A delay in or disruption of
client services could lead to the loss of the client, the incurrence of
contractual penalties, exposure to damages claims and/or an adverse impact on
our reputation and accordingly could materially and adversely impact on our
financial condition and results of operations.
  
 U.S.
recessionary conditions have affected and are continuing to affect our
business.
 
 The
U.S. is in the most significant economic downturn in at least several
decades.  Sustained downturns or sluggishness in the U.S. economy
generally affect the markets in which we operate.  Customers in
certain of our businesses are reducing marketing expenditures, delaying
decisions on new marketing initiatives and/or shifting their outsourced service
activities to areas that represent lower margin business from inVentiv's
perspective.  The U.S. recession will likely continue to have a
significant adverse impact on our clients and our business for the next several
years.
  Recent
disruptions in the credit markets may negatively impact our liquidity and our
ability to obtain financing, and may increase our financing costs.
  We
have a $50 million working capital line under our secured credit facility that
provides us with a source of liquidity beyond cash generated from
operations.  If one of our lenders suffers liquidity issues, we may be
unable to access these anticipated sources of liquidity if and when they are
required.  The continuing weakness in the credit market could
negatively impact our ability to obtain additional sources of
financing.  An impairment of our access to credit facilities when
required could have a material adverse effect on our ability to execute our
operating strategy, and could also prevent us from executing our acquisition
strategy or taking advantage of other business expansion
opportunities.  Furthermore, to the extent the counterparties to our
interest rate swap agreements suffer liquidity issues, we could be exposed to
interest rate risk that is intended to be eliminated by our hedging
arrangements.
  
 12
 Certain
of our customer contracts contain fixed price components that are not subject to
adjustment in the short term and expose us to pricing risk.
 
  Under
the terms of certain of our customer agreements, we charge clients on a fixed
price basis based on our cost estimates at the beginning of the contract
term.  Although we seek to adjust these costs as contracts are
renewed, we are subject to pricing risk on fixed cost items for the duration of
the contracts under which they are provided.  If the costs to us of
providing fixed priced items increases, we may be exposed to reduced profits, or
losses, under the relevant agreements, which could have a material adverse
effect on our consolidated financial condition and results of
operations.
  
 Inflation
may adversely affect our business operations in the future.
 
 Inflationary
conditions in the economy could increase our cost base, particularly resulting
in an increase in the commissions and compensation and benefits components of
our cost of services and SG&A expenses. This may harm our margins and
profitability if we are unable to increase prices or cut costs enough to offset
the effects of inflation in our cost base.
 
 
 We may experience writedowns of our
goodwill or other intangible assets.
 
 We
are exposed to the risk that writedowns of our goodwill, instruments or other
intangible assets could be required as a result of volatile and/or illiquid
market conditions or for other reasons.  Any such writedown would
negatively affect our results of operations.   A write-down in
goodwill or other intangible assets could be necessitated if, among other
things, there is a decline in the trading price of our common stock based on
general market conditions or factors specific to us or the industries in which
we operate. During 2008, we recorded a non-cash pre-tax goodwill and other
intangible assets impairment charge of approximately $268 million, which was
primarily related to adverse economic and equity market conditions that caused a
decrease in the current marketplace and related multiples and our stock price as
of December 31, 2008 compared to the test performed as of June 30,
2008.  The Company has performed an assessment as of June 30, 2009 and
concluded that goodwill and other indefinite-life intangibles were not impaired
as of that date.
  In
addition, market volatility may complicate the valuation of certain of our
securities.  We recorded a $2.6 million impairment charge related to
our marketable securities during 2008 as a result of fluctuation in the value of
our investment in the Columbia Strategic Cash Portfolio (the "CSCP"), and
although we did not recognize additional writedowns of the CSCP portfolio during
2009, we may experience other securities impairments in the
future.  Moreover, valuations may change significantly in subsequent
periods based on factors then prevailing.  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.  Furthermore, given our
significant amount of cash reserves, we could have further writedowns or
illiquid positions if banks were to fail.
  Any
of these factors could require us to take further writedowns in the value of our
goodwill, other intangibles and securities portfolio, which may have an adverse
effect on our results of operations in future periods.
 
 
 
 We
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 software and databases 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 software and
databases and have focused on the application of this technology to provide
customized solutions to meet many of our clients' needs.  We
anticipate that it will be necessary to continue to select, invest in and
develop new and enhanced software, end-user databases and other technology 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.
 13
 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
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.
 
 
 We
may be adversely affected by customer concentration.
 
 Our
largest customer during 2009 accounted for 9% of revenues and  our top
10 customers account for 55% of our revenue.  If any large customer
decreases or terminates its relationship with us, our business and consolidated
financial position and results of operations could be materially adversely
affected.
 
 We
may lose or fail to attract and retain key employees and management
personnel.
 
 Our
key managerial and other employees are among our most important assets. An
important aspect of our competitiveness is our ability to attract and retain key
employees and management personnel.  A significant aspect of our
acquisition strategy is the retention of key employees of target companies for
significant periods of time.  The loss of the services of any key
executive for any reason could have a material adverse effect upon the
Company.
 
 Compensation
for key employees and management personnel is an essential factor in attracting
and retaining them, and there can be no assurance that we will offer a level of
compensation sufficient to do so.  Equity-based compensation in the
form of  restricted stock, and to a lesser extent, options, 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.
 We
may incur liability in connection with litigation.
 
 We
are subject to lawsuits, investigations and claims arising out of the conduct of
our business, including those related to commercial transactions, contracts,
government regulation and employment matters.  Certain claims, suits
and complaints have been or may in the future be filed against us as described
under "Legal Proceedings" in Part I, Item 3 below.  Litigation is
inherently uncertain and we cannot assure you that we will not suffer a
material, adverse effect as a consequence of any pending or future
claims.  Moreover, new or adverse developments in existing litigation
claims or legal proceedings involving us could require us to establish or
increase litigation reserves.
  We
have been and may in the future become a party to legal actions related to the
design and management of our service offerings, including, among others,
privacy-based actions and contract disputes.  Adheris was the subject
of a recently settled action asserting, among other claims, violation of the
California Confidentiality of Medical Information Act and has had asserted
against it in the past other claims based on purported violations of privacy
statutes and common law arising from its patient refill reminder
programs.  PRS was the subject of an indemnification claim based on a
recently settled action asserting, among other claims, violation of the
Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention
Act of 2005.  Although it has not been the subject of litigation to
date, AWAC could become the subject of medical malpractice claims based on the
design and management of its service offerings.  Adheris, PRS and AWAC
each maintain errors and omissions insurance and other traditional business
coverage.  AWAC does not insure for medical malpractice since it does
not deem itself to be practicing medicine.  Although we believe that
all of our businesses are adequately insured, certain types of claims, such as
punitive damages, are not covered by insurance.
  We
could face substantial product liability claims in the event any of the
pharmaceutical or other products we have previously marketed or market now or
may in the future market are alleged to cause negative reactions or adverse side
effects or in the event any of these products causes injury, is alleged to be
unsuitable for its intended purpose or is alleged to be otherwise defective. We
rely on contractual indemnification provisions with our customers to protect us
against certain product liability related claims. There is no assurance that
these provisions will be fully enforceable, that the parties providing
indemnification will have the financial resources to satisfy an indemnification
claim or that these indemnification provisions will otherwise provide adequate
protection against claims intended to be covered.
  We
could face liability for drug samples that we distribute to physicians or for
drug samples that we dispense to patients which are alleged to be adulterated or
misbranded, to have been negligently dispensed, to cause negative reactions or
adverse side effects or in the event any of these products causes injury, is
alleged to be unsuitable for its intended purpose or is alleged to be otherwise
defective.
 
 
 14
 We
may not be able to comply with the requirements of our credit
facility.
 
 We
are party to 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 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 July 6, 2014, with scheduled quarterly amortization of 1%
per year until the final year of the Amended and Restated Credit Agreement,
during which 94% of the term loan is to be repaid.  The revolving
loans will mature July 6, 2013.  Amounts advanced under the credit
facility must be prepaid with a portion of our "Excess Cash Flow", as defined in
the credit agreement.  The credit facility contains numerous operating
covenants that have the effect of reducing management's discretion in operating
our businesses, including covenants limiting:
 
 ·
              the
      incurrence of indebtedness;
 
 ·
              the
      creation of liens on our assets;
 
 ·
              sale-leaseback
      transactions;
 
 ·
              repurchase
      of company shares;
 
 ·
              acquisitions;
 
 ·
              guarantees;
 
 ·
              payment
      of dividends; and
 
 ·
              fundamental
      changes and transactions with
affiliates.
 
 The
Amended and Restated Credit Agreement also includes a financial covenant under
which inVentiv is required to maintain a total leverage ratio that does not
exceed, as of the last day of any four consecutive fiscal quarters, 3.5 to 1.0
commencing with our 2010 fiscal year.  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 targets.
 
 From
time to time, we communicate to the market targets 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 targets 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 targets. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Cautionary
Statement Regarding Forward-Looking Disclosure" below.
 
  The
inability to generate sufficient cash flows to support operations and other
activities could prevent future growth and success.
   Our
inability to generate sufficient cash flows to support capital expansion,
business acquisition plans and general operating activities could negatively
affect our operations and prevent our expansion into existing and new
markets.  Our ability to generate cash flows is dependent in part upon
obtaining necessary financing at favorable interest rates. Interest rate
fluctuations and other capital market conditions may prevent us from doing
so.
   15


Risks Related to our Common
Stock








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





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




variations
  in operating results;
        the
  gain or loss of significant customers or suppliers;
        announcements
  relating to our acquisition of other
businesses;
        changes
  in the estimates of our operating results or downward variances in operating
  results as compared to guidance;
        changes
  in recommendations by any securities analysts that elect to follow our common
  stock; and
        changes
  in regulations that impact our service offerings;
  and
        market
  conditions in our industry, the industries of our customers and our suppliers
  and the economy as a
  whole.





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




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






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







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








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




limitations
  on the ability of our shareholders to call a special meeting of
  shareholders;
        our
  ability to issue additional shares of our common stock without shareholder
  approval;
        our
  ability to issue preferred stock with voting or conversion rights that
  adversely affect the voting or other rights of holders of common stock without
  their approval;
        provisions
  that provide that vacancies on the board of directors, including any vacancy
  resulting from an expansion of the board, may be filled by a vote of the
  directors in office at the time of the vacancy;
  and
        advance
  notice requirements for raising matters of business or making nominations at
  shareholders’
meetings.


16


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 18, 2010, we had
33,790,752 shares of common stock outstanding.  Of these shares, a
total of approximately 17,813 shares were subject to contractual resale
restrictions under acquisition agreements and will become eligible for sale over
the next several years.  Shares issued in future acquisitions, and
shares issued in satisfaction of earnout obligations under completed
acquisitions, may add substantially to the number of shares available for future
sale.





In addition, as of February 18, 2010,
approximately 1,949,513 shares of our common stock were subject to outstanding
stock options.  Holders of our stock options are likely to exercise
them, if ever, at a time when we otherwise could obtain a price for the sale of
our securities that is higher than the exercise price per security of the
options or warrants.  This exercise, or the possibility of this
exercise, may reduce the price of our common stock.







Item 1B.Unresolved Staff
Comments






We have received no written comments
regarding our periodic or current reports from the Staff of the Securities and
Exchange Commission that were issued 180 days or more preceding the end of
our 2009 fiscal year that remain unresolved.









Item 2.  Properties





As of
December 31, 2009, we leased 46 office facilities totaling 1,099,179 square
feet, including our principal executive offices located in Somerset, New Jersey
and our principal businessesare
located in New Jersey, Ohio, and Texas.Nine facilities
totaling 105,428 square feet are leased by the inVentiv Clinical segment, 26
facilities totaling 416,144 square feet are leased by the inVentiv
Communications segment, eight facilities totaling 519,566 square feet are leased
by the inVentiv Commercial segment, and three facilities totaling 58,041 square
feet are leased by the inVentiv Patient Outcomes segment.  We believe
that our facilities are adequate for our present and reasonably anticipated
business requirements.





Item 3.  Legal
Proceedings.





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.  We do not believe that any
such 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, 2009.


17


PART II





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





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





High
            
            
            LowYear
      ended December 31, 2009First
      Quarter
            
            $
            12.47
            
            
            $
            6.74Second
      Quarter
            
            $
            13.65
            
            
            $
            7.60Third
      Quarter
            
            $
            17.49
            
            
            $
            12.95Fourth
      Quarter
            
            $
            18.53
            
            
            $
            15.79High
            
            
            LowYear
      ended December 31, 2008First
      Quarter
            
            $
            34.00
            
            
            $
            27.78Second
      Quarter
            
            $
            35.70
            
            
            $
            26.99Third
      Quarter
            
            $
            28.39
            
            
            $
            16.79Fourth
      Quarter
            
            $
            17.53
            
            
            $
            8.49





On
February 18, 2010, there were approximately 229 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 2009, 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.





During the fourth quarter of 2009, we
issued 17,813 shares of common stock to Paragon Rx LLC (the predecessor to our
entity of the same name) ("Old Paragon") upon the closing under the Paragon Rx
acquisition agreement.  The Paragon acquisition agreement permits a
portion of the earnout payments thereunder to be satisfied in additional shares
of common stock.  When issued, the common stock to be issued pursuant
to Old Paragon will be exempt from registration pursuant to either
Regulation D or Section 4(2) of the Securities Act of 1933, as
amended.  There was no general solicitation or advertising, the number
of recipients of such unregistered shares was limited and such recipients were
accredited and/or sophisticated.





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







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






The
performance graph required by Regulation S-K Item 201(e) will be set forth in
our annual report to security holders for the fiscal year ended December 31,
2009 and is incorporated herein by this reference.




18





Item 6.  Selected Financial
Data.





SELECTED
FINANCIAL DATA





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





For
      the Years Ended December 31,2009
            
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005(in
      thousands, except per share data)Revenues
            
            $
            1,071,961
            
            
            $
            1,119,812
            
            
            $
            977,300
            
            
            $
            766,245
            
            
            $
            556,312Impairment
      of goodwill and other intangible assets
            
            
            --
            
            
            $
            (267,849
            )
            
            
            --
            
            
            
            --
            
            
            
            --Income
      (loss) from continuing operations
            
            $
            47,683
            
            
            $
            (127,539
            )
            
            $
            48,296
            
            
            $
            50,405
            
            
            $
            43,306Income
      from discontinued operations
            
            
            --
            
            
            $
            664
            
            
            $
            258
            
            
            $
            2,037
            
            
            $
            781Income
      attributable to the noncontrolling interest
            
            $
            (812
            )
            
            $
            (1,146
            )
            
            $
            (1,070
            )
            
            $
            (1,207
            )
            
            $
            (224
            )Net
      income (loss) attributable to inVentiv Health, Inc.
            
            $
            46,871
            
            
            $
            (128,021
            )
            
            $
            47,484
            
            
            $
            51,235
            
            
            $
            43,863Basic
      earnings (loss) per share:Continuing
      operations
            
            $
            1.40
            
            
            $
            (3.89
            )
            
            $
            1.50
            
            
            $
            1.69
            
            
            $
            1.60Discontinued
      operations
            
            
            --
            
            
            $
            0.02
            
            
            $
            0.00
            
            
            $
            0.07
            
            
            $
            0.03Basic
      earnings (loss) per share
            
            $
            1.40
            
            
            $
            (3.87
            )
            
            $
            1.50
            
            
            $
            1.76
            
            
            $
            1.63Diluted
      earnings (loss) per share:Continuing
      operations
            
            $
            1.39
            
            
            $
            (3.89
            )
            
            $
            1.46
            
            
            $
            1.64
            
            
            $
            1.53Discontinued
      operations
            
            
            --
            
            
            $
            0.02
            
            
            $
            0.01
            
            
            $
            0.06
            
            
            $
            0.03Diluted
      earnings (loss) per share
            
            $
            1.39
            
            
            $
            (3.87
            )
            
            $
            1.47
            
            
            $
            1.70
            
            
            $
            1.56Shares
      used in computing basic earnings (loss) per share
            
            
            33,502
            
            
            
            33,043
            
            
            
            31,578
            
            
            
            29,159
            
            
            
            26,875Shares
      used in computing diluted earnings (loss) per share
            
            
            33,798
            
            
            
            33,043
            
            
            
            32,267
            
            
            
            30,058
            
            
            
            28,165Balance
      sheet data:Total
      assets
            
            $
            1,029,963
            
            
            $
            973,116
            
            
            $
            1,110,856
            
            
            $
            771,054
            
            
            $
            583,894Long-term
      debt (a)
            
            $
            332,530
            
            
            $
            346,838
            
            
            $
            345,995
            
            
            $
            184,717
            
            
            $
            190,508Total
      equity
            
            $
            429,253
            
            
            $
            367,644
            
            
            $
            477,626
            
            
            $
            358,577
            
            
            $
            253,215




Long-term
debt includes the non-current portion of our credit arrangement and capital
lease obligations, but excludes the current portion of our credit agreement and
capital lease obligations.




19


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




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





Overview





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





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





We were
incorporated in Delaware in 1999.





Business
Segments





We
currently serve our clients primarily through four business segments, which
correspond to our reporting segments for 2009:




- inVentiv Clinical,
  which provides professional resourcing and services to 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 and CRO services
  in various areas, including clinical operations, medical affairs and
  biometrics/data management.   inVentiv Clinical consists of the
  Smith Hanley group of companies, “iCS” and Paragon;
- inVentiv
  Communications, which provides services related to pharmaceutical
  advertising, branding, public relations, interactive communications and
  physician education.  This segment includes inVentiv Communications,
  Inc., JSAI, Ignite, Chamberlain, Addison Whitney, Liedler and
  CCA;
- inVentiv
  Commercial, which consists of our outsourced sales and marketing teams,
  planning and analytics services, sample accountability services, marketing
  support services, professional development and training, and recruitment of
  sales representatives in the commercial services area.  This segment
  includes Advance Insights and inVentiv Selling Solutions;
  and
- inVentiv Patient
  Outcomes,  which provides services related to patient
  pharmaceutical compliance programs, patient support programs, clinical
  educator teams, medical cost containment and consulting solutions and patient
  relationship marketing.  This segment includes Adheris, Franklin,
  TTI, AWAC and PMG.

Material
Trends Affecting our Business





Our
business is related significantly to the research and development efforts of
pharmaceutical and biotechnology companies and the degree to which
pharmaceutical companies outsource services that have traditionally been
performed internally by fully integrated manufacturers.  Although the
pharmaceutical industry is generally regarded as non-cyclical, the current
recessionary environment has impacted virtually all economic activity in the
United States and abroad, including in the pharmaceutical and life sciences
industry. Furthermore, increased competition as a result of patent expirations,
market acceptance of generic drugs  and governmental and privately
managed care organization efforts to reduce healthcare costs have also added to
drug pricing pressures.  Our clients continue to make efforts to
significantly reduce expenditures in all areas of their businesses, resulting in
increased budget scrutiny.  The pharmaceutical industry as a whole is
responding by consolidating.





20


These
circumstances present both risks and opportunities for inVentiv.  We
aggressively pursue opportunities to enhance our business and market share with
clients who seek the efficiencies and cost savings that can be attained by
consolidating their outsourcing programs with a smaller number of high quality
providers, and we believe that these opportunities will continue.  In
the longer term, we believe the pressures on our customers to reduce unit costs
are likely to drive decisions to outsource a greater scope of commercialization
services and a concomitant increase in the overall size of the markets in which
we operate.  Our clients already appear to be adopting strategies to
outsource more of their pharmaceutical marketing expenditures with select,
sophisticated providers who are capable of delivering lower cost and more
flexible solutions consistent with the service capabilities that inVentiv
offers.  Our approach to creating integrated, multi-service offerings
is a significant area of opportunity in the future.  In addition, the
pharmaceutical industry is increasingly investing in commercialization solutions
that drive patient adherence and loyalty to branded prescription products, and
improve health outcomes.  We believe that our Patient Outcomes
division is a market leader in terms of expertise and a breadth of
patient-centric services and is well positioned to benefit from this market
development.





