<PAGE>
                       Securities and Exchange Commission

                             Washington, D.C. 20549

                                    FORM 10-Q

            Quarterly Report Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


                  For the Quarterly Period Ended June 30, 2002

                        Commission file number 000-23520

                          QUINTILES TRANSNATIONAL CORP.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


         North Carolina                                   56-1714315
---------------------------------              ---------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.)

   4709 Creekstone Dr., Suite 200
             Durham, NC                                    27703-8411
----------------------------------------       ---------------------------------
(Address of principal executive offices)                    (Zip Code)


                                 (919) 998-2000
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                      N/A
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

The number of shares of Common Stock, $.01 par value, outstanding as of June 30,
2002 was 117,587,639.
<PAGE>
                                      Index

<TABLE>
<CAPTION>
                                                                                Page
                                                                                ----
<S>            <C>           <C>                                                <C>
Part I.        Financial Information

               Item 1.       Financial Statements (unaudited)

                             Condensed consolidated balance sheets -
                             June 30, 2002 and December 31, 2001                  3

                             Condensed consolidated statements of
                             operations - Three months ended
                             June 30, 2002 and 2001; six months ended
                             June 30, 2002 and 2001                               4

                             Condensed consolidated statements of
                             cash flows - Six months ended
                             June 30, 2002 and 2001                               5

                             Notes to condensed consolidated financial
                             statements - June 30, 2002                           6

               Item 2.       Management's Discussion and Analysis of
                             Financial Condition and Results of Operations       20

               Item 3.       Quantitative and Qualitative Disclosure
                             about Market Risk                                   39

Part II.       Other Information

               Item 1.       Legal Proceedings                                   39

               Item 2.       Changes in Securities and Use of Proceeds           40

               Item 3.       Defaults upon Senior Securities - Not Applicable    40

               Item 4.       Submission of Matters to a Vote of Security
                             Holders                                             40

               Item 5.       Other Information - Not Applicable                  40

               Item 6.       Exhibits and Reports on Form 8-K                    40

Signatures                                                                       42

Exhibit Index                                                                    43
</TABLE>
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               JUNE 30        DECEMBER 31
                                                                2002             2001
                                                             -----------      -----------
                                                             (unaudited)        (Note 1)
                                                           (in thousands, except share data)
<S>                                                          <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                                 $   591,976      $   565,063
   Trade accounts receivable and unbilled services, net          386,299          426,954
   Investments in debt securities                                 27,183           27,489
   Prepaid expenses                                               33,689           28,085
   Other current assets and receivables                           37,565           32,147
                                                             -----------      -----------
         Total current assets                                  1,076,712        1,079,738

Property and equipment                                           462,913          469,919
Less accumulated depreciation                                   (197,370)        (196,144)
                                                             -----------      -----------
                                                                 265,543          273,775
Intangibles and other assets:
   Investments in debt securities                                 10,486            9,510
   Investments in marketable equity securities                    47,273           77,992
   Investments in non-marketable equity securities and
     loans                                                        44,987           37,590
   Investments in unconsolidated affiliates                      123,251               --
   Goodwill                                                       65,128          163,651
   Other identifiable intangibles, net                           140,200          123,999
   Deferred income taxes                                         151,552          136,686
   Deposits and other assets                                      65,033           44,799
                                                             -----------      -----------
                                                                 647,910          594,227
                                                             -----------      -----------
         Total assets                                        $ 1,990,165      $ 1,947,740
                                                             ===========      ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses                     $   233,739      $   223,573
   Credit arrangements, current                                   18,289           16,116
   Unearned income                                               211,409          205,783
   Income taxes                                                   18,463           14,811
   Other current liabilities                                       1,186            1,903
                                                             -----------      -----------
        Total current liabilities                                483,086          462,186

Long-term liabilities:
   Credit arrangements, less current portion                      22,095           21,750
   Other liabilities                                               4,973            8,716
                                                             -----------      -----------
                                                                  27,068           30,466
                                                             -----------      -----------
        Total liabilities                                        510,154          492,652

Shareholders' equity:
   Preferred stock, none issued and outstanding
        at June 30, 2002 and December 31, 2001                        --               --
   Common stock and additional paid-in capital,
      117,587,639 and 118,623,669 shares issued
      and outstanding at June 30, 2002 and
      December 31, 2001, respectively                            878,562          897,075
   Retained earnings                                             627,029          589,142
   Accumulated other comprehensive loss                          (25,580)         (31,129)
                                                             -----------      -----------
        Total shareholders' equity                             1,480,011        1,455,088
                                                             -----------      -----------
        Total liabilities and shareholders' equity           $ 1,990,165      $ 1,947,740
                                                             ===========      ===========
</TABLE>

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


                                       3
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED JUNE 30     SIX MONTHS ENDED JUNE 30
                                                                          --------------------------     ------------------------
                                                                              2002           2001          2002           2001
                                                                           ---------      ---------      ---------      ---------
                                                                                    (in thousands, except per share data)
<S>                                                                        <C>            <C>            <C>            <C>
Revenues:
    Gross service revenues                                                 $ 468,899      $ 467,389      $ 943,219      $ 930,654
    Commercial rights and royalties                                           23,001          3,145         37,195          5,792
    Investment                                                                 6,333          2,270         11,115          1,368
                                                                           ---------      ---------      ---------      ---------
    Total gross revenues                                                     498,233        472,804        991,529        937,814
    Less: reimbursed service costs                                           107,919         66,234        203,072        127,676
                                                                           ---------      ---------      ---------      ---------
                                                                             390,314        406,570        788,457        810,138

Costs of revenues (excluding general, administrative, depreciation and
  amortization expenses shown below):
     Service                                                                 192,110        238,380        403,625        477,285
     Commercial rights and royalties                                          26,570          3,247         40,849          5,808
     Investment                                                                   21            317            179            347
                                                                           ---------      ---------      ---------      ---------
                                                                             218,701        241,944        444,653        483,440
                                                                           ---------      ---------      ---------      ---------
Contribution                                                                 171,613        164,626        343,804        326,698

General, administrative and other:
     General and administrative                                              125,895        129,136        253,128        263,645
     Depreciation and amortization                                            21,278         23,641         42,667         46,042
     Restructuring charges                                                        --          2,146             --          2,146
     Interest (income) expense, net                                           (3,436)        (4,585)        (6,698)       (10,433)
     Other (income) expense, net                                              (2,198)          (150)        (1,129)          (768)
                                                                           ---------      ---------      ---------      ---------
                                                                             141,539        150,188        287,968        300,632
                                                                           ---------      ---------      ---------      ---------

Income before income taxes                                                    30,074         14,438         55,836         26,066
Income tax expense                                                             9,925          4,764         18,426          8,601
                                                                           ---------      ---------      ---------      ---------
Income before equity in earnings of unconsolidated affiliates                 20,149          9,674         37,410         17,465
Equity in earnings of unconsolidated affiliates                                  477             --            477             --
                                                                           ---------      ---------      ---------      ---------
Net income                                                                 $  20,626      $   9,674      $  37,887      $  17,465
                                                                           =========      =========      =========      =========
Net income per share:
    Basic                                                                  $    0.17      $    0.08      $    0.32      $    0.15
    Diluted                                                                     0.17           0.08           0.32           0.14
</TABLE>

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


                                       4
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                       SIX MONTHS ENDED JUNE 30
                                                                                    ------------------------------
                                                                                       2002                 2001
                                                                                    ---------            ---------
                                                                                             (in thousands)
<S>                                                                                 <C>                  <C>
OPERATING ACTIVITIES
Net income                                                                          $  37,887            $  17,465
Adjustments to reconcile net income to net cash provided by operating
activities:
  Depreciation and amortization                                                        43,787               46,546
  Restructuring charge payments, net                                                 (14,862)             (10,778)
  Gain from investments, net                                                         (11,048)              (1,368)
  Benefit from deferred income tax expense                                            (4,131)                (740)
  Change in operating assets and liabilities                                           40,259               28,808
  Other                                                                                   531              (1,808)
                                                                                    ---------            ---------
Net cash provided by operating activities                                              92,423               78,125

INVESTING ACTIVITIES
Acquisition of property and equipment                                                (21,186)             (44,567)
Proceeds from disposition of property and equipment                                     1,674                4,592
Acquisition of businesses, net of cash acquired                                      (25,450)              (6,620)
(Purchases of) proceeds from debt securities, net                                       (666)               71,114
Purchases of equity securities and other investments                                  (8,283)             (28,245)
Proceeds from sale of equity securities and other investments                          18,540                4,613
Purchase of commercial rights                                                         (7,080)                    -
Advances to unconsolidated affiliate                                                 (10,000)                    -
                                                                                    ---------            ---------
Net cash (used in) provided by investing activities                                  (52,451)                  887

FINANCING ACTIVITIES
Decrease in lines of credit, net                                                            -                 (38)
Principal payments on credit arrangements, net                                        (5,725)              (9,579)
Issuance of common stock, net                                                           6,828               20,554
Repurchase of common stock                                                           (25,244)              (1,704)
                                                                                    ---------            ---------
Net cash (used in) provided by financing activities                                  (24,141)                9,233

Effect of foreign currency exchange rate changes on cash                               11,082              (7,023)
                                                                                    ---------            ---------
Increase in cash and cash equivalents                                                  26,913               81,222
Cash and cash equivalents at beginning of period                                      565,063              330,214
                                                                                    ---------            ---------
Cash and cash equivalents at end of period                                          $ 591,976            $ 411,436
                                                                                    =========            =========
</TABLE>

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


                                       5
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

              Notes to Condensed Consolidated Financial Statements
                                   (unaudited)

                                  June 30, 2002

1.       Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and notes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the six-month period ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. For further information, refer to the Consolidated Financial
Statements and Notes thereto included in the Annual Report on Form 10-K for the
year ended December 31, 2001 of Quintiles Transnational Corp. (the "Company").

The balance sheet at December 31, 2001 has been derived from the audited
consolidated financial statements of the Company. Certain amounts in the 2001
financial statements have been reclassified to conform with the 2002 financial
statement presentation. The reclassifications had no effect on previously
reported net income, shareholders' equity or net income per share.

2.       Commercial Rights and Royalties

The Company has entered into financial transactions and other arrangements with
customers and other parties in which a portion of the Company's revenues and
operating income depends on the performance of a specific pharmaceutical
product. These transactions may include providing product development and/or
commercialization services to customers, as well as the funding of such
services, in return for royalties or commissions based on the sales of the
customer's product. Below is a brief description of these agreements:

In May 1999, the Company entered into an agreement with CV Therapeutics, Inc.
("CVTX") to commercialize Ranolazine for angina in the United States and Canada.
Under the terms of this agreement, the Company purchased 1,043,705 shares of
CVTX's common stock for $5 million of which the Company owns 431,705 shares as
of June 30, 2002, and has made available a $10 million credit line for
pre-launch sales and marketing activities. Once Ranolazine, which is currently
in Phase III studies, is approved, the Company will provide a $10 million
milestone payment to CVTX which will be used to pay off any outstanding balances
on the credit line. The Company will also make available an additional line of
credit to help fund a portion of the first year sales and marketing expenses.
Additionally, the Company has committed to provide a minimum of approximately
$14.4 million per year of commercialization services and to fund a minimum of
$7.8 million per year of marketing activities, for a period of five years. In
return it will receive payment for services rendered by the Company in year one
and royalties based on the net sales of Ranolazine in years two through five
subject to a cap not to exceed 300% of funding by the Company in any year or
over the life


                                       6
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

of the contract. In addition, the Company will also receive royalties in years
six and seven.

