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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington D.C.
    20549
  Form 20-F
  o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)
    OF THE SECURITIES EXCHANGE ACT OF 1934orþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

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

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934   Commission file number
    001-33444
  EURAND N.V.
 (Exact name of Registrant as
    specified in its charter)
  The Netherlands
 (Jurisdiction of incorporation
    or organization)
  Olympic Plaza, Fred. Roeskestraat 123, 1076 EE Amsterdam, The
    Netherlands
 (Address of principal executive
    offices)
  SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
    ACT:
  Title of Each Class

Name of Each Exchange on Which RegisteredOrdinary shares, par value 0.01 per share

NASDAQ Global Market   SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
    ACT:
 None
  SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION
  PURSUANT TO SECTION 15(d) OF THE ACT:
 None
 (Title of Class)
    o þ
  o þ
  þ o
  Rule 12b-2
 o Large
    accelerated filer
    o Accelerated
    filer
    þ Non-accelerated
    filer  o þ
  Rule 12b-2 o þ




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##### 





TABLE OF
    CONTENTS
   
  PageFORWARD-LOOKING INFORMATION


1PART I.


2ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
    ADVISERS


2ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE


2ITEM 3.

KEY INFORMATION


2ITEM 4.

INFORMATION ON THE COMPANY


31ITEM 4A.

UNRESOLVED STAFF COMMENTS


60ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS


60ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


77ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY
    TRANSACTIONS


88ITEM 8.

FINANCIAL INFORMATION


90ITEM 9.

THE OFFER AND LISTING


91ITEM 10.

ADDITIONAL INFORMATION


92ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK


102ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY
    SECURITIES


103PART II.


103ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND
    DELINQUENCIES


103ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
    HOLDERS AND USE OF PROCEEDS


103ITEM 15.

CONTROLS AND PROCEDURES


104ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT


104ITEM 16B.

CODE OF ETHICS


104ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


104ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
    COMMITTEES


105ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
    AFFILIATED PURCHASERS


105PART III


106ITEM 17.

FINANCIAL STATEMENTS


106ITEM 18.

FINANCIAL STATEMENTS


106ITEM 19.

EXHIBITS


106Eurand N.V. Equity Compensation PlanLEASE AGREEMENT DATED JANUARY 15,2008DEVELOPMENT AND LICENSE AGREEMENT DATED APRIL 21,2006SECURITIES PURCHASE AGREEMENT DATED NOVEMBER 30,2007SUBSIDIARIES OF COMPANYCERTIFICATION OF THE CHIEF EXECUTIVE OFFICERCERTIFICATION OF THE CHIEF FINANCIAL OFFICERCERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




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FORWARD-LOOKING
    INFORMATION  Form 20-F
    
    the expected timing, progress or success of our preclinical and
    clinical development programs;  
    the timing, costs and other limitations involved in obtaining
    regulatory approval for any of our product candidates;
    our ability to market, commercialize and achieve market
    acceptance for any of the product candidates that we are
    developing or may develop in the future, including the
    establishment or acquisition of specialty sales, marketing and
    distribution capabilities in the United States to commercialize
    Zentasetm
    (also known as EUR-1008), if approved;  
    delays in obtaining, or a failure to obtain and maintain,
    regulatory approval for our product candidates, including, but
    not limited to, our lead product candidate,
    Zentasetm
    (also known as EUR-1008);
    the possibility the FDA may continue to extend the deadline for
    seeking or receiving a new drug application, or NDA,
    and/or not
    withdraw existing pancreatic enzyme products, or PEPs, from the
    U.S. market that do not receive approval for NDAs by the
    then applicable deadline;
    our ability to continue to successfully manufacture our existing
    products;
    the potential advantages of our products or product candidates
    over other existing or potential products;
    our ability to enter into any new co-development or licensing
    agreements or to maintain any existing co-development or
    licensing agreements with respect to our product candidates and
    products;
    our ability to effectively maintain existing licensing
    relationships and establish new licensing relationships;
    the expense, time and uncertainty involved in the development of
    our product candidates, some or all of which may never reach the
    regulatory approval stage;
    our reliance on collaboration partners and licensees, whose
    actions we cannot control, to obtain and maintain regulatory
    approval for our products and product candidates, and to
    commercialize such products;
    our ability to compete in the pharmaceutical industry;
    our ability to protect our intellectual property and know-how
    and operate our business without infringing the intellectual
    property rights or regulatory exclusivity of others;
    the continuation of product sales by our collaborators and
    licensees;
    a loss of rights to develop and commercialize our products under
    our license and sublicense agreements;
    a loss of any of our key scientists or management personnel;
    our estimates of market sizes and anticipated uses of our
    product candidates;
    our estimates of future performance; and
    our estimates regarding anticipated operating losses, future
    revenue, expenses, capital requirements and our needs for
    additional financing.  Form 20-F Form 20-F,
 1




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PART I  Form 20-F,
  ITEM 1.
    IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS    ITEM 2.
    OFFER
    STATISTICS AND EXPECTED TIMETABLE    ITEM 3.
    KEY
    INFORMATION  Selected
    Consolidated Financial Data
  Year Ended December 31,2003


2004


2005


2006


2007


2007(In thousands, except per share amounts)Selected Consolidated Statements of Operations Data:RevenuesProduct sales


87,067



74,561



63,139



69,771



71,076


$
103,792Royalties


5,634



3,472



3,730



3,896



4,373



6,386Development fees


2,282



3,214



5,386



9,182



9,372



13,686Revenues


94,983



81,247



72,255



82,849



84,821



123,864Operating expensesCost of goods sold


(55,212
)


(49,040
)


(44,150
)


(47,558
)


(49,439
)


(72,196
)Research and development(1)


(16,979
)


(16,525
)


(14,513
)


(16,287
)


(17,110
)


(24,986
)Selling, general and administrative


(13,858
)


(12,854
)


(11,537
)


(14,786
)


(21,497
)


(31,391
)Amortization of intangibles


(881
)


(962
)


(720
)


(727
)


(788
)


(1,151
)Restructuring and impairment charges






(6,864
)














Other expenses










(973
)


354



(93
)


(136
)Operating income (loss)


8,053



(4,998
)


362



3,845



(4,106
)


(5,996
)Interest expense, net


(6,577
)


(6,847
)


(7,214
)


(7,261
)


(1,532
)


(2,237
)Foreign exchange gains (losses), net


161



(158
)


(327
)


12



104



152Income (loss) before taxes


1,637



(12,003
)


(7,179
)


(3,404
)


(5,534
)


(8,081
)Income tax expense


(2,713
)


(5,069
)


(1,100
)


(1,593
)


(1,140
)


(1,665
)Net loss


(1,076
)


(17,072
)


(8,279
)


(4,997
)


(6,674
)


(9,746
)Basic and diluted net loss per share


(0.80
)


(7.71
)


(3.74
)


(2.19
)


(0.24
)


(0.34
)Weighted average shares used to compute basic and diluted net
    loss per share


1,353



2,215



2,215



2,278



28,367



28,367  2




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Year Ended December 31,2003


2004


2005


2006


2007


2007(In thousands)Selected Consolidated Balance Sheet Data:Cash and cash equivalents


7,794



3,607



3,423



5,810



12,541


$
18,314Total assets


135,334



111,028



110,094



102,946



109,508



159,914Total debt(s)


88,671



86,703



95,450



63,144



1,551



2,265Total liabilities


116,606



108,565



116,823



90,213



28,441



41,532Series A redeemable preference shares convertible into
    ordinary shares


26,844



26,844



26,844



26,844







Series C redeemable preference shares convertible into
    ordinary shares














23,000







Total shareholders equity (deficit)(2)


(8,116
)


(24,381
)


(33,573
)


(37,111
)


81,067



118,382     (1)
    
    Research and development expenses include expenses that can be
    attributed to co-development projects with our customers that
    generate development fee revenues and other expenses related to
    our internal research and development projects. The split of
    cost between these two categories is as follows:  Year Ended December 31,2003


2004


2005


2006


2007


2007(In thousands)Expenses attributable to development fees


3,371



2,501



3,807



5,590



5,432


$
7,932Other research and development expenses


13,608



14,024



10,706



10,697



11,678



17,054Research and development expenses


16,979



16,525



14,513



16,287



17,110



24,986   (2)
    
    Our capital stock of 440,000 at December 31, 2007
    consisted of 44,034,114 ordinary shares with par value of
    0.01 per share compared to 2,339,686 such shares at
    December 31, 2006. The increase is the result of the
    issuance of 32,487,940 ordinary shares on conversion of all of
    our Series A preference shares the issuance of 2,029,786
    ordinary on conversion of all of our Series C preference
    shares, the issuance of 7,000,000 ordinary shares in our IPO for
    net proceeds of 74.0 million (or $108.1 million)
    and the issuance of 176,702 ordinary shares due to the exercise
    of options under our employee stock option plan.  Exchange
    Rate Information
     3




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U.S. Dollar per EuroPeriodYear Ended December 31,

High


Low


Average


End2003


1.2597



1.0361



1.1411



1.25972004


1.3625



1.1801



1.2478



1.35382005


1.3476



1.1667



1.2400



1.18422006


1.3327



1.1860



1.2563



1.31972007


1.4862



1.2904



1.3705



1.4603         U.S. Dollar per EuroPeriodHigh


Low


Average


EndMonth in 2007September


1.4219



1.3606



1.3924



1.4219October


1.4468



1.4092



1.4237



1.4468November


1.4862



1.4469



1.4675



1.4688December


1.4759



1.4344



1.4559



1.4603Month in 2008January


1.4877



1.4574



1.4728



1.4841February


1.5187



1.4495



1.4759



1.5187March (through March 25, 2008)


1.5784



1.5195



1.5459



1.5595         Capitalization
    and Indebtedness
    Reasons
    For the Offer and Use of Proceeds
   4




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Risk
    Factors
  An investment in our ordinary shares involves a high degree
    of risk. You should consider carefully the risks described
    below, together with the other information contained in this
    Annual Report on
    Form 20-F,
    including in our consolidated financial statements and the
    related notes appearing at the end of this Annual Report on
    Form 20-F,
    before you decide whether to buy our ordinary shares. If any of
    the following risks actually occur, our business, results of
    operations and financial condition could suffer significantly.
    In any of these cases, the market price of our ordinary shares
    could decline, and you may lose all or part of the money you
    paid to buy our ordinary shares.
  Risks
    Related to Our Financial Condition
  We
    have a history of net losses, and we might not achieve or
    maintain profitability.
  tm
  Our
    revenues decreased during the two-year period beginning in 2003
    primarily due to decreases in product sales, and we may
    experience a decrease in product sales and revenues in the
    future.
       5




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Risks
    Related to Our Lead Product Candidate 
    Zentasetm (EUR-1008)
  Even
    though we have completed two Phase III clinical trials and
    our NDA has been accepted for review, we may never succeed in
    obtaining regulatory approval for
    Zentasetm from any regulatory agency. Without regulatory approval,
    we will be unable to commercialize
    Zentasetm and our growth prospects will be materially
    impaired.
  tm tm
  tm tm tm
  tm tm
  tm tm tm tm
  
    our failure to demonstrate to the satisfaction of the FDA, the
    EMEA or any other applicable regulatory authority that
    Zentasetm
    is safe and effective for a particular indication;
    our inability to demonstrate that the benefits of
    Zentasetm
    outweigh its risks;
    our inability to complete any testing required to obtain FDA
    approval in respect of
    Zentasetm;
    disagreement of the FDA, the EMEA or any other applicable
    regulatory authorities with the manner in which we interpret the
    results from clinical trials;
    failure of the FDA, the EMEA or any other applicable regulatory
    authorities to approve our manufacturing processes or
    facilities; and
    a change in the approval policies or regulations of the FDA, the
    EMEA or any other applicable regulatory authority, or a change
    in the laws governing the approval process.  tm tm tm tm tm
  PEPs
    are life saving drugs. The FDA may not remove existing PEPs from
    the market in April 2010 even if they have not been
    FDA-approved. This would increase the level of competition that
    Zentasetm,
    if approved, will face.
   6




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tm
  tm
  tm tm tm tm tm tm
  Even
    though we have completed two Phase III clinical trials in
    respect of
    Zentasetm ,
    and assuming we obtain regulatory approval for
    Zentasetm ,
    a competitor might obtain approval for a competing product
    that can be marketed to a broader patient population. This would
    put us at a competitive disadvantage.
  tm tm tm tm tm tm
 7




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We
    currently have limited internal sales, marketing and
    distribution capabilities. If we are unable to develop our
    sales, marketing and distribution capabilities on our own or
    through an acquisition, we will not be successful in
    commercializing
    Zentasetmin the United States.
  tm tm tm
  tm tm tm tm
    
    developing or acquiring our own sales force would be expensive
    and time-consuming and could delay any product launch;
    failure to acquire sufficient or suitable personnel to
    establish, oversee, or implement an effective launch plan;
    failure to recruit, train, oversee and retain adequate numbers
    of effective sales and marketing personnel;
    failure to acquire sales personnel that can effectively obtain
    access to or persuade adequate numbers of physicians to
    prescribe our products; and
    unforeseen costs and expenses associated with creating or
    acquiring and sustaining an independent sales and marketing
    organization.  If we
    or our licensees outside of the United States are unable to
    commercialize
    Zentasetm or experience significant delays in doing so, our growth
    prospects will be materially harmed.
  tm tm tm
  
    our ability to find a commercial partner with the appropriate
    resources to efficiently commercialize the product and enter
    into an agreement on commercially reasonable or commercially
    viable terms and conditions;
    our ability to coordinate global regulatory approval for the
    product in a consistent and effective manner;
    successfully completing any trials and tests required by
    applicable regulatory authorities;
    receiving marketing approvals from applicable regulatory
    authorities;
    continued operation of our manufacturing facilities, and our raw
    material suppliers, in compliance with current good
    manufacturing practice regulations, or cGMP;
    establishing favorable pricing from regulatory authorities
    outside of the United States; and
    obtaining commercial acceptance of
    Zentasetm,
    if approved, from the medical community and third-party payors. 8