Our
clients are intently focused on their short-term spending and cost-cutting
efforts, and are continuing to look for ways to streamline their
operations.  Our business was affected during 2009 by the
tentativeness of clients to make outsourcing expenditure
decisions.  Although we have seen evidence in recent months that our
clients’ expenditures with certain of our business units are stabilizing,
current economic conditions present continuing challenges and make it difficult
for us to predict client marketing spend levels.  Delays in FDA
approval of drug candidates also impact our clients from time to time and can
lead to unanticipated reduction or deferral of outside marketing
spend.





Management
is addressing the challenges of the current environment by taking steps to
reduce fixed costs and create more flexibility in our cost structure, maximize
and conserve strong cash flow and be in a position to pay down debt or acquire
businesses over time.  Cost management strategies employed by
management include:




- reducing
  fixed cost headcount;
- our "in
  balance" staffing initiative, through which we have converted FTE's to hourly
  positions that can be billed in direct response to the requirements of our
  client engagements;
- completion
  during the first quarter of 2009 of our "super studio" in Columbus, Ohio,
  which has increased utilization and efficiency by allowing the management
  of project-based graphic design and production needs for agencies across the
  inVentiv Communications division;
- negotiation
  of favorable rates with our vendors;
- ongoing
  implementation of our Peoplesoft software to manage enterprise-wide resources;
  and
- consolidation
  of certain facilities and
  operations.

We
believe that these steps will allow inVentiv to provide competitive pricing to
its clients and to improve margins.





Pharmaceutical
industry consolidation is likely to make more pronounced both the downside risks
and the upside opportunities for providers of outsourced commercialization
services.  To date, although there have been isolated instances in
which a program or relationship has been eliminated or reduced following a
business combination involving one or more existing clients, we do not believe
we have been materially impacted by consolidation.  The concentration
of business with our largest clients has increased slightly in recent years,
while the total number of clients and functional areas we cover has expanded
substantially.





Our
business has also been affected by the difficult financing environment that is
currently faced by biotechnology clients, particularly those that do not yet
have any products approved for commercialization.  The financing
challenges in the biotechnology market and the resulting impact on the liquidity
of individual biotechnology companies affect the number of projects our clients
in this segment can initiate, the amount available to be budgeted for the
services we provide and may impact the quality of receivables generated in terms
of both aging and ultimate collectability.





Finally,
in 2009, our medical insurance claims experience increased, mainly due to higher
occurrences of individually large medical and prescription drug
claims.  Since we are self-insured to a significant degree,
continuance of these trends could result in a material adverse impact on our
financial condition and results of operations.  During the years ended
December 31, 2009 and 2008, the Company incurred approximately $29.5
million and $26.4 million in medical costs, respectively.





21


Regulatory Uncertainty





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





Although
delays in FDA approvals have negatively impacted the pharmaceutical industry,
and indirectly inVentiv, the new product pipeline in the industry remains
strong, with many late-stage products awaiting FDA approval.  Even if
the FDA approval rate does not improve, we believe that the number of products
to be submitted for and awaiting approval, and the requirement for
pharmaceutical manufacturers to support these products as they reach
commercialization, represents an opportunity over the medium to longer-term for
inVentiv to capture increasing levels of outsourced services engagements. As a
result of our deep and long-standing relationships with our clients, we believe
that we are well positioned to capture these opportunities.





Business
Strategy





Although
certain areas of our business slowed during early 2009 as a result of the
current trends discussed above, our businesses have generated strong overall
revenue growth for the past several years.  Our organic revenue growth
reflects our strong track record in winning new business, which in turn is
enhanced by our pursuit of cross-servicing opportunities within and across our
business segments.  Our revenues are generally received under
contracts with limited terms that can be terminated at the client’s option on
short notice.  We have been successful historically in obtaining
increasing amounts of repeat business from many of our clients and in expanding
the scope of the services we provide to them and thereby sustaining multi-year
relationships with many of our clients.  When relationships do not
renew, we have been successful in redeploying personnel quickly and
efficiently.





Strategic
acquisitions have been a core element of our business strategy since
2004.  We expect to execute fewer acquisitions going
forward.  We will continue to evaluate our strategic position and
intend to make opportunistic acquisitions that enable us to expand the scope of
our service offerings and drive shareholder value.





Our
acquisitions are accounted for using purchase accounting and the financial
results of the acquired businesses are included in our consolidated financial
statements from their acquisition dates.  A prior year period that
ended before an acquisition was completed, however, will not include the
corresponding financial results of the acquired business.  The
acquisition of Paragon Rx was consummated on December 31, 2009; as such, our
financial results do not reflect any revenues from this acquisition during
2009.





During
2009, we established inVentiv Japan, a business unit within inVentiv Selling
Solutions.We
believe the potential opportunity in Japan is significant based on the total
number of Japanese representatives, labor laws that could encourage outsourcing,
the competitive landscape, and a significant number of drugs that are expected
to enter the Japanese market in the coming years.





Earnout
Obligations Related to Completed Acquisitions





The terms
of most of our completed acquisitions include the opportunity for the sellers to
receive contingent earnout consideration based on the performance of the
acquired businesses.  The terms of the acquisition agreements
generally include multiple earnout periods or a multi-year earnout
period.  Earnout obligations under certain of our acquisitions have
not yet been completed.   The acquisitions  consummated
prior to January 1, 2009 fall under the guidance of ASC 805, excluding the
requirements of contingent consideration for acquisitions made after January 1,
2009.  As such, we accrue the earnout obligations for these
acquisitions at the end of an earnout period when the contingency is resolved
and additional consideration is distributable for these
acquisitions.  These earnout obligations have been,
and may be, material in amount and represent a significant use of
cash for the periods in which they are earned or paid.  Based on the
performance of the applicable business units to date and our projections of
the financial performance of such business units for the remainder of the
applicable earnout periods, we project that our use of cash and equity in
satisfaction of earnout obligations during 2009 and payable in 2010 is
approximately $41.5 million.  Such payout amounts are subject to
variability and could vary significantly based on the actual performance of the
acquired businesses.





Earnout
obligations for acquisitions consummated after January 1, 2009 are initially
recorded as part of the purchase price at the estimated fair value at the date
of acquisition in accordance with the updated guidance of ASC 805.Any subsequent
changes in the earnout amounts expected to be paid in future years will not be
adjustments to purchase accounting, but will be recorded as a gain or loss in
the respective periods and will result in fluctuations in our Consolidated
Statements of Operations.





22


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 and
  CRO Services- Revenues are recognized and recorded under the
  proportional performance method.  Certain contracts are also
  recognized and recorded when services are rendered.
- 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.
- REMS- Revenues are expected
  to be recognized and recorded under the proportional performance
  method.

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 proportional performance method, depending on the
  terms of the specific
  contracts.

inVentiv
Commercial




inVentiv Selling Solutions




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

Our inVentiv
Sales 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 Sales
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
the revenue recognition guidance applicable to multiple deliverable
arrangements,in which
we have concluded that the deployment and promotion phases are being sold
separately and therefore qualify as separate units of accounting.




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 fee 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 on a
  straight-line basis.  For certain analytics projects, revenues are
  recognized upon
  completion.




23


inVentiv
Advance Insights




- Planning
  and Analytics- Revenues for Advance Insights 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.  Advance Insights 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.  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 program revenues depend on the number of
  patients served and are recognized and recorded as each service is
  performed.
- Clinical Nurse Educators,
  On-Call Specialists, and Medical Science Liaison Programs- Revenue
  recognition is the same as inVentiv Sales Teams, as the two services are
  similar in the business arrangement and fee
  structure.
- Medical Cost Containment
  and Consulting Solutions- The majority of revenues are recognized on a
  completed contract basis, based on an analysis of claims as a percentage of
  savings realized by our clients.  Certain services are performed on
  a fee-for-services basis and recognized when the service is
  rendered.
- Patient Relationship
  Marketing- Revenues are recognized and recorded as time and production
  billings are billed as incurred for actual time and
  expenses.

General Revenue
Recognition





Reimbursable
Costs


Reimbursable
costs, including those relating to travel and out-of pocket expenses, sales
force bonuses tied to individual or product revenues, and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable
expenses is included in costs of services in the period in which such amounts
have been finalized.  In certain cases, based on our analysis of ASC
605 in regards to reimbursable revenues, 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 2009, 2008
or 2007.




Billing


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




24


Goodwill
and Other Intangible Assets




Goodwill
and other indefinite-life intangibles are assessed for potential impairment
pursuant to the guidelines of ASC 350on 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.  Goodwill is tested for
impairment at least annually using a two-step process that begins with an
estimation of the fair value of a reporting unit.  The first step is a
screen for potential impairment, and the second step measures the amount of
impairment, if any.  We calculate and compare the fair value of each
reporting unit to its carrying value.  If the carrying value exceeds
the fair value, an impairment loss will be recognized in an amount equal to the
difference.




The
Company performed annual impairment tests as of June 30, 2008 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired.  The Company's declining stock price during the fourth
quarter of 2008 resulted in a market capitalization that was well below the book
value of the Company.  This was due to a combination of declining
market conditions and lower than expected operating results for certain
businesses.  As such, the Company conducted an interim impairment test
during the fourth quarter of 2008, resulting in the following impairment
charges:





(in
      thousands)
            2008
              ImpairmentGoodwill
            $212,638Intangible assets:Customer
      relationships
            5,605Tradenames
            25,833Technology
            23,773Total
      Impairment
            $267,849





We
performed annual impairment tests as of June 30, 2009 and concluded that the
existing goodwill and indefinite lived intangible tradename balances were not
impaired.





Customer
Relationships





An
important asset in most of our acquisition agreements have been our customer
relationships, which primarily arise from the allocation of the purchase price
of the respective businesses acquired.  Customer relationships
typically are finite-lived intangible assets.





The
classification of our customer relationships and the determination of their
appropriate useful lives require substantial judgment.  In our
evaluation of the appropriate useful lives of these assets, we consider the
nature and terms of the underlying agreements; our intent and ability to use the
customer relationships; the historical breadth of the respective customer
relationships before being acquired by inVentiv and the projected growth of the
customer relationships.





These
finite-lived customer relationships are amortized over their expected useful
life, which generally ranges from four to sixteen years.  For these
customer relationships, evaluations for impairment are performed only if facts
and circumstances indicate that the carrying value may not be
recoverable.





25


Claims
and Insurance Accruals





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




Income
Taxes





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




Derivative
Financial Instruments







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






Use
of Forecasted Financial Information in Accounting Estimates
 
 The use
of forecasted financial information is inherent in many of our accounting
estimates, including but not limited to, determining the estimated fair value of
goodwill and intangible assets, matching intangible amortization to underlying
benefits (e.g. sales and cash inflows) and evaluating the need for valuation
allowances for deferred tax assets.  Such forecasted financial information
is comprised of numerous assumptions regarding our future revenues, cash
flows, and operational results.  Management believes that its financial
forecasts are reasonable and appropriate based upon current facts and
circumstances.  Because of the inherent nature of forecasts, however,
actual results may differ from these forecasts.  Management regularly
reviews the information related to these forecasts and adjusts the carrying
amounts of the applicable assets prospectively, if and when actual results
differ materially from previous estimates.






26




Recent
Accounting Pronouncements






In
October 2009, the FASB issued Accounting Standards Update 2009-13 (ASU 2009-13),
which provided an update to ASC 605.  ASU 2009-13 addresses how to
separate deliverables and how to measure and allocate arrangement consideration
to one or more units of accounting in multiple-deliverable arrangements. The
amendments in this update will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. The Company is currently evaluating the impact that this
update will have on its Consolidated Financial Statements.




In June
2009, the FASB created the Accounting Standards Codification, which is codified
as ASC 105.ASC 105
establishes the codification as the single official non-governmental source of
authoritative accounting principles (other than guidance issued by the SEC) and
supersedes and effectively replaces previously issued GAAP hierarchy
framework.  All other literature that is not part of the codification
will be considered non-authoritative.  The codification is effective
for interim and annual periods ending on or after September 15,
2009.  The Company has applied the codification, as required,
beginning with the 2009 third quarter Form 10-Q.  The adoption of the
codification did not have a material impact on the Company’s consolidated
financial position, results of operations or cash
flows.




In June
2009, the FASB updated ASC 855,which established
principles and requirements for subsequent events.  This guidance
details the period after the balance sheet date which the Company should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which the
Company should recognize events or transactions occurring after the balance
sheet date in its financial statements and the required disclosures for such
events.  ASC 855 is effective for interim and annual periods ending
after June 15, 2009.  The implementation of ASC 855 did not have a
material effect on the Company’s consolidated financial
statements.  The Company adopted ASC 855, effective June 30, 2009, as
required, and has evaluated all subsequent events through February 24, 2010 (the
date the Company’s financial statements are issued).




In
April 2009, the FASB updated ASC 820 to provide additional guidance for
estimating fair value when the volume and level of activity for the asset or
liability have decreased significantly.  ASC 820 also provides
guidance on identifying circumstances that indicate a transaction is not
orderly. The provisions of ASC 820 are effective for the Company’s interim
period ending on June 30, 2009. The implementation of ASC 820 did not have
a material effect on the Company’s consolidated financial
statements.




In
April 2009, the FASB updated ASC 825 regarding interim disclosures about
fair value of financial instruments.  ASC 825 requires disclosures
about fair value of financial instruments in interim reporting periods of
publicly traded companies that were previously only required to be disclosed in
annual financial statements. The provisions of ASC 825 are effective for the
Company’s interim period ending on June 30, 2009. The implementation of ASC
825 did not have a material effect on the Company’s consolidated financial
statements.




In
April 2009, the FASB updated ASC 320 for proper recognition and
presentation of other-than-temporary impairments.  ASC 320 provides
additional guidance designed to create greater clarity and consistency in
accounting for and presenting impairment losses on securities. The provisions of
ASC 320 are effective for the Company’s interim period ending on June 30,
2009.  The implementation of ASC 320 did not have a material effect on
the Company’s consolidated financial statements.


In
October 2008, the FASB updated ASC 820 to provide guidance of determining the
fair value of a financial asset when the market for that asset is not
active.  ASC 820 amended previous guidance on this topic to include
guidance on how to determine the fair value of a financial asset in an inactive
market.  This update of ASC 820 is effective immediately on issuance,
including prior periods for which financial statements have not been
issued.  The implementation of ASC 820 did not have a material impact
on the Company’s financial position and results of
operations.







In March
2008, the FASB updated ASC 815 to amend previous guidance regarding disclosures
about derivative instruments and hedging activities. ASC 815 requires additional
disclosures regarding a company’s derivative instruments and hedging activities
by requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also requires disclosure of derivative
features that are credit risk–related as well as cross-referencing within the
notes to the financial statements to enable financial statement users to locate
important information about derivative instruments, financial performance, and
cash flows. ASC 815 is effective for fiscal years beginning after November 15,
2008. The Company adopted ASC 815, effective January 1, 2009, as
required.







In
December 2007, the FASB updated ASC 805 for guidance regarding business
combinations.  ASC 805 addresses the recognition and accounting for
identifiable assets acquired, liabilities assumed, and noncontrolling interests
in business combinations. ASC 805 also establishes expanded disclosure
requirements for business combinations. The update to ASC 805 is effective
January 1, 2009 and as such is being applied to the Paragon Rx acquisition in
December 2009.  All acquisitions completed prior to January 1, 2009
will be treated in accordance with the guidance under ASC 805 before the updated
guidance described above.  The Company adopted this update to ASC 805,
effective January 1, 2009, as required for applicable acquisitions.






In
December 2007, the FASB updated ASC 810 for noncontrolling interests in
consolidated financial statements.  ASC 810 addresses the accounting
and reporting framework for minority interests by a parent
company.  ASC 810 also addresses disclosure requirements to
distinguish between interests of the parent and interests of the noncontrolling
owners of a subsidiary.  The Company adopted the provisions of ASC
810, effective January 1, 2009, as required.  As a result of the
adoption, the Company has reported noncontrolling interest (previously minority
interest) as a component of equity in the Consolidated Balance Sheets and the
net income or loss attributable to noncontrolling interests has been separately
identified in the Consolidated Income Statements.  The prior periods
presented have also been reclassified to conform to the current classification
required by ASC 810.





27


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 31,2009
            2008
            2007(in
      thousands, except for per share data)Revenues:
            
            Percentage*
            
            Percentage*
            
            Percentage
      *inVentiv
      Clinical
            $209,538
            19.5%
            $216,934
            19.4%
            $186,927
            19.1%inVentiv
      Communications
            309,884
            28.9%
            341,887
            30.5%
            289,113
            29.6%inVentiv
      Commercial
            413,313
            38.6%
            435,066
            38.9%
            400,786
            41.0%inVentiv
      Patient Outcomes
            139,226
            13.0%
            125,925
            11.2%
            100,474
            10.3%Total
      revenues
            1,071,961
            100.0%
            1,119,812
            100.0%
            977,300
            100.0%Cost
      of services:inVentiv
      Clinical
            153,822
            73.4%
            149,531
            68.9%
            127,492
            68.2%inVentiv
      Communications
            169,539
            54.7%
            199,160
            58.3%
            175,801
            60.8%inVentiv
      Commercial
            326,822
            79.1%
            347,611
            79.9%
            317,693
            79.3%inVentiv
      Patient Outcomes
            79,452
            57.1%
            76,140
            60.5%
            60,576
            60.3%Total
      cost of services
            729,635
            68.1%
            772,442
            69.0%
            681,562
            69.7%Selling,
      general and administrative expenses:inVentiv
      Clinical
            45,347
            21.6%
            50,617
            23.3%
            45,223
            24.2%inVentiv
      Communications
            93,812
            30.3%
            99,186
            29.0%
            71,329
            24.7%inVentiv
      Commercial
            45,275
            11.0%
            43,288
            10.0%
            45,505
            11.4%inVentiv
      Patient Outcomes
            30,754
            22.1%
            26,940
            21.4%
            21,638
            21.5%Other
            26,565
            --
            21,653
            --
            17,250
            --Total
      Selling, general and administrative expenses:
            241,753
            22.5%
            241,684
            21.6%
            200,945
            20.6%Impairment
      of goodwill and other intangible assets
            --
            --
            267,849
            23.9%
            --
            --Total
      operating income (loss)
            100,573
            9.4%
            (162,163)
            (14.5)%
            94,793
            9.7%Interest
      expense
            (23,125)
            (2.2)%
            (25,464)
            (2.3)%
            (20,717)
            (2.1)%Interest
      income
            187
            0.1%
            1,983
            0.2%
            3,039
            0.3%Income
      (loss) from continuing operations before income tax (provision) benefit,
      and (loss) income from equity investments
            77,635
            7.3%
            (185,644)
            (16.6)%
            77,115
            7.9%Income
      tax (provision) benefit
            (29,870)
            (2.8)%
            58,207
            5.2%
            (29,401)
            (3.0)%Income
      (loss) from continuing operations before (loss) income from equity
      investments
            47,765
            4.5%
            (127,437)
            (11.4)%
            47,714
            4.9%(Loss)
      income from equity investments
            (82)
            --
            (102)
            --
            582
            --Income
      (loss) from continuing operations
            47,683
            4.5%
            (127,539)
            (11.4)%
            48,296
            4.9%Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            --
            --
            664
            0.1%
            258
            0.1%Income
      from discontinued operations
            --
            --
            664
            0.1%
            258
            0.1%Net
      (loss) income
            47,683
            4.5%
            (126,875)
            (11.3)%
            48,554
            5.0%Less:  Net
      income attributable to the noncontrolling interest
            (812)
            (0.1)%
            (1,146)
            (0.1)%
            (1,070)
            (0.1)%Net
      income (loss) attributable to inVentiv Health, Inc.
            $46,871
            4.4%
            ($128,021)
            (11.4)%
            $47,484
            4.9%Earnings
      (loss) per share:Continuing
      operations:Basic
            $1.40
            
            ($3.89)
            
            $1.50Diluted
            $1.39
            
            ($3.89)
            
            $1.46Discontinued
      operations:Basic
            $0.00
            
            $0.02
            
            $0.00Diluted
            $0.00
            
            $0.02
            
            $0.01Net income
      (loss):Basic
            $1.40
            
            ($3.87)
            
            $1.50Diluted
            $1.39
            
            ($3.87)
            
            $1.47





*Cost of services and selling,
general and administrative expenses are expressed as a percentage of segment
revenue.  All other line items are displayed as a percentage of total
revenues.