In December 1999, the Company obtained the distribution rights to market four
pharmaceutical products in the Philippines from a large pharmaceutical customer
in exchange for providing certain commercialization services amounting to
approximately $5.1 million during the two-year period ended December 31, 2001.
As of June 30, 2002, the Company has capitalized 251.8 million philippino pesos
(approximately $5.0 million) related to these commercialization rights, and is
amortizing these costs over seven years. Under the terms of the agreement, the
customer has the option to reacquire the rights to the four products from the
Company after seven years for a price to be determined at the exercise date.

In January 2001, the Company entered into an agreement with Scios Inc. ("SCIO")
to market Natrecor(R) for acute congestive heart failure in the United States
and Canada. Under the terms of the agreement, the Company agreed to provide $30
million in funding over a two and one-half year period for sales and marketing
activities following product launch. The $30 million in payments will be
capitalized and amortized ratably as a reduction of revenue over the 24-month
service period. As of June 30, 2002, $17. 1 million has been paid by the
Company. The Company also received warrants to purchase 700,000 shares of SCIO's
common stock at $20 per share, exercisable in installments over two and one-half
years. In addition to receiving payments on a fee for service basis for
providing commercialization services through May 2003, the Company will receive
royalties based on net sales of the product from 2002 through 2008. The royalty
payments are subject to minimum and maximum amounts of $50 million and $65
million, respectively, over the life of the agreement.

In June 2001, the Company entered into an agreement with Pilot Therapeutics,
Inc. ("PLTT") to commercialize a natural therapy for asthma, AIROZIN(TM), in the
United States and Canada. Under the terms of the agreement, the Company will
provide commercialization services for AIROZIN(TM) and a milestone-based $6
million line of credit which is convertible into PLTT's common stock, of which
$4 million was funded by the Company as of June 30, 2002. Further, the Company
has committed to funding 50% of sales and marketing activities for AIROZIN(TM)
over five years with a $6 million limit per year. Following product launch, the
Company will receive royalties based on the net sales of AIROZIN(TM). The
royalty percentage will vary to allow the Company to achieve a minimum rate of
return.

In December 2001, the Company entered into an agreement with Discovery
Laboratories, Inc. ("DSCO") to commercialize, in the United States, DSCO's
humanized lung surfactant, Surfaxin(R), which is currently in Phase III studies.
Under the terms of the agreement, the Company acquired 791,905 shares of DSCO's
common stock and a warrant to purchase 357,143 shares of DSCO's common stock at
$3.48 per share for a total of $3 million, and has agreed to make available a
line of credit up to $10 million for pre-launch commercialization services as
certain milestones are achieved by DSCO. In addition, the Company will receive
additional warrants to purchase approximately 38,000 shares of DSCO common stock
at an exercise price of $3.03 per share for each million dollars made available
by the Company under the line of credit as milestones are achieved. The Company
has agreed to fund the sales and marketing activities of this product up to $10
million per year for seven years. In return, the Company will receive
commissions based on net sales of Surfaxin(R) for meconium aspiration syndrome,
infant respiratory distress syndrome and all "off-label" uses for 10 years.


                                       7
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

In December 2001, the Company acquired the license to market SkyePharma's
Solaraze(TM) skin treatment in the United States, Canada and Mexico for 15 years
from Bioglan Pharma Plc for a total consideration of $26.7 million. The Company
will amortize the rights ratably over 15 years. The Company has a commitment to
pay royalties to SkyePharma based on a percentage of net sales of Solaraze(TM).
Pursuant to the license, the Company may pursue additional indications for the
compound, which will be facilitated through the Company's ownership rights in
the Solaraze(TM) New Drug Application and Investigational New Drug.

In January 2002, the Company entered into an agreement with Kos Pharmaceuticals,
Inc. ("KOSP") to commercialize, in the United States, KOSP's treatments for
cholesterol disorders, Advicor(R) and Niaspan(R). Advicor(R) was launched in
January 2002 and Niaspan(R) is also on the market. Under the terms of the
agreement, the Company will provide, at its own expense, a dedicated sales force
of 150 cardiovascular-trained representatives who, in combination with KOSP's
sales force of 300 representatives, will commercialize Advicor(R) and Niaspan(R)
for two years. In return, the Company also received warrants to purchase 150,000
shares of KOSP's common stock at $32.79 per share, exercisable in installments
over two years. Further, the Company will receive commissions based on net sales
of the product from 2002 through 2006. The commission payments are subject to
minimum and maximum amounts of $45 million and $75 million, respectively, over
the life of the agreement.

In March 2002, the Company acquired certain assets of Bioglan Pharma, Inc.
("Bioglan") for a total consideration of approximately $27.9 million. The assets
included distribution rights to market ADOXA(TM) in the United States for 10
years along with other products and product rights that Bioglan had previously
marketed, as well as approximately $1.6 million in cash. Under the purchase
method of accounting, the results of operations of Bioglan are included in the
Company's results of operations as of March 22, 2002 and the assets and
liabilities of Bioglan were recorded at their respective fair values. The fair
values are preliminary and are subject to refinement as information relative to
the fair values as of March 22, 2002 becomes available. The acquisition did not
have a material impact on the financial position or results of operations for
the Company. The acquisition resulted in total intangible assets of $27.5
million. The Company will amortize the intangible assets ratably over the lives
of these products. Under certain of the contracts acquired, the Company has
commitments to pay royalties based on a percentage of net sales of the acquired
products.

During the second quarter of 2002, the Company finalized its previously
announced letter of intent with a large pharmaceutical customer to market
pharmaceutical products in Belgium, Germany and Italy. The Company will provide,
at its own expense, sales and marketing resources over the five-year life of the
agreement. The Company estimates the remaining cost of its minimum obligation
over the contract life to be approximately $52 million, in return for which the
customer will pay the Company royalties on product sales in excess of certain
baselines. The royalty is comprised of a minimal royalty on the baseline sales
targets for these products plus a share of incremental net sales above these
baselines. Either party may cancel the contract at six-month intervals in the
event that sales are not above certain levels specified. Based on the terms of
the letter of intent in place at March 31, 2002, the Company deferred $0.9
million of costs; with the final execution of these agreements, these costs were
expensed. Future revenues under these agreements will be recognized as they are
earned and costs expensed as incurred.


                                       8
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

In July 2002, the Company entered into an agreement with Eli Lilly and Company
("LLY") to support LLY in its commercialization efforts for Cymbalta(TM) in
the United States. LLY has submitted a New Drug Application ("NDA") for
Cymbalta(TM), which is currently under review by the United States Food and
Drug Administration ("FDA") for the treatment of depression. Under the terms of
the agreement, the Company will provide, at its expense, more than 500 sales
representatives to supplement the extensive LLY sales force in the promotion of
Cymbalta(TM) for the five years following product launch. The sales force will
promote Cymbalta(TM) in its primary, or P1, position within sales calls.
During the first three years LLY will pay for the remainder of the capacity of
this sales force, referred to as the P2 and P3 positions, on a fee-for-service
basis. The Company will make marketing and milestone payments to LLY totaling
$110 million; the first $30 million is payable during the third quarter of 2002,
$40 million is due based upon LLY receiving an approvable letter from the FDA
for Cymbalta(TM), and the remaining $40 million is due throughout the four
quarters following approval. The initial $30 million payment from the Company is
on an at-risk basis, and is not refundable in the event LLY does not receive an
approvable letter for Cymbalta(TM). The following $40 million is also on an
at-risk basis, and is not refundable in the event the FDA does not grant final
approval following the issuance of an approvable letter. However, if any such
non-approval occurs solely as a result of regulatory issues the FDA cites with
respect to LLY's manufacturing processes and facilities, the Company will be
entitled to recoup its pre-approval outlays, plus interest at the prime rate
plus five percent, from a percentage of any revenues or royalties LLY derives
from the sales of Cymbalta(TM) by LLY or sublicense of Cymbalta(TM) to third
parties, if any. The $110 million in payments will be capitalized and amortized
ratably as a reduction of revenue over the five-year service period. The sales
force costs will be expensed as incurred. In return for the P1 position for
Cymbalta(TM) and the marketing and milestone payments, LLY will pay to the
Company 8.25% of U.S. Cymbalta(TM) sales for depression and other neuroscience
indications over the five year service period followed by a 3% royalty over the
subsequent three years. As of June 30, 2002, the Company had not paid any funds
to LLY under the agreement. In addition to the Company's obligations, LLY is
obligated to spend at specified levels. Further, the Company or LLY has the
ability to cancel this agreement if Cymbalta(TM) is not approved by January
31, 2005, in which case the Company would write-off any payments made through
that date, unless the FDA had failed to grant approval for Cymbalta(TM) based
on concerns over LLY's manufacturing processes and facilities.

In July 2002, the Company entered into an agreement with Columbia Laboratories,
Inc. ("COB") to assist COB in the U.S. commercialization of the following
women's health products: Prochieve(TM) 8%, Prochieve(TM) 4%, Advantage-S(R) and
RepHresh(TM). Under the terms of the agreement, the Company purchased 1,121,610
shares of COB common stock for $5.5 million. The Company will also pay to COB
four quarterly payments of $1.125 million each commencing in the third quarter
of 2002 in exchange for royalties of 5% on the sales of the four COB products
for a five-year period beginning in the first quarter of 2003. The aggregate
royalties are subject to contractual minimums and maximums. In addition, the
Company will provide to COB, at COB's expense on a fee-for-service basis, a
sales force to commercialize the products.

The Company has firm commitments under the above arrangements (excluding LLY and
COB) to provide funding of approximately $172.3 million in exchange for
various commercial rights. As of June 30, 2002, the Company has funded
approximately $77.5 million of these commitments. Further, the Company has
future


                                       9
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

funding commitments that are contingent upon satisfaction of certain milestones
being met by the third party such as receiving the FDA approval, obtaining
funding from additional third parties, agreement of a marketing plan and other
similar milestones. Due to the uncertainty of the amounts and timing, these
contingent commitments are not included in the commitment amounts.

The above commitments and related payment amounts do not incorporate the LLY and
COB agreements as they were not signed until after June 30, 2002.

Below is a summary of the remaining commitments (excluding LLY and COB) with
pre-determined payment schedules under such arrangements (in thousands):


<TABLE>
<CAPTION>
                       Commitments
                       -----------
<S>                    <C>
      2002               $26,006

      2003                33,515

      2004                10,374

      2005                10,410

      2006                10,554

Thereafter                 3,966
                         -------
                         $94,825
                         =======
</TABLE>

3.       Investments - Marketable Equity Securities

The Company has entered into financial arrangements with various customers and
other parties in which the Company provides funding in the form of an equity
investment. The equity investments may be subject to certain trading
restrictions including "lock-up" agreements. The Company's portfolio in such
transactions as of June 30, 2002 is as follows (in thousands except share data):

<TABLE>
<CAPTION>
                                                                                        Fair
                                                        Number           Cost          Market
Company                               Trading Symbol   of Shares         Basis          Value
-------                               --------------   ---------         -----          -----
<S>                                   <C>              <C>               <C>           <C>
Common Stock:
Triangle Pharmaceuticals Inc.             VIRS         3,775,000        $15,029        $10,230
The Medicines Company                     MDCO         2,059,221          8,978         25,390
CV Therapeutics, Inc.                     CVTX           431,705          2,102          8,038
Other                                                                     3,746          3,615
                                                                        -------        -------
Total Marketable Equity Securities                                      $29,855        $47,273
                                                                        =======        =======
</TABLE>

The Company may from time to time acquire warrants of companies in which a
current market value is not readily available. As such, these investments are
included in Deposits and Other Assets.