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tm
  Risks
    Related to Our Business
  We
    depend on the success of our existing products. If we are unable
    to maintain our existing arrangements with our licensees or fail
    to establish new licensing arrangements, our business and growth
    prospects will suffer.
    tm
  Disputes
    may arise involving the contractual obligations of our
    customers, licensees or marketing collaborators to purchase our
    products or pay royalties on the sale of our products, and such
    disputes, if not resolved in our favor, could result in
    decreased revenues and material harm to our
    business.
   9




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Any
    difficulties with, or interruptions of, our manufacturing could
    delay our output of products and harm our relationships with our
    collaborators. If we are unable to continue to manufacture our
    existing products, our results of operations and future
    prospects will suffer.
      Development
    of pharmaceutical products is expensive, time-consuming and
    subject to uncertainties, and we may not realize a return on our
    investment in product development for a significant period of
    time, if at all.
       10




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We
    rely on third parties to conduct, supervise and monitor our
    clinical trials, and those third parties may perform in an
    unsatisfactory manner, such as by failing to meet established
    deadlines for the completion of such trials.
  tm
  There
    is a high risk that our product candidates will not have
    successful clinical trial results and will not advance to the
    regulatory approval stage.
    tm
  
    conditions imposed on us or our collaborators by the FDA, the
    EMEA or other applicable regulatory authorities, regarding the
    scope or design of our clinical trials;
    the results of clinical trials may not meet the level of
    statistical significance required for approval by the FDA, the
    EMEA or other applicable regulatory authorities;
    the FDA, the EMEA or other applicable regulatory authorities may
    require additional or expanded trials;
    delays in obtaining, or the inability to obtain or maintain,
    required approvals from institutional review boards, or IRBs, or
    other reviewing entities at clinical sites selected for
    participation in our clinical trials;
    insufficient supply or deficient quality of our product
    candidates or other materials necessary to conduct our clinical
    trials;
    difficulties in manufacturing the product;
    difficulties enrolling subjects and high drop-out rates of
    subjects in our or our collaborators clinical trials;
    negative or inconclusive results from clinical trials, or
    results that are inconsistent with earlier results, that
    necessitate additional clinical studies;
    serious or unexpected drug-related side effects experienced by
    subjects in clinical trials; or
    failure of our third-party contractors or our investigators to
    comply with regulatory requirements or otherwise meet their
    contractual obligations to us in a timely manner. 11




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Even
    if we complete our clinical trials, we may never succeed in
    obtaining regulatory approval for any of our product candidates.
    Without regulatory approval, we will be unable to commercialize
    our product candidates, and our growth prospects will be
    materially impaired.
        
    the failure to demonstrate to the satisfaction of the FDA, the
    EMEA or other applicable regulatory authorities that a product
    candidate is safe and effective for a particular indication;
    the inability to demonstrate that a product candidates
    benefits outweigh its risks;
    the inability to demonstrate that the product candidate presents
    an advantage over existing products;
    disagreement of the FDA, the EMEA or other applicable regulatory
    authorities with the manner in which the results from
    preclinical studies or clinical trials are interpreted;
    failure of the FDA, the EMEA or other applicable regulatory
    authorities to approve the manufacturing processes or facilities
    of third-party manufacturers with whom we contract for clinical
    and commercial supplies; and
    a change in the approval policies or regulations of the FDA, the
    EMEA or other applicable regulatory authorities, or a change in
    the laws governing the approval process.   12




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tm
    Failure
    to obtain regulatory approval for our products in our markets
    and to retain approvals already granted will prevent us from
    marketing or licensing our products in these
    markets.
    and/or tm tm
 13




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Even
    if our product candidates receive regulatory approval or do not
    require regulatory approval, they may not become commercially
    viable products.
    
    difficulty in large-scale manufacturing;
    low market acceptance by physicians, healthcare payors, patients
    and the medical community as a result of lower demonstrated
    clinical safety or efficacy compared to other products,
    prevalence and severity of adverse side effects, or other
    potential disadvantages relative to alternative treatment
    methods;
    insufficient or unfavorable levels of reimbursement from
    government or third-party payors;
    infringement on proprietary rights of others for which we have
    not received licenses;
    incompatibility with other drugs;
    other potential advantages of alternative treatment methods;
    ineffective marketing and distribution support;
    lack of cost-effectiveness; or
    timing of market introduction of competitive products.    Our
    existing products and our product candidates, if they receive
    regulatory approval for marketing, remain subject to ongoing
    regulatory requirements and, if we fail to comply with these
    requirements, we could lose these approvals, and the sales of
    any approved commercial products could be
    suspended.
    
    restrictions on the products, manufacturers or manufacturing
    processes;
    warning letters and untitled letters; 14




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
    civil penalties and criminal prosecutions and penalties;
    fines;
    injunctions;
    product seizures or detentions;
    import or export bans or restrictions;
    voluntary or mandatory product recalls and related publicity
    requirements;
    suspension or withdrawal of regulatory approvals;
    total or partial suspension of production; and
    refusal to approve pending applications for marketing approval
    of new products or of supplements to approved applications.    If we
    fail to comply with the laws governing the marketing and sale of
    our products, regulatory agencies may take action against us,
    which could significantly harm our business.
           15




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Rapid
    technological change could make our products, product candidates
    or technologies obsolete.
  tm tm
  We
    depend on our senior management and other key personnel to
    manage the growth of our business, and if we fail to attract and
    retain additional key personnel, we may not be able to expand
    our business or manage our growth effectively.
       16




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The
    failure to maintain our existing co-development relationships on
    acceptable terms could adversely affect our ability to develop
    and commercialize our product candidates and our future growth
    prospects.
  and/or
  scale-up
    If we
    are not successful in establishing and maintaining additional
    co-development relationships, our growth prospects will be
    materially harmed.
   17




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We
    rely on our collaboration partners and licensees to successfully
    commercialize products using our technologies, and we cannot
    control the actions of such collaborators and licensees. If we,
    our collaboration partners or licensees are unable to
    commercialize our co-development product candidates or if we,
    our collaboration partners or licensees experience significant
    delays in such commercialization, our growth prospects will be
    materially harmed.
    
    successfully completing preclinical studies and clinical trials
    and any additional trials and tests required by the FDA, the
    EMEA or other applicable regulatory authorities;
    receiving marketing approvals, to the extent required, from the
    FDA, the EMEA or other applicable regulatory
    authorities; and
    obtaining commercial acceptance, if approved, from the medical
    community and third-party payors.       18




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Acquisitions
    are part of our growth strategy, and we may fail to execute this
    aspect of our strategy or to successfully integrate any acquired
    business.
      We
    depend on a few key suppliers.
    We are
    exposed to political, economic and other risks that arise from
    operating a multinational business.
    
    changes in general economic, social and political conditions;
    adverse tax consequences;
    the difficulty of enforcing agreements and collecting
    receivables through certain legal systems;
    inadequate protection of intellectual property;
    required compliance with a variety of laws and regulations of
    jurisdictions outside of the United States, including labor and
    tax laws;
    customers outside of the United States may have longer payment
    cycles;
    changes in laws and regulations of jurisdictions outside of the
    United States; and 19




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
    terrorist acts and natural disasters.    Currency
    exchange rate fluctuations may have a negative effect on our
    financial condition.
      Our
    competitors may develop products that are less expensive, safer
    or more effective than, and may diminish or prevent the
    commercial success of, any product candidates that we may bring
    to market. In addition, our proprietary products may compete
    with products we develop and manufacture for our collaborators
    or with our collaborators other products.
    tm
   20




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tm
  Our
    revenue is currently dependent upon a small number of customers,
    the loss of any one of which could have a material adverse
    impact on our business, financial condition and results of
    operations.
  and/or
  Approximately
    75% of employees are represented by collective bargaining or
    other labor agreements or arrangements, and we could face labor
    disruptions that would interfere with our
    operations.
    Risks
    Related to Intellectual Property
  Patent
    protection for our products is important and
    uncertain.
   21




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® ® ® ®
      Although
    we have sought patent protection for our lead product candidate,
    Zentasetm,
    we may not ultimately receive any issued patents or related
    patent rights.
  tm tm
    If we
    are unable to protect the confidentiality of our trade secrets
    or know-how, such proprietary information may be used by others
    to compete against us.
  tm
 22




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tm
  Legal
    proceedings or third-party claims of intellectual property
    infringement may require us to spend substantial time and money
    and could prevent us from developing or commercializing
    products.
        We may
    be subject to other patent-related litigation or proceedings
    that could be costly to defend and uncertain in their
    outcome.
      
    EP 1058538 for Fast Disintegrating Tablets.
    EP 0914818 for Intraorally Rapidly Disintegrable Tablet.
    EP 01335706 for Process for the Production of Microspheres of
    Pancreatic Enzymes with High Stability.   23




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Risks
    Related to Our Industry
  We
    must comply with the laws, regulations and rules of many
    jurisdictions relating to the healthcare business, and if we are
    unable to fully comply with such laws, regulations and other
    rules, we could face substantial penalties.
    
    the anti-kickback laws that prohibit persons from knowingly and
    willfully soliciting, offering, receiving or providing
    remuneration, directly or indirectly, in cash or in kind, to
    induce either the referral of an individual, or the furnishing
    or arranging for a good or service, for which payment may be
    made under federal healthcare programs such as Medicare and
    Medicaid in the United States;
    other healthcare laws, including Medicare laws in the U.S.,
    regulations, rules, manual provisions and policies that
    prescribe the requirements for coverage and payment for services
    performed by our customers, including the amount of such payment;
    laws and regulations, including the U.S. False Claims Act,
    which impose civil and criminal liability on individuals and
    entities who submit, or cause to be submitted, false or
    fraudulent claims for payment to the government;
    laws and regulations, including the U.S. False Statements
    Act, which prohibit knowingly and willfully falsifying,
    concealing or covering up a material fact or making any
    materially false statement in connection with the delivery of or
    payment for healthcare benefits, items or services; and
    state law equivalents and comparable laws in countries outside
    of the United States, including laws regarding pharmaceutical
    company marketing compliance, reporting and disclosure
    obligations.    Government
    authorities in many of our target markets have, from time to
    time, proposed legislation that would permit re-importation of
    drugs into those markets, including from countries where the
    drugs are sold at lower prices. This and other regulatory
    changes of a similar nature could force us to lower the prices
    at which we sell our products and impair our ability to derive
    revenues from these products.
   24




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If the
    government or third-party payors fail to provide coverage and
    adequate payment rates for our products, the products of our
    collaboration partners or our future products, if any, our
    revenues and our prospects for profitability will be
    harmed.
      We may
    be exposed to product liability claims.
    
    decreased demand for our product candidates;
    injury to our reputation;
    withdrawal of clinical trial participants;
    significant litigation costs and substantial monetary awards to,
    or costly settlement with, patients;
    product recalls and loss of revenue; and
    the inability to commercialize our product candidates.   25




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##### Table of Contents



We
    deal with hazardous materials and must comply with
    environmental, health and safety laws and regulations, which can
    be expensive and restrict how we do business.
        If we
    or others identify side effects after any of our products are on
    the market, we or our collaborators or licensees may be required
    to withdraw our products from the market, perform lengthy
    additional clinical trials or change the labeling of our
    products, any of which would hinder or preclude our ability to
    generate revenues.
    
    regulatory authorities may withdraw their approvals;
    we or our collaborators or licensees may be required to
    reformulate our products, conduct additional clinical trials,
    change the labeling of our products or implement changes to
    manufacturers facilities to obtain new approvals;
    we or our collaborators or licensees may have to recall the
    affected products from the market;
    we or our collaborators or licensees may experience a
    significant drop in sales of the affected products;
    our reputation in the marketplace may suffer;
    we may become the target of lawsuits, including class action
    suits; and 26




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##### Table of Contents




    we or our collaborators or licensees may be required to withdraw
    our products from the market and may not be able to reintroduce
    them into the market.    If the
    FDA, EMEA or other applicable regulatory agencies approve
    generic products that compete with any of our branded products,
    sales of those products may be adversely affected.
    Our
    development of generic drugs may expose us to
    litigation.
    We are
    currently unable to accurately predict what our short-term and
    long-term effective tax rates will be in the
    future.
   27




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Risks
    Related to Our Ordinary Shares
  We are
    a controlled company under the NASDAQ Stock Market
    rules, and as such we are entitled to exemption from certain
    NASDAQ corporate governance standards, and you may not have the
    same protections afforded to shareholders of companies that are
    subject to all of the NASDAQ corporate governance
    requirements.
    Our
    ordinary share price could be highly volatile.
    