28


Year
Ended December 31, 2009 Compared to Year Ended December 31, 2008




Revenues:Revenues
decreased by approximately $48 million, or 4%, to $1.07 billion during 2009,
from $1.12 billion during 2008.  Net revenues decreased by
approximately $24 million, or 3%, to $928 million during 2009, from $952 million
during 2008.





inVentiv
Clinical’s revenues were $210 million during 2009, a decrease of $7 million, or
3%, compared to $217 million during 2008.  Revenues in inVentiv
Clinical were lower in 2009 predominantly due to a softening in the demand for
our resourcing services due to the current economic
environment.  Although our clinical staffing services providers
continue to be the industry leaders in providing clinical research professional
contract personnel, this part of our segment was challenged throughout
2009.  Net placements declined in 2009, reflective of reduced clinical
research spending.  Order volume increased nominally in the fourth
quarter over previous 2009 quarterly order volumes.





inVentiv
Communications’ revenues were $310 million during 2009, a decrease of $32
million, or 9%, from 2008.  inVentiv Communications’ revenues
accounted for 29% of total inVentiv revenues during 2009.  The
majority of this decrease is due to lower pass-through revenues as a result of
our clients focus on advertising services that are cost efficient in delivering
the message to their customers.  The remaining decrease relates to a
softening in the demand for our marketing services due to the current economic
environment.




inVentiv
Commercial’s revenues were $413 million during 2009, a decrease of $22 million,
or 5%, from 2008.  The decrease in revenues was due to delays in
decision making by our clients and proposals that did not materialize into new
contracts.  These decreases were  partially offset by the
launch of our Japan sales teams and the acquisition of PLS, which contributed
$13 million of revenues during 2009, as opposed to $1 million during the fourth
quarter of 2008, when PLS was acquired.





inVentiv
Patient Outcomes’ revenues were $139 million during 2009, up $13 million from
2008.  Revenues from acquisition growth represented 76% of this
increase, with the remainder due to organic growth from our patient services
programs.




Cost of
Services:  Cost of services decreased by approximately $42
million or 5%, to $730 million for 2009 from $772 million in
2008.  Cost of services as a percentage of revenues decreased slightly
to 68% for 2009 from 69% in 2008.




inVentiv
Clinical’s cost of services increased by approximately $4 million, or 3%, to
$154 million during 2009 from $150 million during 2008.  Cost of
services as a percentage of revenues was 73% and 69% during 2009 and 2008,
respectively.   The increased percentage was primarily due to an
increase in our CRO Services teams’ headcounts and increased pass-through
expenses.





inVentiv
Communications’ cost of services decreased by approximately $29 million, or 15%,
to $170 million during 2009 from $199 million during 2008.  Cost of
services as a percentage of revenues decreased from 58% in 2008 to 55% in 2009,
mainly due to the decrease in pass-through revenues, as described
above.




inVentiv
Commercial’s cost of services decreased by approximately 6% during 2009 from
2008.  Cost of services was 79% of inVentiv Commercial’s revenues
during 2009 and 80% of revenues during 2008.  This decreased
percentage of cost of services is primarily due to lower fuel costs in 2009
compared to 2008 for our applicable contract sales representative
agreements.




inVentiv
Patient Outcomes’ cost of services increased by approximately $3 million, or 4%,
to $79 million during 2009 from $76 million during 2008.  The
increase was primarily due to the growth in revenue, as described
above.




29


Selling, General
and Administrative ("SG&A"):  SG&A expenses, which also
encompass the activities of the corporate management group, stayed consistent at
$242 million in 2009 and 2008.  Unfavorable medical claims experience
and the inclusion of PMG and PLS were offset by cost reductions at Clinical and
Communications, as more fully highlighted below.




SG&A
expenses at inVentiv Clinical was approximately $45 million in 2009, compared to
$51 million in 2008.  The decrease was primarily due to lower
commissions in our resourcing and permanent placement groups as a result of the
lower revenue, and various reductions in force.




SG&A
expenses at inVentiv Communications decreased $5 million to $94 million in 2009,
primarily due to various reductions in force and other cost savings
initiatives.




SG&A
expenses at inVentiv Commercial increased by approximately $2 million to $45
million during 2009 from 2008.  This increase was primarily due to the
inclusion of results from PLS and Japan sales teams and costs related to moving
facilities in July 2009, offset by the integration of certain departments into
the Corporate function.




SG&A
expenses at inVentiv Patient Outcomes increased by $4 million to $31 million
during 2009, mainly due to the acquisition of PMG.




Other
SG&A, which mainly represents Corporate costs, increased by approximately
23%, to $27 million from 2009 to 2008.  This increase was mainly
related to unfavorable claims experience from our self-insured medical plan as
well as an integration of certain divisional departments into a corporate
function in 2009.  Included in Other SG&A is approximately $2.1
million of pre-acquisition tax liabilities as described below in Provision for Income
Taxes.




Impairment of
Goodwill and Other Intangible Assets:In conjunction with the
preparation, review and audit of financial statements for our 2008 fiscal year,
as a result of adverse equity market conditions that caused a decrease in the
current market multiples and our stock price, we concluded that a triggering
event had occurred indicating potential impairment, and accordingly performed an
impairment test of our goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets, and $30 million of
definite-lived assets.  There was no impairment of goodwill and other
intangible assets during 2009.




Interest
Expense:Interest expense was approximately $23 million and
$25 million for 2009 and 2008, respectively.  The decrease was mainly
due to interest savings from a lower principal balance on our Credit Agreement,
as more fully explained in Liquidity and Capital Resources,and lower capitalized interest on the fleet vehicles from our inVentiv
Commercial segment.




Provision for
Income Taxes:  Our 2009 effective tax rate is
38.9%.  Included in this rate are $2.1 million of foreign taxes and a
tax benefit due to the expiration of the statute of limitations related to
pre-acquisition liabilities of $2.1 million that were recognized in accordance
with ASC 805, which was adopted as of January 1, 2009.




In
December 2008, we recognized a reduction in a tax benefit of approximately $14.9
million relating to the impairment of $267.8 million of intangible
assets.  Including the impact of the impairment our annual effective
tax rate was 31.1% in 2008.




Our
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which we do business and are subject to
taxation.  Our effective tax rate could fluctuate due to changes in
earnings between operating entities and related tax jurisdictions.




Net (Loss) Income
and Earnings Per Share ("EPS"): inVentiv’s net income
increased by approximately $175 million from net income of $47 million in 2009
compared to a net loss of $128 million during 2008.  Earnings per
share increased to $1.39 from a loss of $(3.87) per share in
2008.  The aforementioned 2008 impairment charge, which did not affect
inVentiv’s current operations, liquidity or cash position, was the main factor
in the increase for the respective periods.




30


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




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




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




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




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




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




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




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





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




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




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




31


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




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




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




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




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




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




Impairment of
Goodwill and Other Intangible Assets:In conjunction with the
preparation, review and audit of financial statements for our 2008 fiscal year,
as a result of adverse equity market conditions that caused a decrease in the
current market multiples and our stock price, we concluded that a triggering
event had occurred indicating potential impairment, and accordingly performed an
impairment test of our goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets, and $30 million of
definite-lived assets.




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




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




Our
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which we do business and are subject to
taxation.  Our effective tax rate could fluctuate due to changes in
earnings between operating entities and related tax jurisdictions.




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




32


Liquidity
and Capital Resources





At
December 31, 2009, we had $133 million of unrestricted cash and equivalents, an
increase of $43 million from December 31, 2008.  For the year ended
December 31, 2008 compared to 2009, cash provided by operations increased by $38
million from $87 million to $125 million.  Cash used in investing
activities increased from $28 million to $64 million for the year ended December
31, 2008 and 2009, respectively.  Cash from financing activities
increased slightly from a use of $18 million to a use of $19 million over the
same comparative periods.





Cash
provided by operations was $125 million during the year ended December 31, 2009,
while cash provided by operations was $87 million in the year ended December 31,
2008.  This increase primarily resulted from the timing of collections
of  our receivables, client advances and unearned
revenues;  landlord reimbursements from the relocation of our
Corporate facility in New Jersey during the third quarter of 2009; and the
timing of certain bonus payments.





Cash used
in investing activities increased by $36 million from $28 million to $64 million
for the years ended December 31, 2008 and 2009, respectively.  We paid
$46 million of cash in 2009 primarily relating to the earnout contingency
payments from previous acquisitions and the Paragon Rx acquisition, and we paid
$48 million in 2008 primarily relating to the earnout contingency payments from
previous acquisitions and the acquisitions of PMG and PLS.  During
2009 and 2008, the Company also received proceeds of $10 million and $32
million, respectively, from our investment in the Columbia Strategic Cash
Portfolio (“CSCP”).  Finally, we acquired $25 million of property and
equipment during 2009 compared to $17 million during 2008.  The
majority of the difference relates to acquiring new property and equipment for
our Corporate facility in New Jersey.





Cash from
financing activities increased slightly from a use of $18 million to a use of
$19 million during 2008 and 2009, respectively, mainly consisting of debt
repayments and capital lease obligations.





Our principal external source of
liquidity is our syndicated, secured Amended and Restated Credit Agreement with
UBS AG, and the other lenders party thereto.  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 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 July 6, 2014, with scheduled
amortization of 1% per year until the final year of the Amended and Restated
Credit Agreement, during which 94% of the term loan is to be
repaid.  The revolving loans will mature on July 6, 2013.




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 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 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.  We have the intent and ability to choose the
three-month LIBOR base rate for the duration of the term of the Credit
Agreement.
  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, 3.5 to 1.0 commencing with our 2010 fiscal year
(the permitted leverage ratio was 4.0 to 1.0 through December 31, 2009; our
leverage ratio was 2.5 to 1.0 as of December 31, 2009).
 
 Effective
September 6, 2007, we entered into a five-year swap arrangement for $165
million, in which the notional amount increased to $325 million upon the
expiration of our 2005 swap arrangement in December 2008, to hedge against our
credit exposure under the Amended and Restated Credit Agreement.  The
swap arrangement is explained in more detail in Part I, Item 3
below.
  33


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 to medium
term.  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 2007, 2008 and 2009 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 report.





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)
            
            $
            408,437
            
            
            $
            24,769
            
            
            $
            48,570
            
            
            $
            335,098
            
            
            $
            --
            
            
            $
            --Capital lease
      obligations (b)
            
            
            24,366
            
            
            
            9,751
            
            
            
            13,556
            
            
            
            1,059
            
            
            
            --
            
            
            
            --Operating
      leases (c)
            
            
            136,503
            
            
            
            22,760
            
            
            
            38,447
            
            
            
            26,615
            
            
            
            48,681
            
            
            
            --Other tax
      liabilities (d)
            
            
            7,204
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            7,204Total
      obligations
            
            $
            576,510
            
            
            $
            57,280
            
            
            $
            100,573
            
            
            $
            362,772
            
            
            $
            48,681
            
            
            $
            7,204




These
future commitments represent the principal and interest payments under the $330
million term loan under our credit facility.





These
future commitments include interest and management fees, which are not recorded
on the Consolidated Balance Sheet as of December 31, 2009 but will be recorded
as incurred.




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.




The
timing of future cash outflows associated with these tax liabilities is highly
uncertain and accordingly has been disclosed in Other as shown
above.






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




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 2009, 2008 or 2007, except for fluctuations in gas prices in
2008.




Off-Balance
Sheet Arrangements




As of
December 31, 2009, we did not have any off-balance-sheet arrangements, as
defined in Item 303(a) (4)(ii) of SEC Regulation S-K.





34


CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING DISCLOSURE





This
report contains “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements are only
predictions and provide our current expectations or forecasts of future events
and financial performance and may be identified by the use of forward-looking
terminology, including the terms “believes,” “estimates,” “anticipates,”
“expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their
negative, or other variations or comparable terminology, though the absence of
these words does not necessarily mean that a statement is not
forward-looking.





We intend
that all forward-looking statements be subject to the safe-harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are subject to many risks and uncertainties that could cause our actual results
to differ materially from any future results expressed or implied by the
forward-looking statements. Forward-looking statements include all matters that
are not historical facts and include statements concerning:




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



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 the
following:




- the
  potential impact of a recessionary environment on our customers and
  business;
- our
  ability to sufficiently increase our revenues and maintain or decrease
  expenses and cash capital expenditures to permit us to fund our
  operations;
- our
  ability to continue to comply with the covenants and terms of our credit
  facility and to access sufficient capital under our credit agreement or from
  other sources of debt or equity financing to fund our
  operations;
- the
  impact of any default by any of our credit providers or swap
  counterparties;
- our
  ability to accurately forecast costs to be incurred in providing services
  under fixed price contracts
- our
  ability to accurately forecast insurance claims within our self-insured
  programs;
- our
  ability to accurately forecast the performance of business units to which our
  potential earnout obligations relate and, therefore, to accurately estimate
  the amount of the earnout obligations we will
  incur;
- the
  potential impact of pricing pressures on pharmaceutical manufacturers from
  future health care reform initiatives or from changes in the reimbursement
  policies of third party
  payers;
- potential
  disruptions and switching costs related to vendors’
  relationships;
- the possibility
  that customer agreements will be terminated or not
  renewed;
- our
  ability to grow our existing client relationships, obtain new clients and
  cross-sell our
  services;
- our
  ability to successfully operate new lines of
  business;
- our
  ability to manage our infrastructure and resources to support our
  growth;
- our
  ability to successfully identify new businesses to acquire, conclude
  acquisition negotiations and integrate the acquired businesses into our
  operations;
- any
  disruptions, impairments, or malfunctions affecting software as well as
  excessive costs or delays that may adversely impact our continued investment
  in and development of
  software;
- the
  potential impact of government regulation on us and on our client
  base;
- our
  ability to comply with all applicable laws as well as our ability to
  successfully implement from a timing and cost perspective any changes in
  applicable
  laws;
- our
  ability to recruit, motivate and retain qualified personnel, including sales
  representatives and clinical
  staff;
- our
  ability to maintain technological advantages in a variety of functional areas,
  including sales force automation, electronic claims surveillance and patient
  compliance;
- the
  actual impact of the adoption of certain accounting
  standards;
- the
  actual outcome of pending
  litigation;
- any
  potential impairment of intangible
  assets;
- consolidation
  in the pharmaceutical industry;
  and
- changes
  in trends in the pharmaceutical industry or in pharmaceutical
  outsourcing.

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


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





Long-Term
Debt Exposure





At
December 31, 2009, we had approximately $322 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, 2009, 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





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 that increased to $325 million effective December 31,
2008 (concurrently with the expiration of our original 2005 three-year interest
rate swap arrangement) to hedge the total outstanding debt notional
amount.  This hedge relationship was designated as a cash flow
hedge.  At hedge inception, we employed the dollar offset method by
performing a sensitivity analysis to assess effectiveness and utilized the
hypothetical derivative method under ASC 815 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  The fair value of the
derivative, net of credit value adjustment, was approximately $24.6 million and
$30.8 million as of December 31, 2009 and December 31, 2008, respectively, and
was recorded in other non-current liabilities.  As a result of the
hypothetical derivative method, there was no ineffectiveness for the period
ended December 31, 2009, and accordingly, $6.2 million ($3.8 million, net of
taxes) was recorded as an increase to Other Comprehensive Income and a decrease
to other non-current liabilities on our Consolidated Balance Sheet.





Foreign
Currency Exchange Rate Exposure





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, Japanese and Canadian subsidiaries and equity investments and
noncontrolling interests in our foreign business units, which are not material
to its consolidated financial statements.  Our treatment of foreign
subsidiaries is consistent with the guidelines set forth in ASC
830.   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, 2009, the accumulated
other comprehensive losses related to foreign currency translations was
approximately $1.8 million.  Foreign currency transaction gains and
losses are included in the results of operations and are not
material.


35


Item 8.  Financial Statements and
Supplementary Data.





INDEX
TO FINANCIAL STATEMENTS





Report of Management
            37Report of Independent Registered Public Accounting
      Firm
            38Consolidated Balance Sheets as of December 31, 2009 and
      2008
            39Consolidated Statements of Operations for the years ended
      December 31, 2009, 2008 and 2007
            40Consolidated Statements of Stockholders' Equity for the
      years ended December 31, 2009, 2008 and 2007
            41Consolidated Statements of Cash Flows for the years ended
      December 31, 2009, 2008 and 2007
            42Notes to Consolidated Financial
    Statements
            43-64





36




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 Paragon Rx business
we acquired in 2009 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 this
acquired business constitute 1% and 0% of total assets and revenues,
respectively, of the consolidated financial statement amounts as of and for the
year ended December 31, 2009.  Based on this evaluation, our
management concluded that our system of internal control over financial
reporting was effective as of December 31, 2009.  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.
 37







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM






To the
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, 2009 and 2008, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2009. Our
audits also included the financial statement schedule listed in the Index at
Item 15 (a).  We also have audited the Company's internal control over
financial reporting as of December 31, 2009, 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 Paragon Rx which was acquired in
2009, and whose financial statements reflect total assets and revenues
constituting 1% and 0%, respectively, of the related consolidated financial
statements as of and for the year ended December 31, 2009. Accordingly, our
audit did not include the internal control over financial reporting at the
aforementioned Paragon Rx.  The Company's management is responsible
for these financial statements and financial statement schedule, for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule and an opinion on the Company's internal control
over financial reporting based on our audits.






We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects.  Our audits of the financial statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on
the assessed risk.  Our audits also included performing such other
procedures as we considered necessary in the circumstances.  We believe
that our audits provide a reasonable basis for our opinions.






A
company's internal control over financial reporting is a process designed by, or
under the supervision of, the company's principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company's board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.  A company's internal control
over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial
statements.






Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis.  Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.






In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of inVentiv Health, Inc. and
subsidiaries as of December 31, 2009 and 2008, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2009, in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.  Also, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, 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
24, 2010







38


INVENTIV
HEALTH, INC.


CONSOLIDATED BALANCE SHEETS


(in
thousands, except share amounts)





December
      31,2009
            
            
            2008ASSETSCurrent
      assets:Cash
      and equivalents
            
            $
            132,818
            
            
            $
            90,463Restricted
      cash and marketable securities
            
            
            2,539
            
            
            
            8,069Accounts
      receivable, net of allowances for doubtful accounts of $5,254 and $4,787
      atDecember
      31, 2009 and 2008, respectively
            
            
            160,012
            
            
            
            158,689Unbilled
      services
            
            
            76,502
            
            
            
            86,390Prepaid
      expenses and other current assets
            
            
            12,676
            
            
            
            16,880Current
      tax assets
            
            
            4,408
            
            
            
            595Current
      deferred tax assets
            
            
            12,881
            
            
            
            9,198Total
      current assets
            
            
            401,836
            
            
            
            370,284Property
      and equipment, net
            
            
            65,243
            
            
            
            63,382Investments
      in affiliates
            
            
            1,873
            
            
            
            1,423Goodwill
            
            
            262,528
            
            
            
            215,526Other
      intangibles, net
            
            
            218,283
            
            
            
            226,509Non-current
      deferred tax assets
            
            
            58,920
            
            
            
            75,172Deposits
      and other assets
            
            
            21,280
            
            
            
            20,820Total
      assets
            
            $
            1,029,963
            
            
            $
            973,116LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
            
            $
            9,293
            
            
            $
            13,417Current
      portion of long-term debt
            
            
            3,455
            
            
            
            4,279Accrued
      payroll, accounts payable and accrued expenses
            
            
            129,471
            
            
            
            129,009Current
      income tax liabilities
            
            
            --
            
            
            
            2,736Client
      advances and unearned revenue
            
            
            65,437
            
            
            
            57,223Total
      current liabilities
            
            
            207,656
            
            
            
            206,664Capital
      lease obligations, net of current portion
            
            
            14,080
            
            
            
            25,010Long-term
      debt
            
            
            318,450
            
            
            
            321,828Non-current
      income tax liabilities
            
            
            5,758
            
            
            
            5,636Other
      non-current liabilities
            
            
            54,766
            
            
            
            46,334Total
      liabilities
            
            
            600,710
            
            
            
            605,472Equity:inVentiv
      Health Inc. stockholders’ equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atDecember
      31, 2009 and 2008, respectively
            
            
            --
            
            
            
            --Common
      stock, $.001 par value, 50,000,000 shares authorized; 33,630,886 and
      33,272,543Shares
      issued and outstanding at December 31, 2009 and 2008,
      respectively
            
            
            34
            
            
            
            33Additional
      paid-in-capital
            
            
            404,763
            
            
            
            394,560Accumulated
      other comprehensive losses
            
            
            (16,203
            )
            
            
            (20,869
            )Accumulated
      earnings (deficit)
            
            
            40,661
            
            
            
            (6,210
            )Total
      inVentiv Health Inc. stockholders’ equity
            
            
            429,255
            
            
            
            367,514Noncontrolling
      interest
            
            
            (2
            )
            
            
            130Total
      equity
            
            
            429,253
            
            
            
            367,644Total
      liabilities and stockholders’ equity
            
            $
            1,029,963
            
            
            $
            973,116





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


39


INVENTIV HEALTH, INC.