                                       10
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

4.       Investments - Non-marketable Equity Securities and Loans

The Company has entered into financial arrangements with various customers and
other parties in which the Company provides funding in the form of an equity
investment in non-marketable securities or loans. These financial arrangements
are comprised of direct and indirect investments. The indirect investments are
made through eight venture capital funds in which the Company is an investor.
The Company's portfolio in such transactions as of June 30, 2002 is as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                 Remaining Funding
               Company                             Cost Basis       Commitment
               -------                             ----------       ----------
<S>                                                <C>           <C>
Venture capital funds                                $25,606          $26,355
Equity investments (eight companies)                  11,546               --
Convertible loans (five companies)                     7,438            2,586
Loans (two companies)                                    345           19,655
Other                                                     52               --

                                                     -------          -------
Total non-marketable equity securities and loans     $44,987          $48,596
                                                     =======          =======

</TABLE>

Below is a table representing management's best estimate as of June 30, 2002 of
the amount and timing of the above commitments (in thousands):

<TABLE>
<CAPTION>
                    Total
                   -------
<S>                <C>
2002               $16,620
2003                23,826
2004                 8,150
                   -------
                   $48,596
                   =======
</TABLE>

The Company also has future loan commitments that are contingent upon
satisfaction of certain milestones by the third party such as receiving FDA
approval, obtaining funding from additional third parties, agreement of a
marketing plan and other similar milestones. Due to the uncertainty of the
amounts and timing, these contingent commitments are not included in the
commitment amounts described above.

The Company has determined that it is not practicable at each reporting date to
estimate the fair value of its investments in non-marketable equity securities;
however, the carrying values are reviewed if the facts and circumstances suggest
that a potential impairment may have occurred.


                                       11
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

5.       Investments in Unconsolidated Affiliates

On May 20, 2002 the Company and McKesson Corporation ("McKesson") completed the
formation of a previously announced healthcare informatics joint venture named
Verispan, L.L.C. ("Verispan"). The Company and McKesson are equal co-owners of a
majority of the equity of Verispan, with a portion of the equity of Verispan
owned by or to be issued to key providers of de-identified healthcare data in
exchange for the data. The Company contributed the net assets of its informatics
group and funded $10 million to Verispan. Accordingly, the Company has recorded
its investment in Verispan, approximately $122.9 million at June 30, 2002, as an
investment in unconsolidated affiliates. Verispan will license data products to
the Company and McKesson for use in their respective core businesses. Under the
license arrangement, the Company's product development and commercial services
groups continue to have access to Verispan's market information and products to
enhance their service delivery to the Company's customers.

The Company's pro rata share of Verispan's earnings, since the date of
formation, is included in equity in earnings of unconsolidated affiliates.
Results of operations for the informatics group prior to formation of Verispan
are included in the Company's revenues and expenses as appropriate.

The Company acquired an equity interest in a sales and marketing organization in
France for approximately $328,000. The Company's pro rata share of earnings is
included in equity in earnings of unconsolidated affiliates.

6.       Goodwill and Identifiable Intangible Assets

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." As such, all
goodwill is no longer amortized but reviewed at least annually for impairment.
Other intangible assets continue to be amortized over their useful lives. The
Company completed the required impairment test as of January 1, 2002 and did not
identify any impairment.

Through December 2001, goodwill was amortized on a straight-line basis over
periods from five to 40 years. The following is a summary of reported net income
and net income per share, adjusted to exclude goodwill amortization expense (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                   Three months ended                Six months ended
                                     June 30, 2001                    June 30, 2001
                                     -------------                    -------------
<S>                                <C>                               <C>
Net income                              $  9,674                         $ 17,465
Add: goodwill amortization                 1,972                            3,906
Less: income tax benefit                    (651)                          (1,289)
                                        --------                         --------
Adjusted net income                     $ 10,995                         $ 20,082
                                        ========                         ========

Adjusted net income per share:
     Basic                              $   0.09                         $   0.17
     Diluted                                0.09                             0.17

</TABLE>


                                       12
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

As of June 30, 2002, the Company had approximately $65.1 million of goodwill.
The decrease in goodwill during the second quarter of 2002 is a result of the
formation of the Verispan joint venture. The following is a summary of goodwill
by segment (in thousands):

<TABLE>
<CAPTION>
                                               Product      Commercial
                                             Development     Services       Informatics       Consolidated
                                             -----------     --------       -----------       ------------
<S>                                          <C>            <C>             <C>               <C>
Balance as of December 31, 2001                $31,746        $30,168        $ 101,737         $ 163,651
Add: acquisition                                   202             --               --               202
Less: impairment                                    --             --               --                --
      contribution to joint venture                 --             --         (101,737)         (101,737)
Impact of foreign currency fluctuations          2,272            740               --             3,012
                                               -------        -------        ---------         ---------
Balance as of June 30, 2002                    $34,220        $30,908        $      --         $  65,128
                                               =======        =======        =========         =========
</TABLE>

In conjunction with the adoption of SFAS No. 142, the Company has reclassed
capitalized software and related accumulated amortization to other identifiable
intangible assets from property and equipment for all periods presented.
Identifiable assets consist primarily of software, which are amortized over the
estimated useful life ranging from three to five years, and commercial rights,
which are amortized ratably, based on estimated cash flows, over the life of the
rights ranging from five to 15 years. Amortization expense associated with
identifiable intangible assets was $6.5 million and $6.9 million for the three
months ended June 30, 2002 and 2001, respectively, and $12.4 million and $12.2
million for the six months ended June 30, 2002 and 2001, respectively. The
following is a summary of identifiable intangible assets (in thousands):

<TABLE>
<CAPTION>
                                           As of June 30, 2002                    As of December 31, 2001
                                     ----------------------------------     ----------------------------------
                                      Gross     Accumulated      Net         Gross     Accumulated      Net
                                      Amount    Amortization    Amount       Amount    Amortization    Amount
                                      ------    ------------    ------       ------    ------------    ------
<S>                                  <C>        <C>            <C>           <C>       <C>             <C>
Identifiable intangible assets:
     Software and related assets     $146,909     $ 68,341     $ 78,568     $156,806     $ 63,938     $ 92,868
     Commercial rights                 64,752        3,120       61,632       33,475        2,344       31,131
                                     --------     --------     --------     --------     --------     --------
                                     $211,661     $ 71,461     $140,200     $190,281     $ 66,282     $123,999
                                     ========     ========     ========     ========     ========     ========
</TABLE>

Estimated amortization expense for existing identifiable intangible assets is
approximately $25 million to $26.5 million per year for each of the years in the
five-year period ended December 31, 2006, respectively. Estimated amortization
expense will be affected by various factors including future acquisitions of
product and/or commercial rights.

7.       Stock Repurchase

The Company was authorized by its Board of Directors to repurchase up to $100
million of the Company's Common Stock until March 1, 2002. On February 7, 2002,
the Board of Directors extended this authorization until March 1, 2003. During
the six months ended June 30, 2002, the Company entered into agreements to
repurchase 1,570,000 shares of its Common Stock for an aggregate price of
approximately $22.2 million.


                                       13
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

8.       Significant Customers

One customer accounted for 11.3 %, 11.9%, 10.3% and 10.9% of consolidated gross
service revenues less reimbursed service costs for the three and six months
ended June 30, 2002 and 2001, respectively. The revenues were derived from the
product development, commercial services and informatics groups.

9.       Investment Revenues

The following table is a summary of investment revenues for the three and six
months ended June 30, 2002 and 2001(in thousands):

<TABLE>
<CAPTION>
                                             Three months ended June 30       Six months ended June 30
                                             --------------------------       ------------------------
                                                 2002         2001               2002          2001
                                                -------      -------           --------      -------
<S>                                          <C>            <C>               <C>           <C>
Marketable equity securities:
    Gross realized gains                        $ 7,465      $ 2,270           $ 12,189      $ 2,270
    Gross realized losses                        (1,277)          --             (1,277)          --
    Impairment losses                                --           --                 --       (3,099)
Non-marketable equity securities and loans:
     Gross realized gains                            --           --                 --        2,197
     Gross realized losses                           --           --               (400)          --
Other                                               145           --                603           --
                                                -------      -------           --------      -------
                                                $ 6,333      $ 2,270           $ 11,115      $ 1,368
                                                =======      =======           ========      =======
</TABLE>

10.      Restructuring Charge

During the second quarter of 2002, the Company revised its estimates of the
restructuring plan adopted during 2001 ("2001 Plan") which resulted in a
reduction of $9.1 million in accruals for the 2001 Plan. The reduction included
approximately $5.7 million in severance payments and $3.4 million of exit costs.
The reductions are primarily the result of a higher than expected number of
voluntary terminations and the reversal of restructuring accruals due to the
Company's contribution of its informatics segment to the Verispan joint venture.

Also during the second quarter of 2002, the Company recognized $9.1 million of
restructuring charges as a result of the continued implementation of the
strategic plan announced during 2001. This restructuring charge included
revisions to 2001 and 2000 restructuring plans of approximately $2.5 million and
$1.9 million, respectively, due to a revision in the estimates for the exit
costs relating to the abandoned leased facilities. In addition, the adopted
follow-on restructuring plan ("2002 Plan") consisted of $4.3 million related to
severance payments, $310,000 related to exit costs and $112,000 of asset
write-offs. As part of this plan, approximately 99 positions are to be
eliminated mostly in the Europe and Africa region. As of June 30, 2002, 31
individuals have been terminated.


                                       14
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Activity during the first six months of 2002 was as follows for the 2002 Plan
(in thousands):

<TABLE>
<CAPTION>
                                  Balance at                         Write-Offs/      Balance at
                               December 31, 2001    Accruals          Payments       June 30, 2002
                               -----------------    --------          --------       -------------
<S>                            <C>                  <C>              <C>             <C>
Severance and related costs          $   --          $ 4,241           $(1,095)          $3,146
Exit costs                               --              310              (151)             159
Asset write-offs                         --              112              (112)              --
                                     ------          -------           -------           ------
                                     $   --          $ 4,663           $(1,358)          $3,305
                                     ======          =======           =======           ======
</TABLE>

During the third quarter of 2001, the Company adopted a restructuring plan that
resulted in the recognition of a restructuring charge of $50.9 million. Of the
approximately 1,000 positions to be eliminated under this plan, 864 individuals
have been terminated as of June 30, 2002.

Activity during the first six months of 2002 was as follows for the 2001 Plan
(in thousands):

<TABLE>
<CAPTION>
                                                                    Revisions to 2001 Plan
                                                                   -------------------------
                                  Balance at       Write-Offs/                                   Balance at
                              December 31, 2001     Payments        Reversals       Accruals   June 30, 2002
                              -----------------     --------        ---------       --------   -------------
<S>                           <C>                   <C>            <C>              <C>        <C>
Severance and related costs        $ 19,323         $ (9,181)        $(5,725)        $   --        $4,417
Exit costs                            8,806           (2,771)         (3,347)         2,472         5,160
                                   --------         --------         -------         ------        ------
                                   $ 28,129         $(11,952)        $(9,072)        $2,472        $9,577
                                   ========         ========         =======         ======        ======
</TABLE>

The Company adopted a restructuring plan in January 2000 ("January 2000 Plan")
and a follow-on restructuring plan which resulted in the recognition of a
restructuring charge of $58.6 million. Of the approximately 990 positions that
were to be eliminated under these plans, 916 positions have been terminated as
of June 30, 2002, which includes 770 positions under the January 2000 Plan.