    announcements of technological innovations or new products by us
    or others;
    public concern as to the safety of drugs we or others develop;
    general market conditions;
    success of research and development projects;
    changes in government regulations or patent decisions; and
    developments by our collaboration partners.    Raising
    additional capital by issuing securities may cause dilution to
    existing shares.
    
    the failure to obtain regulatory approval or achieve commercial
    success of our lead product candidate,
    Zentasetm;
    our success in establishing new collaboration partnerships;
    the success of our collaboration partners in selling products
    utilizing our technologies; 28




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##### Table of Contents




    the results of our preclinical studies and clinical trials for
    our earlier stage product candidates, and any decisions to
    initiate clinical trials if supported by the preclinical results;
    the costs, timing and outcome of regulatory review of
    Zentasetm
    and any of our other product candidates that progress to
    clinical trials;
    the costs of establishing or acquiring specialty sales,
    marketing and distribution capabilities, if any of our product
    candidates are approved;
    the costs of preparing, filing and prosecuting patent
    applications, maintaining and enforcing our issued patents and
    defending intellectual property-related claims;
    the extent to which we acquire or invest in businesses, products
    or technologies and other strategic relationships; and
    the costs of financing unanticipated working capital
    requirements and responding to competitive pressures.      Warburg,
    Pincus Equity Partners, L.P., Warburg, Pincus Ventures
    International, L.P. and their affiliates, our major
    shareholders, control approximately 76.6% of our ordinary
    shares, and this concentration of ownership may deter a change
    in control or other transaction that is favorable to our
    shareholders.
    We are
    a Netherlands public limited liability company (naamloze
    vennootschap) and it may be difficult for you to obtain or
    enforce judgments against us or our executive officers, some of
    our directors and some of our named experts in the United
    States.
  and/or
 29




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##### Table of Contents



Future
    sales of our ordinary shares may depress our share
    price.
    We do
    not anticipate paying dividends on our ordinary shares, which
    could reduce the return on your investment.
    Your
    rights as a holder of ordinary shares will be governed by Dutch
    law and will differ from the rights of shareholders under U.S.
    law.
    We
    will incur significant increased costs as a result of operating
    as a public company, and our management will be required to
    devote substantial time to new compliance
    initiatives.
     30




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ITEM 4.
    INFORMATION
    ON THE COMPANY  History
    and Development of the Company
  20-673 Form 20-F.
  Business
    Overview
  tm tm tm
    Zentasetm .
  tm
 31




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tm tm
  tm
  tm tm tm tm tm tm
  tm tm
  tm tm tm
  Amrix®
  Amrix ® ® ® ® once-a-day scale-up,
 32




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##### Table of Contents



®
  Acquisition
    of
    SourceCF.
    ® tm
    Partnered
    and Proprietary Advancing Pipeline
    Products.
  tm
    
    EUR-1048, a tastemasked orally disintegrating tablet developed
    using our
    AdvaTab®
    and
    Microcaps®
    technologies, which was the subject of an NDA filing by
    GlaxoSmithKline in December 2007 and is anticipated to launch in
    late 2008; and
    EUR-1000, a generic to Inderal LA, which is a sustained release
    formulation of propranolol for the treatment of hypertension and
    migraines, developed with Reliant Pharmaceuticals, but acquired
    by GSK in December 2007. The ANDA for EUR-1000 was filed with
    the FDA in December 2006.  once-per-day
 33




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##### Table of Contents



Continued
    R&D and Product Development
    
    Customized release technologiesto reduce daily dosing
    requirements and time the release of drugs in the body either to
    increase efficacy or to reduce side effects;
    Dosage form technologiesto increase patient compliance
    through more convenient dosage forms such as orally
    disintegrating tablets and taste-masked drugs;
    Bioavailability enhancement technologyto improve drug
    absorption, resulting in dose reduction and improved onset of
    action; and
    Drug conjugation technologyto extend drug half-life and
    to target specific organs or other biological targets such as
    tumors.  Our
    Strategy
    
    Establish a U.S. specialty sales and marketing
    organization for
    Zentasetm.  We
    are establishing a specialty sales and marketing organization to
    market our lead product candidate,
    Zentasetm,
    in the United States. This sales force will target the
    approximately 120 Cystic Fibrosis Treatment Centers and selected
    gastroenterologists and pulmonologists. We believe this focused
    sales force will be able to effectively market
    Zentasetm
    and our other CF products to this group of prescribers. As our
    product pipeline advances to commercialization, we expect to
    build and leverage our sales infrastructure with these
    prescribers and prescribers in other therapeutics areas.
    Continue to build and develop our product
    pipeline.  Through the application of our
    proprietary technologies, development expertise, and research
    infrastructure, we intend to continue to develop and expand our
    product pipeline. We expect to continue to identify many product
    development opportunities since we believe a large number of
    marketed and development-stage pharmaceuticals have less than
    optimal safety and efficacy profiles. For example, through the
    application of our formulation technologies and development and
    manufacturing expertise, we believe
    Zentasetm
    will overcome a number of the challenges facing current EPI
    therapeutics and satisfy the requirements of the FDA for such
    products.
    Enter into additional collaboration
    partnerships.  We intend to continue to seek
    collaboration partnerships with other pharmaceutical and
    biopharmaceutical companies. These relationships provide us with
    a diversified revenue stream and facilitate expansion of our
    product pipeline and potential for future revenue growth. For
    example, we currently are collaborating with GSK to develop and
    manufacture formulations of some of their products. We believe
    we are an attractive collaborator for larger pharmaceutical
    companies due to our broad portfolio of proprietary
    technologies, our development track record and our multinational
    infrastructure and manufacturing capabilities.
    Acquire additional businesses, products and
    technologies.  In the past, we have been
    successful in identifying, acquiring and integrating businesses
    and technologies based upon our regulatory, manufacturing and
    development expertise. Examples of our past successes include
    the recent acquisition of the SourceCF 34




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##### Table of Contents



family of companies in 2007, the acquisition of certain assets
    from Polytech, a drug formulation company specializing in
    polymer-based drug conjugation, in 2002; the acquisition of
    Pharmatec in 2000; and, the execution of an agreement with Kyowa
    Hakko under which we have a worldwide license to patents related
    to
    AdvaTab®
    ODT technology. We intend to continue pursuing assets that would
    further our research and development capabilities, expand our
    product pipeline, and accelerate the expansion of our specialty
    sales and marketing organization.  Our Lead
    Product Candidate 
    Zentasetm
  tm tm tm tm
    Exocrine
    Pancreatic Insufficiency Overview and Market
    Opportunity
      Cystic Fibrosis.
  Chronic Pancreatitis. tm tm tm
 35




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##### Table of Contents



FDA
    Guidelines to Improve Existing Pancreatic Enzyme
    Products
      
    Overfill.  The finished product should be
    formulated to 100% of the label-claimed lipase activity to
    eliminate drug overfill.
    Viral inactivation.  The manufacturing process
    should be validated for its ability to remove
    and/or
    inactivate viral agents.
    Drug characterization.  The drug substance
    should be adequately characterized using appropriate chemical,
    physical and biological testing.
    Drug product specifications.  Specifications
    for the drug product should include tests for identifying and
    measuring biological activity of different classes of enzymes.
    Stability.  Due to the inherent instability
    observed in currently available PEPs, stability results are
    required to support the recommended shelf life of the product.       36




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##### Table of Contents



tm
  Advantages
    of
    Zentasetm
  tm tm tm
  
    Zero
    overfill.  Zentasetm
    is formulated to 100% of the label-claimed lipase enzyme
    activity, which leads to the following patient benefits:  
    More consistent and reliable dosing.  The
    elimination of the need to overfill will allow treating
    physicians to know the exact amount of enzymes each patient is
    taking, thus reducing the possibility of therapeutic failures
    and over dosage, as well as the possibility of under
    dosage; and
    Reduced pill
    burden.  Zentasestm
    stability leads to more consistent therapeutic outcomes and
    therefore reduced pill burden for patients.  
    Multiple dosage strengths.  Due to the
    variability in dosing requirements, patients with EPI require
    multiple dosage strengths to be adequately treated. We have
    developed four different dosage strengths to facilitate dose
    titration.
    Elimination of concurrent PPI dosing.  PEPs are
    often dosed with proton pump inhibitors, or PPIs, to protect the
    PEPs from destruction by stomach acids. Based on the efficacy
    results from our clinical trials, we believe that
    Zentasetm
    does not require the concurrent administration of PPIs to
    achieve efficacy, further reducing a patients pill burden
    and medication costs.


    Pediatric formulation.  We have developed and
    tested in clinical trials a specific low-dose formulation of
    Zentasetm
    for children under seven. This product contains very small
    particles which can be sprinkled on food to facilitate
    administration to these children.  tm
  
    Safety.  Crystallized enzymes are produced from
    microbial sources using fermentation and purification processes,
    and have traditionally been used for industrial purposes in
    products such as laundry and dishwashing detergents. We believe
    the long-term safety profile of these industrial enzymes in
    humans has not been fully demonstrated, whereas porcine-derived
    PEPs, such as
    Zentasetm,
    have over 70 years of clinical history.
    Efficacy.  We believe that any synthetic
    formulation of an enzyme supplement will be limited to only a
    few of the key enzymes necessary for the digestive process,
    whereas
    Zentasetm
    contains the eight key enzymes, as well as a complement of
    coenzymes and cofactors, that we believe are essential for
    proper digestion and absorption of food.
    Manufacturing.  A number of the microbial or
    synthetic enzyme products currently in development have not been
    scaled to satisfy commercial levels of production. In addition,
    we believe these products are likely to be expensive to
    manufacture and will have difficulty competing against
    porcine-derived PEPs that we believe are more efficacious and
    cost-effective.    tm
 37




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tm
  Overview
    of Our Completed Pivotal and Supportive Phase III Clinical
    Trials
  tm tm tm
  tm tm tm
  tm tm tm
  tm tm
    Measurement

Zentasetm


Placebo


P-ValueCoefficient of Fat Absorption (CFA)


88.3
%


62.8
%


<0.001Coefficient of Nitrogen Absorption (CNA)


87.2
%


65.7
%


<0.001Stools per day


1.77



2.66



<0.001    38




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seven-day seven-day
  tm tm tm tm
  End of


End ofMeasurement

Screening


Stabilization


Treatment% of responders


52.6
%


68.4
%


57.9
%Fecal Fat Absorption


24.8
%


27.0
%


27.3
%Body weight


16.60 kg



16.75 kg



16.63 kgStools per day


1.82



1.64



1.45   tm tm tm
  Bioavailability
    Study
  tm tm tm tm tm
  Fast
    Track Designation
  tm
 39




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Priority
    Review
  tm tm
  Commercialization
    of
    Zentasetmin the United States
      U.S.-based
  ® ®
  tm tm
 40




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Commercialization
    of
    Zentasetm Outside the United States
  tm tm
  Established
    Business
    Co-development co-development
    ® ® ®
  
    Customized release.  Innopran
    XL®,
    Amrix®,
    Unisom®
    and
    Ultrase®.
    Dosage form.  Childrens
    Tylenol®,
    Cibalginadue and Rulide.
    Bioavailability enhancement.  Nimedex.   41




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and/or
  Multinational Operations.
  Other
    Pipeline Opportunities
  tm
  Co-Development
    Products
    EUR-1048. ® ® scale-up,
  EUR-1000. scale-up,
 42




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Proprietary
    Product Candidate
  EUR-1025. once-a-day ® ®
    ®
  Earlier
    Stage Product Candidates
    Product
    Development Technologies
    
    accelerate onset of action and symptom relief;
    reduce dosing frequency;
    create convenient, patient-friendly dosage forms such as
    taste-masked orally disintegrating tablets and suspensions;
    customize pharmacokinetic profiles through timed drug release to
    improve therapy;
    enhance bioavailability, or absorption by the body, leading to
    lower doses of drugs; and
    improve therapeutic effect through gastro-protection.    Customized
    Release
  ® ® ® ®
 43




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
    Diffucapstechnology consists of multiparticulate systems
    in which customized release profiles are achieved by layering
    polymer membranes onto drug-containing cores. The type and
    thickness of these membranes control the speed and location at
    which the drug exits the core because the membranes are
    sensitive to pH and dissolve at different rates. By
    incorporating beads of differing drug release profiles into hard
    gelatin capsules, customized release profiles can be achieved.
    This technology has the potential to exhibit less variability
    than a controlled-release tablet, which typically has only a
    single drug release characteristic. Diffucap dosage units can
    contain one or more drugs, and one or more drug release profiles
    can be incorporated into a single dosage unit. In comparison to
    tablets, multiparticulates generally exhibit decreased food
    effects and decreased variability between patients.
    Diffutabtechnology consists of a blend of waxes and
    polymers that control drug release through diffusion and
    erosion. Diffutab is an effective means of creating sustained
    release,
    once-a-day
    formulations of high-dosage products.
    Eurand Minitabsare very small, cylindrical tablets.
    These tablets can contain materials that are able to form gels
    in water-based environments, and the rate of drug release is
    modified by its need to exit the gel layer. The tablets can also
    be coated with polymer membranes that are sensitive to pH or
    take time to dissolve, allowing the site or the time at which
    the drug is released in the body to be controlled. These tablets
    possess the advantages of multiparticulates in that they can be
    filled into hard-shell gelatin capsules. As a result,
    combination products can be developed to allow for two or more
    release profiles within a single capsule. Eurand Minitabs are
    able to contain a high level of drug in comparison to the total
    weight of the finished dosage form, and drug release rates can
    be fine-tuned.
    Orbexatechnology consists of a process whereby a
    concentrated formulation of a drug is extruded as a ribbon
    through a fine nozzle, cut and then shaped, a process called
    spheronisation, to produce beads suited to formulation as
    sustained or controlled release multiparticulates. This process
    allows a high concentration of a drug to be present in the
    beads, and speed and simplicity make the technology suited for
    use with sensitive materials such as proteins.  Dosage
    Form
    