CONSOLIDATED
STATEMENTS OF OPERATIONS


(in
thousands, except per share amounts)





For
      the Years Ended December 31,2009
            
            
            2008
            
            
            2007Net
      Revenues
            
            $
            927,878
            
            
            $
            951,656
            
            
            $
            796,659Reimbursed
      out-of-pocket expenses
            
            
            144,083
            
            
            
            168,156
            
            
            
            180,641Total
      Revenues
            
            
            1,071,961
            
            
            
            1,119,812
            
            
            
            977,300Operating
      expenses:Cost
      of services
            
            
            582,835
            
            
            
            598,465
            
            
            
            498,106Reimbursable
      out-of-pocket expenses
            
            
            146,800
            
            
            
            173,977
            
            
            
            183,456Selling,
      general and administrative expenses
            
            
            241,753
            
            
            
            241,684
            
            
            
            200,945Impairment
      of goodwill and other intangible assets
            
            
            --
            
            
            
            267,849
            
            
            
            --Total
      operating expenses
            
            
            971,388
            
            
            
            1,281,975
            
            
            
            882,507Operating
      income (loss)
            
            
            100,573
            
            
            
            (162,163
            )
            
            
            94,793Interest
      expense
            
            
            (23,125
            )
            
            
            (25,464
            )
            
            
            (20,717
            )Interest
      income
            
            
            187
            
            
            
            1,983
            
            
            
            3,039Income
      (loss) from continuing operations before income tax (provision) benefit
      and (loss) income from equity investments
            
            
            77,635
            
            
            
            (185,644
            )
            
            
            77,115Income
      tax (provision) benefit
            
            
            (29,870
            )
            
            
            58,207
            
            
            
            (29,401
            )Income
      (loss) from continuing operations before (loss) income from equity
      investments
            
            
            47,765
            
            
            
            (127,437
            )
            
            
            47,714(Loss)
      income from equity investments
            
            
            (82
            )
            
            
            (102
            )
            
            
            582Income
      (loss) from continuing operations
            
            
            47,683
            
            
            
            (127,539
            )
            
            
            48,296Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of tax benefit (expense)
      of
              $--,
      $73 and $(131) for the years ended December 31, 2009, 2008 and 2007,
      respectively
            
            
            --
            
            
            
            664
            
            
            
            258Income
      from discontinued operations
            
            
            --
            
            
            
            664
            
            
            
            258Net
      income (loss)
            
            
            47,683
            
            
            
            (126,875
            )
            
            
            48,554Less:  Net
      income attributable to the noncontrolling interest
            
            
            (812
            )
            
            
            (1,146
            )
            
            
            (1,070
            )Net
      income (loss) attributable to inVentiv Health, Inc.
            
            $
            46,871
            
            
            $
            (128,021
            )
            
            $
            47,484Earnings
      (loss) per share:Continuing
      operations:Basic
            
            $
            1.40
            
            
            $
            (3.89
            )
            
            $
            1.50Diluted
            
            $
            1.39
            
            
            $
            (3.89
            )
            
            $
            1.46Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.01Net
      income (loss):Basic
            
            $
            1.40
            
            
            $
            (3.87
            )
            
            $
            1.50Diluted
            
            $
            1.39
            
            
            $
            (3.87
            )
            
            $
            1.47Weighted
      average common shares outstanding:Basic
            
            
            33,502
            
            
            
            33,043
            
            
            
            31,578Diluted
            
            
            33,798
            
            
            
            33,043
            
            
            
            32,267





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


40


INVENTIV
HEALTH, INC.





CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


For
the years ended December 31, 2009, 2008 and 2007


(in
thousands)


Common
      Stock
            
            
            Additional
      Paid-In
              Capital
            
            
            Accumulated
      earnings
              (deficit)
            
            
            Comprehensive
              Income
              (Losses)
            
            
            Accumulated
      Other Comprehensive Income (Losses)
            
            
            Noncontrolling
      Interest
            
            
            TotalBalance
      at December 31, 2006 (revised)
            
            
            30
            
            
            $
            284,331
            
            
            $
            74,327
            
            
            
            
            
            $
            (226
            )
            
            $
            115
            
            
            $
            358,577Net
      income
            
            
            
            
            
            
            
            
            
            
            47,484
            
            
            
            47,484
            
            
            
            
            
            
            
            1,070
            
            
            
            48,554Foreign
      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
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            53,173Distribution
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,025
            )
            
            
            (1,025
            )Balance
      at December 31, 2007 (revised)
            
            
            32
            
            
            
            362,116
            
            
            
            121,811
            
            
            
            
            
            
            
            (6,493
            )
            
            
            160
            
            
            
            477,626Net
      loss
            
            
            
            
            
            
            
            
            
            
            (128,021
            )
            
            
            (128,021
            )
            
            
            
            
            
            
            1,146
            
            
            
            (126,875
            )Foreign
      currency translation
              Adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,445
            )
            
            
            (3,445
            )
            
            
            
            
            
            
            (3,445
            )Net
      change in effective portion of derivative, net of taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (10,931
            )
            
            
            (10,931
            )
            
            
            
            
            
            
            (10,931
            )(142,397
            )Vesting
      of restricted shares
            
            
            
            
            
            
            6,832
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,832Withhold
      shares for taxes
            
            
            
            
            
            
            (1,111
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,111
            )Consultant
      compensation
            
            
            
            
            
            
            127
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            127Exercise
      of stock options
            
            
            
            
            
            
            2,387
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,387Stock
      option expense
            
            
            
            
            
            
            3,752
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,752Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            
            
            
            
            
            
            387
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            387Issuance
      of shares in connection with acquisitions
            
            
            1
            
            
            
            18,920
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            18,921Distribution
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,176
            )
            
            
            (1,176
            )Acquisition-related
      equity plan
            
            
            
            
            
            
            1,150
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,150Balance
      at December 31, 2008 (revised)
            
            
            33
            
            
            
            394,560
            
            
            
            (6,210
            )
            
            
            
            
            
            
            (20,869
            )
            
            
            130
            
            
            
            367,644Net
      income
            
            
            
            
            
            
            
            
            
            
            46,871
            
            
            
            46,871
            
            
            
            
            
            
            
            812
            
            
            
            47,683Foreign
      currency translation
              Adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            843
            
            
            
            843
            
            
            
            
            
            
            
            843Unrealized
      loss on marketable securities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (7
            )
            
            
            (7
            )
            
            
            
            
            
            
            (7
            )Net
      change in effective portion of derivative, net of taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,830
            
            
            
            3,830
            
            
            
            
            
            
            
            3,83051,537Vesting
      of restricted shares
            
            
            1
            
            
            
            5,779
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,780Withhold
      shares for taxes
            
            
            
            
            
            
            (601
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (601
            )Consultant
      compensation
            
            
            
            
            
            
            139
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            139Exercise
      of stock options
            
            
            
            
            
            
            885
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            885Stock
      option expense
            
            
            
            
            
            
            3,164
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,164Tax
      benefit from exercise of employee stock options and vesting  of
      restricted stock
            
            
            
            
            
            
            (1,272
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,272
            )Issuance
      of shares in connection with acquisitions
            
            
            
            
            
            
            2,623
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,623Purchase
      from remaining shares from noncontrolling interest
            
            
            
            
            
            
            (1,682
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (282
            )
            
            
            (1,964
            )Acquisition-related
      equity plan
            
            
            
            
            
            
            1,168
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,168Distribution
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (662
            )
            
            
            (662
            )Balance
      at December 31, 2009
            
            
            34
            
            
            $
            404,763
            
            
            $
            40,661
            
            
            
            
            
            
            $
            (16,203
            )
            
            $
            (2
            )
            
            $
            429,253





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


41


INVENTIV
HEALTH, INC.


CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


For
      the Years EndedDecember
      31,2009
            
            
            2008
            
            
            2007Cash
      flows from operating activities:Net
      income (loss)
            
            $
            47,683
            
            
            $
            (126,875
            )
            
            $
            48,554Income
      from discontinued operations
            
            
            --
            
            
            
            (664
            )
            
            
            (258
            )Income
      (loss) from continuing operations
            
            
            47,683
            
            
            
            (127,539
            )
            
            
            48,296Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
            
            
            20,910
            
            
            
            20,870
            
            
            
            18,169Amortization
            
            
            12,398
            
            
            
            15,118
            
            
            
            10,939Tradename
      writeoff
            
            
            117
            
            
            
            --
            
            
            
            --Loss
      (income) from equity investments
            
            
            82
            
            
            
            102
            
            
            
            (582
            )Fair
      market value adjustment on derivative financial instrument
            
            
            --
            
            
            
            1,121
            
            
            
            1,218Deferred
      taxes
            
            
            12,569
            
            
            
            (93,255
            )
            
            
            (6,384
            )Impairment
      of goodwill and other intangible assets
            
            
            --
            
            
            
            267,849
            
            
            
            --Adjustment
      of marketable securities
            
            
            (1,844
            )
            
            
            2,561
            
            
            
            841Stock
      compensation expense
            
            
            8,943
            
            
            
            10,584
            
            
            
            9,716Tax
      benefit from stock option exercises and vesting of restricted
      shares
            
            
            1,179
            
            
            
            3,225
            
            
            
            9,801Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
            
            
            (619
            )
            
            
            7,097
            
            
            
            (12,765
            )Unbilled
      services
            
            
            9,894
            
            
            
            4,585
            
            
            
            (10,508
            )Prepaid
      expenses and other current assets
            
            
            4,231
            
            
            
            3,399
            
            
            
            (8,673
            )Accrued
      payroll, accounts payable and accrued expenses
            
            
            1,794
            
            
            
            (10,300
            )
            
            
            (3,472
            )Net
      tax liabilities
            
            
            (8,878
            )
            
            
            (9,200
            )
            
            
            10,928Client
      advances and unearned revenue
            
            
            8,055
            
            
            
            (19,782
            )
            
            
            3,186Excess
      tax benefits from stock based compensation
            
            
            1,274
            
            
            
            (252
            )
            
            
            (7,928
            )Other
            
            
            7,968
            
            
            
            10,234
            
            
            
            (3,893
            )Net
      cash provided by continuing operations
            
            
            125,756
            
            
            
            86,417
            
            
            
            58,889Net
      cash (used in) provided by discontinued operations
            
            
            (613
            )
            
            
            508
            
            
            
            (221
            )Net
      cash provided by operating activities
            
            
            125,143
            
            
            
            86,925
            
            
            
            58,668Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
            
            
            (150
            )
            
            
            524
            
            
            
            (46,343
            )Investment
      in cash value of life insurance policies
            
            
            (3,983
            )
            
            
            270
            
            
            
            (2,440
            )Investment
      in marketable securities
            
            
            11,248
            
            
            
            32,286
            
            
            
            --Cash
      paid for acquisitions, net of cash acquired
            
            
            (7,960
            )
            
            
            (25,506
            )
            
            
            (169,739
            )Acquisition
      earnout cash payments
            
            
            (38,264
            )
            
            
            (22,126
            )
            
            
            (23,556
            )Investment
      in unconsolidated affiliates
            
            
            (532
            )
            
            
            (1,203
            )
            
            
            37Purchases
      of property and equipment
            
            
            (25,382
            )
            
            
            (17,449
            )
            
            
            (10,446
            )Proceeds
      from manufacturers rebates on leased vehicles
            
            
            612
            
            
            
            5,453
            
            
            
            5,574Net
      cash used in continuing operations
            
            
            (64,411
            )
            
            
            (27,751
            )
            
            
            (246,913
            )Net
      cash provided by discontinued operations
            
            
            613
            
            
            
            156
            
            
            
            479Net
      cash used in investing activities
            
            
            (63,798
            )
            
            
            (27,595
            )
            
            
            (246,434
            )Cash
      flows from financing activities:Borrowings
      on credit agreement
            
            
            --
            
            
            
            --
            
            
            
            166,250Borrowings
      on line of credit, net of repayments
            
            
            (948
            )
            
            
            948
            
            
            
            --Repayments
      on credit agreement
            
            
            (3,254
            )
            
            
            (3,191
            )
            
            
            (2,484
            )Repayments
      of capital lease obligations
            
            
            (13,278
            )
            
            
            (15,685
            )
            
            
            (15,538
            )Fees
      to establish credit agreement
            
            
            --
            
            
            
            --
            
            
            
            (2,154
            )Withholding
      shares for taxes
            
            
            (601
            )
            
            
            (1,111
            )
            
            
            (873
            )Proceeds
      from exercise of stock options
            
            
            885
            
            
            
            2,387
            
            
            
            6,908Excess
      tax benefits from stock-based compensation
            
            
            (1,274
            )
            
            
            252
            
            
            
            7,928Distributions
      to noncontrolling interests in affiliated partnership
            
            
            (944
            )
            
            
            (1,178
            )
            
            
            (1,216
            )Net
      cash (used in) provided by continuing operations
            
            
            (19,414
            )
            
            
            (17,578
            )
            
            
            158,821Net
      cash provided by discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --Net
      cash (used in) provided by financing activities
            
            
            (19,414
            )
            
            
            (17,578
            )
            
            
            158,821Effect
      of exchange rate changes
            
            
            424
            
            
            
            (2,262
            )
            
            
            83Net
      increase (decrease) in cash and equivalents
            
            
            42,355
            
            
            
            39,490
            
            
            
            (28,862
            )Cash
      and equivalents, beginning of year
            
            
            90,463
            
            
            
            50,973
            
            
            
            79,835Cash
      and equivalents, end of year
            
            $
            132,818
            
            
            $
            90,463
            
            
            $
            50,973Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            22,574
            
            
            $
            23,610
            
            
            $
            19,549Cash
      paid for income taxes
            
            $
            26,275
            
            
            $
            33,076
            
            
            $
            17,972Supplemental
      disclosure of non-cash activities:Vehicles
      acquired through capital lease agreements
            
            $
            7,582
            
            
            $
            18,475
            
            
            $
            13,532Stock
      issuance related to acquisitions
            
            $
            2,623
            
            
            $
            18,921
            
            
            $
            53,173





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





42
 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, life sciences
and healthcare industries. The Company supports 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, the
Company provides medical cost containment services to payors in our patient
outcomes business.  The Company’s 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. The Company provides services to
over 350 client organizations, including all top 20 global pharmaceutical
companies, numerous emerging and specialty biotechnology companies and third
party administrators.





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





Business
Segments





The
Company currently serves its clients primarily through four business segments,
which correspond to its reporting segments for 2009:




- inVentiv Clinical,
  which provides professional resourcing and clinical research services to
  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 full service late-stage
  clinical development and 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 (“Smith Hanley”), inVentiv Clinical Solutions (“iCS”), and Paragon
  Rx (“Paragon”), which was acquired in December 2009;
- inVentiv
  Communications, which provides services related to pharmaceutical
  advertising, branding, public relations, interactive communications and
  physician education.  This segment includes inVentiv Communications,
  Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health and Incendia Health
  Studios (collectively, “Ignite”), Chamberlain Communications Group, Inc.
  (“Chamberlain”), Addison Whitney, Angela Liedler GmbH (“Liedler”) and Chandler
  Chicco Agency (“CCA”);
- inVentiv
  Commercial, which consists of oursales teams, sales support
  services, market research, commercial
  analytics, healthcare strategies, embedded partners, managed markets access,
  biotech/specialty managed markets, and integrated
  commercialization.This segment includes Advance Insights,
  formerly known as inVentiv Strategy &
  Analytics, and inVentiv Selling Solutions.  inVentiv Selling
  Solutions includes Promotech Logistics Solutions LLC ("PLS"), acquired in
  December 2008; and
- inVentiv Patient
  Outcomes, which provides services related to patient pharmaceutical
  compliance programs, patient support programs, clinical educator teams,
  medical cost containment and consulting solutions and patient relationship
  marketing.  This segment includes Adheris, Inc. (“Adheris”), The
  Franklin Group (“Franklin”), The Therapeutics Institute (“TTI”), AWAC and
  Patient Marketing Group, LLC. (“PMG”) (acquired in August
  2008).

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


2.  Summary
of Significant Accounting Policies:





Basis
of Presentation





The
consolidated financial statements include the accounts of inVentiv Health, Inc.,
its wholly owned subsidiaries and its 60% 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
Liedler, a service provider of communication and marketing tools for technical,
medical and pharmaceutical products, located in Germany.   In
December 2009 the Company increased its investment interest from 85% to
100%.  The Company accounted for Liedler as an equity investment until
the 2007 acquisition date, and then included its results in our consolidated
results thereafter.





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





Cash
and Equivalents





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








43


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 and
  CRO Services- Revenues are recognized and recorded under the
  proportional performance method.  Certain contracts are also
  recognized and recorded when services are rendered.
- 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.
- Risk Evaluation and
  Mitigating Strategy (“REMS”)- Revenues are expected to be recognized
  and recorded under the proportional performance
  method.

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 proportional performance method, depending on the
  terms of the specific
  contracts.



inVentiv
Commercial




inVentiv Selling Solutions




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

Our
inVentiv Sales 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 Sales 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 the revenue recognition guidance applicable
to multiple deliverable arrangements,in which we have
concluded that the deployment and promotion phases are being sold separately and
therefore qualify as separate units of accounting.




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.




44


inVentiv
Advance Insights




·
            Planning and
      Analytics- Revenues for Advance Insights 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.  Advance Insights 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.  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
      Educators, On-Call Specialists, and Medical Science Liaison
      Programs- Revenue recognition is the same as inVentiv Sales Teams,
      as the two services are similar in the business arrangement and fee
      structure.




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




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





General Revenue
Recognition





Reimbursable
Costs


Reimbursable
costs, including those relating to travel and out-of pocket expenses, sales
force bonuses tied to individual or product revenues, and other similar costs,
are generally included in revenues, and an equivalent amount of reimbursable
expenses is included in costs of services in the period in which such amounts
have been finalized.  In certain cases, based on the Company’s
analysis of Accounting Standards Codification (“ASC” or “the codification”) 605,
in regards to reimbursable revenues, 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
2009 or 2008 or 2007.





Billing


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





45


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 ASC 350,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.  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
compares the fair value of the reporting unit to its carrying value. If the
carrying amount exceeds the fair value, the second step of the test is performed
to measure the amount of impairment loss, if any. The second step compares the
implied fair value of reporting unit goodwill with the carrying amount of that
goodwill. To calculate the implied fair value of goodwill in this second step,
the Company allocates the fair value of the reporting unit to all of the assets
and liabilities of that reporting unit (including any unrecognized intangible
assets) as if the reporting unit had been acquired in a business combination and
the fair value was the price paid to acquire the reporting unit. The excess of
the fair value of the reporting unit over the amount assigned to the assets and
liabilities of the reporting unit represents the implied fair value of goodwill.
If the carrying amount of goodwill exceeds the implied fair value of goodwill,
an impairment loss is recognized for that difference.





The
Company performed annual impairment tests as of June 30, 2008 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired.  During the fourth quarter of 2008, as a result of
adverse equity market conditions that caused a decrease in the current market
multiples and the company’s stock price, the Company concluded that a triggering
event had occurred indicating potential impairment, and accordingly performed an
impairment test of its goodwill and other intangible assets at December 31,
2008.  This interim impairment test resulted in pre-tax noncash
goodwill and intangible asset impairment charges of approximately $268 million,
including $238 million of indefinite-lived assets and $30 million of
definite-lived assets.  See Note 7 for further details of these
noncash goodwill and intangibles impairment charges.