Activity during the first six months of 2002 was as follows for the 2000 plans
(in thousands):

<TABLE>
<CAPTION>
                                                                Revisions to
                                  Balance at     Write-Offs/      January     Balance at
                              December 31, 2001   Payments       2000 Plan   June 30, 2002
                              -----------------   --------       ---------   -------------
<S>                           <C>                <C>           <C>           <C>
Severance and related costs        $   894         $  (693)          $ --        $  201
Exit costs                           1,714            (971)         1,937         2,680
                                   -------         -------         ------        ------
                                   $ 2,608         $(1,664)        $1,937        $2,881
                                   =======         =======         ======        ======
</TABLE>


                                       15
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

As a result of the restructuring plans, the Company has approximately 400,000
square feet of abandoned leased facilities as of June 30, 2002. A portion of
these facilities has been subleased and the Company is pursuing disposition of
the remaining abandoned facilities. Below is a summary of the total lease
obligations for the abandoned facilities (in thousands):

<TABLE>
<S>                                                                      <C>
Remainder of 2002                                                        $  3,840
2003                                                                        5,587
2004                                                                        3,516
2005                                                                        2,764
2006                                                                        2,707
Thereafter                                                                  7,544
                                                                         --------
Gross abandoned lease obligations                                          25,958
Less: sublease/restructuring accrual                                      (13,947)
                                                                         --------
Total obligation in excess of
existing subleases and related
restructuring accrual balances                                           $ 12,011
                                                                         ========
</TABLE>

11.      Net Income Per Share

The following table sets forth the computation of the weighted-average shares
used when calculating the basic and diluted net income per share (in thousands):

<TABLE>
<CAPTION>
                                             Three months ended June 30         Six months ended June 30
                                             --------------------------         ------------------------
                                               2002             2001             2002             2001
                                              -------          -------          -------          -------
<S>                                          <C>               <C>              <C>              <C>
Weighted average shares:
     Basic weighted average shares            118,352          117,149          118,518          116,746
     Effect of dilutive securities:
     Stock options                                592            3,698            1,035            3,754
                                              -------          -------          -------          -------
     Diluted weighted average shares          118,944          120,847          119,553          120,500
                                              =======          =======          =======          =======
</TABLE>

Options to purchase approximately 11.0 million shares and 13.8 million shares of
the Company's Common Stock were outstanding during the three and six months
ended June 30, 2002, respectively, but were not included in the computation of
diluted net income per share because the option's exercise price was greater
than the average market price of the Company's Common Stock and, therefore, the
effect would be antidilutive.

12.      Comprehensive Income

The following table represents the Company's comprehensive income for the three
and six months ended June 30, 2002 and 2001, respectively (in thousands):

<TABLE>
<CAPTION>
                                                                  Three months ended June 30   Six months ended June 30
                                                                  --------------------------   ------------------------
                                                                      2002          2001          2002          2001
                                                                    --------      --------      --------      --------
<S>                                                               <C>             <C>           <C>           <C>
Net income                                                          $ 20,626      $  9,674      $ 37,887      $ 17,465
Other comprehensive income (loss):
   Unrealized (loss) gain on marketable securities,
     net of income taxes                                             (12,828)       55,719       (11,178)      (27,245)
   Reclassification adjustment, net of income taxes                   (4,597)            -        (7,750)            -
   Foreign currency adjustment                                        32,263        (7,398)       24,477       (21,344)
                                                                    --------      --------      --------      --------
Comprehensive income (loss)                                         $ 35,464      $ 57,995      $ 43,436      $(31,124)
                                                                    ========      ========      ========      ========
</TABLE>


                                       16
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

13.      Segments

The following table presents the Company's operations by reportable segment. The
Company is managed through four reportable segments, namely, the product
development group, the commercial services group, the informatics group and the
PharmaBio group. Management has distinguished these segments based on the normal
operations of the Company. The product development group is primarily
responsible for all phases of clinical research and outcomes research
consulting. The commercial services group is primarily responsible for sales
force deployment and strategic marketing services. Before being transferred to
the joint venture in May 2002, the informatics group was primarily responsible
for providing market research solutions and strategic analysis to support
healthcare decisions. The PharmaBio group is primarily responsible for
facilitating non-traditional customer alliances and consists primarily of
product revenues, royalties and commissions and investment revenues relating to
the financial arrangements with customers and other third parties. During 2002,
the Late Phase, primarily Phase IV, operations included in the commercial
services group were reclassified to the product development group in order to
consolidate the operational and business development activities. These changes
are reflected in all periods presented. The Company does not include general and
administrative expenses, depreciation and amortization except amortization of
commercial rights, interest income (expense), other income (expense) and income
tax expense (benefit) in segment profitability. Significant intersegment
revenues have been eliminated. (In thousands)

                        Three months ended June 30, 2002

<TABLE>
<CAPTION>
                                    Product          Commercial
                                  Development         Services        Informatics      PharmaBio      Eliminations     Consolidated
                                  -----------         --------        -----------      ---------      ------------     ------------
<S>                               <C>                <C>              <C>              <C>            <C>              <C>
Net services:
   External                         $231,231          $122,092          $7,657          $    --          $     --        $360,980
   Intersegment                           --            12,342              --               --           (12,342)             --
                                    --------          --------          ------          -------          --------        --------
   Total net services                231,231           134,434           7,657               --           (12,342)        360,980

Commercial rights and royalties           --                --              --           23,001                --          23,001

Investment                                --                --              --            6,333                --           6,333
                                    --------          --------          ------          -------          --------        --------
     Total net revenues             $231,231          $134,434          $7,657          $29,334          $(12,342)       $390,314
                                    ========          ========          ======          =======          ========        ========

     Contribution                   $115,699          $ 49,617          $3,554          $ 2,743          $     --        $171,613
                                    ========          ========          ======          =======          ========        ========
</TABLE>

                        Three months ended June 30, 2001

<TABLE>
<CAPTION>
                                    Product         Commercial
                                  Development        Services        Informatics      PharmaBio     Eliminations    Consolidated
                                  -----------        --------        -----------      ---------     ------------    ------------
<S>                               <C>               <C>              <C>              <C>           <C>             <C>
Net services:
   External                        $232,607          $153,886          $14,662          $   --          $ --          $401,155
   Intersegment                          --                --               --              --            --                --
                                   --------          --------          -------          ------          ----          --------
   Total net services               232,607           153,886           14,662              --            --           401,155

Commercial rights and royalties          --                --               --           3,145            --             3,145

Investment                               --                --               --           2,270            --             2,270
                                   --------          --------          -------          ------          ----          --------
     Total net revenues            $232,607          $153,886          $14,662          $5,415          $ --          $406,570
                                   ========          ========          =======          ======          ====          ========

     Contribution                  $111,788          $ 44,504          $ 6,481          $1,853          $ --          $164,626
                                   ========          ========          =======          ======          ====          ========
</TABLE>


                                       17
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

                         Six Months Ended June 30, 2002

<TABLE>
<CAPTION>
                                     Product    Commercial
                                   Development   Services    Informatics PharmaBio  Eliminations  Consolidated
                                   -----------   --------    ----------- ---------  ------------  ------------
<S>                                <C>          <C>          <C>         <C>        <C>           <C>
Net services:
   External                         $461,688     $258,112     $20,347          $-     $     --      $740,147
   Intersegment                           --       23,554          --          --      (23,554)           --
                                    --------     --------     -------     -------     --------      --------
   Total net services                461,688      281,666      20,347          --      (23,544)      740,147

Commercial rights and royalties           --           --          --      37,195           --        37,195

Investment                                --           --          --      11,115           --        11,115
                                    --------     --------     -------     -------     --------      --------
     Total net revenues             $461,688     $281,666     $20,347     $48,310     $(23,554)     $788,457
                                    ========     ========     =======     =======     ========      ========

     Contribution                   $228,112     $100,385     $ 8,024     $ 7,283     $     --      $343,804
                                    ========     ========     =======     =======     ========      ========
</TABLE>


                         Six Months Ended June 30, 2001

<TABLE>
<CAPTION>
                                       Product        Commercial
                                     Development       Services      Informatics    PharmaBio    Eliminations   Consolidated
                                     -----------       --------      -----------    ---------    ------------   ------------
<S>                                  <C>              <C>            <C>            <C>          <C>            <C>
Net services:
   External                            $457,849        $315,003        $30,126        $   --        $   --        $802,978
   Intersegment                              --              --             --            --            --              --
                                       --------        --------        -------        ------        ------        --------
   Total net services                   457,849         315,003         30,126            --            --         802,978

Commercial rights and royalties              --              --             --         5,792            --           5,792

Investment                                   --              --             --         1,368            --           1,368
                                       --------        --------        -------        ------        ------        --------
     Total net revenues                $457,849        $315,003        $30,126        $7,160        $   --        $810,138
                                       ========        ========        =======        ======        ======        ========

     Contribution                      $216,857        $ 94,809        $14,024        $1,008        $   --        $326,698
                                       ========        ========        =======        ======        ======        ========
</TABLE>

14.      Commitments and Contingencies

On January 26, 2001, a purported class action lawsuit was filed in the State
Court of Richmond County, Georgia, naming Novartis Pharmaceuticals Corp.,
Pharmed Inc., Debra Brown, Bruce I. Diamond and Quintiles Laboratories Limited,
a subsidiary of the Company, on behalf of 185 Alzheimer's patients who
participated in drug studies involving an experimental drug manufactured by
defendant Novartis and their surviving spouses. The complaint alleges claims for
breach of fiduciary duty, civil conspiracy, unjust enrichment,
misrepresentation, Georgia RICO violations, infliction of emotional distress,
battery, negligence and loss of consortium as to class member spouses. The
complaint seeks unspecified damages, plus costs and expenses, including
attorneys' fees and experts' fees. The Company believes the claims to be without
merit and intends to defend the suit vigorously.


                                       18
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

On January 22, 2002, Federal Insurance Company ("Federal") and Chubb Custom
Insurance Company ("Chubb") filed suit against the Company, Quintiles Pacific,
Inc. and Quintiles Laboratories Limited, two of the Company's subsidiaries, in
the United States District Court for the Northern District of Georgia. In the
suit, Chubb, the Company's primary commercial general liability carrier, and
Federal, the Company's excess liability carrier, seek to rescind the policies
issued to the Company for coverage years 2000-2001 and 2001-2002 based on an
alleged misrepresentation by the Company on the policy application.
Alternatively, Chubb and Federal seek a declaratory judgment that there is no
coverage under the policies for some or all of the claims asserted against the
Company and its subsidiaries in the litigation described in the prior paragraph
and, if one or more of such claims is determined to be covered, Chubb and
Federal request an allocation of the defense costs between the claims they
contend are covered and non-covered claims. The Company has filed an answer with
counterclaims against Federal and Chubb in response to their complaint. The
Company believes their allegations are without merit and intends to defend this
case vigorously.