    Microcaps taste-masking.  The ability to mask
    the bitter or irritant characteristics of many drugs with
    flavors and sugars is limited, and coating of the drug is
    generally required to achieve maximum taste-masking
    effectiveness. Our Microcaps technology deposits a polymer layer
    around the drug particles to form a complete and continuous
    barrier.
    Orally disintegrating tablets.  We have two
    commercialized orally disintegrating tablet technologies,
    AdvaTab®,
    through our license with Kyowa Hakko, and our internally
    developed
    Zipletstm.
    We are able to combine either of these dosage forms with our
    particle-coating technologies for taste-masking,
    gastro-protection and controlled release. Our technologies allow
    us to produce pleasant-tasting tablets that dissolve in the
    mouth in seconds. We are able to manufacture this
    easy-to-administer dosage form using standard tableting and
    packaging equipment, thus eliminating the need for expensive
    specialty packaging.
    Liquitard liquid suspensions.  Oral
    administration of certain dosage forms, such as medium- to
    large-sized capsules and tablets, can be problematic for
    patients having difficulties swallowing, such as pediatric and
    geriatric populations, or patients with severe clinical
    conditions. Using our Liquitard technology, we can incorporate
    both our taste-masking and controlled-release technologies into
    permanent or temporary suspensions. 44




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Bioavailability
    Enhancement
    Drug
    Conjugation
  and/or
  Research
    and Development
        Manufacturing
     45




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scale-up
  
    accelerate development,
    scale-up and
    commercialization of our development candidates and products;
    maintain control over our technologies;
    maximize our revenue streams and profitability;
    control interactions with regulatory agencies; and
    facilitate product approval.    Intellectual
    Property
    Patents
    and Proprietary Technology
    ® ® ® ® ® ® ® ® ®
  ® ® ® ® ® ®
 46




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® ® ® ® ®
  ®
      ® ®
  tm
       47




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Trademarks
    Know-how
    Competition
           48




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##### Table of Contents



tm
  tm tm tm
      Government
    Regulation
     49




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##### Table of Contents



United
    States
  and/or
    
    preclinical laboratory tests, animal studies and formulation
    studies;
    submission to the FDA of a request for an investigational new
    drug, or IND, exemption for human clinical testing;
    adequate and well controlled clinical trials to determine the
    safety and efficacy of the drug for each indication;
    submission to the FDA of a NDA;
    a potential public hearing of an outside advisory committee to
    discuss the application; 50




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
    satisfactory completion of an FDA inspection of the
    manufacturing facility or facilities at which the drug is
    manufactured; and
    FDA review and approval of the NDA.        Clinical Trials.
    NDAs and ANDAs.
 51




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and/or and/or
          Postmarketing Requirements.
 52




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Generic Competition.
       53




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European
    Economic Area
    Centralized
    Procedure.
  Mutual Recognition and Decentralized
    Procedures.
 54




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##### Table of Contents



Full Applications.
  Abridged Applications.
  Cross-referral to Innovators
    Data.
 55




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
    having the same qualitative and quantitative composition in
    active substance as the reference medicinal product;
    having the same pharmaceutical form as the reference medicinal
    product; and
    whose bioequivalence with the reference medicinal product has
    been demonstrated by appropriate bioavailability studies.      Well-established Medicinal Use. and/or
  Informed Consent.
 56




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Law Relating to Pediatric Research and Vulnerable
    Populations.
  Post-authorization Obligations.
  Other
    Countries
    Related
    Matters
   57




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Pharmaceutical
    Pricing and Reimbursement
        and/or
  and/or
  and/or
   58




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##### Table of Contents



Insurance
    Environmental
    Matters
    Properties
    and Infrastructure
           59




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##### Table of Contents



Employees
    ITEM 4A.
    UNRESOLVED
    STAFF COMMENTS    ITEM 5.
    OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS    Overview
  tm tm tm
      
    In February 2000, substantially all of the assets of
    Vectorpharma, providing us with complementary expertise for our
    Biorise system, new products in the development pipeline and
    additional research and development capabilities.
    In June 2000, Pharmatec, which provided us with additional
    research and development capabilities, additional manufacturing
    capacity in Italy and several marketed products.
    In January 2002, certain assets of Polytech, an early-stage
    company specializing in polymer-based drug conjugation. 60




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
    In December 2007, SourceCF, which provided us with products
    marketed to the Cystic Fibrosis community. SourceCF has a sales
    and marketing organization with knowledge of the Cystic Fibrosis
    market which is expected to be an important market for
    Zentasetm.    ®
  tm
  Financial
    Operations Overview
  Revenues
  tm tm tm
 61




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Total RevenuesYear Ended December 31,2007(1)


2006(1)


2005(1)USA


40.3
%


40.3
%


34.6
%Germany


21.0
%


18.8
%


26.1
%United Kingdom


11.5
%


15.6
%


13.9
%Japan


6.9
%


6.3
%


4.2
%Italy


4.8
%


6.2
%


7.4
%Switzerland


3.7
%


3.7
%


4.0
%France


2.4
%


2.6
%


3.2
%Spain


2.1
%


1.1
%


1.2
%Canada


1.3
%


1.3
%


0.5
%South Africa


1.3
%


1.5
%


1.4
%Netherlands


1.2
%


0.0
%


0.1
%Other


3.5
%


2.5
%


3.4
%100.0
%


100.0
%


100.0
%     (1)
    
    For absolute amounts on which these percentages are based please
    refer to the consolidated financial statements included
    elsewhere in this Annual Report.    Product Sales. tm
  Royalties.
  Development Fees.
  
    feasibility and prototype development;
    formulation optimization and preparation of pilot clinical
    samples;
    scale-up,
    validation and preparation of clinical samples for regulatory
    and commercial purposes;
    clinical trials; and
    preparation of documents and regulatory filings. 62




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and/or agreed-upon
    Expenses
  Cost of Goods Sold.
    Research and Development.
  
    salaries and expenses for personnel, including stock-based
    compensation expenses;
    costs of manufacturing clinical samples and related materials;


    performance of preclinical studies and clinical trials for
    proprietary products;
    fees paid to professional service providers, notably in
    conjunction with independent monitoring of our clinical trials
    and acquiring and evaluating results in conjunction with our
    clinical trials;
    fees paid to regulatory agencies relating to products under
    development;
    patent filing and maintenance costs; and
    depreciation of our fixed assets used for development purposes. 63




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##### Table of Contents



Year Ended December 31,2005


2006


2007(In thousands)Research and development expenses attributable to development
    fees


3,807



5,590



5,432Other research and development expenses


10,706



10,697



11,678Research and development expenses


14,513



16,287



17,110         
    the number of sites included in the trials;
    the length of time required to enroll patients;
    the number of patients that participate in the trials;
    the duration of patient
    follow-up
    called for by the trial protocol or that seems appropriate in
    light of the results; and
    the efficacy and safety profile of the product candidate.  tm tm tm tm
    Selling, General and Administrative
    Expenses.
 64




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##### Table of Contents



tm tm
  tm
    Stock-based Compensation.
  Year Ended December 31,2003


2004


2005


2006


2007(In thousands)Included in the statement of operations as:Cost of goods sold


4











(5
)


269Research and development expenses


3



52



4



(36
)


240Selling, general and administrative expenses


29



1



46



(24
)


750Stock option expense


36



53



50



(65
)


1,259     Foreign Exchange Gains and Losses.
  Other Operating Expenses.
  Interest Income and Interest Expense. tm
 65




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##### Table of Contents



Income
    Taxes
        Critical
    Accounting Policies
      
    revenue recognition;
    valuation of pre-launch inventory;
    research and development expenses;
    stock-based compensation;
    income taxes;
    valuation of goodwill and intangible assets; and
    derivatives and hedging instruments.    Revenue
    Recognition
   66




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##### Table of Contents




    Product sales are recognized when title transfers, which
    generally occurs on the date when we ship products to our
    customers. Our policy is not to accept returned goods without
    proof that the returned goods are defective and as a result,
    historically, the value of returned goods has not been material.
    Provisions for any returns and other adjustments related to
    sales are provided in the same period the related sales are
    recorded when historical rates of return indicate such a
    provision is necessary.
    Royalties are based on reported sales of licensed products, and
    revenues are recognized based on contract terms when reported
    sales are reliably measurable and payment is reasonably assured.
    Research and development agreements with collaboration partners
    may provide that development work is compensated at a
    non-refundable hourly rate for a projected number of hours, and
    revenue is then recognized at the hourly rate for the number of
    hours worked.
    Research and development agreements with collaboration partners
    generally contain milestone payments based on performance; these
    payments are recognized when the performance criteria are met.
    When milestone payments are paid in advance and are not subject
    to forfeiture, the revenues are deferred and subsequently
    recognized as income over the related development phase and in
    accordance with the contract terms.    Pre-Launch
    Inventories
      
    whether the regulatory process and regulatory requirements for
    the product are sufficiently well known that it is likely that
    the product will be approved;
    whether our manufactured lots will likely have sufficient
    remaining commercial shelf life at the time it anticipates that
    the product will be sold; and
    whether our manufacturing process will be in accordance with the
    specifications that will likely be approved for the product.  tm tm tm
 67




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##### Table of Contents



Research
    and Development Expenses
    
    research and development expenses attributable to co-development
    contracts for which we receive fees from collaborators; and
    research and development expenses attributable to projects
    undertaken to research and develop products and technologies on
    our own behalf.    Stock-based
    Compensation
             68




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##### Table of Contents



Income
    Taxes
     69




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##### Table of Contents



Valuation
    of Goodwill and Other Intangible Assets
          
    feedback from actual and potential collaboration partners on the
    value they attach to a technology or patent;
    preparation of sales forecasts by product;
    internal factors, such as the current focus of our business
    development staff in its search for new development contracts;
    projections of technological viability over the estimated useful
    life of the intangible asset;
    review of period-to-period actual revenues and profitability by
    product; and
    a discount rate based on our estimated weighted average
    cost-of-capital.    Derivatives
    and Hedging Instruments
    
    to hedge receivables and payables denominated in foreign
    currency against exchange rate fluctuations by using forward
    exchange contracts; and
    to fix the interest payments on floating rate long-term debt to
    a fixed rate by using interest rate swaps. 70




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##### Table of Contents



Recent
    Accounting Developments
    Results
    of Operations
  Year
    ended December 31, 2007 Compared to Year ended
    December 31, 2006
    Year Ended December 31,2007


2006


Increase (Decrease) Compared to Previous Period(Euros in thousands, except percentages)Product sales


71,076



69,771



1,305



2
%Royalty income


4,373



3,896



477



12
%Development fees


9,372



9,182



190



2
%Total revenues


84,821



82,849



1,972



2
%   Revenues.
        Cost of Goods Sold. tm tm
 71




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##### Table of Contents



Research and Development Expenses.
  Selling, General and Administrative
    Expenses.
  
    the build out of our
    Zentasetm
    marketing and sales organization including new hires and
    pre-launch initiatives;
    higher legal costs, primarily related to ongoing litigation
    between the company and UCB;
    costs associated with being a public company, including legal
    advisory and costs related to the Sarbanes-Oxley Act; and
    the cost of stock options granted in 2007 for which there was no
    comparable cost in 2006.  Interest Expense.
  
    reduced interest on long term notes payable to shareholders
    after 23.0 million of these notes were converted to
    equity on November 30, 2006;
    further reduced interest expenses, after all the remaining notes
    payable to shareholders and almost all bank debt was repaid on
    May 30, 2007, using proceeds from our IPO; and
    repayment of bank debt which allowed us to terminate an interest
    rate swap, realizing a gain because interest rates had risen
    since the inception of the swap.  Taxes.
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
    Year Ended December 31,Increase (Decrease)Compared to Previous2006


2005


Period(Euros in thousands, except percentages)Revenues:Product sales


69,771



63,139



6,632



11
%Royalties


3,896



3,730



166



4
%Development fees


9,182



5,386



3,796



70
%Revenues


82,849



72,255



10,594



15
%   Revenues.
 72




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##### Table of Contents



Cost of Goods Sold.
  
    increased sales volumes of products such as pancreatin, which
    have lower costs of goods sold relative to other
    products; and
    higher capacity utilization, and consequently, lower absorption
    of overhead per unit of production.  Research and Development Expenses. co-development
  Selling, General and Administrative
    Expenses.
  
    higher accrual for management and personnel bonuses in the year
    ended December 31, 2006, compared to the same period in
    2005;
    costs associated with preparing to become a public company,
    including costs related to the Sarbanes-Oxley Act; and
    higher legal costs, primarily related to our claim against UCB
    and its affiliates.  Other Operating Income and Expenses.
  Interest Expense.
  Taxes.
 73