Goodwill
and other indefinite-life intangibles were assessed for potential impairment on
June 30, 2009 for the Company’s annual impairment testing.   The
Company conducted its assessment and concluded that the foregoing balances on
the Company’s Consolidated Balance Sheet were not impaired as of June 30,
2009.  The Company has determined that there are no factors present
that would more-likely-than-not reduce the fair value of the Company’s reporting
units below their carrying amounts and therefore the Company believes that no
impairment exists as of December 31, 2009.








Impairment
of Long-Lived Assets





ASC
360establishes
accounting standards for the impairment of long-lived assets.  The
Company reviews its long-lived assets, including property and equipment, for
impairment whenever events or circumstances indicate that the carrying amount of
an asset may not be recoverable.  Events or circumstances that would
result in an impairment review primarily include operations reporting sustained
losses or a significant change in the use of an asset. An impairment loss would
be recognized based on the amount by which the carrying value of the asset
exceeds its fair value.  As explained above, the Company performed an
impairment test of its goodwill and intangible assets as of December 31, 2008,
and recorded $30 million of pre-tax noncash impairment of certain definite-lived
intangible assets.  There were no material impairment losses in 2009
or 2007.





Customer
Relationships





An
important asset in most of our acquisition agreements have been the Company’s
customer relationships, which primarily arise from the allocation of the
purchase price of the respective businesses acquired.  Customer
relationships typically are finite-lived intangible assets.





The
classification of the Company’s customer relationships and the determination of
their appropriate useful lives require substantial judgment.  In the
Company’s evaluation of the appropriate useful lives of these assets, we
consider the nature and terms of the underlying agreements; our intent and
ability to use the customer relationships; the historical breadth of the
respective customer relationships before being acquired by inVentiv and the
projected growth of the customer relationships.





These
finite-lived customer relationships are amortized over their expected useful
life, which generally ranges from four to sixteen years.  For these
customer relationships, evaluations for impairment are performed only if facts
and circumstances indicate that the carrying value may not be
recoverable.





Claims
and Insurance Accruals





The
Company maintains self-insured retention limits for certain insurance
policies.  The liabilities associated with the risk retained by the
Company 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.





46


Earnings
(Loss) Per Share (“EPS”)





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





Year
      Ended December 31,2009
            
            
            2008
            
            
            2007(in
      thousands, except per share data)Basic EPS from Continuing Operations
      ComputationIncome
      (loss) from continuing operations attributable to inVentiv Health,
      Inc.
            
            $
            46,871
            
            
            $
            (128,685
            )
            
            $
            47,226Weighted
      average number of common shares outstanding
            
            
            33,502
            
            
            
            33,043
            
            
            
            31,578Basic
      EPS from continuing operations attributable to inVentiv Health,
      Inc.
            
            $
            1.40
            
            
            $
            (3.89
            )
            
            $
            1.50Diluted EPS from Continuing Operations
      ComputationIncome
      (loss) from continuing operations attributable to inVentiv Health,
      Inc.
            
            $
            46,871
            
            
            $
            (128,685
            )
            
            $
            47,226Weighted
      average number of common shares outstanding
            
            
            33,502
            
            
            
            33,043
            
            
            
            31,578Stock
      options (1)
            
            
            55
            
            
            
            n/a
            
            
            
            497Restricted
      awards (2)
            
            
            241
            
            
            
            n/a
            
            
            
            192Total
      diluted common shares outstanding
            
            
            33,798
            
            
            
            33,043
            
            
            
            32,267Diluted
      EPS from continuing operations attributable to inVentiv Health,
      Inc.
            
            $
            1.39
            
            
            $
            (3.89
            )
            
            $
            1.46




For the
years ended December 31, 2009, December 31, 2008 and December 31, 2007,
1,731,834 shares, 271,227 shares and 145,510 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.




For the
years ended December 31, 2009, December 31, 2008 and December 31, 2007, 67,263
shares, 767,679 shares and negligible 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, Japan and Canadian subsidiaries and equity investments and
noncontrolling 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 ASC 830,
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, 2009, the accumulated other comprehensive losses related to foreign
currency translations was approximately $1.8 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.





47


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





Concentration
of Credit Risk





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





Accounting
for Stock Options




The
Company follows ASC 718, which provides guidance in 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.




Stock-based compensation expense for
the years ended December 31, 2009, 2008 and 2007 of $8.9 million, $10.6 million
and $9.7 million, respectively, of which $1.8 million, $2.3 million and $2.4
million, respectively, were recorded in cost of services and $7.1 million, $8.3
million and $7.3 million were recorded as Selling, General and Administrative
expenses (“SG&A”), respectively.




Cash
provided by financing activities (decreased) increased by ($1.3) million, $0.3
million and $7.9 million for the years ended December 31, 2009, 2008 and 2007,
respectively, related to excess tax benefits from the exercise of stock-based
awards.





As of
January 1, 2008, the Company applied updated guidance of ASC 718 for determining
the expected term and the range of the expected term remained unchanged at 5.5
to 6 years as previously reported.







Use
of Forecasted Financial Information in Accounting Estimates
 
 The use
of forecasted financial information is inherent in many of the Company's
accounting estimates, including but not limited to, determining the estimated
fair value of goodwill and intangible assets, matching intangible amortization
to underlying benefits (e.g. sales and cash inflows) and evaluating the need for
valuation allowances for deferred tax assets.  Such forecasted financial
information is comprised of numerous assumptions regarding the Company's
future revenues, cash flows, and operational results.  Management believes
that its financial forecasts are reasonable and appropriate based upon current
facts and circumstances.  Because of the inherent nature of forecasts,
however, actual results may differ from these forecasts.  Management
regularly reviews the information related to these forecasts and adjusts the
carrying amounts of the applicable assets prospectively, if and when actual
results differ materially from previous
estimates.






48


Recent
Accounting Pronouncements






In
October 2009, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standards Update 2009-13 (ASU 2009-13), which provided an update to
ASC 605.  ASU 2009-13 addresses how to separate deliverables and how
to measure and allocate arrangement consideration to one or more units of
accounting in multiple-deliverable arrangements. The amendments in this update
will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010. The
Company is currently evaluating the impact that this update will have on its
Consolidated Financial Statements.




In June
2009, the FASB created the Accounting Standards Codification, which is codified
as ASC 105.ASC 105
establishes the codification as the single official non-governmental source of
authoritative accounting principles (other than guidance issued by the SEC) and
supersedes and effectively replaces previously issued GAAP hierarchy
framework.  All other literature that is not part of the codification
will be considered non-authoritative.  The codification is effective
for interim and annual periods ending on or after September 15,
2009.  The Company has applied the codification, as required,
beginning with the 2009 third quarter Form 10-Q.  The adoption of the
codification did not have a material impact on the Company’s consolidated
financial position, results of operations or cash
flows.




In June
2009, the FASB updated ASC 855,which established
principles and requirements for subsequent events.  This guidance
details the period after the balance sheet date which the Company should
evaluate events or transactions that may occur for potential recognition or
disclosure in the financial statements, the circumstances under which the
Company should recognize events or transactions occurring after the balance
sheet date in its financial statements and the required disclosures for such
events.  ASC 855 is effective for interim and annual periods ending
after June 15, 2009.  The implementation of ASC 855 did not have a
material effect on the Company’s consolidated financial
statements.  The Company adopted ASC 855, effective June 30, 2009, as
required, and has evaluated all subsequent events through February 24, 2010 (the
date the Company’s financial statements are issued).




In
April 2009, the FASB updated ASC 820 to provide additional guidance for
estimating fair value when the volume and level of activity for the asset or
liability have decreased significantly.  ASC 820 also provides
guidance on identifying circumstances that indicate a transaction is not
orderly. The provisions of ASC 820 are effective for the Company’s interim
period ending on June 30, 2009. The implementation of ASC 820 did not have
a material effect on the Company’s consolidated financial
statements.




In
April 2009, the FASB updated ASC 825 regarding interim disclosures about
fair value of financial instruments.  ASC 825 requires disclosures
about fair value of financial instruments in interim reporting periods of
publicly traded companies that were previously only required to be disclosed in
annual financial statements. The provisions of ASC 825 are effective for the
Company’s interim period ending on June 30, 2009. The implementation of ASC
825 did not have a material effect on the Company’s consolidated financial
statements.




In
April 2009, the FASB updated ASC 320 for proper recognition and
presentation of other-than-temporary impairments.  ASC 320 provides
additional guidance designed to create greater clarity and consistency in
accounting for and presenting impairment losses on securities. The provisions of
ASC 320 are effective for the Company’s interim period ending on June 30,
2009.  The implementation of ASC 320 did not have a material effect on
the Company’s consolidated financial statements.


In
October 2008, the FASB updated ASC 820 to provide guidance of determining the
fair value of a financial asset when the market for that asset is not
active.  ASC 820 amended previous guidance on this topic to include
guidance on how to determine the fair value of a financial asset in an inactive
market.  This update of ASC 820 is effective immediately on issuance,
including prior periods for which financial statements have not been
issued.  The implementation of ASC 820 did not have a material impact
on the Company’s financial position and results of
operations.




In March
2008, the FASB updated ASC 815 to amend previous guidance regarding disclosures
about derivative instruments and hedging activities. ASC 815 requires additional
disclosures regarding a company’s derivative instruments and hedging activities
by requiring disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format. It also requires disclosure of derivative
features that are credit risk–related as well as cross-referencing within the
notes to the financial statements to enable financial statement users to locate
important information about derivative instruments, financial performance, and
cash flows. ASC 815 is effective for fiscal years beginning after November 15,
2008. The Company adopted ASC 815, effective January 1, 2009, as
required.




In
December 2007, the FASB updated ASC 805 for guidance regarding business
combinations.  ASC 805 addresses the recognition and accounting for
identifiable assets acquired, liabilities assumed, and noncontrolling interests
in business combinations. ASC 805 also establishes expanded disclosure
requirements for business combinations. The update to ASC 805 is effective
January 1, 2009 and as such is being applied to the Paragon Rx acquisition in
December 2009.  All acquisitions completed prior to January 1, 2009
will be treated in accordance with the guidance under ASC 805 before the updated
guidance described above.  The Company adopted this update to ASC 805,
effective January 1, 2009, as required for applicable acquisitions.





In
December 2007, the FASB updated ASC 810 for noncontrolling interests in
consolidated financial statements.  ASC 810 addresses the accounting
and reporting framework for minority interests by a parent
company.  ASC 810 also addresses disclosure requirements to
distinguish between interests of the parent and interests of the noncontrolling
owners of a subsidiary.  The Company adopted the provisions of ASC
810, effective January 1, 2009, as required.  As a result of the
adoption, the Company has reported noncontrolling interest (previously minority
interest) as a component of equity in the Consolidated Balance Sheets and the
net income or loss attributable to noncontrolling interests has been separately
identified in the Consolidated Income Statements.  The prior periods
presented have also been reclassified to conform to the current classification
required by ASC 810.





49


3.  Acquisitions:





Acquisitions
are accounted for using purchase accounting, including the guidance of ASC 805
for all acquisitions prior to 2009 and the updated guidance the FASB issued
relating to ASC 805 for acquisitions after January 1, 2009.  The
financial results of the acquired businesses are included in the Company’s
financial statements from their acquisition dates.  Earnout payments
from acquisitions prior to 2009 are generally accrued at the end of an earnout
period in conjunction with the preparation of the Company’s financial statements
when the acquired company’s results are reviewed, as more fully described
below.  The present value of earnout payments from acquisitions after
January 1, 2009 is estimated and recorded as of the acquisition date, as
required by the updated guidance of ASC 805. The terms of the acquisition
agreements generally include multiple earnout periods or a multi-year earnout
period.  Pro forma financial information was not required to be
disclosed for the 2008 and 2009 acquisitions noted below as they were not
material to the consolidated operations of the Company prior to the dates they
were acquired and began to be consolidated into the Company.





The
following acquisition was consummated during 2009:





Paragon– In December 2009,
the Company completed the acquisition of the net assets of Paragon for
approximately $5.9 million in upfront cash and stock consideration, including
post-closing adjustments yet to be finalized, as described in the table
below.  As required by the updated guidance of ASC 805, effective
January 1, 2009, the Company recorded an additional $4.1 million in earnout
consideration based on Paragon’s estimated performance measurements during 2010
through 2012.  The $4.1 million is included on the December 31, 2009
consolidated balance sheet as part of other non-current
liabilities.  Paragon is headquartered in Delaware and is a leading
provider in designing and implementing REMS.  The Company acquired
Paragon to strengthen its REMS capabilities,to complementits broad array of risk
communications and REMS implementation services and to expand the breadth of
inVentiv Clinical’s scope of safety science offerings.





The
following table summarizes the purchase price for Paragon:


(in
      thousands)
            
            Fair
      Value of ConsiderationFair
      Value of the Net Assets Acquired
            
            $
            277Customer
      Relationships
            
            
            3,100Technology
            
            
            1,000Tradename
      subject to amortization
            
            
            250Goodwill,
      excluding contingent consideration (tax deductible)
            
            
            1,248Total
      purchase price, before contingent consideration
            
            
            5,875Contingent
      consideration estimate at acquisition date
            
            
            4,100Total
      purchase price, including estimate of contingent
    consideration
            
            $
            9,975







The $4.1
million of contingent consideration, as described above, is based on Paragon’s
estimated performance measurements during 2010 through 2012 and represents the
present value of the expected payments during these respective periods, using a
discounted cash flow analysis.








The
following acquisitions were consummated during 2008:




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





PMG - In August 2008, the
Company completed the acquisition of the net assets of PMG for approximately
$15.2 million in cash, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earnout payments, which may be material, contingent on PMG’s performance
measurements during 2008 through 2009.  The amount accrued at December
31, 2009 for the 2009 earnout was $18.5 million.  PMG is headquartered
in New Jersey and is a leading provider of patient relationship marketing
services.  PMG’s financial results have been reflected in the inVentiv
Patient Outcomes segment since the date of its acquisition.





The
following acquisitions consummated prior to 2008 still have earnouts outstanding
for future periods:





Acquisition
            Acquisition
      Date
            Segment
            Unexpired
      Earnout PeriodCCA
            July
      2007
            Communications
            July
      2007- June 2010(1)AWAC
            July
      2007
            Patient
      Outcomes
            July
      2007- June 2010Addison
      Whitney
            June
      2007
            Communications
            July
      2007- June 2010Ignite
            March
      2007
            Communications
            April
      2007- March 2010(2)Chamberlain
            March
      2007
            Communications
            January
      2007-December 2009(3)





(1)  Under
certain circumstances a portion of the earnout amount will be deferred and
become payable based on the financial results of the CCA for the period July
2010- June 2011.


(2)  If
the earnout payment for such period exceeds a specified amount, the excess will
be deferred and become payable based on the financial results of Ignite for the
period April 2010- March 2011.


(3)  The
amount accrued at December 31, 2009 for the Chamberlain earnout period described
above was $23.0 million.








4.  Significant
Clients:





During the years ended December 31,
2009 and 2008, 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.





50


5.  Restricted
Cash and Marketable Securities:





As of December 31, 2009 and December
31, 2008, there was approximately $1.4 million and $1.3 million of restricted
cash, of which $0.4 million collateralizes 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 beneficiaries have not drawn on the $0.4
million letters of credit.





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 as restricted
accordingly. Cash held in such segregated bank accounts totaled approximately
$0.1 million at December 31, 2009 and December 31, 2008,
respectively.





As of December 31, 2008, the Company
had approximately $10.0 million invested in the Columbia Strategic Cash
Portfolio (“CSCP”).  The CSCP balance was fully liquidated in December
2009.  Accordingly, the Company’s recorded balance in the CSCP was
$6.3 million as of December 31, 2008 and is classified as restricted cash and
marketable securities on the December 31, 2008 consolidated balance
sheet.  During the periods ended December 31, 2009 and December 31,
2008, the Company recorded realized gain of $0.4 million and impairment of $2.6
million, respectively, relating to impairments of the Company's investment in
the CSCP, which held certain asset-backed securities.  Consistent with
the Company's investment policy guidelines, the majority of CSCP investments had
AAA/Aaa credit ratings at the time of purchase.





The CSCP maintained a net asset value
of $1 per unit until December 2007, after which the net asset value per unit
fluctuated 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 was fully liquidated in December 2009.  The $3.0
million net loss ($3.4 million cumulative impairment charge offset by $0.4
million realized gain) from inception through December 31, 2009 did not have a
material impact on the company's liquidity or financial
flexibility.





6.  Property
and Equipment, net:





Property
and equipment consist of the following:





As
      of December 31,2009
            
            
            2008(in
      thousands)Buildings
      and leasehold improvements
            
            $
            27,244
            
            
            $
            15,479Computer
      equipment and software
            
            
            47,179
            
            
            
            35,676Vehicles
            
            
            14,089
            
            
            
            32,252Furniture
      and fixtures
            
            
            14,602
            
            
            
            12,783103,114
            
            
            
            96,190Accumulated
      depreciation
            
            
            (37,871
            )
            
            
            (32,808
            )$
            65,243
            
            
            $
            63,382





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





Depreciation
expense of property and equipment totaled $20.9 million, $20.9 million and $18.2
million in 2009, 2008 and 2007, respectively. In 2009, 2008 and 2007 inVentiv
recorded $8.3 million, $11.2 million and $10.5 million of depreciation,
respectively, on vehicles under capital lease.








51


7.  Goodwill and Other Intangible
Assets:





Goodwill
consists of the following:





(in
      thousands)
            
            inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalBalance
      as of January 1, 2008
            
            $
            56,944
            
            
            $
            190,958
            
            
            $
            45,773
            
            
            $
            90,039
            
            
            $
            --
            
            
            $
            383,714Goodwill
      acquired during the year
            
            
            --
            
            
            
            --
            
            
            
            1,561
            
            
            
            5,202
            
            
            
            --
            
            
            
            6,763Goodwill
      through contingent consideration(1)
            
            
            32
            
            
            
            31,127
            
            
            
            --
            
            
            
            12,153
            
            
            
            --
            
            
            
            43,312Goodwill
      allocation (2)
            
            
            --
            
            
            
            (6,674
            )
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (6,674
            )Other
      adjustments
            
            
            186
            
            
            
            863
            (4)
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,049Impairment
      losses(3)
            
            
            (41,344
            )
            
            
            (112,667
            )
            
            
            --
            
            
            
            (58,627
            )
            
            
            --
            
            
            
            (212,638
            )Balance
      as of December 31, 2008
            
            $
            15,818
            
            
            $
            103,607
            
            
            $
            47,334
            
            
            $
            48,767
            
            
            $
            --
            
            
            $
            215,526Goodwill
      acquired during the year
            
            
            1,248
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            1,248Goodwill
      through contingent consideration(1)
            
            
            4,100
            
            
            
            23,088
            
            
            
            --
            
            
            
            18,506
            
            
            
            --
            
            
            
            45,694Goodwill
      allocation(5)
            
            
            --
            
            
            
            --
            
            
            
            60
            
            
            
            --
            
            
            
            --
            
            
            
            60Balance
      as of December 31, 2009
            
            $
            21,166
            
            
            $
            126,695
            
            
            $
            47,394
            
            
            $
            67,273
            
            
            $
            --
            
            
            $
            262,528





(1)
            For
      acquisitions before January 1, 2009, the contingent consideration
      represents adjustments relating to the finalization of the earnouts for
      the respective periods.  For Paragon, the contingent
      consideration represents the estimated earnout at the acquisition
      date.


(2)
            The
      amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the final valuation, completed
      during 2008, for the Liedler acquisition, which was acquired on December
      28, 2007.  Under ASC 805 guidance prior to January 1, 2009, if a
      business combination is consummated toward the end of an acquiring
      enterprise's fiscal year or the acquired enterprise is very large or
      unusually complex, the acquiring enterprise may not be able to obtain some
      of the data required to complete the allocation of the cost of the
      purchased enterprise for inclusion in its next annual financial
      report.  As such the valuation was not completed by the time the
      2007 10-K was filed.