The Company is also a party to certain other pending litigation arising in the
normal course of our business. In the opinion of management, based on
consultation with its legal counsel, the outcome of such litigation currently
pending will not have a material effect on the Company's consolidated financial
statements.

15.      Recently Adopted Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment on Disposal of Long-Lived Assets." This statement
supersedes SFAS No. 121, "Accounting for Long-Lived Assets to Be Disposed Of"
and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company adopted SFAS No. 144 as required to do so on January
1, 2002. The adoption of SFAS No. 144 did not have a material impact on the
Company's results of operations and/or financial position.

In November 2001, the Emerging Issues Task Force ("EITF") released EITF Issue
01-14, "Income Statement Characterization of Reimbursements Received for
"Out-of-Pocket" Expenses Incurred," requiring companies to report reimbursed
costs as part of gross revenues. The Company adopted the provisions of EITF
01-14 as required to do so on January 1, 2002 and, as such, reimbursed service
costs have been reclassified to gross service revenues for all periods
presented. However, it was impracticable to identify and reclassify certain
prior period commercialization reimbursed service costs and, accordingly,
historical results have not been restated for these costs. During the three and
six months ended June 30, 2002, these commercialization reimbursed service costs
totaled approximately $16.1 million and $35.7 million, respectively.


                                       19
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION

Information set forth in this Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as
amended. Forward looking statements represent our judgment concerning the future
and are subject to risks and uncertainties that could cause our actual operating
results and financial position to differ materially. Such forward looking
statements can be identified by the use of forward looking terminology such as
"may," "will," "expect," "anticipate," "estimate," "believe," "continue," or
"target" or the negative thereof or other variations thereof or comparable
terminology.

We caution you that any such forward looking statements are further qualified by
important factors that could cause our actual operating results to differ
materially from those in the forward looking statements, including without
limitation, the risk that the market for our products and services will not grow
as we expect, the risk that our PharmaBio transactions will not generate
revenues, profits or return on investment at the rate or levels we expect or
that royalty revenues under our PharmaBio arrangements may not be adequate to
offset our upfront and on-going expenses in providing sales and marketing
services or in making milestone and marketing payments, risks associated with
entering into a new line of business such as those being entered into by
PharmaBio, our ability to distribute backlog among project management groups and
match demand to resources, our actual operating performance, the actual savings
and operating improvements resulting from our restructuring activities, our
ability to maintain large customer contracts or to enter into new contracts,
changes in trends in the pharmaceutical industry, the risk that our joint
venture with McKesson Corporation relating to the informatics business will not
be successful, liability risks associated with our business which could result
in losses or indemnity to others not covered by insurance. See "Risk Factors"
below for additional factors that could cause actual results to differ.

Results of Continuing Operations

We adopted Emerging Issues Task Force Issue 01-14 on January 1, 2002, as
required. This new accounting guidance requires us to report reimbursed service
costs as part of gross service revenues. Our reimbursed service costs include
such items as payments to investigators and travel expenses for our clinical
monitors and sales representatives. Historically, we have not reported these
reimbursed service costs as service revenues since we do not earn a profit on
these costs. In accordance with this new accounting guidance, we have
reclassified reimbursed service costs to gross service revenues for all periods
presented. However, it was impracticable to identify and reclassify certain
prior period commercialization reimbursed service costs and, accordingly,
historical results have not been restated for these costs. These
commercialization reimbursed service costs totaled approximately $16.1 million
and $35.7 million for the three and six months ended June 30, 2002,
respectively.


                                       20
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Three Months Ended June 30, 2002 and 2001

Gross service revenues, which are total service fees accrued to our customers
including reimbursed service costs, for the second quarter of 2002 were $468.9
million versus $467.4 million for the second quarter of 2001. Reimbursed service
expenses, which are pass-through expenses that are to be reimbursed by our
customers, were $107.9 million for the second quarter of 2002 as compared to
$66.2 million for the second quarter of 2001.

Gross service revenues accrued to our customers less reimbursed service costs,
or net service revenues, for the second quarter of 2002 were $361.0 million, a
decrease of $40.2 million or (10.0%) over the second quarter of 2001 net service
revenues of $401.2 million. Net service revenues were positively impacted by
approximately $1.8 million due to the effect of foreign currency fluctuations
related to the weakening of the US Dollar relative to the euro and the British
pound. This was partially offset by the strengthening of the US Dollar relative
to the South African Rand. Using a constant exchange rate for each period, net
service revenues decreased $42.0 million or (10.5%). Net service revenues
increased in the Asia Pacific region $6.7 million or 16.9% to $46.2 million. Net
service revenues increased $13.9 million or 9.8% to $156.4 million in the Europe
and Africa region. Net service revenues decreased $60.8 million or (27.7%) to
$158.3 million in the Americas region primarily as a result of the decline in
the commercial services segment due to continued difficult business conditions
for large fee-for-service contracts in the United States.

Commercial rights and royalties revenues, which include product revenues,
royalties and commissions, for the second quarter of 2002 were $23.0 million, an
increase of $19.9 million over the second quarter of 2001 commercial rights and
royalties revenues of $3.1 million. These revenues include revenues from
products for which we have acquired certain commercial rights, such as the
dermatology products, Solaraze(TM) and ADOXA(TM). Also included are product
revenues that we receive in exchange for providing commercial or product
development services. The $19.9 million increase is primarily the result of our
acquisition of certain assets of Bioglan Pharma, Inc., or Bioglan, and its suite
of dermatology products, a new risk sharing contract in Europe with a large
pharmaceutical customer and our contracts with Scios Inc. and Kos
Pharmaceuticals, Inc.

Investment revenues, which include gains and losses on the sale of equity
securities and impairment of investment instruments, for the second quarter of
2002 were $6.3 million versus $2.3 million for the second quarter of 2001.

Total net revenues decreased $16.3 million or (4.0%) to $390.3 million for the
second quarter of 2002 from $406.6 million for the second quarter of 2001.

Service costs, which include compensation and benefits for billable employees,
and other expenses directly related to service contracts, were $192.1 million or
53.2% of net service revenues for the second quarter of 2002 versus $238.4
million or 59.4% of net service revenues for the second quarter of 2001. The
reduction as a percentage of net revenue is primarily a result of the continued
effect of our process enhancements and cost reduction efforts.


                                       21
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Commercial rights and royalties costs, which include compensation and related
benefits for employees, amortization of commercial rights, infrastructure costs
of the PharmaBio group and other expenses directly related to commercial rights
and royalties, were $26.6 million for the second quarter of 2002 versus $3.2
million for the second quarter of 2001. These costs include services and
products provided by third parties, as well as services provided by our other
service groups, totaling approximately $12.3 million for the second quarter of
2002. The profit for these internal services is reported within the service
group providing the services. The second quarter of 2002 also includes costs to
market Solaraze(TM) and ADOXA(TM) and expenses relating to the start-up of a new
risk sharing contract in Europe.

Investment costs, which include costs directly related to direct and indirect
investments in our customers or other third parties as part of the financing
arrangements, were $21,000 for the second quarter of 2002 versus $317,000 for
the second quarter of 2001.

Revenue less associated direct costs, or contribution, was $171.6 million or
44.0% of total net revenues for the second quarter of 2002 versus $164.6 million
or 40.5% of total net revenues for the second quarter of 2001.

General and administrative expenses, which include compensation and benefits for
administrative employees, non-billable travel, professional services, and
expenses for advertising, information technology and facilities, were $125.9
million or 32.3% of total net revenues for the second quarter of 2002 versus
$129.1 million or 31.8% of total net revenues for the second quarter of 2001.
General and administrative expenses decreased $3.2 million primarily due to
realization of the benefits from our restructurings including efficiencies
created through the implementation of our shared service centers, as well as,
global cost reduction efforts.

Depreciation and amortization, which include depreciation of our property and
equipment and amortization of our definite-lived intangible assets except
commercial rights, decreased to $21.3 million for the second quarter of 2002
versus $23.6 million for the second quarter of 2001. This decrease is primarily
due to the adoption of Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," which requires all goodwill and
indefinite-lived intangible assets no longer be amortized but reviewed at least
annually for impairment. During the second quarter of 2002, we completed the
goodwill impairment test as of January 1, 2002, as required, in which no
impairment was identified.

In the second quarter of 2002, we revised our estimates of the restructuring
plan which we adopted during 2001. This review resulted in a reduction of $9.1
million in our accruals including $5.7 million in severance payments and $3.4
million in exit costs. The reductions are primarily the result of a higher than
expected number of voluntary terminations, as well as the reversal of accruals
that would not be used due to the formation of the Verispan joint venture.

Also during the second quarter of 2002, we recognized $9.1 million of
restructuring charges as a result of the continued implementation of the
strategic plan we announced during 2001. This restructuring charge included
revisions to 2001 and 2000 restructuring plans of approximately $2.5 million and
$1.9 million, respectively,


                                       22
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

due to a revision in the estimates for the exit costs relating to the abandoned
leased facilities. The remaining $4.7 million restructuring charge consisted of
$4.3 million related to severance payments, $310,000 related to exit costs and
$112,000 of asset write-offs. As part of this plan, approximately 99 positions
are to be eliminated and as of June 30, 2002, 31 individuals were terminated.
Most of the eliminated positions are in our Europe and Africa region.

Net interest income, which represents interest income received from bank
balances and investments in debt securities net of interest expense incurred on
lines of credit, notes and capital leases, was $3.4 million for the second
quarter of 2002 versus $4.6 million for the second quarter of 2001. The $1.1
million decrease was due to a decline in interest rates.

Other income was $2.2 million for the second quarter of 2002 versus $150,000 for
the second quarter of 2001. The $2.0 million variation was primarily the result
of a gain of approximately $3.9 million for the second quarter of 2002 due to
the effects of foreign currency fluctuations relating principally to the
Argentine peso and the euro. This was partially offset by transaction costs
associated with the formation of the Verispan joint venture.

Income before income taxes was $30.1 million or 7.7% of total net revenues for
the second quarter of 2002 versus $14.4 million or 3.6% of total net revenues
for the second quarter of 2001.

The effective income tax rate was 33.0% for the second quarter of 2002 and 2001,
respectively. Since we conduct operations on a global basis, our effective
income tax rate may vary.

We recognized $477,000 of income from equity in earnings of unconsolidated
affiliates which represents our pro rata share of Verispan's net income since
its formation in May 2002.

Analysis by Segment:

In the first quarter of 2002, we transferred the portion of the operations of
our Late Phase, primarily Phase IV, clinical group that was in the commercial
services group to the product development group. All historical information
presented has been restated to reflect this change.

The following table summarizes the operating activities for our four reportable
segments for the three months ended June 30, 2002 and 2001, respectively. We do
not include general and administrative expenses, depreciation and amortization
except amortization of commercial rights, interest income (expense), other
income (expense) and income tax expense (benefit) in our segment analysis.
Significant intersegment revenues have been eliminated, (dollars in millions).