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##### Table of Contents



Financial
    Condition, Liquidity and Capital Resources
        tm
      As of December 31, 2007Current


Long-term


TotalPortion


Portion


Outstanding(In thousands)Euribor + 1.75% euro denominated loan due 2010


500



875



1,375Deferred financing fees


(1
)


(2
)


(3
)Total


499



873



1,372     As of December 31,2008


2009


2010


2011


2012


Thereafter


Total Debt(Euros, in thousands)Aggregate debt maturities


500



500



375















1,375  74




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##### Table of Contents



Net Cash Provided by Operating Activities.
    Net Cash Used in Investing Activities.
      Net Cash Used in Financing Activities.
    tm
  
    the costs, timing and outcome of regulatory review of
    Zentasetm
    and any of our other product candidates that progress to
    clinical trials;
    the results of our preclinical studies and clinical trials for
    our earlier-stage product candidates, and any decisions to
    initiate clinical trials if supported by the preclinical results;
    the costs of establishing our specialty sales, marketing and
    distribution capabilities, for
    Zentasetm
    and other products in development; 75




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##### Table of Contents




    the costs of preparing, filing and prosecuting patent
    applications, maintaining and enforcing our issued patents and
    defending other intellectual property-related claims;
    the extent to which we acquire or invest in businesses, products
    or technologies and other strategic relationships;
    the costs of financing unanticipated working capital
    requirements and responding to competitive pressures;
    the failure to obtain regulatory approval or achieve commercial
    success of our lead product candidate,
    Zentasetm;
    the success in establishing new co-development contracts with
    collaborators; and
    the success of our collaboration partners in selling products
    utilizing our technologies.  Off-Balance
    Sheet Arrangements
    Contractual
    Commitments
    Cash Payments Due by Period(1)Less Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Bank debt obligations


1,375



500



875







Operating lease obligations


1,448



507



641



300



Construction and other capital commitments


4,892



4,892











Total contractual obligations


7,715



5,899



1,516



300



     (1)
    
    The table above does not include certain commitments to Kyowa
    Hakko that are contingent on events in which the timing is
    uncertain. In December 2002, we entered into an agreement with
    Kyowa Hakko under which we have a worldwide license to practice
    under patents related to the
    AdvaTab®
    technology. The license is exclusive subject to Kyowa
    Hakkos reservation of certain rights, including, but not
    limited to, rights to maintain certain licensing arrangements
    with companies registered in Japan for development and sale of
    certain products; the use of the technology in products marketed
    by or under the name of Kyowa Hakko or certain of its
    affiliates; Kyowa Hakkos and its affiliates rights
    to have their licensees and sublicensees use the technology for
    products proprietary to Kyowa Hakko; and the right of Kyowa
    Hakkos and its affiliates sublicensees to use the
    technology on in-licensed products for development of Kyowa
    Hakkos proprietary products. The license agreement
    provides for aggregate payments in an amount up to $1,250,000,
    which includes payments upon signing the license agreement and
    amounts which have been paid or will be payable upon the
    occurrence of certain events. In addition, we must make certain
    other payments as well as pay a calculated royalty.   76




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ITEM 6.
    DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES    Name

Age

Positions

Expiration of Term of OfficeDirectorsGearóid M. Faherty


48


Chief Executive Officer, Executive Director

2011 Annual General Meeting of ShareholdersRolf A. Classon(1)(2)


62


Non-Executive Director

2010 Annual General Meeting of ShareholdersWilliam J. Jenkins(1)(3)


60


Non-Executive Director

2011 Annual General Meeting of ShareholdersNicholas J. Lowcock(2)(3)


44


Non-Executive Director

2011 Annual General Meeting of ShareholdersAngelo C. Malahias(1)(2)


46


Non-Executive Director

2010 Annual General Meeting of ShareholdersExecutive OfficersMario P. Crovetto


54


Chief Financial OfficerKonstantinos Efthymiopoulos(4)


47


Chief Scientific OfficerJohn J. Fraher


42


Chief Commercial OfficerManya S. Deehr


42


Chief Legal Officer, SecretaryMichael Walters


47


Executive Vice President of Sales and Marketing, Eurand
    Pharmaceuticals, Inc.     (1)
    
    Member of the audit committee.(2)
    
    Member of the compensation committee.(3)
    
    Member of the nominating and corporate governance committee.(4)
    
    Konstantinos Efthymiopoulos resigned as Chief Scientific Officer
    on January 10, 2008.    Directors
  Gearóid M. Faherty
  Rolf A. Classon
 77




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##### Table of Contents



William J. Jenkins
  Nicholas J. Lowcock
  Angelo C. Malahias
  Executive
    Officers
  Mario P. Crovetto
  John J. Fraher
  Manya S. Deehr
  Michael Walters tm
 78




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##### Table of Contents



Compensation
    of Directors and Senior Management
    Non-Executive Directors of our Board

Directors FeesRolf A. Classon


10,750Aleksandar Erdeljan


19,750William J. Jenkins


31,250Nicholas J. Lowcock


Angelo C. Malahias


17,083Total


78,833         Sole Executive Director of Our Board and CEO

Salary(1)


Bonus(2)


Non-cash Benefits(3)


TotalGearóid M. Faherty


530,000



250,000



13,386



793,386     (1)
    
    The non-executive members of our Board, upon the recommendation
    of our Compensation Committee, approved an annual salary for
    2007 for our CEO of 530,000.(2)
    
    The bonus paid to the sole executive member of our Board and CEO
    during the 2007 financial year was approved by the Compensation
    Committee, and approved by the non-executive members of our
    Board in respect of the 2007 financial year, based on
    fulfillment of a number of pre-defined objectives for 2007.(3)
    
    Includes use of a company car and additional medical coverage. 79




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##### Table of Contents



Stock
    Options
    Number


Exercise


2007


Number


ExpirationName

Granted


Price


Exercises


Outstanding


DateGearóid M. Faherty


240,000



6.67







240,000



2/28/2012120,000



5.00







120,000



6/23/2013120,000



5.00







120,000



10/26/2015120,000
(1)

$
16.00







120,000



5/16/2017Rolf A. Classon


10,000
(1)

$
12.88







10,000



8/29/2017William J. Jenkins


15,000



6.67







15,000



7/5/201010,000
(1)

$
16.00







10,000



5/16/2017Nicholas J. Lowcock


















Angelo C. Malahias


15,000
(1)

$
12.88







15,000



8/29/2017     (1)
    
    Options were granted pursuant to the Eurand N.V. Equity
    Compensation Plan in 2007.  Board
    Practices
    
    overseeing the conduct of the Companys business, to
    evaluate whether the business is being properly managed;
    reviewing and, where appropriate, approving the Companys
    major financial objectives, plans and actions;
    reviewing and, where appropriate, approving major changes in,
    and determinations of other major issues respecting, the
    appropriate auditing and accounting principles and practices to
    be used in the preparation of the Companys consolidated
    financial statements;
    reviewing and, where appropriate, approving major changes in,
    and determinations under the Guidelines, Code of Ethics and
    other Company policies;
    reviewing and, where appropriate, approving actions to be
    undertaken by the Company that would result in a material change
    in the financial structure or control of the Company, the
    acquisition or disposition of any business or asset(s) material
    to the Company or the entry of the Company into any major new
    line of business;
    regularly reviewing and evaluating the performance of the Chief
    Executive Officer and other members of senior management based
    on reports from the Compensation Committee;
    providing advice and counsel to the Chief Executive Officer and
    principal senior executives;
    planning for succession with respect to the position of Chief
    Executive Officer and monitoring managements succession
    planning for other key executives;
    ensuring that the Companys business is conducted with the
    highest standards of ethical conduct and in conformity with
    applicable laws and regulations; and
    performing such other functions as the Board believes
    appropriate or necessary, or as otherwise prescribed by rules or
    regulations.     80




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( )
    Corporate
    Governance
                
    a Code of Business Conduct and Ethics;
    a Nominating and Corporate Governance Committee Charter;
    a Compensation Committee Charter; and
    an Audit Committee Charter. 81




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##### Table of Contents



www.eurand.com
  Committees
    of the Board of Directors
    Audit
    Committee
      
    integrity of the Companys consolidated financial
    statements, including its system of internal controls;
    the Companys compliance with legal and regulatory
    requirements;
    the independent auditors qualifications and
    independence; and
    the performance of the Companys independent audit function
    and independent auditors,    Nominating
    and Corporate Governance Committee
    
    reviewing the Board structure, size and composition and making
    recommendations to the Board with regard to any adjustments that
    are deemed necessary;
    identifying candidates for the approval of the Board to fill
    Board vacancies as and when they arise as well as developing
    plans for succession, in particular, of the chairman and
    executive officers;
    overseeing the Boards annual evaluation of its own
    performance and the performance of other Board
    committees; and
    developing and recommending to the Board for adoption a set of
    Corporate Governance Guidelines applicable to the Company and to
    periodically review the same.  Compensation
    Committee
    
    establishing and periodically reviewing the Companys
    compensation programs;
    reviewing the performance of directors, officers and employees
    of the Company who are eligible for awards and benefits under
    any plan or program and adjust compensation arrangements as
    appropriate based on performance; 82




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##### Table of Contents




    reviewing and monitoring management development and succession
    plans and activities; and
    reporting on compensation arrangements and incentive grants to
    the Board.  One-tier Board
      Independence
    Conflicts
    of interests
    Remuneration
      and/or
 83




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##### Table of Contents



Share
    Ownership
  and/or
  Retirement
    of Board members
    Reporting
    of trading in Netherlands listed companies
    Code of
    Business Conduct and Whistleblowing Policy
    Employment
    Agreements
  Employment
    Agreement with Gearóid M. Faherty
   84




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##### Table of Contents



Employment
    Agreements Senior Management
    Employees
      Share
    Ownership
  and/or
  Equity
    Compensation Plan
         85




---



##### Table of Contents



The Wall Street Journal
         86




---



##### Table of Contents



and/or and/or and/or
    and/or
         87




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##### Table of Contents



ITEM 7.
    MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  Major
    Shareholders
    
    each person or entity that we know beneficially owns 5% or more
    of our shares of outstanding ordinary shares;
    our chief executive officer and our other members of senior
    management;
    each of our directors; and
    all of our current directors and executive officers as a group.  and/or
  Shares Beneficially OwnedName of Beneficial Owner

Number


PercentagePrincipal ShareholdersWarburg, Pincus Equity Partners, L.P.(1)


16,991,227



38.3
%Warburg, Pincus Ventures International, L.P.(1)


16,991,225



38.3
%Executive Officers and DirectorsDirectorsRolf A. Classon






*Gearóid M. Faherty(2)


3,040,017



6.8
%William J. Jenkins(3)


18,332



*Nicholas J. Lowcock(4)


33,982,452



76.6
%Angelo C. Malahias






*Executive OfficersMario P. Crovetto(5)


571,563



1.3
%Manya S. Deehr(6)


33,382



*Konstantinos Efthymiopoulos(7)


21,550



*John J. Fraher(8)


571,563



1.3
%Michael Walters


50



*All Directors and Executive Officers as a group (10 persons)


38,238,909



86.2
%     *
    
    Represents beneficial ownership of less than one percent of our
    outstanding ordinary shares.(1)
    
    Warburg, Pincus Equity Partners, L.P. includes two affiliated
    partnerships, Warburg, Pincus Netherlands Equity Partners I C.V.
    and Warburg, Pincus Netherlands Equity Partners III C.V.,
    or, together, WPEP. Warburg Pincus Partners LLC, or WP Partners,
    is the general partner of each of WPEP and Warburg, Pincus
    Ventures International, L.P., or WPVI. Each of WPEP and WPVI is
    managed by Warburg Pincus LLC, or WP LLC. Charles R. Kaye and
    Joseph P. Landy are the managing general partners of Warburg
    Pincus & Co., or WP, the sole 88




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##### Table of Contents



member of WP Partners, and managing members of WP LLC and may be
    deemed to control both entities. Each of Mr. Kaye and
    Mr. Landy disclaims beneficial ownership of all shares
    owned by Warburg Pincus entities. WPEP, WPVI, WP Partners, WP
    and WP LLC are collectively referred to in this Annual Report as
    Warburg Pincus. The address of the Warburg Pincus entities is
    466 Lexington Avenue, New York, New York 10017.  (2)
    
    Includes options which are fully vested to purchase 500,000
    ordinary shares under our equity compensation plan.(3)
    
    Includes options which are fully vested to purchase 18,332
    ordinary shares under our equity compensation plan.(4)
    
    Mr. Lowcock, one of our directors, is a senior advisor to
    Warburg Pincus International LLC. All shares indicated as owned
    by Mr. Lowcock are included because of his affiliation with
    the Warburg Pincus entities. Mr. Lowcock disclaims
    beneficial ownership of all shares owned by the Warburg Pincus
    entities.(5)
    
    Includes options which are fully vested to purchase 571,513
    ordinary shares under our equity compensation plan.(6)
    
    Includes options which are fully vested to purchase 33,332
    ordinary shares under our equity compensation plan.(7)
    
    Konstantinos Efthymiopoulos resigned as Chief Scientific Officer
    on January 10, 2008. Includes options which are fully
    vested to purchase 21,500 ordinary shares under our equity
    compensation plan.(8)
    