(3)
            These
      amounts relate to the respective reporting unit noncash impairment charges
      of goodwill as a result of the interim impairment tests the Company
      performed at December 31, 2008.  The fair value of each
      reporting unit was estimated using the expected present value of future
      cash flows.  These impairment losses represent the total
      accumulated impairment losses related to our existing goodwill as of
      December 31, 2009.


(4)
            This
      amount relates to a tax adjustment on the Chamberlain acquisition
      accounted for under the ASC 805 guidance, prior to January 1, 2009,
      relating to uncertainties related to income taxes in a purchase business
      combination.


(5)
            The
      amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the PLS
      acquisition.  Identifiable intangible assets were allocated at
      December 31, 2008, but were revised accordingly based on finalization of
      the valuation, as allowed under ASC 805 guidance prior to January 1,
      2009.





Other intangible assets consist of the
following:





December
      31, 2009
            
            
            December
      31, 2008(in
      thousands)
            
            
            
            
            Accumulated
            
            
            
            
            
            
            
            
            AccumulatedGross
            
            
            Amortization
            
            
            Net
            
            
            Gross
            
            
            Amortization
            
            
            NetCustomer
      relationships
            
            $
            116,934
            
            
            $
            (37,917
            )
            
            $
            79,017
            
            
            $
            113,896
            
            
            $
            (27,177
            )
            
            $
            86,719Technology
            
            
            15,168
            
            
            
            (5,277
            )
            
            
            9,891
            
            
            
            14,168
            
            
            
            (4,497
            )
            
            
            9,671Noncompete
      agreement
            
            
            1,506
            
            
            
            (1,127
            )
            
            
            379
            
            
            
            1,506
            
            
            
            (911
            )
            
            
            595Tradenames
      subject to amortization
            
            
            2,409
            
            
            
            (1,163
            )
            
            
            1,246
            
            
            
            2,275
            
            
            
            (790
            )
            
            
            1,485Other
            
            
            1,232
            
            
            
            (972
            )
            
            
            260
            
            
            
            1,232
            
            
            
            (683
            )
            
            
            549Total
      definite-life intangibles
            
            
            137,249
            
            
            
            (46,456
            )
            
            
            90,793
            
            
            
            133,077
            
            
            
            (34,058
            )
            
            
            99,019Tradenames
      not subject to amortization (1)
            
            
            127,490
            
            
            
            --
            
            
            
            127,490
            
            
            
            127,490
            
            
            
            --
            
            
            
            127,490Total
      other intangibles (2)
            
            $
            264,739
            
            
            $
            (46,456
            )
            
            $
            218,283
            
            
            $
            260,567
            
            
            $
            (34,058
            )
            
            $
            226,509





(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.


(2)
            The
      increase in total other intangibles is related to the Paragon acquisition,
      offset by the allocation of goodwill and identifiable intangible assets
      for the PLS acquisition, as described above and the writeoff of the
      Strategyx name, as described below.





The Company has the following
identifiable intangible assets:





Intangible asset
            
            Amount
              (in
      thousands)
            
            
            Weighted
      average amortization periodTradename
            
            $
            129,899
            
            
            
            (1
            )Customer
      relationships
            
            
            116,934
            
            
            10.7
      yearsTechnology
            
            
            15,168
            
            
            13.8
      yearsNoncompete
      agreement
            
            
            1,506
            
            
            4.5
      yearsOther
            
            
            1,232
            
            
            4.5
      yearsTotal
            
            $
            264,739





(1)
            $2.4
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 4.8
  years.





Amortization expense, based on
intangibles subject to amortization held at December 31, 2009, is expected to be
$12.5 million in 2010, $12.1 million in 2011, $12.0 million in 2012, $10.7
million in 2013, $10.3 million in 2014 and $32.6 million
thereafter.





52


The
balances recorded on the Company’s Consolidated Balance Sheet for goodwill and
other indefinite-life intangibles, such as tradenames, are assessed annually for
potential impairment as of June 30, pursuant to the guidelines of ASC 350 and
ASC 360.  In accordance with ASC 350, the Company uses the two-step
process for periods in which impairment testing is performed.  The
first step compares the fair value of the reporting unit to its carrying value.
If the carrying amount exceeds the fair value, the second step of the test is
performed to measure the amount of impairment loss, if any. The second step
compares the implied fair value of reporting unit goodwill with the carrying
amount of that goodwill. To calculate the implied fair value of goodwill in this
second step, the Company allocates the fair value of the reporting unit to all
of the assets and liabilities of that reporting unit (including any unrecognized
intangible assets) as if the reporting unit had been acquired in a business
combination and the fair value was the price paid to acquire the reporting unit.
The excess of the fair value of the reporting unit over the amount assigned to
the assets and liabilities of the reporting unit represents the implied fair
value of goodwill. If the carrying amount of goodwill exceeds the implied fair
value of goodwill, an impairment loss is recognized for that
difference.





The
Company performed annual impairment tests as of June 30, 2008 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired.  The Company's declining stock price during the fourth
quarter of 2008 resulted in a market capitalization that was well below the book
value of the Company.  This was due to a combination of declining
market conditions and lower than expected operating results for certain
businesses.  As such, the Company conducted an interim impairment test
during the fourth quarter of 2008, resulting in the following impairment
charges:





(in
      thousands)
            
            2008
              ImpairmentGoodwill
            
            $
            212,638Intangible assets:Customer
      relationships
            
            
            5,605Tradenames
            
            
            25,833Technology
            
            
            23,773Total
      Impairment
            
            $
            267,849





Goodwill
and other indefinite-life intangibles were assessed for potential impairment on
June 30, 2009, as noted above, for the Company’s annual impairment
testing.   The Company conducted its assessment and concluded
that the foregoing balances on the Company’s Consolidated Balance Sheet were not
impaired as of June 30, 2009.  The Company has determined that there
are no factors present that would more-likely-than-not reduce the fair value of
the Company’s reporting units below their carrying amounts and therefore the
Company believes that no impairment exists as of December 31, 2009.


During
the first quarter of 2009, the Company strategically changed its Strategy &
Analytics’ name to Advance Insights, thereby discontinuing the usage of Health
Products Research, Strategyx, Ventiv Access Services and Creative Healthcare
Solutions names.  The Company accordingly recorded a $0.1 million
tradename writeoff as a result of discontinuing the Strategyx name, which is
included as part of selling, general and administrative expenses in the
consolidated income statement.





53


8.  Debt:




The
Company is party to 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, a $50 million revolving credit facility, of which
$10 million is available for the issuance of letters of credit, and a swingline
facility.  The Credit Agreement was used to:






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




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






The term
loan will mature on July 6, 2014, with scheduled quarterly amortization of 1%
per year until the final year (July 2013 – July 2014) of the Amended and
Restated Credit Agreement, during which 94% of the term loan is to be repaid.
The revolving loans will mature on July 6, 2013. 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 Company has certain
restrictions under this Credit Agreement to pay dividends.  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 (the permitted leverage ratio was
3.5 to 1.0 through December 31, 2009; the Company’s leverage ratio was 2.5 to
1.0 as of December 31, 2009).






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, 2009 and December 31, 2008 was 0.25% and
1.43%, respectively.  As disclosed in Note 12, the Company has a
derivative financial instrument, currently with a notional amount of $322
million, to hedge against the current term loan facility.




The
Company accounts for amendments to its revolving credit facility under the
provisions of ASC 470, and its term loan under the provisions of ASC 470. 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 ASC 470.  In connection
with an amendment of our existing $164 million term loan, under the terms of ASC
470, 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 was approximately $3.4 million and $3.9 million and are included
in Deposits and Other Assets on the consolidated balance sheets as of December
31, 2009 and December 31, 2008, respectively.





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





Years
      Ending December 31,
            
            (in
      thousands)2010
            
            $
            3,4552011
            
            
            3,3002012
            
            
            3,3002013
            
            
            156,7502014
            
            
            155,100Total
      minimum payments
            
            $
            321,905





54


9.  Accrued
Payroll, Accounts Payable and Accrued Expenses:





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





December
      31,2009
            
            
            2008(in
      thousands)Accrued
      payroll and related employee benefits
            
            $
            36,103
            
            
            $
            38,733Accounts
      payable
            
            
            11,123
            
            
            
            10,421Accrued
      media liability
            
            
            9,008
            
            
            
            9,415Accrued
      insurance
            
            
            11,255
            
            
            
            9,912Accrued
      commissions
            
            
            4,468
            
            
            
            6,185Accrued
      professional fees
            
            
            4,983
            
            
            
            4,403Contingent
      consideration from acquisitions
            
            
            41,585
            
            
            
            40,875Accrued
      expenses
            
            
            10,946
            
            
            
            9,065$
            129,471
            
            
            $
            129,009





10.           Fair
Value Measurement




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




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




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







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





The
following table represents the Company’s assets and liabilities measured at fair
value on a recurring basis as of December 31, 2009 and the basis for that
measurement:







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







55





(in
      thousands)
            
            Total
      Fair Value Measurement December 31, 2009
            
            
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            
            $
            1,014
            
            
            $
            --
            
            
            $
            1,014
            
            
            $
            --Deferred
      Compensation
              Plan
      Assets
            
            
            10,413
            
            
            
            --
            
            
            
            10,413
            
            
            
            --TOTAL
      ASSETS
            
            $
            11,427
            
            
            $
            --
            
            
            $
            11,427
            
            
            $
            --LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            
            $
            9,393
            
            
            $
            --
            
            
            $
            9,393
            
            
            $
            --Derivative
      Liabilities
            
            
            24,572
            
            
            
            --
            
            
            
            --
            
            
            
            24,572Acquisition–related
      contingent consideration
            
            
            4,100
            (1)
            
            
            
            
            
            
            
            
            
            
            4,100TOTAL
      LIABILITIES
            
            $
            38,065
            
            
            $
            --
            
            
            $
            9,393
            
            
            $
            28,672





(1) See
Note 3 for further details of the acquisition –related contingent
consideration





As a
result of market conditions related to the interest rate environment, the
Company updated its valuation of its five-year interest rate derivative as of
December 31, 2008 and December 31, 2009, resulting in a credit value adjustment
of $4.8 million and $1.8 million, respectively, to the derivative liability,
with a corresponding offset to Other Comprehensive Income as a result of cash
flow hedge accounting (see Note 12).  This valuation, which involved
current and future probability-adjusted risk factors, included inputs derived
from valuation techniques in which one or more significant inputs were
unobservable, classifying this as a Level 3 input under the definition described
above.  The significant inputs in this valuation included credit
market spread, estimated exposure and company and counterparty default
risk.





As a
result of the decrease in available investment prices from September 30, 2008 to
December 31, 2008 due to market conditions, the Company changed its
classification of marketable securities from a Level 2 input to a Level 3
input.    The Company incurred a $2.6 million impairment
charge during 2008, of which $2.0 million was in the fourth quarter of 2008 and
primarily related to the lack of liquidity and resulting distressed values of
investments in the marketplace.  These factors resulted in a
significant percentage of the securities within CSCP that required unobservable
inputs, which was not materially present through September 30,
2008.  These significant inputs included interest rate curves, credit
curves and creditworthiness of the counterparty.  The classification
was not necessary as of December 31, 2009, as the CSCP has been fully
liquidated.








The
following is a rollforward of the Level 3 assets and liabilities from January 1,
2008 through December 31, 2009:





Fair
      Value Measurements(in
      thousands)
            
            Using
      Significant Unobservable Inputs (Level 3)ASSETS
            
            CSCPBalance
      at January 1, 2008
            
            $
            --Included
      in earnings (or changes in net assets)
            
            
            --Included
      in other comprehensive income
            
            
            --Purchases,
      issuances and settlements
            
            
            --Transfers
      in and/or out of Level 3
            
            
            9,999Balance
      at January 1, 2009
            
            $
            9,999Included
      in earnings (or changes in net assets)
            
            
            415Included
      in other comprehensive income
            
            
            --Purchases,
      issuances and settlements
            
            
            (10,414
            )Transfers
      in and/or out of Level 3
            
            
            --Balance
      at December 31, 2009
            
            $
            --LIABILITIES
            
            Derivative/Acquisition-related
      Contingent ConsiderationBalance
      at January 1, 2008
            
            $
            --Included
      in earnings (or changes in net assets)
            
            
            --Included
      in other comprehensive income
            
            
            --Deferred
      tax impact of other comprehensive income
            
            
            --Transfers
      in and/or out of Level 3
            
            
            10,491Balance
      at September 30, 2008
            
            $
            10,491Included
      in earnings (or changes in net assets)
            
            
            --Included
      in other comprehensive income
            
            
            12,058Deferred
      tax impact of other comprehensive income
            
            
            8,234Transfers
      in and/or out of Level 3
            
            
            --Balance
      at January 1, 2009
            
            $
            30,783Included
      in earnings (or changes in net assets)
            
            
            --Included
      in other comprehensive income
            
            
            (3,828
            )Deferred
      tax impact of other comprehensive income
            
            
            (2,383
            )Acquisition
      –related contingent consideration (1)
            
            
            4,100Transfers
      in and/or out of Level 3
            
            
            --Balance
      at December 31, 2009
            
            $
            28,672


(1) See
Note 3 for further details of the acquisition –related contingent
consideration.





56


11.
Leases:





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





The
following is a schedule of future minimum lease payments for these operating
leases at December 31, 2009 (in thousands):





Years
      Ending December 31,2010
            
            $
            22,7602011
            
            
            20,3972012
            
            
            18,0502013
            
            
            14,4522014
            
            
            12,163Thereafter
            
            
            48,681Total
      minimum lease payments
            
            $
            136,503





Rental
expense charged to operations was approximately $22.7 million, $19.0 million and
$13.0 million for the years ended December 31, 2009, 2008 and 2007,
respectively.





The
Company also has commitments under capital leases.  The following is a
schedule of future minimum lease payments for these capital leases at December
31, 2009 (in thousands):





(a)Years
      Ending December 31,2010
            
            $
            9,7512011
            
            
            8,7652012
            
            
            4,7912013
            
            
            9422014
            
            
            117Total
      minimum lease payments
            
            
            24,366Amount
      representing interest and
              management
      fees
            
            
            (993
            )23,373Current
      portion
            
            
            (9,293
            )Non-current
      lease obligations
            
            $
            14,080





(a) These
future commitments include interest and management fees, which are not recorded
on the Consolidated Balance Sheet as of December 31, 2009 but will be recorded
as incurred.





57


12.  Derivative
Financial Instruments:







ASC 815,
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 ASC 815, changes in fair value of the effective portion of a designated
cash flow hedge are recorded to Other Comprehensive Iincome or loss; the
ineffective portion is recorded to interest expense in our consolidated income
statement.




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





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 that increased to $325 million effective
December 31, 2008 (concurrently with the expiration of the Company’s original
2005 three-year interest rate swap arrangement) to hedge the total outstanding
debt notional amount.  This hedge relationship was designated as a
cash flow hedge.  At hedge inception, the Company employed the dollar
offset method by performing a sensitivity analysis to assess effectiveness and
utilized the hypothetical derivative method to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  The fair value of the
derivative, net of credit value adjustment, was approximately $24.6 million and
$30.8 million as of December 31, 2009 and December 31, 2008, respectively, and
was recorded in other non-current liabilities.  As a result of the
hypothetical derivative method, there was no ineffectiveness for the period
ended December 31, 2009, and accordingly, $6.2 million ($3.8 million, net of
taxes) was recorded as an increase to Other Comprehensive Income and a decrease
to other non-current liabilities on the Company’s Consolidated Balance
Sheet.  This change in Other Comprehensive Income includes the $4.8
million and $1.8 million credit value adjustment for December 31, 2008 and
December 31, 2009, respectively, as discussed in Note 10.  The amount
of loss reclassified from accumulated other comprehensive income into interest
expense for the year ended December 31, 2009 was approximately $13.1
million.





Based on
current assumptions regarding the interest rate environment and other market
conditions at December 31, 2009, 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 $13.8
million.





13.  Commitments
and Contingencies:





The
Company is subject to lawsuits, investigations and claims arising out of the
conduct of its business, including those related to commercial transactions,
contracts, government regulation and employment matters. Certain claims, suits
and complaints have been filed or are pending against the
Company.   In the opinion of management, taking into account the
advice of legal counsel, no matters outstanding as of December 31, 2009 are
likely to have a material adverse effect on inVentiv.





14.  Common
Stock and Stock Incentive Plans:





The
Company’s 2006 Stock Incentive Plan (Amended on April 27, 2009) (“Stock Plan” or
“LTIP”) authorizes incentive stock options, nonqualified stock options,
restricted stock awards, restricted stock units and stock appreciation rights
("SARs”).  Prior to the adoption of the LTIP, the Company was
authorized to grant equity incentive awards under its 1999 Stock Incentive Plan
(together with the LTIP, the "Equity Incentive Plans").  The Company
discontinued making grants under the 1999 Stock Incentive Plan at the time the
LTIP was adopted.  The aggregate number of unissued shares of the
Company’s common stock that may be issued under the Stock Plan is 4.2 million
shares, which includes 4.1 million additional shares that were approved by our
shareholders on June 17, 2009.





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





The
following table summarizes stock option activity under the Company’s equity
incentive plans for the years ended December 31, 2009, 2008 and 2007 (in
thousands, except per share amounts):





Shares
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Remaining Contractual Term (in years)
            
            
            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2007
            
            
            2,194
            
            
            $
            14.43
            
            
            
            7.24
            
            
            $
            45,900Granted
      and assumed
            
            
            172
            
            
            
            35.75Exercised
            
            
            (783
            )
            
            
            8.82Forfeited/expired/cancelled
            
            
            (77
            )
            
            
            21.20Outstanding
      at December 31, 2007
            
            
            1,506
            
            
            $
            19.43
            
            
            
            6.86
            
            
            $
            18,121Granted
      and assumed
            
            
            261
            
            
            
            31.37Exercised
            
            
            (173
            )
            
            
            13.82Forfeited/expired/cancelled
            
            
            (95
            )
            
            
            19.21Outstanding
      at December 31, 2008
            
            
            1,499
            
            
            $
            22.18
            
            
            
            6.52
            
            
            $
            1,014Granted
      and assumed
            
            
            526
            
            
            
            11.14Exercised
            
            
            (120
            )
            
            
            7.38Forfeited/expired/cancelled
            
            
            (233
            )
            
            
            16.53Outstanding
      at December 31, 2009
            
            
            1,672
            
            
            $
            20.55
            
            
            
            6.39
            
            
            $
            2,926Vested
      and expected to vest at December 31, 2009
            
            
            1,632
            
            
            $
            20.66
            
            
            
            6.33
            
            
            $
            2,780Options
      exercisable at December 31, 2007
            
            
            853
            
            
            $
            14.59
            
            
            
            5.99
            
            
            $
            13,963Options
      exercisable at December 31, 2008
            
            
            935
            
            
            $
            17.13
            
            
            
            5.44
            
            
            $
            1,014Options
      exercisable at December 31, 2009
            
            
            1,001
            
            
            $
            20.89
            
            
            
            5.11
            
            
            $
            1,088




The
weighted-average grant-date fair value of stock options granted was $5.13,
$12.82 and $16.62 at December 31, 2009, 2008 and 2007,
respectively.   The total intrinsic value of options exercised
during the years ended December 31, 2009, 2008 and 2007, was $0.9 million, $2.4
million and $6.9 million, respectively.  As of December 31, 2009, 2008
and 2007, there was approximately $4.2 million, $4.6 million and $6.6 million of
total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted; that cost is expected to be recognized over a
weighted average of 2.5 years, 2.5 years and 2.2 years,
respectively.






58


The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled $0.3 million, $1.1 million and $8.0
million for the years ended December 31, 2009, 2008 and 2007,
respectively.