                                       23
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                 Total Net Revenues                         Contribution
                        ---------------------------------      -------------------------------------------
                                                                          % of Net                % of Net
                         2002        2001        Growth %      2002       Revenues     2001       Revenues
                        ------      ------       --------     ------      --------    ------      --------
<S>                     <C>         <C>          <C>          <C>         <C>         <C>         <C>
Product development     $231.2      $232.6         (0.6%)     $115.7        50.0%     $111.8        48.1%
Commercial services      134.4       153.9        (12.6)        49.6        36.9        44.5        28.9
Informatics                7.7        14.7        (47.8)         3.6        46.4         6.5        44.2
PharmaBio                 29.3         5.4        441.7          2.7         9.4         1.9        34.2
Eliminations             (12.3)         --           --           --          --          --          --
                        ------      ------                    ------                  ------
                        $390.3      $406.6         (4.0%)     $171.6        44.0%     $164.6        40.5%
</TABLE>

The product development group's financial performance improvement was a result
of the continued effect of process enhancements.

The commercial services group's financial performance was negatively impacted by
continued difficult business conditions for large fee-for-service contracts in
the United States. This trend is anticipated to continue at least into the next
quarter. The negative impact was offset by the effects of our cost reduction
efforts.

The second quarter of 2002 includes only two months of revenues and contribution
for the informatics group as a result of the formation of Verispan.

The PharmaBio group's increase in net revenues, which consist of commercial
rights and royalties and investments, was primarily the result of our
acquisition of certain assets of Bioglan and its suite of dermatology products,
a new risk sharing contract in Europe and our contracts with Scios Inc. and Kos
Pharmaceuticals, Inc. The performance of this group was negatively impacted by
the costs associated with the marketing of Solaraze(TM) and ADOXA(TM) and
expenses relating to a new risk sharing contract in Europe. We believe the costs
of marketing these products and the expenses for the risk sharing contract will
exceed related revenues during the first year.

Six Months Ended June 30, 2002 and 2001

Gross service revenues for the six months ended June 30, 2002 were $943.2
million versus $930.7 million for the six months ended June 30, 2001. Reimbursed
service expenses were $203.1 million for the six months ended June 30, 2002 as
compared to $127.7 million for the six months ended June 30, 2001.

Net service revenues for the first six months of 2002 were $740.1 million, a
decrease of $62.8 million or (7.8%) over the first six months of 2001 net
service revenues of $803.0 million. However, there was a negative impact of
approximately $10.1 million due to the effect of foreign currency fluctuations
related to the strengthening of the US Dollar relative to the Japanese yen and
South African Rand. The effect of weakening of the US Dollar relative to the
euro and the British pound during the second quarter of 2002 offset the
strengthening of the US Dollar relative to these currencies during the first
quarter of 2002. Using a constant exchange rate for each period, net service
revenues decreased $52.7 million or (6.6%). Net service


                                       24
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

revenues increased in the Asia Pacific region $14.2 million or 19.2% to $88.1
million, which was negatively impacted by $4.4 million due to the effect of
foreign currency fluctuations. Net service revenues increased $12.8 million or
4.3% to $306.2 million in the Europe and Africa region, which was negatively
impacted by $5.6 million due to the effect of foreign currency fluctuations. Net
service revenues decreased $89.8 million or (20.6%) to $345.8 million in the
Americas region primarily as a result of the decline in the commercial services
group revenues.

Commercial rights and royalties revenues, which include product revenues,
royalties and commissions, for the first six months of 2002 were $37.2 million,
an increase of $31.4 million over the first six months of 2001 commercial rights
and royalties revenues of $5.8 million. These revenues include products for
which we have acquired the rights, such as the dermatology products,
Solaraze(TM) and ADOXA(TM). Also included are product revenues that we receive
in exchange for providing commercial or product development services. The $31.4
million increase is primarily the result of our acquisition of certain assets of
Bioglan and its suite of dermatology products, a new risk sharing contract in
Europe with a large pharmaceutical customer and our contracts with Scios Inc.
and Kos Pharmaceuticals, Inc.

Investment revenues, which include gains and losses on the sale of equity
securities and impairment of investment instruments, for the first six months of
2002 were $11.1 million versus $1.4 million for the first six months of 2001.
The first six months of 2001 included a $3.1 million impairment loss on
securities whose decline in fair value was considered to be other than
temporary.

Total net revenues decreased $21.7 million or (2.7%) to $788.5 million for the
first six months of 2002 from $810.1 million for the first six months of 2001.

Service costs, which include compensation and benefits for billable employees,
and other expenses directly related to service contracts, were $403.6 million or
54.5% of net service revenues for the first six months of 2002 versus $477.3
million or 59.4% of net service revenues for the first six months of 2001. This
reduction is primarily a result of the continued effect of our process
enhancements and cost reduction efforts.

Commercial rights and royalties costs, which include compensation and related
benefits for employees, amortization of commercial rights, infrastructure costs
of the PharmaBio group and other expenses directly related to commercial rights
and royalties, were $40.8 million for the first six months of 2002 versus $5.8
million for the first six months of 2001. These costs include services and
products provided by third parties, as well as services provided by our other
service groups, totaling approximately $23.6 million for the first six months of
2002. The profit for these internal services is reported within the service
group providing the services. The first six months of 2002 also includes costs
to launch and market Solaraze(TM) and ADOXA(TM) and expenses relating to a new
risk sharing contract in Europe.

Investment costs, which include costs directly related to direct and indirect
investments in our customers or other third parties as part of the financing
arrangements, were $179,000 for the first six months of 2002 versus $347,000 for
the first six months of 2001.


                                       25
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Revenue less associated direct costs, or contribution, was $343.8 million or
43.6% of total net revenues for the first six months of 2002 versus $326.7
million or 40.3% of total net revenues for the first six months of 2001.

General and administrative expenses, which include compensation and benefits for
administrative employees, non-billable travel, professional services, and
expenses for advertising, information technology and facilities, were $253.1
million or 32.1% of total net revenues for the first six months of 2002 versus
$263.6 million or 32.5% of total net revenues for the first six months of 2001.
General and administrative expenses decreased $10.5 million primarily due to
realization of the benefits from our restructurings including efficiencies
created through the implementation of our shared service centers, as well as,
global cost reduction efforts.

Depreciation and amortization, which include depreciation of our property and
equipment and amortization of our definite-lived intangible assets except
commercial rights, decreased to $42.7 million for the first six months of 2002
versus $46.0 million for the first six months of 2001. This decrease is
primarily due to the adoption of Statement of Financial Accounting Standards No.
142, "Goodwill and Other Intangible Assets," which requires all goodwill and
indefinite-lived intangible assets no longer be amortized but reviewed at least
annually for impairment. During the second quarter of 2002, we completed the
goodwill impairment test as of January 1, 2002, as required, in which no
impairment was identified.

In the second quarter of 2002, we revised our estimates of the restructuring
plan which we adopted during 2001. This review resulted in a reduction of $9.1
million in our accruals, including $5.7 million in severance payments and $3.3
million in exit costs.

Also during the second quarter of 2002, we recognized $9.1 million of
restructuring charges as a result of the continued implementation of the
strategic plan we announced during 2001. This restructuring charge included
revisions to 2001 and 2000 restructuring plans of approximately $2.5 million and
$1.9 million, respectively, due to a revision in the estimates for the exit
costs relating to the abandoned leased facilities.

Net interest income, which represents interest income received from bank
balances and investments in debt securities net of interest expense incurred on
lines of credit, notes and capital leases, was $6.7 million for the first six
months of 2002 versus $10.4 million for the first six months of 2001. The $3.7
million decrease was due to a decline in interest rates.

Other income was $1.1 million for the first six months of 2002 versus $768,000
for the first six months of 2001. The $361,000 variation was a result of several
factors, including effects of foreign currency translations, disposal of assets
and transaction costs associated with the formation of the Verispan joint
venture.

Income before income taxes was $55.8 million or 7.1% of total net revenues for
the first six months of 2002 versus $26.1 million or 3.2% of total net revenues
for the first six months of 2001.

The effective income tax rate was 33.0% for the first six months of 2002 and
2001, respectively. Since we conduct operations on a global basis, our effective
income tax rate may vary.


                                       26
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

We recognized $477,000 of income from equity in earnings of unconsolidated
affiliates which represents our pro rata share of Verispan's net income since
its formation in May 2002.

Analysis by Segment:

During the first quarter of 2002, we transferred the portion of the operations
of our Late Phase, primarily Phase IV, clinical group that was in the commercial
services group to the product development group. All historical information
presented has been restated to reflect this change.

The following table summarizes the operating activities for our four reportable
segments for the six months ended June 30, 2002 and 2001, respectively. We do
not include general and administrative expenses, depreciation and amortization
except amortization of commercial rights, interest income (expense), other
income (expense) and income tax expense (benefit) in our segment analysis.
Significant intersegment revenues have been eliminated, (dollars in millions).

<TABLE>
<CAPTION>
                              Total Net Revenues                           Contribution
                        -------------------------------       ------------------------------------------
                                                                        % of Net                 % of Net
                         2002        2001       Growth %       2002      Revenues      2001      Revenues
                        ------      ------      --------      ------    ---------     ------     --------
<S>                     <C>         <C>         <C>           <C>       <C>           <C>        <C>
Product development     $461.7      $457.8          0.8%      $228.1        49.4%     $216.9        47.4%
Commercial services      281.7       315.0        (10.6)       100.4        35.6        94.8        30.1
Informatics               20.3        30.1        (32.5)         8.0        39.4        14.0        46.6
PharmaBio                 48.3         7.2        574.7          7.3        15.1         1.0        14.1
Eliminations             (23.6)         --           --           --          --          --          --
                        ------      ------                    ------                  ------
                        $788.5      $810.1         (2.7%)     $343.8        43.6%     $326.7        40.3%
</TABLE>

The product development group's financial performance improvement was a result
of several factors, including an increase in revenues and the continued effect
of process enhancements.

The commercial services group's financial performance was negatively impacted by
difficult business conditions for large fee-for-service contracts in the United
States, as well as the completion of several contracts in the United States.
This trend is anticipated to continue into the next quarter. The negative impact
was offset by the effects of our cost reduction efforts.

The informatics group's performance was impacted by the pending transfer of this
group into a joint venture with McKesson which was completed in May 2002. The
2002 results include only five months of revenues and contribution for the
informatics group.

The PharmaBio group's increase in net revenues, which consist of commercial
rights and royalties and investments, was primarily the result of our
acquisition of certain assets of Bioglan and its suite of dermatology products,
a new risk sharing contract in Europe and our contracts with Scios Inc. and Kos
Pharmaceuticals, Inc. This group was negatively impacted by the costs associated
with the launch and


                                       27
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

marketing of Solaraze(TM) and ADOXA(TM). We believe the costs of marketing these
products and expenses for the risk sharing contract will exceed related revenues
during the first year.

Liquidity and Capital Resources

Cash and cash equivalents were $592.0 million at June 30, 2002 as compared to
$565.1 million at December 31, 2001.

Cash from operations was $92.4 million for the six months ended June 30, 2002
versus $78.1 million for the comparable period of 2001. Decreasing cash from
operations for the six months ended June 30, 2002 was approximately $15.0
million primarily relating to the funding of our sales forces under the
commercial rights and royalties arrangements with certain customers. Increasing
cash from operations for the six months ended June 30, 2001 was an income tax
refund of $47.6 million. Investing activities consisted primarily of the
acquisition of certain assets of Bioglan, purchases and sales of equity
investments and other investments and capital asset purchases. Purchases of
equity investments and other investments required an outlay of cash of $8.3
million for the six months ended June 30, 2002 compared to an outlay of $28.2
million for the same period in 2001. We received $18.6 million of proceeds from
the sale of equity investments and other investments during the six months ended
June 30, 2002 as compared to $4.6 million for the same period in 2001. Capital
asset purchases required an outlay of cash of $21.2 million for the six months
ended June 30, 2002 compared to an outlay of $44.6 million for the same period
in 2001.