    Includes options which are fully vested to purchase 571,513
    ordinary shares under our equity compensation plan.  non-United
  Related
    Party Transactions
    Management
    Affiliations
    Loans
  Loans
    from Shareholders
     89




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##### Table of Contents



Agreements
    with Directors and Officers
  Employment
    Agreements
    Agreements
    with Directors and Officers
    Indemnification
    Agreements
    ITEM 8.
    FINANCIAL
    INFORMATION    Significant Changes. Form 20-F.
  Legal Proceedings.
   90




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##### Table of Contents



Dividend Policy.
    ITEM 9.
    THE
    OFFER AND LISTING    Trading
    on the NASDAQ Stock Market
    High


Low2007Second Quarter (May 16, 2007 through June 30, 2007)

$
17.40


$
14.68Third Quarter


16.52



9.65Fourth Quarter


17.17



11.382008First Quarter (through March 25, 2008)

$
16.00


$
12.07September 2007


16.26



13.01October 2007


17.17



13.60November 2007


14.86



11.38December 2007


16.15



14.47January 2008


15.73



12.90February 2008


15.15



12.20March 2008 (through March 25, 2008)


16.00



12.07  91




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##### Table of Contents



ITEM 10.
    ADDITIONAL
    INFORMATION  Share
    Capital
  Form 20-F.
    Ordinary
    Shares
    Dividends
  called-up
    Articles
    of Association
    Board
    Seats
   92




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##### Table of Contents



Election
    and Removal of Directors
        General
    Meeting of Shareholders
      
    capital reduction; and
    exclusion or restriction of pre-emptive rights, or designation
    of the board of directors as the authorized corporate body for
    this purpose.   93




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##### Table of Contents



Voting
    Rights
    
    the sale or transfer of substantially all of our business or
    assets;
    the commencement or termination of certain major joint ventures
    and our participation as a general partner with full liability
    in a limited partnership (commanditaire vennootschap) or
    general partnership (vennootschap onder firma);and
    the acquisition or disposal by us of a participating interest in
    a companys share capital, the value of which amounts to at
    least one-third of the value of our assets.  Extraordinary
    General Meetings of Shareholders
    Issuance
    of Shares and Pre-emptive Rights
    Repurchase
    of Our Ordinary Shares
    
    a general meeting of shareholders has authorized our board of
    directors to acquire the ordinary shares, which authorization
    may be valid for no more than 18 months and shall stipulate
    the number of shares that may be acquired and the upper and
    lower limit of the price of acquisition;
    our equity, after deduction of the price of acquisition, is not
    less than the sum of the paid-in and
    called-up
    portion of the share capital and the reserves that the laws of
    The Netherlands or our articles of association require us to
    maintain; and
    we would not hold after such purchase, or hold as pledgee,
    ordinary shares with an aggregate par value exceeding one-tenth
    of our issued share capital.   94




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##### Table of Contents



Capital
    Reduction; Cancellation
    Liquidation
    Rights
    Limitations
    on Nonresidents and Exchange Controls
    Registration
    Rights
  Form F-3, lock-up
  Adoption
    of Annual Accounts and Discharge of Management
    Liability
   95




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##### Table of Contents



Choice
    of Law and Exclusive Jurisdiction
    Material
    Contracts
    SourceCF
    Securities Purchase Agreement
  Acquisition
    of SourceCF
  GSK
    Agreement
  Co-Development Products
  Exchange
    Controls
    Taxation
    Material
    Netherlands Tax Consequences for Holders of Ordinary
    Shares
  his/her
 96




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##### Table of Contents



his/her and/or
  Withholding
    Tax
    
    distributions in cash or in kind;
    liquidation proceeds, proceeds of redemption of ordinary shares,
    or proceeds of the repurchase of ordinary shares by us or one of
    our subsidiaries or other affiliated entities to the extent such
    proceeds exceed the average capital paid into those shares as
    recognized for Netherlands dividend withholding tax purposes;
    an amount equal to the par value of ordinary shares issued or an
    increase in the par value of ordinary shares, as the case may
    be, to the extent that it does not appear that a contribution
    has been recognized for Netherlands dividend withholding tax
    purposes; and
    partial repayment of paid-in capital, recognized for Netherlands
    dividend withholding tax purposes, if and to the extent that we
    have net profits (zuivere winst), unless the general
    meeting of our shareholders has resolved in advance to make such
    repayment and provided that the par value of the ordinary shares
    concerned has been reduced by an equal amount by way of an
    amendment of our articles of association.         97




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##### Table of Contents




    3% of the portion of the distribution paid by us that is subject
    to Netherlands dividend withholding tax; and
    3% of the dividends and profit distributions, before deduction
    of foreign withholding taxes, received by us from qualifying
    foreign subsidiaries in the current calendar year (up to the
    date of the distribution by us) and the two preceding calendar
    years, insofar as such dividends and profit distributions have
    not yet been taken into account for purposes of establishing the
    above-mentioned deductions.      Taxes
    on Income and Capital Gains
  Netherlands Resident Individuals.
  
    the ordinary shares are attributable to an enterprise from which
    The Netherlands resident individual derives a share of the
    profit, whether as an entrepreneur or as a person who has a
    co-entitlement to the net worth of such enterprise, without
    being an entrepreneur or a shareholder, as specified in The
    Netherlands Income Tax Act 2001; or
    the holder of the ordinary shares is considered to perform
    activities with respect to the shares that go beyond ordinary
    active asset management (normaal vermogensbeheer) or such
    holder derives benefits from the shares that are (otherwise)
    taxable as benefits from other activities (resultaat uit
    overige werkzaamheden).  (rendementsgrondslag)
  Netherlands Resident Entities.
  (vrijgestelde
    beleggingsinstelling)
 98




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##### Table of Contents



Nonresidents of The Netherlands.
  
    such holder is neither a resident nor deemed to be resident in
    The Netherlands for Netherlands tax purposes and, if such holder
    is an individual, such holder has not made an election for the
    application of the rules of The Netherlands Income Tax Act 2001
    as they apply to residents of The Netherlands;
    such holder does not have an interest in an enterprise or a
    deemed enterprise that, in whole or in part, is either
    effectively managed in The Netherlands or is carried out through
    a permanent establishment, a deemed permanent establishment
    (statutorily defined term) or a permanent representative in The
    Netherlands and to which enterprise or part of an enterprise the
    ordinary shares are attributable; and
    in the event such holder is an individual, such holder does not
    carry out any activities in The Netherlands with respect to the
    ordinary shares that go beyond ordinary active asset management
    (normaal vermogensbeheer) and does not derive benefits
    from the ordinary shares that are (otherwise) taxable as
    benefits from other activities in The Netherlands (resultaat
    uit overige werkzaamheden).  Gift,
    Estate and Inheritance Taxes
  Residents of The Netherlands. his/her
  Non-residents of The Netherlands.
  
    such holder at the time of the gift has or at the time of
    his/her
    death had an enterprise or an interest in an enterprise that, in
    whole or in part, is or was either effectively managed in The
    Netherlands or carried on through a permanent establishment or a
    permanent representative in The Netherlands and to which
    enterprise or part of an enterprise the ordinary shares are or
    were attributable; or
    in the case of a gift of ordinary shares by an individual who at
    the time of the gift was neither resident nor deemed to be
    resident in The Netherlands, such individual dies within
    180 days after the date of the gift while being resident or
    deemed to be resident in The Netherlands.    Other
    Taxes and Duties
    Material
    U.S. Federal Income Tax Consequences
   99




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##### Table of Contents




    persons subject to the imposition of the U.S. federal
    alternative minimum tax;
    partnerships or other pass-through entities treated as
    partnerships for U.S. federal income tax purposes;
    insurance companies;
    tax-exempt persons;
    financial institutions;
    regulated investment companies;
    dealers in securities;
    persons who hold ordinary shares as part of a hedging, straddle,
    constructive sale or conversion transaction;
    persons whose functional currency is not the
    U.S. dollar; and
    persons owning (directly, indirectly or constructively) 10% or
    more of our voting shares        Taxation
    of Dividends
       100




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##### Table of Contents



Sale or
    Other Disposition of the Ordinary Shares
    Passive
    Foreign Investment Company
  non-U.S. corporation
     101




---



##### Table of Contents



Backup Withholding and Information
    Reporting. U.S.-related
    Dividends
    and Paying Agents
    Statement
    by Experts
    Documents
    on Display
  (http://www.sec.gov)
  ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Exchange
    Rate Risk
        Interest
    Rate Risk
   102




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##### Table of Contents



Impact of
    Inflation
    ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES   PART II  ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES    ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS  Form F-1 No. 333-142481)
  
    to repay outstanding indebtedness of 19.3 million (or
    approximately $28.2 million), including interest
    accumulated of 597,000, under our 5.87%
    U.S. dollar-denominated long-term loan agreement due 2009,
    on May 29, 2007;
    to repay outstanding indebtedness of 12.2 million (or
    approximately $17.8 million), including interest
    accumulated of 400,000, under our 6.73%
    U.S. dollar-denominated long-term loan agreement due 2010,
    on May 29, 2007;
    to repay the 31.0 million (or approximately
    $45.3 million) of unsecured notes outstanding that carried
    cumulative interest at a fixed rate of 8% per annum, on
    May 29, 2007, pursuant to which approximately
    30.8 million and 237,000 were payable to
    affiliates of Warburg Pincus LLC and Gearóid Faherty,
    respectively, shareholders of ours;
    to develop specialty sales, marketing and distribution
    capabilities in the United States to commercialize our lead
    product,
    Zentasetm,
    including our acquisition of SourceCF for approximately
    5.7 million (or approximately $8.3 million);
    renovate and expand our research and development facility in
    Dayton, Ohio, currently under construction for which we had
    spent 394,000 (or approximately $575,000) as of
    December 31, 2007; and
    fund working capital and general corporate purposes.   103




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##### Table of Contents



ITEM 15.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
    Managements
    Report on Internal Control over Financial Reporting
    ITEM 16A.
    AUDIT
    COMMITTEE FINANCIAL EXPERT    ITEM 16B.
    CODE
    OF ETHICS  http://www.eurand.com.
  ITEM 16C.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    2006


2007Audit fees


501



1,398Audit-Related fees


88



75Tax fees


62



83Other fees


0



0Total


651



1,556   Audit
    fees
  Form 6-K
   104




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##### Table of Contents



Audit-Related
    fees
    Tax
    fees
    Other
    fees
    Non-audit
    services
    ITEM 16D.
    EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES    ITEM 16E.
    PURCHASES
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS   105




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##### Table of Contents



PART III  ITEM 17.
    FINANCIAL
    STATEMENTS    ITEM 18.
    FINANCIAL
    STATEMENTS    ITEM 19.
    EXHIBITS  Number

Description1
.1

Articles of Association of Eurand N.V.*1
.2

Form of Amended Articles of Association of Eurand N.V.*1
.3

Form of Amended Articles of Association of Eurand N.V.*4
.1

Eurand N.V. Equity Compensation Plan, adopted on August 29,
    2007 and amended on December 12, 2007**4
.2

Form of Indemnification Agreement*4
.3

Form of Investor Rights Agreement*4
.4

Exclusive Development, License and Supply Agreement between
    Eurand International S.p.A and Axcan Scandipharm, Inc.*4
.5

Amendment to Exclusive Development, License and Supply Agreement
    between Eurand International S.p.A and Axcan Scandipharm,
    Inc.*4
.6

Development, License and Supply Agreement between Eurand
    America, Inc. and Reliant Pharmaceuticals*4
.7

License Agreement between Kyowa Hakko Kogyo Co., Ltd. and Eurand
    Pharmaceuticals Limited*4
.8

Development, License and Contract Manufacturing Agreement
    between Eurand America, Inc. and ECR Pharmaceuticals*4
.9

Promissory Note between Eurand B.V. and Warburg,
    Pincus & Co., on behalf of Warburg, Pincus Equity
    Partners, L.P., Warburg, Pincus Netherlands Equity Partners I
    C.V., Warburg, Pincus Netherlands Equity Partners II C.V.,
    and Warburg, Pincus Netherlands Equity Partners III C.V.*4
.10

Promissory Note between Eurand B.V. and Warburg, Pincus Equity
    Partners, L.P.*4
.11

Promissory Note between Eurand B.V. and Warburg, Pincus Ventures
    International, L.P.*4
.12

Promissory Note between Eurand B.V. and Warburg, Pincus Ventures
    International, L.P.*4
.13

Promissory Note between Eurand B.V. and Gearóid Faherty*4
.14

Conversion Agreement between Eurand B.V. and Warburg Pincus
    Partners, LLC and Warburg, Pincus Ventures International, L.P.*4
.15

Amendment to Conversion Agreement between Eurand N.V. and
    Warburg Pincus Partners, LLC and Warburg, Pincus Ventures
    International, L.P.*4
.16

Amendment No. 2 to the Development, License and Contract
    Manufacturing Agreement between Eurand, Inc. and E. Clairborne
    Robins Company, Inc. d/b/a ECR Pharmaceuticals, dated
    August 23, 2007 (Incorporated by reference to
    Exhibit 2 to the Current Report on
    Form 6-K
    filed on September 14, 2007).4
.17

Lease Agreement between Hudson-Alpha Institute for Biotechnology
    and Eurand Pharmaceuticals, Inc., dated January 15, 2008**4
.18