Options
outstanding and exercisable at December 31, 2009 had exercise price ranges and
weighted average remaining contractual lives of:





Outstanding Options
            
            
            Exercisable OptionsExercise
      Price Range
            
            
            Numbers
      of Options
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average
              Remaining
      Life
              (years)
            
            
            Number
      of Options
            
            
            Weighted
      Average
              Exercise
      Price$
            1.66
            
            To
            
            $
            10.30
            
            
            
            103,425
            
            
            $
            6.61
            
            
            
            3.61
            
            
            
            103,425
            
            
            $
            6.61$
            10.82
            
            To
            
            $
            10.82
            
            
            
            343,488
            
            
            $
            10.82
            
            
            
            9.04
            
            
            
            --
            
            
            $
            --$
            10.86
            
            To
            
            $
            15.48
            
            
            
            24,808
            
            
            $
            14.18
            
            
            
            4.51
            
            
            
            24,808
            
            
            $
            14.18$
            15.96
            
            To
            
            $
            15.96
            
            
            
            237,500
            
            
            $
            15.96
            
            
            
            4.10
            
            
            
            237,500
            
            
            $
            15.96$
            16.13
            
            To
            
            $
            17.57
            
            
            
            168,993
            
            
            $
            16.95
            
            
            
            5.17
            
            
            
            137,879
            
            
            $
            17.12$
            17.75
            
            To
            
            $
            26.76
            
            
            
            220,499
            
            
            $
            23.71
            
            
            
            5.35
            
            
            
            203,249
            
            
            $
            23.63$
            26.77
            
            To
            
            $
            26.77
            
            
            
            180,000
            
            
            $
            26.77
            
            
            
            6.45
            
            
            
            135,000
            
            
            $
            26.77$
            28.66
            
            To
            
            $
            32.55
            
            
            
            259,626
            
            
            $
            31.21
            
            
            
            7.81
            
            
            
            84,149
            
            
            $
            31.19$
            35.01
            
            To
            
            $
            35.01
            
            
            
            75,799
            
            
            $
            35.01
            
            
            
            5.76
            
            
            
            45,709
            
            
            $
            35.01$
            37.21
            
            To
            
            $
            37.21
            
            
            
            57,914
            
            
            $
            37.21
            
            
            
            7.50
            
            
            
            28,958
            
            
            $
            37.211,672,052
            
            
            
            
            
            
            
            
            
            
            
            1,000,677





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:





2009
            
            
            2008
            
            
            2007Expected
      life of option
            
            6
      yrs
            
            
            6
      yrs
            
            
            6
      yrsRisk-free
      interest rate
            
            
            1.42
            %
            
            
            3.06
            %
            
            
            4.81
            %Expected
      volatility
            
            
            47
            %
            
            
            37
            %
            
            
            40
            %Expected
      dividend yield
            
            
            0.00
            %
            
            
            0.00
            %
            
            
            0.00
            %





The Company analyzed historical trends
in expected volatility and expected life of stock options on a quarterly basis;
during 2009 and 2008 the volatility ranged between 37%-50%.  As of
January 1, 2008, the Company applied updated guidance from ASC 718 for
determining the expected term and the range of the expected term remained
unchanged at 5.5 to 6 years as previously reported.  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 ASC 718,
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 2009, 2008 and
2007 was 5.34%, 6.58% and 3.91%.


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, 2007
            
            
            520
            
            
            $
            24.66Granted
            
            
            271
            
            
            $
            35.37Released
            
            
            (134
            )
            
            $
            22.96Forfeited
            
            
            (61
            )
            
            $
            27.94Nonvested
      at December 31, 2007
            
            
            596
            
            
            $
            29.41Granted
            
            
            318
            
            
            $
            30.13Released
            
            
            (198
            )
            
            $
            27.55Forfeited
            
            
            (49
            )
            
            $
            29.17Nonvested
      at December 31, 2008
            
            
            667
            
            
            $
            30.30Granted
            
            
            667
            
            
            $
            11.25Released
            
            
            (201
            )
            
            $
            29.35Forfeited
            
            
            (125
            )
            
            $
            21.25Nonvested
      at December 31, 2009
            
            
            1,008
            
            
            $
            19.00




As of
December 31, 2009, 2008 and 2007, there was approximately $11.8 million, $12.6
million and $12.4 million, respectively, of total unrecognized compensation cost
related to nonvested share-based compensation arrangements granted under the
Stock Plan; that cost is expected to be recognized over a weighted average of
2.5 years, 2.5 years and 2.8 years, respectively. The total fair value of shares
vested during the years ended December 31, 2009, 2008 and 2007 were $2.3
million, $5.7 million and $4.9 million, respectively.







15.  Benefit
Plans:





inVentiv
Health, Inc. and certain of its subsidiaries maintain defined contribution
benefit plans.  Costs incurred by the Company related to this plan
amounted to approximately $3.5 million, $3.7 million and $3.0 million for 2009,
2008 and 2007, 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 $9.4
million and $6.8 million was included in other liabilities in our Consolidated
Balance Sheets as of December 31, 2009 and 2008,
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, 2009 and 2008 were approximately $9.1 million and $5.1 million,
respectively and are currently classified in Deposits and other assets on our
Consolidated Balance Sheets.  In addition, approximately $1.3 million
and $1.6 million as of December 31, 2009 and 2008, respectively, were invested
in mutual funds and classified in other current assets on our Consolidated
Balance Sheets.





59


16.  Income
Taxes:





Our
income tax provision included the following components:





For
      the Years EndedDecember
      31,2009
            
            
            2008
            
            
            2007(in
      thousands)Current:U.S.—Federal
            
            $
            19,863
            
            
            $
            27,376
            
            
            $
            25,979U.S.—State
      and local
            
            
            858
            
            
            
            3,325
            
            
            
            2,164Foreign
            
            
            1,923
            
            
            
            2
            
            
            
            433$
            22,644
            
            
            $
            30,703
            
            
            $
            28,576Deferred:U.S.—Federal
            
            $
            6,345
            
            
            $
            (77,567
            )
            
            $
            788U.S.—State
      and local
            
            
            881
            
            
            
            (11,343
            )
            
            
            37Foreign
            
            
            0
            
            
            
            0
            
            
            
            0$
            7,226
            
            
            $
            (88,910
            )
            
            $
            825Income
      tax provision (benefit)
            
            $
            29,870
            
            
            $
            (58,207
            )
            
            $
            29,401





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
      31,2009
            
            
            2008
            
            
            2007Taxes
      at statutory U.S. federal income tax rate
            
            
            35.0
            %
            
            
            35.0
            %
            
            
            35.0
            %Foreign
      tax differences
            
            
            0.1
            
            
            
            0.0
            
            
            
            0.1State
      and local income taxes, net of federal tax benefit
            
            
            2.2
            
            
            
            4.3
            
            
            
            2.9Establish/(release)
      of valuation allowance/ Utilization of net operating losses / Other tax
      benefits
            
            
            (0.3
            )
            
            
            0.1
            
            
            
            (0.4
            )Impairment
      of intangible assets
            
            
            0.0
            
            
            
            (8.0
            )
            
            
            0.0Other
      permanent differences
            
            
            1.9
            
            
            
            (0.3
            )
            
            
            0.8Effective
      tax rate
            
            
            38.9
            %
            
            
            31.1
            %
            
            
            38.4
            %








Deferred
income taxes are recorded based upon differences between the financial statement
and tax bases of assets and liabilities. As of December 31, 2009 and 2008, the
deferred tax assets and liabilities consisted of the following:





As
      of December 31,2009
            
            
            2008Current
      Deferred Tax Assets:
            
            (in
      thousands)Accrued
      expenses
            
            $
            11,631
            
            
            $
            10,487Deferred
      rent
            
            
            923
            
            
            
            134Deferred
      revenue
            
            
            1,884
            
            
            
            268Allowance
      for doubtful accounts
            
            
            1,301
            
            
            
            1,314Other
            
            
            534
            
            
            
            321Subtotal
            
            
            16,273
            
            
            
            12,524


Non-Current
Deferred Tax Assets:


Deferred
      Compensation
            
            
            8,941
            
            
            
            9,965Fair
      market value adjustment
            
            
            10,134
            
            
            
            12.517Intangible
      Assets
            
            
            47,756
            
            
            
            57,438NOL
      & FTC carry forwards
            
            
            3,639
            
            
            
            3,628Fixed
      Assets
            
            
            6,869
            
            
            
            7,764Other
            
            
            300
            
            
            
            850Subtotal
            
            
            77,639
            
            
            
            92,162Gross
      Deferred Tax Assets
            
            $
            93,912
            
            
            $
            104,686Current Deferred Tax
      Liabilities:Accrued
      Expenses
            
            $
            (1,069
            )
            
            $
            (571
            )Other
            
            
            (2,324
            )
            
            
            (2,351
            )Subtotal
            
            
            (3,393
            )
            
            
            (2,922
            )Non-Current
      Deferred Tax Liabilities:Property
      and Equipment
            
            
            (10,941
            )
            
            
            (9,081
            )Intangible
      Assets
            
            
            (3,081
            )
            
            
            (3,260
            )Other
            
            
            (520
            )
            
            
            (697
            )Subtotal
            
            $
            (14,542
            )
            
            $
            (13,038
            )Gross
      Deferred Tax Liabilities
            
            $
            (17,935
            )
            
            $
            (15,960
            )Valuation
      Allowance
            
            $
            (4,176
            )
            
            $
            (4,353
            )Net
      Deferred Tax Assets
            
            $
            71,801
            
            
            $
            84,373











60


The
Company accounts for income taxes in accordance with the Income Taxes Topic of
ASC 740.  Deferred tax assets and liabilities are determined based on
temporary differences between the financial reporting bases and the tax bases of
assets and liabilities.  Deferred tax assets are also recognized for
tax net operating loss carry forwards.  These deferred tax assets and
liabilities are measured using the enacted tax rates and laws that will be in
effect when such amounts are expected to be reversed or
utilized.  Valuation allowances are provided to reduce such deferred
tax assets to amounts more likely than not to be ultimately
realized.





At
December 31, 2008 a deferred tax asset in the amount of $3.2 million existed
relating to foreign jurisdictions and state net operating loss carry
forwards.  At December 31, 2008 management determined that it was more
likely than not that the amounts would not be realized in the future and a full
valuation allowance of $3.2 million was recorded.  During 2009, the
Company determined that the state net operating loss carry forwards would be
utilized during 2009 and the deferred tax asset and valuation reserve of $0.2
million were reversed.  At December 31, 2009 there is a deferred tax
asset in the amount of $3.4 million relating to the foreign jurisdiction net
operating losses which was offset by a full valuation allowance.  The
net operating losses expire in varying amounts beginning in 2027 and certain
amounts have an indefinite life.





As of
December 31, 2009 and 2008 the Company had deferred tax assets of $0.3 million
and $0.4 million respectively relating to foreign tax credit carry
forwards.  Management believes that it was more likely than not that
the associated deferred tax assets will not be realized in the future, and has
recorded a full valuation allowance for these amounts.  The foreign
tax credit carry forwards expire in varying amounts through 2017.





During
2008, the impairment of $268.7 million of intangible assets resulted in an
increase of approximately $88.2 million to deferred tax assets.  This
item is disclosed net of U.S. deferred tax liabilities related to intangibles
assets of $30.8 million resulting in a net deferred tax asset of $57.4
million.  At December 31, 2009, the deferred tax asset relating to
this impairment is $80.9 million.  This item is disclosed net of U.S.
deferred tax liabilities related to intangible assets of $33.2 million resulting
in a net deferred tax asset of $47.7 million.  It is management’s
belief that it is more likely than not that the deferred tax asset will be
realized in the future.  Reversal of the deferred tax assets will
occur in varying amounts through 2023.





The
Company does not provide for federal income taxes or tax benefits relating to
the undistributed earnings or losses of its foreign subsidiaries that are
controlled foreign corporations.  It is the Company’s belief that such
earnings will be indefinitely reinvested in the companies that produced
them.  At December 31, 2009, the Company has not provided federal
income taxes on approximately $7.7 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 assesses uncertain tax
positions in accordance with ASC
740.Under this method, income tax benefits should be recognized when,
based on the technical merits of a tax position, the Company believes that if a
dispute arose with the taxing authority and were taken to a court of last
resort, it is more likely than not (i.e., a probability of
greater than 50 percent) that the tax position would be sustained as
filed.  If a position is determined to be more likely than not of
being sustained, the reporting enterprise should recognize the largest amount of
tax benefit that is greater than 50 percent likely of being realized upon
ultimate settlement with the taxing authority.  The Company’s practice
is to recognize interest and penalties related to income tax matters in income
tax expense.





As of
December 31, 2009, 2008 and 2007 the Company had unrecognized tax benefits of
$5.1 million, $5.3 million, and $6.3 million respectively.  After
consideration of the adoption of ASC 805 positions totaling $3.2 million at
December 31, 2009 if recognized, would affect the effective tax
rate.  There were positions totaling $0.9 million and $1.0 million at
December 31, 2008 and 2007 respectively that, if recognized would affect the
effective tax rate.





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





As
      of December 31,
            
            2009
            
            
            2008
            
            
            2007Unrecognized
      tax benefits balance
            
            $
            5.3
            
            
            $
            6.3
            
            
            $
            2.5Increase
      in tax positions for prior years
            
            
            1.2
            
            
            
            0.0
            
            
            
            0.0Decreases
      in tax positions for prior years
            
            
            0.0
            
            
            
            (0.4
            )
            
            
            (0.6
            )Increase
      in tax positions for current year
            
            
            0.2
            
            
            
            0.2
            
            
            
            4.8Settlements
            
            
            0.0
            
            
            
            (0.1
            )
            
            
            (0.3
            )Lapse
      of statute of limitations
            
            
            (1.6
            )
            
            
            (0.7
            )
            
            
            (0.1
            )Unrecognized
      tax benefits balance
            
            $
            5.1
            
            
            $
            5.3
            
            
            $
            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 December 31, 2009, 2008 and 2007 was $2.1 million,
$2.6 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 2006 and generally, is no longer subject to state and local income tax
examinations by tax authorities for years before 2005.





Management
has concluded that it is reasonably possible that the unrecognized tax benefits
will decrease by approximately $2.1 million within the next 12
months.  The decrease is primarily related to additional federal and
state taxes that have expiring statutes of limitations.








61








17.  Related
Parties:





Several
inVentiv business units provided services to Cardinal Health, Inc. (“Cardinal”)
during 2009.  Revenues generated for services provided to Cardinal
totaled approximately $0.9 million and $0.5 million for the periods ended
December 31, 2009 and December 31, 2008, respectively.  Robert Walter,
who is the father of R. Blane Walter, our CEO, served as Executive Chairman, and
subsequently as an Executive Director, of Cardinal during 2007 and
2008.  R. Blane Walter and his immediate family members and related
trusts own less than 5% 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.





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





The Company is party to an acquisition
agreement dated September 6, 2005 pursuant to which the Company acquired
inVentiv Communications, Inc. (then known as inChord Communications, Inc.
("inChord")) from Mr. Walter and other former inChord
shareholders.  Mr. Walter and certain of his family members had
approximately a 92% interest in the earnout consideration payable under the
acquisition agreement.  As a result, during 2008, Mr. Walter and such
family members received a total of $17.1 million in cash and common stock
constituting their share of the final earnout payment under the agreement, net
of a portion of such payment (the "Deferred Earnout Payment") that the parties
agreed would be deferred pending further evaluation of a customer
receivable.  In April of 2009, Mr. Walter and such family members
received a total of $2.2 million in common stock constituting their share of the
Deferred Earnout Payment.  The inChord acquisition agreement was
approved prior to its execution by the Board of Directors of the
Company.





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 Mr. Walter, his brothers and other current
employees of inVentiv Communications.  The term of the lease is
fifteen years, and expires on September 30, 2015.  During the
year ended December 31, 2009, the Company paid $1.8 million in rent to Lexington
MLP Westerville L.P.





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.The following represents
the Company’s reportable segments as of December 31, 2009:





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





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





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





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





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





The
following segment information has been prepared as if our Patient Outcomes
segment, which was established during 2007, had been in effect from January 1,
2007:





For the
year ended December 31, 2009 (in thousands):





InVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            209,779
            
            
            $
            311,760
            
            
            $
            426,904
            
            
            $
            139,690
            
            
            $
            --
            
            
            $
            1,088,133Less:
      Intersegment revenues
            
            
            (241
            )
            
            
            (1,876
            )
            
            
            (13,591
            )
            
            
            (464
            )
            
            
            --
            
            
            
            (16,172
            )Reported
      Revenues
            
            $
            209,538
            
            
            $
            309,884
            
            
            $
            413,313
            
            
            $
            139,226
            
            
            
            --
            
            
            $
            1,071,961Depreciation
      and amortization
            
            
            3,311
            
            
            
            10,372
            
            
            
            14,970
            
            
            
            4,619
            
            
            
            36
            
            
            
            33,308Interest
      expense
            
            
            --
            
            
            
            76
            
            
            
            348
            
            
            
            4
            
            
            
            22,697
            
            
            
            23,125Interest
      income
            
            
            1
            
            
            
            26
            
            
            
            13
            
            
            
            2
            
            
            
            145
            
            
            
            187Segment
      income (loss) (1)
            
            $
            10,371
            
            
            $
            46,483
            
            
            $
            40,881
            
            
            $
            29,017
            
            
            $
            (49,117
            )
            
            $
            77,635








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








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








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





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








(1)
Income from continuing operations before income tax provision, and (loss) income
from equity investments








(in
      thousands)
            
            December
      31,2009
            
            
            2008Total
      Assets:inVentiv
      Clinical
            
            $
            119,744
            
            
            $
            97,162inVentiv
      Communications
            
            
            407,920
            
            
            
            377,123inVentiv
      Commercial
            
            
            176,021
            
            
            
            205,910inVentiv
      Patient Outcomes
            
            
            154,519
            
            
            
            134,355Other
            
            
            171,759
            
            
            
            158,566Total
      assets
            
            $
            1,029,963
            
            
            $
            973,116


62


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





The
following table summarizes financial data by quarter for inVentiv for 2009 and
2008.





2009
      Quarter EndedMarch
      31
            
            
            June
      30
            
            
            Sept.
      30
            
            
            Dec.
      31
            
            
            Total(a)(in
      thousands, except per share amounts)Revenues
            
            $
            257,652
            
            
            $
            269,041
            
            
            $
            270,466
            
            
            $
            274,802
            
            
            $
            1,071,961Gross
      profit
            
            
            76,476
            
            
            
            86,765
            
            
            
            86,142
            
            
            
            92,943
            
            
            
            342,326Income from
      continuing operations
            
            
            7,858
            
            
            
            11,346
            
            
            
            11,859
            
            
            
            16,620
            
            
            
            47,683Income from
      discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Net
      loss (income) attributable to the noncontrolling interest
            
            
            51
            
            
            
            (54
            )
            
            
            (136
            )
            
            
            (673
            )
            
            
            (812
            )Net
      income attributable to inVentiv Health, Inc.
            
            
            7,909
            
            
            
            11,292
            
            
            
            11,723
            
            
            
            15,947
            
            
            
            46,871Earnings per
      share (a)Continuing
      operations:Basic
            
            $
            0.24
            
            
            $
            0.34
            
            
            $
            0.35
            
            
            $
            0.47
            
            
            $
            1.40Diluted
            
            $
            0.24
            
            
            $
            0.34
            
            
            $
            0.35
            
            
            $
            0.46
            
            
            $
            1.39Discontinued
      operations:Basic
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Diluted
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Net
      income:Basic
            
            $
            0.24
            
            
            $
            0.34
            
            
            $
            0.35
            
            
            $
            0.47
            
            
            $
            1.40Diluted
            
            $
            0.24
            
            
            $
            0.34
            
            
            $
            0.35
            
            
            $
            0.46
            
            
            $
            1.39





2008
      Quarter EndedMarch
      31
            
            
            June
      30
            
            
            Sept.
      30
            
            
            Dec.
      31
            
            
            Total
      (a)(in
      thousands, except per share amounts)Revenues
            
            $
            262,321
            
            
            $
            285,042
            
            
            $
            289,173
            
            
            $
            283,276
            
            
            $
            1,119,812Gross
      profit
            
            
            82,048
            
            
            
            87,306
            
            
            
            87,097
            
            
            
            90,919
            
            
            
            347,370Income
      (loss) from continuing operations
            
            
            8,608
            
            
            
            13,391
            
            
            
            13,456
            
            
            
            (162,993
            )
            
            
            (127,538
            )Income
      from discontinued operations
            
            
            12
            
            
            
            94
            
            
            
            (3
            )
            
            
            561
            
            
            
            664Net
      (income) attributable to the noncontrolling interest
            
            
            (576
            )
            
            
            (316
            )
            
            
            (130
            )
            
            
            (124
            )
            
            
            (1,146
            )Net income
      (loss) attributable to inVentiv Health, Inc.
            