On March 22, 2002, we acquired certain assets of Bioglan, including
approximately $1.6 million in cash, for approximately $27.9 million. As part of
the agreement, we also acquired Bioglan's rights to certain dermatology products
already on the market in the United States, including ADOXA(TM).

The following table is a summary of our net service receivables outstanding
(dollars in thousands):

<TABLE>
<CAPTION>
                                                      June 30, 2002     December 31, 2001
                                                      -------------     -----------------
<S>                                                   <C>               <C>
Trade service accounts receivable, net                  $ 232,507           $ 258,917
Unbilled services                                         149,490             166,754
Unearned income                                          (208,902)           (205,783)
                                                        ---------           ---------
Net service receivables outstanding                     $ 173,095           $ 219,888
                                                        =========           =========

Number of days of service revenues outstanding                 34                  43
</TABLE>

The decrease in the number of days of service revenues outstanding is a result
of our continued focus on the fundamentals of our business and efficiencies
generated by our shared service centers.

Investments in debt securities were $37.7 million at June 30, 2002 as compared
to $37.0 million at December 31, 2001. Our investments in debt securities
consist primarily of U.S. Government Securities, which are callable by the
issuer at par, and money funds.


                                       28
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Investments in marketable equity securities at June 30, 2002 were $47.3 million,
a decrease of $30.7 million, as compared to $78.0 million at December 31, 2001.
This decrease is due primarily to unrealized losses on the portfolio as a result
of stock price declines and sales of marketable equity securities.

Investments in non-marketable equity securities and loans at June 30, 2002 were
$45.0 million, an increase of $7.4 million, as compared to $37.6 million at
December 31, 2001.

In May 2002, we completed the formation of our previously announced healthcare
informatics joint venture, Verispan, with McKesson which is designed to leverage
the operational strengths of the healthcare information businesses of each
company. We are equal co-owners of a majority of the equity of Verispan with
McKesson with a portion of the equity in Verispan owned or to be issued to key
providers of de-identified healthcare data in exchange for the data. We
contributed the net assets of our informatics group to the joint venture and
funded $10.0 million to Verispan. Accordingly, we have recorded our investment
in Verispan which is approximately $122.9 million at June 30, 2002 as an
investment in unconsolidated affiliates. Verispan will license data products to
McKesson and us for use in our core businesses. Under the license arrangement,
our product development and commercial services groups continue to have access
to Verispan's market information and products, at no further cost to us, to
enhance their service delivery to our customers.

We have available to us a L10.0 million (approximately $15.3 million) unsecured
line of credit and a L1.5 million (approximately $2.3 million) general banking
facility with a U.K. bank. At June 30, 2002, we did not have any outstanding
balances on these facilities.

In March 2001, the Board of Directors authorized us to repurchase up to $100
million of our common stock until March 1, 2002. In February 2002, the Board
extended this authorization until March 1, 2003. During the first six months of
2002, we entered into agreements to repurchase approximately 1.6 million shares
for an aggregate price of $22.2 million. Shareholders' equity at June 30, 2002
was $1.480 billion versus $1.455 billion at December 31, 2001.

Based on our current operating plan, we believe that our available cash and cash
equivalents, together with future cash flows from operations and borrowings
under our line of credit agreements will be sufficient to meet our foreseeable
cash needs in connection with our operations. As part of our business strategy,
we review many acquisition candidates in the ordinary course of business, and in
addition to acquisitions already made, we are continually evaluating new
acquisition and expansion possibilities. In addition, as part of our business
strategy going forward, we intend to review and consider opportunities to
acquire additional product rights, as appropriate. We may from time to time seek
to obtain debt or equity financing in our ordinary course of business or to
facilitate possible acquisitions or expansion.

Subsequent Events

In July 2002, we entered into an agreement with Eli Lilly and Company, LLY, to
support LLY in its commercialization efforts for Cymbalta(TM) in the United
States. LLY has submitted a New Drug Application, or NDA, for Cymbalta(TM),
which is currently under review by the United States Food and Drug


                                       29
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Administration, also known as the FDA, for the treatment of depression. Under
the terms of the agreement, we will provide, at our expense, more than 500 sales
representatives to supplement the extensive LLY sales force in the promotion of
Cymbalta(TM) for the five years following product launch. The sales force will
promote Cymbalta(TM) in its primary, or P1, position within sales calls.
During the first three years LLY will pay for the remainder of the capacity of
this sales force, referred to as the P2 and P3 positions, on a fee-for-service
basis. We will make marketing and milestone payments to LLY totaling $110
million; the first $30 million is payable during the third quarter of 2002, $40
million is due based upon LLY receiving an approvable letter from the FDA for
Cymbalta(TM), and the remaining $40 million is due throughout the four
quarters following approval. The initial $30 million payment from us is on an
at-risk basis, and is not refundable in the event LLY does not receive an
approvable letter for Cymbalta(TM). The following $40 million is also on an
at-risk basis, and is not refundable in the event the FDA does not grant final
approval following the issuance of an approvable letter. However, if any such
non-approval occurs solely as a result of regulatory issues the FDA cites with
respect to LLY's manufacturing processes and facilities, we will be entitled to
recoup our pre-approval outlays, plus interest at the prime rate plus five
percent, from a percentage of any revenues or royalties LLY derives from the
sales of Cymbalta(TM) by LLY or sublicense of Cymbalta(TM) to third parties,
if any. The $110 million in payments will be capitalized and amortized ratably
as a reduction of revenue over the five-year service period. The sales force
costs will be expensed as incurred. In return for the P1 position for
Cymbalta(TM) and the marketing and milestone payments, LLY will pay us 8.25%
of U.S. Cymbalta(TM) sales for depression and other neuroscience indications
over the five-year service period followed by a 3% royalty over the subsequent
three years. As of June 30, 2002, we have not paid any funds to LLY under the
agreement. In addition to our obligations, LLY is obligated to spend at
specified levels. Further, LLY or we have the ability to cancel this agreement
if Cymbalta(TM) is not approved by January 31, 2005, in which case we would
write-off any payments made through that date, unless the FDA had failed to
grant approval for Cymbalta(TM) based on concerns over LLY's manufacturing
processes and facilities. Royalty payments to us under this agreement may not be
adequate to offset our expenses in providing the sales force or making milestone
and marketing payments. At least during the first year, we expect that our
expenses will exceed revenues under this agreement.

In July 2002, we entered into an agreement with Columbia Laboratories, Inc., or
COB, to assist COB in the U.S. commercialization of the following women's health
products: Prochieve(TM) 8%, Prochieve(TM) 4%, Advantage-S(R) and RepHresh(TM).
Under the terms of the agreement, we purchased 1,121,610 shares of COB common
stock for $5.5 million. We will also pay to COB four quarterly payments of
$1.125 million each commencing in the third quarter of 2002 in exchange for
royalties of 5% on the sales of the four COB products for a five-year period
beginning in the first quarter of 2003. The aggregate royalties are subject to
contractual minimums and maximums. In addition, we will provide to COB, at COB's
expense on a fee-for-service basis, a sales force to commercialize the products.


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                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Backlog and Net New Business Reporting

We report backlog, $1.783 billion at June 30, 2002, based on anticipated net
revenue from uncompleted projects that our customers have authorized. Backlog at
June 30, 2002 includes approximately $77 million of backlog related to services
contracted from our service groups, primarily commercial services, in connection
with the strategic alliances forged by our PharmaBio group.

Net new business, which anticipated net revenue from contracts which we entered
into during the period and adjusted for contracts which were cancelled during
the period, for the six months ended June 30, 2002 was $580 million including
$54 million of internal service contracts. Net new business for our product
development and commercial services groups during this same time was $360
million and $220 million, respectively.

We do not include product revenue or commercial rights-related revenue
(royalties and commissions) in backlog or net new business. Our backlog and net
new business is calculated based upon our estimate of forecasted currency
exchange rates. Annually, we adjust the beginning balance of our backlog to
reflect changes in our forecasted currency exchange rates. Our backlog and net
new business at any time can be affected by:

-        the variable size and duration of projects,

-        the loss or delay of projects, and

-        a change in the scope of work during the course of a project.

If customers delay projects, the projects will remain in backlog, but will not
generate revenue at the rate originally expected. Accordingly, historical
indications of the relationship of backlog to revenues may not be indicative of
the future relationship.

The reporting of revenue backlog and net new business is not authoritatively
prescribed, therefore practices tend to vary among competitors and reported
amounts are not necessarily comparable.

RISK FACTORS

In addition to the other information provided in this report, you should
consider the following factors carefully in evaluating our business and us.
Additional risks and uncertainties not presently known to us, that we currently
deem immaterial or that are similar to those faced by other companies in our
industry or business in general, such as competitive conditions, may also impair
our business operations. If any of the following risks occur, our business,
financial condition, or results of operations could be materially adversely
affected.


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                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Changes in outsourcing trends in the pharmaceutical and biotechnology industries
could adversely affect our operating results and growth rate.

Economic factors and industry trends that affect our primary customers,
pharmaceutical and biotechnology companies, also affect our business. For
example, the practice of many companies in these industries has been to hire
outside organizations like us to conduct large clinical research and sales and
marketing projects. This practice has grown substantially over the past decade,
and we have benefited from this trend. Some industry commentators believe that
the rate of growth of outsourcing will continue to trend downward. If these
industries reduce their tendency to outsource those projects, our operations,
financial condition and growth rate could be materially and adversely affected.
Recently, we also believe we have been negatively impacted by mergers and other
factors in the pharmaceutical industry, which appear to have slowed decision
making by our customers and delayed certain trials. A continuation of these
trends would have an ongoing adverse effect on our business. In addition,
numerous governments have undertaken efforts to control growing healthcare costs
through legislation, regulation and voluntary agreements with medical care
providers and pharmaceutical companies. If future regulatory cost containment
efforts limit the profits which can be derived on new drugs, our customers may
reduce their research and development spending, which could reduce the business
they outsource to us. We cannot predict the likelihood of any of these events or
the effects they would have on our business, results of operations or financial
condition.

If we are unable to successfully develop and market potential new services, our
growth could be adversely affected.

Another key element of our growth strategy is the successful development and
marketing of new services that complement or expand our existing business. If we
are unable to succeed in (1) developing new services and (2) attracting a
customer base for those newly developed services, we will not be able to
implement this element of our growth strategy, and our future business, results
of operations and financial condition could be adversely affected.

Our plan to web-enable our product development and commercialization services
may negatively impact our results in the short term.

We are currently developing an Internet platform for our product development and
commercialization services. We have entered into agreements with certain vendors
for them to provide web-enablement services to help us develop this platform. If
such vendors fail to perform as required or if there are substantial delays in
developing and implementing this platform, we may have to make substantial
further investments, internally or with third parties, to achieve our
objectives. Meeting our objectives is dependent on a number of factors which may
not take place as we anticipate, including obtaining adequate web-enablement
services, creating web-enablement services which our customers will find
desirable and implementing our business model with respect to these services.
Also, these expenditures are likely to negatively impact our profitability, at
least until our web-enabled products are operationalized. Over time, we envision
continuing to invest in extending and enhancing our Internet platform in other
ways to further support and improve our services. We cannot assure you that any
improvements in operating income resulting from our Internet capabilities will
be


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                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

sufficient to offset our investments in the Internet platform. Our results could
be further negatively impacted if our competitors are able to execute their
services on a web-based platform before we can launch our Internet services or
if they are able to structure a platform that attracts customers away from our
services.