Development and License Agreement between Eurand, Inc. and
    SmithKline Beecham Corporation d/b/a GlaxoSmithKline, dated as
    of April 21, 2006**4
.19

Securities Purchase Agreement by and among Michael J. Walters,
    Norman Stanley, Lonnie S. McMillian, Stoneway LLC and Eurand
    Pharmaceuticals, Inc., dated November 30, 2007**8


Subsidiaries of the Company**12
.1

Certification of the Chief Executive Officer**12
.2

Certification of the Chief Financial Officer** 106




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##### Table of Contents



Number

Description13
.1

Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350 as added by Section 906 of
    the Sarbanes-Oxley Act of 2002**13
.2

Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350 as added by Section 906 of
    the Sarbanes-Oxley Act of 2002**15
.1

Consent of Independent Registered Public Accounting Firm**     
    
    Confidential treatment has been requested for certain portions
    of this exhibit, which portions have been omitted and filed
    separately with the Securities and Exchange Commission.*
    
    Previously filed as an exhibit to the Companys
    Registration Statement on
    Form F-1
    (File
    No. 333-142481)
    filed with the SEC and hereby incorporated by reference to such
    Registration Statement.**
    
    Filed herewith. 107




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##### Table of Contents



Signatures
  Form 20-F
  EURAND, N.V..
  By:
    /s/  Gearóid
    M. Faherty   Title:
    Chief Executive Officer   108




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##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  EURAND
    N.V.
  INDEX TO
    FINANCIAL STATEMENTS
   
 Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2007, and 2006


F-3Consolidated Statements of Operations for the
    years ended December 31, 2007, 2006 and 2005


F-5Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2007, 2006 and 2005


F-6Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2006 and 2005


F-7Notes to Consolidated Financial Statements


F-8   F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             Ernst &
    Young
     F-2




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##### Table of Contents



EURAND
    N.V.
  CONSOLIDATED
    BALANCE SHEETS
 December 31,
    2007 and 2006
  2007


2006(In thousands of euros)ASSETSCurrent AssetsCash and cash equivalents


12,541



5,810Accounts receivable, less allowance for doubtful accounts of
    115 and 283, respectively


13,437



12,587Inventories, net


9,750



7,655Prepaid expenses and other current assets


1,960



3,764Deferred income taxes


191



858Total Current Assets


37,879



30,674Property, plant and equipment, net


35,642



39,882Goodwill


26,251



26,956Other intangible assets, net


8,894



3,976Deferred income taxes


791



418Other non current assets


51



1,040Total Assets


109,508



102,946    F-3




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##### Table of Contents



EURAND
    N.V.
  CONSOLIDATED BALANCE SHEETS (Continued)
 December 31, 2007 and 2006
  2007


2006(In thousands of euros, except share and per share
    amounts)LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCurrent portion of long-term debt


499



7,067Short-term borrowings


179



221Accounts payable


8,103



7,977Income taxes payable


26



38Accrued expenses and other current liabilities


10,495



9,941Total Current Liabilities


19,302



25,244Long-term notes payable to shareholders






30,105Long-term debt from banks


873



25,751Employees severance indemnities


4,369



4,781Other non-current liabilities


2,611



2,393Deferred income taxes


1,286



1,939Total Non-Current Liabilities


9,139



64,969Commitments and contingencies (see Note 16)Series A redeemable preference shares convertible to
    ordinary shares, none authorized at December 31, 2007 and
    64,999,998 shares authorized as of December 31, 2006
    of which 32,487,940 issued and outstanding, par value 0.01






26,844Series C redeemable preference shares convertible to
    ordinary shares, none authorized as of December 31, 2007
    and 2 shares authorized as of December 31, 2006 of
    which, all issued and outstanding, par value 0.01






23,000Shareholders Equity(Deficit)Ordinary shares, authorized 130,000,000 and
    65,000,000 shares as of December 31, 2007 and 2006,
    respectively, 44,034,114 and 2,339,686 issued and outstanding,
    as of December 31, 2007 and 2006, respectively, with par
    value 0.01


440



23Additional paid-in capital


130,858



5,848Accumulated deficit


(52,011
)


(45,337
)Other comprehensive income


1,780



2,355Total Shareholders Equity (Deficit)


81,067



(37,111
)Total Liabilities and Shareholders Equity


109,508



102,946    F-4




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##### Table of Contents



EURAND
    N.V.



CONSOLIDATED
    STATEMENTS OF OPERATIONS

Years
    ended December 31, 2007, 2006 and 2005  2007


2006


2005(In thousands of euros, except shareand per share amounts)Product sales


71,076



69,771



63,139Royalties


4,373



3,896



3,730Development fees


9,372



9,182



5,386Revenues


84,821



82,849



72,255Cost of goods sold


(49,439
)


(47,558
)


(44,150
)Research and development expenses attributable to development
    fees


(5,432
)


(5,590
)


(3,807
)Other research and development expenses


(11,678
)


(10,697
)


(10,706
)Selling, general and administrative expenses


(21,497
)


(14,786
)


(11,537
)Amortization of intangibles


(788
)


(727
)


(720
)Other income (expense)


(93
)


354



(973
)Operating income (loss)


(4,106
)


3,845



362Interest expense


(2,024
)


(7,401
)


(7,260
)Interest income


492



140



46Foreign exchange gains (losses), net


104



12



(327
)Loss before taxes


(5,534
)


(3,404
)


(7,179
)Income tax expense


(1,140
)


(1,593
)


(1,100
)Net loss


(6,674
)


(4,997
)


(8,279
)Net loss per share:Basic and diluted net loss per share


(0.24
)


(2.19
)


(3.74
)Weighted average shares used to compute basic and diluted net
    loss per share


28,367,118



2,278,147



2,215,087    F-5




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##### Table of Contents



EURAND
    N.V.



CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

Years
    ended December 31, 2007, 2006 and 2005  Additional





Other


TotalOrdinary Shares


Paid-In


Accumulated


Comprehensive


ShareholdersShares


Amount


Capital


Deficit


Income


Equity(In thousands of Euros except share amounts)As at December 31, 2004


2,215,087



22



5,863



(32,061
)


1,795



(24,381
)Comprehensive loss:Net loss














(8,279
)






(8,279
)Cumulative exchange translation adjustment


















(1,586
)


(1,586
)Change in fair value of hedge instruments


















623



623Comprehensive loss






















(9,242
)Stock option expense










50











50As at December 31, 2005


2,215,087



22



5,913



(40,340
)


832



(33,573
)Comprehensive loss:Net loss














(4,997
)






(4,997
)Cumulative exchange translation adjustment


















1,700



1,700Change in fair value of hedge instruments


















(177
)


(177
)Comprehensive loss






















(3,474
)Exercise of stock options


124,599



1















1Stock option forfeitures










(65
)










(65
)As at December 31, 2006


2,339,686



23



5,848



(45,337
)


2,355



(37,111
)Comprehensive loss:Net loss














(6,674
)






(6,674
)Cumulative exchange translation adjustment


















(54
)


(54
)Change in fair value of hedge instruments


















(77
)


(77
)Reclassification upon termination of hedge instruments


















(444
)


(444
)Comprehensive loss






















(7,249
)Conversion of Series A Preference shares into 32,487,940
    ordinary shares


32,487,940



325



26,519











26,844Conversion of Series C Preference shares into
    2,029,786 ordinary shares


2,029,786



20



22,980











23,000Issue of 7,000,000 ordinary shares in initial public offering


7,000,000



70



73,907











73,977Stock option compensation










1,028











1,028Share award compensation










281











281Exercise of stock options


176,702



2



295











297As at December 31, 2007


44,034,114



440



130,858



(52,011
)


1,780



81,067    F-6




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##### Table of Contents



EURAND
    N.V.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

Years
    ended December 31, 2007, 2006 and 2005  2007


2006


2005(In thousands of euros)Operating ActivitiesNet loss


(6,674
)


(4,997
)


(8,279
)Adjustments to reconcile net loss to net cash provided by
    operating activities:Depreciation


7,074



7,881



8,977Amortization


788



727



720(Gain) loss on disposal of property, plant and equipment


93



(354
)


21Non-cash interest expense


201



4,315



4,079Employees severance indemnities


180



860



778Unrealized foreign exchange losses


655



643



757Stock compensation


1,309



(65
)


50Deferred income taxes


146



468



(285
)Changes in operating assets and liabilities:Accounts receivable, net


(673
)


(383
)


630Inventories, net


(2,263
)


1,276



(780
)Prepaid expenses and other current assets


1,675



(1,747
)


(206
)Other non-current assets


987



587



(1,047
)Accounts payable


(36
)


(90
)


1,222Accrued expenses and other current liabilities


101



4,592



(2,482
)Income taxes


(430
)


(344
)


(915
)Other non current liabilities


(1,335
)


(21
)


(313
)Cash provided by operating activities


1,798



13,348



2,927Investing ActivitiesPurchases of property, plant and equipment


(4,091
)


(2,744
)


(2,262
)Proceeds from disposals of property, plant and equipment






1,326



3Purchase of other intangible assets










(210
)Acquisition of SourceCF, net of cash acquired


(4,643
)






Cash used in investing activities


(8,734
)


(1,418
)


(2,469
)Financing ActivitiesProceeds from the issuance of ordinary shares


73,977







Repayment of principal on long term notes payable to shareholders


(30,105
)






Increase in long-term debt from banks










2,000Repayment of long-term debt from banks


(31,200
)


(6,197
)


(2,725
)Cash received on termination of interest rate swap


663







Net change in short-term borrowings


179



(3,181
)


(21
)Exercise of stock options


297



1



Cash provided by (used in) financing activities


13,811



(9,377
)


(746
)Effect of exchange rates on cash


(144
)


(166
)


104Increase (decrease) in cash and cash equivalents


6,731



2,387



(184
)Cash and cash equivalents at beginning of year


5,810



3,423



3,607Cash and cash equivalents at end of year


12,541



5,810



3,423Supplemental disclosures:Cash paid during the period for:Interest


14,509



2,946



3,135Taxes


1,224



1,252



2,224    F-7




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    Description
    of Business      2.
    Summary
    of Significant Accounting Policies and Basis of
    Presentation  Regulation S-X
  Principles
    of Consolidation
    Use of
    Estimates
    Segment
    information
  , Disclosures about Segments of an Enterprise and
    Related Information
  Cash
    and Cash Equivalents
    Accounts
    Receivable
    Inventories
   F-8




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Property,
    Plant and Equipment
    Buildings


18 to 30 yearsMachinery and equipment


8 to 12 yearsFurniture and fittings


3 to 5 years     Goodwill
    Goodwill and Other Intangible Assets
  Other
    Intangible Assets
    Impairment
    of Long-Lived Assets
   F-9




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Short-Term
    Borrowings and Long-Term Debt
    Income
    Taxes
  Accounting
    for Income Taxes ,
  , Accounting for Uncertainty in Income Taxes
    Foreign
    Currency Translation
        Revenue
    Recognition
   F-10




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          Research
    and Development Expenses
    Accounting
    for Stock Based Compensation
  Share-Based Payment
  Accounting for Stock Issued to Employees
 F-11




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Derivatives
    and Hedging Activities
  Accounting for Derivative Instruments
    and Hedging Activities
      Statement
    of Cash Flows
    Shipping
    and Handling Costs
   F-12




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Per
    Share Information
    Government
    Grants
      Recent
    Accounting Developments
  Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans
  , Fair Value
    Measurements
  The
    Fair Value Option for Financial Assets and Liabilities including
    an Amendment of FASB Statement No. 115
  EITF 07-3, Accounting for Advance Payments for Goods or Services to be
    Used in Future Research and Development Activities EITF 07-3 EITF 07-1: Accounting for Collaborative Arrangements Related to the
    Development and Commercialization of Intellectual Property EITF 07-1 EITF 07-1
 F-13




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Business
    Acquisitions  Acquisition
    of SourceCF
    ® tm
      Current assets, including cash


790Property, plant and equipment


20Intangible assets


5,689Total Assets Acquired


6,499Current liabilities


(711
)Net asset acquired


5,788Less: cash acquired


(104
)Cost of acquisition, net of cash acquired


5,684       4.
    Inventories,
    net  December 31,


December 31,2007


2006Raw materials


4,839



2,849Work in progress


1,732



2,552Finished goods


3,179



2,2549,750



7,655  F-14




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##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  tm tm
  5.
    Prepaid
    Expenses and Other Current Assets  December 31,


December 31,2007


2006Deferred initial public offering costs






1,918Prepayments


750



1,020Recoverable amounts for income taxes


235



181Recoverable amounts for other taxes


975



546Deferred financing fees






991,960



3,764     6.
    Property,
    Plant and Equipment, net  December 31,


December 31,2007


2006Land


1,714



1,739Buildings


29,955



30,649Machinery and equipment


57,350



55,556Furniture and fittings


4,953



4,879Construction in progress


2,598



1,04396,570



93,866Accumulated depreciation


(60,928
)


(53,984
)35,642



39,882     7.
    Goodwill    As at December 31, 2005


27,789Exchange translation


(833
)As at December 31, 2006


26,956Exchange translation


(705
)As at December 31, 2007


26,251  F-15




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Other
    Intangible Assets, net  As of December 31, 2007


As of December 31, 2006Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountPatents


1,630



(1,038
)