            
            8,044
            
            
            
            13,169
            
            
            
            13,323
            
            
            
            (162,557
            )
            
            
            (128,021
            )Earnings
      (loss) per share (a)Continuing
      operations:Basic
            
            $
            0.25
            
            
            $
            0.40
            
            
            $
            0.40
            
            
            $
            (4.94
            )
            
            $
            (3.89
            )Diluted
            
            $
            0.24
            
            
            $
            0.39
            
            
            $
            0.40
            
            
            $
            (4.92
            )
            
            $
            (3.89
            )Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.02Diluted
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.02
            
            
            $
            0.02Net
      income (loss):Basic
            
            $
            0.25
            
            
            $
            0.40
            
            
            $
            0.40
            
            
            $
            (4.92
            )
            
            $
            (3.87
            )Diluted
            
            $
            0.24
            
            
            $
            0.39
            
            
            $
            0.40
            
            
            $
            (4.90
            )
            
            $
            (3.87
            )





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














63





SCHEDULE
II VALUATION AND QUALIFYING ACCOUNTS


YEARS
ENDED DECEMBER 31, 2009, 2008 and 2007


(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, 2009
            
            $
            4,787
            
            
            $
            3,642
            
            
            $
            11
            
            
            $
            3,186
            
            
            $
            5,254Year
      ended December 31, 2008
            
            $
            3,098
            
            
            $
            4,622
            
            
            $
            109
            
            
            $
            3,042
            
            
            $
            4,787Year
      ended December 31, 2007
            
            $
            3,583
            
            
            $
            9,311
            
            
            $
            865
            
            
            $
            10,661
            
            
            $
            3,098


(1)
Reserves acquired through acquisitions.





Balance
      at
              Beginning
              Of
      Year
            
            
            Additions
            
            
            Deductions
            
            
            Balance
      at End
              Of
      YearSelf
      Insurance Reserves:Year
      ended December 31, 2009
            
            $
            9,112
            
            
            $
            31,285
            
            
            $
            31,552
            
            
            $
            8,845Year
      ended December 31, 2008
            
            $
            7,170
            
            
            $
            29,238
            
            
            $
            27,296
            
            
            $
            9,112Year
      ended December 31, 2007
            
            $
            6,794
            
            
            $
            24,444
            
            
            $
            24,068
            
            
            $
            7,170








Balance
      at
              Beginning
              Of
      Year
            
            
            Additions
            
            
            Deductions
            
            
            Balance
      at End
              Of
      YearTax
      Valuation Allowance:Year
      ended December 31, 2009
            
            $
            4,353
            
            
            $
            152
            
            
            $
            329
            
            
            $
            4,176Year
      ended December 31, 2008
            
            $
            4,843
            
            
            $
            635
            
            
            $
            1,125
            
            
            $
            4,353Year
      ended December 31, 2007
            
            $
            2,628
            
            
            $
            4,129
            
            
            $
            1,914
            
            
            $
            4,843





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




None.






Item 9A.  Controls and
Procedures.






Attached
as exhibits to this report 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 report 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 set forth
below in this section. This section should be read in conjunction with the
certifications, management’s assessment and the Deloitte & Touche LLP report
for a more complete understanding of the topics presented.






64


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 report.    Based
on this evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of December 31, 2009, our disclosure controls and procedures
are effective to provide reasonable assurance that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified by the Securities and Exchange
Commission and that material information relating to us and our consolidated
subsidiaries is made known to management, including the Chief Executive Officer
and Chief Financial Officer during the period when our periodic reports are
being prepared.   Our quarterly evaluation of Disclosure Controls
includes an evaluation of some components of our internal control over financial
reporting, and internal control over financial reporting is also separately
evaluated on an annual basis for purposes of providing management's annual
report on internal control over financial reporting.






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






Changes
in Internal Control Over Financial Reporting






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






Management’s
Report on Internal Control over Financial Reporting






Management's
assessment that we maintained effective internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission is included under the caption Management's Report on Internal
Control Over Financial Reporting, in Part II, Item 8 of this Annual
Report on Form 10-K.







Item 9B.Other
Information.







None
















65










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 14of Form 10-K will be set forth in our Proxy Statement (to be filed within
120 days after our fiscal year ended December 31, 2009) relating to the 2010
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, 2009 and 2008.





Consolidated
Statements of Operations for the years ended December 31, 2009, 2008 and
2007.





Consolidated
Statements of Stockholders' Equity for the years ended December 31, 2009, 2008
and 2007.





Consolidated
Statements of Cash Flows for the years ended December 31, 2009, 2008 and
2007.





Notes to
Consolidated Financial Statements





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





Schedule
II--Valuation and Qualifying Accounts





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





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





(b)





Exhibit
            
            Description3.1
            
            Amended
      and Restated Certificate of Incorporation of the Registrant (filed as
      Exhibit 3.1 to the Registrant's Form 10 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *3.1.1
            
            Certificate
      of Amendment to Certificate of Incorporation of the Registrant (filed as
      Exhibit 3.1.1 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *3.2
            
            Amended
      and Restated By-Laws of the Registrant (filed as Exhibit 3.1 to the
      Registrant's Current Report on Form 8-K filed December 18, 2006).
      *3.2.2
            
            Amendment
      to Amended and Restated By-Laws (filed as Exhibit 3.2.2 to the
      Registrant’s Current Report on Form 8-K filed June 16, 2008 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended).*4.1
            
            Specimen
      form of certificate representing the Registrant’s common stock (filed as
      Exhibit 4.1 to the Registrant's Form 10 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *10.4.5
            
            inVentiv
      Health, Inc. 2006 Long-Term Incentive Plan. (filed as Exhibit 10.21 to the
      Registrant's Current Report on Form 8-K filed June 19, 2006 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.4.8
            
            Form
      of Director Stock Option Award Notice. (filed as Exhibit 10.4.8 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended December
      31, 2006 filed with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.9
            
            Form
      of Director Restricted Stock Award Notice. (filed as Exhibit 10.4.9 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended December
      31, 2006 filed with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.10
            
            Form
      of Executive Officer Restricted Stock Award Notice. (filed as Exhibit
      10.4.10 to the Registrant's Current Report on Form 8-K filed January 23,
      2008 with the Securities and Exchange Commission under the Securities Act
      of 1934, as amended). *†10.4.11
            
            Form
      of Executive Officer Stock Option Award Notice. (filed as Exhibit 10.4.11
      to the Registrant's Current Report on Form 8-K filed January 23, 2008 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.4.12
            
            Form
      of Executive Officer/Chairman Restricted Stock Award Notice. (filed as
      Exhibit 10.4.12 to the Registrant's Current Report on Form 8-K filed
      January 23, 2008 with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended). *†10.4.13
            
            Form
      of Executive Officer/Chairman Stock Option Award Notice. (filed as Exhibit
      10.4.13 to the Registrant's Current Report on Form 8-K filed January 23,
      2008 with the Securities and Exchange Commission under the Securities Act
      of 1934, as amended). *†10.4.14
            
            Form
      of Executive Officer Restricted Stock Award Notice. (filed as Exhibit 10.1
      to the Registrant's Current Report on Form 8-K filed February 3, 2009 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.4.15
            
            Form
      of Executive Officer Stock Option Award Notice. (filed as Exhibit 10.2 to
      the Registrant's Current Report on Form 8-K filed February 3, 2009 with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.4.16
            
            Form
      of Director Restricted Stock Award Notice (filed as Exhibit 10.1 to the
      Registrant's Current Report on Form 8-K filed June 22, 2009 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended).*†10.4.17
            
            Form
      of Director Option Award Notice (filed as Exhibit 10.2 to the Registrant's
      Current Report on Form 8-K filed June 22, 2009 with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended). *†10.4.18
            
            Form
      of Executive Officer Restricted Stock Award Notice  (filed as
      Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed February
      3, 2009 with the Securities and Exchange Commission under the Securities
      Act of 1934, as amended). *†10.4.19
            
            Form
      of Executive Officer Option Award Notice (filed as Exhibit 10.2 to the
      Registrant's Current Report on Form 8-K filed February 3, 2009 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.5
            
            Employment
      Agreement, dated May 9, 2006 by and between Eran Broshy and the Registrant
      (filed as Exhibit 10.21 to the Registrant's Quarterly Report on Form 10-Q
      for the three months ended March 31, 2006 filed with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.5.1
            
            Amendment
      dated February 23, 2007 to Employment Agreement, dated May 9, 2006, by and
      between Eran Broshy and the Registrant (filed as Exhibit 10.5.1 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2006 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *†10.5.2
            
            Employment
      Agreement, dated June 11, 2008 by and between Eran Broshy and the
      Registrant(filed
      as Exhibit 10.5.2 to the Registrant’s Quarterly Report on Form 10-for the
      three months ended June 30, 2008 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.5.3
            
            Letter
      agreement dated August 6, 2009 between the Registrant and Eran Broshy
      (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
      for the three months ended June 30, 2009 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.5.4
            
            Consulting
      Agreement executed August 6, 2009 and effective as of August 1, 2009
      between the Registrant and Eran Broshy (filed as Exhibit 10.2 to the
      Registrant's Quarterly Report on Form 10-Q for the three months ended June
      30, 2009 filed with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended).  *†10.9
            
            Employment
      Agreement, dated August 13, 2001 by and between John R. Emery and the
      Registrant(filed
      as Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2001 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.9.1
            
            Amendment
      dated January 1, 2004 to Employment Agreement, dated August 13, 2001, by
      and between John R. Emery and the Registrant (filed as Exhibit 10.9.1 to
      the Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2003 filed with the Securities and Exchange Commission under
      the Securities Act of 1934, as amended). *†10.11
            
            Employment
      Agreement, dated April 8, 2002 by and between Terrell Herring and the
      Registrant(filed
      as Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2002 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended). *
    †10.11.1
            
            Amendment
      dated January 1, 2004 to Employment Agreement, dated April 8, 2002, by and
      between Terrell Herring and the Registrant (filed as Exhibit 10.11.1 to
      the Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 2003 filed with the Securities and Exchange Commission under
      the Securities Act of 1934, as amended). *†10.11.2
            
            Amendment
      to Employment Agreement dated June 15, 2004 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.2 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.3
            
            Amendment
      to Employment Agreement dated October 18, 2004 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.3 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.4
            
            Amendment
      to Employment Agreement dated January 23, 2006 between the Registrant and
      Terrell Herring (filed as Exhibit 10.11.4 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.11.5
            
            Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated May
      7, 2007 between the Registrant and Terrell Herring (filed as Exhibit
      10.11.5 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended March 31, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.11.6
            
            Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated
      August 6, 2007 between the Registrant and Terrell Herring (filed as
      Exhibit 10.11.6 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended June 30, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.11.7
            
            Amendment
      dated March 2, 2009 to Employment Agreement dated April 8, 2002 between
      the Registrant and Terrell Herring (filed as Exhibit 10.11.6 to the
      Registrant's Current Report on Form 8-K filed March 17, 2009 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.11.8
            
            Separation
      Agreement dated as of November 5, 2009 between the Registrant and Terrell
      Herring(filed
      as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended September 30, 2009 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as
      amended).  *†10.12
            
            Asset
      Purchase Agreement dated as of September 21, 2004 among the Registrant,
      Smith Hanley Holding Corporation and the other parties thereto (filed as
      Exhibit 2.1 to the Registrant's Form 8-K/A filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended, on
      December 29,  2004). * #10.13
            
            The
      Registrant 2005 Deferred Compensation Plan (filed as Exhibit 10.1 to the
      Registrant's Form 8-K filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended, on November 29, 2004).
      *†10.14
            
            Asset
      Purchase Agreement dated as of November 19, 2004 among the Registrant,
      HHI, L.L.C. and the other parties thereto  (filed as Exhibit
      10.14 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended March 31, 2005 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#10.15
            
            Asset
      Purchase Agreement dated as of August 5, 2005 among the Registrant,
      Pharmaceutical Resource Solutions LLC and the other parties thereto (filed
      as Exhibit 10.15 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended September 30, 2005 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *#10.16
            
            Acquisition
      Agreement dated September 6, 2005 by and among inChord Communications,
      Inc., the shareholders of inChord Communications, Inc., the Registrant and
      Accordion Holding Corporation (filed as Exhibit 2.1 to the Registrant's
      Current Report on Form 8-K filed October 11, 2006 with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *10.17
            
            Form
      of Indemnification Agreement entered into with each executive officer and
      director of Ventiv (filed as Exhibit 10.1 to the Registrant's Current
      Report on Form 8-K filed October 11, 2006 with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.18
            
            Employment
      Agreement dated as of September 6, 2005 between inChord Communications,
      Inc. and R. Blane Walter (filed as Exhibit 10.2 to the Registrant's
      Current Report on Form 8-K filed October 11, 2006 with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.18.1
            
            Employment
      Agreement dated as of August 7, 2007 between the Registrant and R. Blane
      Walter (filed as Exhibit 10.18.1 to the Registrant's Quarterly Report on
      Form 10-Q for the three months ended June 30, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.18.2
            
            Employment
      Agreement dated June 3, 2008 between the Registrant and R. Blane Walter
      (filed as Exhibit 10.18.2 to the Registrant’s Current Report on Form 8-K
      filed June 4, 2008 with the Securities and Exchange Commission under the
      Securities Act of 1934, as amended).*†10.19
            
            Credit
      Agreement dated as of October 5, 2005 among the Registrant, the Subsidiary
      Guarantors, the lenders party thereto, UBS Securities LLC, as bookmanager,
      as joint lead arranger, and as documentation agent, UBS Loan Finance LLC,
      as swingline lender, UBS AG, Stamford Branch, as issuing bank, as
      administrative agent for the Lenders and as collateral agent, Banc of
      America Securities LLC, as joint lead arranger, and Bank of America, N.A.,
      as syndication agent (filed as Exhibit 10.3 to the Registrant's Current
      Report on Form 8-K filed October 11, 2006 with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
  *10.20
            
            Amended
      and Restated Acquisition-Related Incentive Plan  (filed as
      Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the
      fiscal year ended December 31, 2001 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#†10.21
            
            Employment
      Agreement dated January 1, 2003 between the Registrant and David Bassin
      (filed as Exhibit 10.21 to the Registrant's Quarterly Report on Form 10-Q
      for the three months ended March 31, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *†10.21.1
            
            Amendment
      to Employment Agreement dated January 1, 2003 between the Registrant and
      David Bassin (filed as Exhibit 10.21.1 to the Registrant's Quarterly
      Report on Form 10-Q for the three months ended March 31, 2007 filed with
      the Securities and Exchange Commission under the Securities Act of 1934,
      as amended). *†10.21.2
            
            Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated May
      11, 2007 between the Registrant and David Bassin (filed as Exhibit 10.21.2
      to the Registrant's Quarterly Report on Form 10-Q for the three months
      ended March 31, 2007 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *†10.21.3
            
            Amendment
      to Stock Option Agreement(s)/Restricted Stock Award Agreement(s) dated
      August 6, 2007 between the Registrant and David Bassin (filed as Exhibit
      10.21.3 to the Registrant's Quarterly Report on Form 10-Q for the three
      months ended June 30, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†10.21.4
            
            Amendment
      dated March 2, 2009 to Employment Agreement dated January 1, 2003 between
      the Registrant and David Bassin (filed as Exhibit 10.21.4 to the
      Registrant's Current Report on Form 8-K filed March 17, 2009 with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended). *†10.22
            
            Amended
      and Restated Credit Agreement dated as of October 5, 2005 among the
      Registrant, the Subsidiary Guarantors, the lenders party thereto, UBS
      Securities LLC, as bookmanager, as joint lead arranger, and as
      documentation agent, UBS Loan Finance LLC, as swingline lender, UBS AG,
      Stamford Branch, as issuing bank, as administrative agent for the Lenders
      and as collateral agent, Banc of America Securities LLC, as joint lead
      arranger, and Bank of America, N.A., as syndication agent (filed as
      Exhibit 10.22 to the Registrant's Current Report on Form 8-K filed July
      12, 2007 with the Securities and Exchange Commission under the Securities
      Act of 1934, as amended). *10.23
            
            Purchase
      Agreement dated as of July 6, 2007 among Chandler Chicco Agency, LLC,
      (“CCA NY”), BioSector 2 LLC, the members of the Companies listed on
      Schedule I thereto, the Registrant and Chandler Chicco LLC (filed as
      Exhibit 10.23 to the Registrant's Quarterly Report on Form 10-Q for the
      three months ended September 30, 2007 filed with the Securities and
      Exchange Commission under the Securities Act of 1934, as amended).
      *#10.24
            
            Purchase
      Agreement dated as of July 6, 2007 by and among, Innovative Health
      Strategies, Inc. (f/k/a IHS of SC, Inc.) (“IHS”), AWAC.MD, Inc. (“AWAC”),
      iProcert, LLC (“iProcert”, and together with IHS and AWAC, the
      “Companies”), the shareholders and members of the Companies listed on
      Schedule I thereto, the Registrant and AWAC LLC. (filed as Exhibit 10.24
      to the Registrant's Quarterly Report on Form 10-Q for the three months
      ended September 30, 2007 filed with the Securities and Exchange Commission
      under the Securities Act of 1934, as amended). *#10.25
            
            Second
      Amended and Restated Acquisition-Related Incentive Plan (filed as Exhibit
      10.25 to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 2007 filed with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *#†10.26
            
            Letter
      Agreement dated February 27, 2008 by and between Blue Ridge Investments,
      L.L.C. and inVentiv Health, Inc., as amended by letter amendment dated May
      7, 2008 (filed as Exhibit 10.26 to the Registrant’s Quarterly Report on
      Form 10-Q for the three months ended March 31, 2008 filed with the
      Securities and Exchange Commission under the Securities Act of 1934, as
      amended).*10.27
            
            Employment
      Agreement dated December 14, 2009 between the Registrant and Nat
      Krishnamurti (filed as Exhibit 10.1 to the Registrant’s Current Report on
      Form 8-K filed December 16, 2009 with the Securities and Exchange
      Commission under the Securities Act of 1934, as amended).
    *†21.1
            
            Subsidiaries
      of inVentiv Health, Inc.23
            
            Consent
      of Deloitte & Touche LLP.31.1
            
            Chief
      Executive Officer’s Certification Pursuant to Rule 13a-14(a) of the
      Exchange Act.31.2
            
            Chief
      Financial Officer’s Certification Pursuant to Rule 13a-14(a) of the
      Exchange Act.32.1
            
            Chief
      Executive Officer's Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
            
            Chief
      Financial Officer's Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.




*
Incorporated by reference.


# Certain
portions omitted pursuant to a request for confidential
treatment.  The omitted material has been filed separately with the
Securities and Exchange Commission.


†
Management contract or compensatory plan or arrangement.





66








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.Date:
      February 24, 2010
              By:
              /s/ David
      S. BassinName David
      S. BassinTitle Chief
      Financial Officer and Secretary






67





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
            Chairman
      of the Board
            February
      24, 2010Eran
      Broshy
            Director/s/
      BLANE WALTER
            Chief
      Executive Officer
            February
      24, 2010Blane
      Walter
            (Principal
      Executive Officer and Director)/s/
      DAVID S BASSIN
            Chief
      Financial Officer
            February
      24, 2010David
      S Bassin
            (Principal
      Financial Officer)/s/
      NAT KRISHNAMURTI
            Chief
      Accounting Officer
            February
      24, 2010Nat
      Krishnamurti
            (Principal
      Accounting Officer)/s/
      TERRELL G. HERRING
            Director
            February
      24, 2010Terrell
      G. Herring/s/
      MARK E.
      JENNINGS
            Director
            February
      24, 2010Mark
      E.Jennings/s/
      PER G.H.
      LOFBERG
            Director
            February
      24, 2010Per
      G.H. Lofberg/s/
      A. CLAYTON PERFALL
            Director
            February
      24, 2010A.
      Clayton Perfall/s/
      DR. CRAIG SAXTON
            Director
            February
      24, 2010Dr.
      Craig Saxton


68