592



1,666



(814
)


852Licenses


1,439



(956
)


483



1,462



(830
)


632Exclusive supply rights


3,250



(1,083
)


2,167



3,250



(758
)


2,492Selling and marketing rights


5,723



(71
)


5,652











Total


12,042



(3,148
)


8,894



6,378



(2,402
)


3,976             EstimatedAmortization Charge2007


1,4872008


1,3712009


1,1912010


1,1572011


1,138Thereafter


2,5508,894   9.
    Short-Term
    Borrowings     F-16




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Income
    Taxes    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Netherlands


2,488



65



(103
)Foreign


(8,022
)


(3,469
)


(7,076
)(5,534
)


(3,404
)


(7,179
)     Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Current


(994
)


(1,125
)


(1,309
)Deferred


(146
)


(468
)


209Income tax


(1,140
)


(1,593
)


(1,100
)     Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2007


2006


2005Income tax benefit at the Dutch statutory tax rate


1,411



1,008



2,261Effect of Italian IRAP


(665
)


(885
)


(759
)Aggregated effect of different foreign tax rates


440



213



260Changes in foreign tax rates


(1,094
)


(190
)


(141
)Permanent differences:Non deductible expenses


(120
)


(201
)


(105
)Non-taxable items


53



8



16Foreign taxes not deductible


(17
)


(30
)


(53
)Reversal of deferred tax liability on revaluation reserve


297







Deductible IPO expenses


902







Stock compensation


(99
)






Other


(103
)


(84
)


70Change in valuation allowance


(2,145
)


(1,432
)


(2,649
)Effective income tax provision


(1,140
)


(1,593
)


(1,100
)      F-17




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2007


2006Deferred tax assets:Property, plant and equipment


4,364



3,521Intangible assets


249



569Inventory allowance


496



201Accrued expenses


439



264Foreign exchange


462



264Deferred revenues


738



1,234Accrued interest expense


3,805



2,752Deductible stock compensation


715



660Tax Credits


273



289Net operating loss carry-forwards


9,673



10,132Other


23



57Total deferred tax assets


21,237



19,943Less: valuation allowance


(18,244
)


(18,210
)Deferred tax assets, net of valuation allowance


2,993



1,733Deferred tax liabilities:Property, plant and equipment


(570
)


(1,441
)Intangible assets


(2,163
)


(659
)Foreign exchange


(528
)


Unrealized gain on derivatives






(257
)Other


(36
)


40Total deferred tax liabilities


(3,297
)


(2,397
)Net deferred tax liabilities


(304
)


(664
)     Balance at December 31, 2006


(18,210
)Increase in valuation allowance recognized in the year


(2,145
)Currency translation adjustment


1,204Decrease in valuation allowance for recognition of net deferred
    tax liability on acquisition of SourceCF


907Balance at December 31, 2007


(18,244
)    F-18




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Italy


2003 through 2007U.S. (Federal)


1999 through 2007France


2002 through 2007Netherlands


2002 through 2007Ireland


2002 through 2007           Balance, January 1, 2007


Additions based on tax positions related to the current year


5,611Additions for tax positions of prior years


Reductions for tax positions of prior years


Reductions for settlements


Reductions due to lapse in statute of limitations


Change attributable to foreign currency translation


Balance, December 31, 2007


5,611  F-19




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  11.
    Accrued
    Expenses and Other Current Liabilities  December 31,


December 31,2007


2006Accrued expenses


3,298



1,915Accrued initial public offering costs






1,532Deferred revenues


1,045



1,373Accrued costs for termination of operating lease


150



150Social Security and other contributions


1,259



1,080Taxes, other than income taxes


810



811Accrued employee compensation


3,933



3,08010,495



9,941   12.
    Long-Term
    Notes Payable to Shareholders and Other Debt  Long-Term
    Notes Payable to Shareholders
      December 31,


December 31,2007


2006Warburg Pincus






29,876Mr. Gearoid Faherty (CEO)






229



30,105     Long-Term
    Debt From Banks
     F-20




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      December 31,


December 31,2007


2006Euribor + 1.75% EUR denominated loan due 2010


1,375



1,8755.87% USD denominated credit facility due 2009






19,1466.73% USD denominated credit facility due 2010






12,0381,375



33,059Less:Deferred financing fees


(3
)


(259
)Accrued interest






181,372



32,818Amount due within one year, net of deferred financing fees of
    1 and 134, respectively


(499
)


(7,067
)873



25,751     Year ended December 31,2008


5002009


5002010


375Total principal repayable


1,375Less:Deferred financing fees


(3
)Amount due within one year, net of deferred financing fees of
    1


(499
)873   13.
    Employees
    Severance Indemnities    14.
    Shareholders
    Equity  Share
    Capital
   F-21




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            Stock
    Options
             F-22




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      WeightedAverageContractualWeighted


Life ofAverage


Options


AggregateNumber of


Exercise


Outstanding


IntrinsicOptions


Price


(Years)


ValueOutstanding at December 31, 2004


3,382,702



2.93



5.9Granted


605,000



5.00Exercised






Forfeited


(41,703
)


5.56Expired






Outstanding at December 31, 2005


3,945,999



3.22



5.7Granted






Exercised


(124,599
)


0.01Forfeited


(107,408
)


5.53Expired






Outstanding at December 31, 2006


3,713,992



3.26



4.7



38,539Granted


957,000



10.73Exercised


(176,702
)


1.40Forfeited


(79,861
)


6.46Expired






Outstanding at December 31, 2007


4,414,429



4.89



4.9



26,228Vested and expected to vest at December 31, 2007


4,378,550



4.80



4.9



26,193Exercisable at December 31, 2007


3,507,361



3.64



3.8



25,188          F-23




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year EndedDecember 31,2007Risk free interest rate

2.9 - 5.3%Expected dividend yield

0%Expected stock price volatility

50%Post vesting forfeiturerate

6%Suboptimal exercise factor

2.0        F-24




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted AverageUnrecognized


Remaining VestingCompensation Cost


Period (Years)Stock options


3,873



1.4     Exercise PriceWeightedAverageExercise Price in

Options


Weighted Average


OptionsEuro at

Outstanding as of


Remaining


Exercisable as ofDecember 31,

December 31,


Contractual


December 31,Contractual

2007

2007


Life (Years)


20070.01

0.01


1,497,319



2.0



1,497,3194.17

4.17


105,369



2.0



105,3695.00

5.00


978,451



6.8



827,3836.67

6.67


784,550



3.3



784,55010.73

7.35


10,000



9.6



$11.21

7.68


25,000



9.6



8.33

8.33


105,740



3.3



105,740$12.88

8.82


25,000



9.7



$13.55

9.28


20,000



9.9



$15.84

10.85


100,000



9.9



$16.00

10.96


748,000



9.4



187,000$16.34

11.19


15,000



9.8



4,414,429



4.7



3,507,361   Share
    Grants
   F-25




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Aggregate
    Stock Compensation Expenses
    Year Ended December 31,2007


2006


2005Cost of goods sold


269



(5
)


Research and development expenses attributable to development
    fees


109



(15
)


Other research and development expenses


131



(21
)


4Selling, general and administrative expenses


750



(24
)


461,259



(65
)


50Capitalized in inventories


50







1,309



(65
)


50   Other
    Comprehensive Income
        15.
    Other
    Expense       F-26




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  16.
    Commitments
    and Contingencies  Litigation
          Capital
    Commitments
   F-27




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Lease
    Commitments
    Year ended December 31,2008


5072009


3792010


2622011


1932012


107Total minimum lease payments


1,448     17.
    Financial
    Instruments  Concentration
    of Credit Risks
      Fair
    Value of Financial Instruments
    Cash and cash equivalents
  Accounts receivable, net and payable
  Short and long-term debt
  18.
    Per Share
    Information     F-28




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    For the Years Ended December 31,2007


2006


2005Numerator:Net loss


(6,674
)


(4,997
)


(17,072
)Denominator:Weighted average shares for basic net loss per share


28,367,118



2,278,147



2,215,087Effect of dilutive securities:Stock options










Convertible preference shares










Weighted average shares for diluted net loss per share


28,367,118



2,278,147



2,215,087     For the Years Ended December 31,2007


2006


2005Numerator:Net loss


(6,674
)


(4,997
)


(8,279
)Denominator:Basic calculation


28,367,118



2,278,147



2,215,087Diluted calculation


28,367,118



2,278,147



2,215,087Basic and diluted net loss per share


(0.24
)


(2.19
)


(3.74
)   19.
    Segment
    and Geographic Information        Total RevenuesYear Ended December 31,


Property, Plant and Equipment, Net December 31,2007


2006


2005


2007


2006


2005Italy


50,748



51,328



47,372



18,225



20,332



24,313United States


26,671



22,350



16,015



16,159



18,109



22,129France


6,989



6,557



6,600



1,257



1,439



1,709Other


413



2,614



2,268



1



2



384,821



82,849



72,255



35,642



39,882



48,154    F-29




---



##### Table of Contents



EURAND
    N.V.
  NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Total RevenuesYear Ended December 31,2007


2006


2005United States


34,188



33,392



25,008Germany


17,782



15,591



18,847United Kingdom


9,731



12,897



10,035Japan


5,839



5,226



3,013Italy


4,044



5,124



5,324Switzerland


3,145



3,057



2,899France


1,997



2,136



2,299Spain


1,778



1,013



878Canada


1,134



1,060



337South Africa


1,149



1,210



1,010Netherlands


1,041



2



74Other


2,993



2,141



2,53184,821



82,849



72,255  F-30




---



##### Table of Contents



Exhibit Index
  Number

Description1
.1

Articles of Association of Eurand N.V.*1
.2

Form of Amended Articles of Association of Eurand N.V.*1
.3

Form of Amended Articles of Association of Eurand N.V.*4
.1

Eurand N.V. Equity Compensation Plan, adopted on August 29,
    2007 and amended on December 12, 2007**4
.2

Form of Indemnification Agreement*4
.3

Form of Investor Rights Agreement*4
.4

Exclusive Development, License and Supply Agreement between
    Eurand International S.p.A and Axcan Scandipharm, Inc.*4
.5

Amendment to Exclusive Development, License and Supply Agreement
    between Eurand International S.p.A and Axcan Scandipharm,
    Inc.*4
.6

Development, License and Supply Agreement between Eurand
    America, Inc. and Reliant Pharmaceuticals*4
.7

License Agreement between Kyowa Hakko Kogyo Co., Ltd. and Eurand
    Pharmaceuticals Limited*4
.8

Development, License and Contract Manufacturing Agreement
    between Eurand America, Inc. and ECR Pharmaceuticals*4
.9

Promissory Note between Eurand B.V. and Warburg,
    Pincus & Co., on behalf of Warburg, Pincus Equity
    Partners, L.P., Warburg, Pincus Netherlands Equity Partners I
    C.V., Warburg, Pincus Netherlands Equity Partners II C.V.,
    and Warburg, Pincus Netherlands Equity Partners III C.V.*4
.10

Promissory Note between Eurand B.V. and Warburg, Pincus Equity
    Partners, L.P.*4
.11

Promissory Note between Eurand B.V. and Warburg, Pincus Ventures
    International, L.P.*4
.12

Promissory Note between Eurand B.V. and Warburg, Pincus Ventures
    International, L.P.*4
.13

Promissory Note between Eurand B.V. and Gearóid Faherty*4
.14

Conversion Agreement between Eurand B.V. and Warburg Pincus
    Partners, LLC and Warburg, Pincus Ventures International, L.P.*4
.15

Amendment to Conversion Agreement between Eurand N.V. and
    Warburg Pincus Partners, LLC and Warburg, Pincus Ventures
    International, L.P.*4
.16

Amendment No. 2 to the Development, License and Contract
    Manufacturing Agreement between Eurand, Inc. and E. Clairborne
    Robins Company, Inc. d/b/a ECR Pharmaceuticals, dated
    August 23, 2007 (Incorporated by reference to
    Exhibit 2 to the Current Report on
    Form 6-K
    filed on September 14, 2007).4
.17

Lease Agreement between Hudson-Alpha Institute for Biotechnology
    and Eurand Pharmaceuticals, Inc., dated January 15, 2008**4
.18

Development and License Agreement between Eurand, Inc. and
    SmithKline Beecham Corporation d/b/a GlaxoSmithKline, dated as
    of April 21, 2006**4
.19

Securities Purchase Agreement by and among Michael J. Walters,
    Norman Stanley, Lonnie S. McMillian, Stoneway LLC and Eurand
    Pharmaceuticals, Inc., dated November 30, 2007**8


Subsidiaries of the Company**12
.1

Certification of the Chief Executive Officer**12
.2

Certification of the Chief Financial Officer**13
.1

Certification of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350 as added by Section 906 of
    the Sarbanes-Oxley Act of 2002**13
.2

Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350 as added by Section 906 of
    the Sarbanes-Oxley Act of 2002**15
.1

Consent of Independent Registered Public Accounting Firm**     
    
    Confidential treatment has been requested for certain portions
    of this exhibit, which portions have been omitted and filed
    separately with the Securities and Exchange Commission.*
    
    Previously filed as an exhibit to the Companys
    Registration Statement on
    Form F-1
    (File
    No. 333-142481)
    filed with the SEC and hereby incorporated by reference to such
    Registration Statement.**
    
    Filed herewith.