We may not be able to derive the benefits we hope to achieve from our joint
venture with McKesson.

In May 2002, we completed the formation of a joint venture with McKesson
Corporation designed to leverage the operational strengths of the healthcare
information business of each party. As part of the formation of the joint
venture, we contributed our former informatics business. As a result, the joint
venture remains subject to the risks to which our informatics business was
exposed. If the joint venture is not successful or if it experiences any of the
difficulties described below, there could be an adverse effect on our results of
operations and financial condition, as the joint venture is a pass-through
entity and, as such, its results are reflected in our financial statements to
the extent of our interest in the joint venture. We may not achieve the intended
benefits of the joint venture if it is not able to secure additional data in
exchange for equity. Although the joint venture currently is in discussions with
several major data providers to become equity participants in the joint venture
in exchange for data, it is possible that these or other data providers will
prefer to receive cash as payment for data, instead of equity in the joint
venture, or will not want to participate at all. Such a trend could have a
material adverse effect on the joint venture's operations and financial
condition. The joint venture also could encounter other difficulties, including:

-        its ability to obtain continuous access to de-identified healthcare
         data from third parties in sufficient quantities to support its
         informatics products;

-        its ability to process and use the volume of data received from a
         variety of data providers;

-        its ability to attract customers, besides Quintiles and McKesson, to
         purchase its products and services;

-        the risk of changes in healthcare information privacy laws and
         regulations that could create a risk of liability, increase the cost of
         the joint venture's business or limit its service offerings;

-        the risk that industry regulation may restrict the joint venture's
         ability to analyze and disseminate pharmaceutical and healthcare data;
         and

-        the risk that it will not be able to effectively and cost-efficiently
         replace services previously provided to the contributed businesses by
         the former parent corporations.

Although we have a license to the joint venture company's data products for use
by our product development and commercial services groups, if the joint venture
is unable to provide us with the quality and character of data products that we
need to support those services, we will not be able to fully realize the
benefits of the joint venture and will need to seek other strategic alternatives
to achieve our goals.


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                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

The potential loss or delay of our large contracts could adversely affect our
results.

Many of our customers can terminate our contracts upon 15-90 days' notice. In
the event of termination, our contracts often provide for fees for winding down
the project, but these fees may not be sufficient for us to maintain our
margins, and termination may result in lower resource utilization rates. Thus,
the loss or delay of a large contract or the loss or delay of multiple contracts
could adversely affect our net revenue and profitability. We believe that this
risk has potentially greater effect as we pursue larger outsourcing arrangements
with global pharmaceutical companies. Also, over the past two years we have
observed that customers may be more willing to delay, cancel or reduce contracts
more rapidly than in the past. If this trend continues, it could become more
difficult for us to balance our resources with demands for our services and our
financial results could be adversely affected.

Underperformance of our commercial rights strategies could have a negative
impact on our financial performance.

As part of our PharmaBio Development business strategy, we enter into
arrangements with customers in which we take on some of the risk of the
potential success or failure of the customer's product. These transactions may
include making a strategic investment in a customer, providing financing to a
customer, or taking an interest in the revenues from a customer's product. For
example, we may build or provide a sales organization for a biotechnology
customer to commercialize a new product in exchange for a share in the revenues
of the product. We anticipate that in the early periods of many of these
relationships, our expenses will exceed revenues from these arrangements,
particularly where we are providing a sales force for the product at our own
cost. Aggregate royalty or other payments made to us under these arrangements
may not be adequate to offset our total expenditure in providing a sales force
or in making milestone or marketing payments to our customers. We must carefully
analyze and select the customers and products with which we are willing to
structure our risk-based deals. Products underlying our commercial rights
strategies may not complete clinical trials, receive FDA approval or achieve the
level of market acceptance or customer demand that we expect, in which case we
might not be able to earn a profit or recoup our investment with regard to a
particular arrangement. The potential negative effect to us could increase
depending on the nature and timing of our investments and the length of time
before it becomes apparent that the product will not achieve commercial success.
Our financial results would be adversely affected if our customer or their
products do not achieve the level of success that we anticipate and/or our
return or payment from the product investment or financing is less than our
costs of performance, investment or financing.

Our rights to market and sell certain pharmaceutical products expose us to
product risks typically associated with pharmaceutical companies.

Our recent acquisition of the rights to market and sell Solaraze(TM) and the
rights to other dermatology products acquired from Bioglan, as well as any other
product rights we may hold at any time, subject us to a number of risks typical
to the pharmaceutical industry. For example, we could face product liability
claims in the event users of these products, or of any other pharmaceutical
product rights we may acquire in the future, experience negative reactions or
adverse side effects or in the event it causes injury, is found to be unsuitable


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                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

for its intended purpose or is otherwise defective. While we believe we
currently have adequate insurance in place to protect against these risks, we
may nevertheless be unable to satisfy any claims for which we may be held liable
as a result of the use or misuse of products which we manufacture or sell, and
any such product liability claim could adversely affect our business, operating
results or financial condition. In addition, like pharmaceutical companies, our
commercial success in this area will depend in part on our obtaining, securing
and defending our intellectual property rights covering our pharmaceutical
products.

These risks may be augmented by certain risks relating to our outsourcing of the
manufacturing and distribution of these products or any pharmaceutical product
rights we may acquire in the future. For example, as a result of our decision to
outsource the manufacturing and distribution of Solaraze(TM), we are unable to
directly monitor quality control in the manufacturing and distribution
processes.

Our plans to market and sell Solaraze(TM) and other pharmaceutical products also
subject us to risks associated with entering into a new line of business. We
have limited experience operating in this line of business. If we are unable to
operate this new line of business as we expect, the financial results from this
new line of business could have a negative impact on our results of operations
as a whole. The risk that our results may be affected if we are unable to
successfully operate our pharmaceutical operations may increase in proportion
with (1) the number of products we license in the future, (2) the applicable
stage of the drug approval process of the products and (3) the levels of
outsourcing involved in the development, manufacture and commercialization of
such products.

If we lose the services of Dennis Gillings, Pamela Kirby or other key personnel,
our business could be adversely affected.

Our success substantially depends on the performance, contributions and
expertise of our senior management team, led by Dennis B. Gillings, Ph.D., our
Chairman, and Pamela J. Kirby, Ph.D., our Chief Executive Officer. Our
performance also depends on our ability to attract and retain qualified
management and professional, scientific and technical operating staff, as well
as our ability to recruit qualified representatives for our contract sales
services. The departure of Dr. Gillings, Dr. Kirby, or any key executive, or our
inability to continue to attract and retain qualified personnel could have a
material adverse effect on our business, results of operations or financial
condition.

Our product development services create a risk of liability from clinical trial
participants and the parties with whom we contract.

We contract with drug companies to perform a wide range of services to assist
them in bringing new drugs to market. Our services include supervising clinical
trials, data and laboratory analysis, patient recruitment and other services.
The process of bringing a new drug to market is time-consuming and expensive. If
we do not perform our services to contractual or regulatory standards, the
clinical trial process could be adversely affected. Additionally, if clinical
trial services such as laboratory analysis do not conform to contractual or
regulatory standards, trial participants could be affected. These events would
create a risk of liability to us from the drug companies with whom we contract
or the study participants. Similar risks apply to our product development
services relating to medical devices.


                                       35
<PAGE>

                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

We also contract with physicians to serve as investigators in conducting
clinical trials. Such testing creates risk of liability for personal injury to
or death of volunteers, particularly to volunteers with life-threatening
illnesses, resulting from adverse reactions to the drugs administered during
testing. It is possible third parties could claim that we should be held liable
for losses arising from any professional malpractice of the investigators with
whom we contract or in the event of personal injury to or death of persons
participating in clinical trials. We do not believe we are legally accountable
for the medical care rendered by third party investigators, and we would
vigorously defend any such claims. For example, we are among the defendants
named in a purported class action by participants in an Alzheimer's study
seeking to hold us liable for alleged damages to the participants arising from
the study. Nonetheless, it is possible we could be found liable for those types
of losses.

In addition to supervising tests or performing laboratory analysis, we also own
a number of labs where Phase I clinical trials are conducted. Phase I clinical
trials involve testing a new drug on a limited number of healthy individuals,
typically 20 to 80 persons, to determine the drug's basic safety. We also could
be liable for the general risks associated with ownership of such a facility.
These risks include, but are not limited to, adverse events resulting from the
administration of drugs to clinical trial participants or the professional
malpractice of Phase I medical care providers.

We also could be held liable for errors or omissions in connection with our
services. For example, we could be held liable for errors or omissions or breach
of contract if one of our laboratories inaccurately reports or fails to report
lab results. Although, we maintain insurance to cover ordinary risks, insurance
would not cover the risk of a customer deciding not to do business with us as a
result of poor performance.

Our insurance may not cover all of our indemnification obligations and other
liabilities associated with our operations.

We maintain insurance designed to cover ordinary risks associated with our
operations and our ordinary indemnification obligations. This insurance might
not be adequate coverage or may be contested by our carriers. For example, our
insurance carrier, to whom we paid premiums to cover risks associated with our
product development services, has filed suit against us seeking to rescind the
insurance policies or to have coverage denied for some or all of the claims
arising from class action litigation involving an Alzheimer study. The
availability and level of coverage provided by our insurance could have a
material impact on our profitability if we suffer uninsured losses or are
required to indemnify third parties for uninsured losses.

In connection with our contribution to our joint venture with McKesson, the
joint venture company assumed our obligation under our settlement agreement with
WedMD to indemnify WebMD for losses arising out of or in connection with the
cancelled Data Rights Agreement with WebMD, our data business that we
contributed to the joint venture, the collection, accumulation, storage or use
of data by ENVOY for the purpose of transmitting or delivering data to us, any
transmission or delivery by ENVOY of data to us or violations of law or contract
attributable to any such event. This indemnity obligation is limited to 50% for
the first $20 million in aggregate losses, subject to exceptions for certain
indemnity obligations that were not


                                       36
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

transferred to the joint venture. Although the joint venture company has assumed
our indemnity obligations to WebMD relating to our data business, WebMD may seek
indemnity from us and we would have to proceed against the joint venture. In
addition, we remain subject to other indemnity obligations to WebMD, including
for losses arising out of the settlement agreement itself or out of the sale of
ENVOY to WebMD, including a class action lawsuit filed against ENVOY prior to
its purchase by us and subsequent sale to WebMD. Our indemnification obligation
with regard to losses arising from the sale of ENVOY to WebMD is not subject to
the limitation on the first $20 million of losses described above.

Relaxation of government regulation could decrease the need for the services we
provide.

Governmental agencies throughout the world, but particularly in the United
States, highly regulate the drug development/approval process. A large part of
our business involves helping pharmaceutical and biotechnology companies through
the regulatory drug approval process. Any relaxation in regulatory approval
standards could eliminate or substantially reduce the need for our services,
and, as a result, our business, results of operations and financial condition
could be materially adversely affected. Potential regulatory changes under
consideration in the United States and elsewhere include mandatory substitution
of generic drugs for patented drugs, relaxation in the scope of regulatory
requirements or the introduction of simplified drug approval procedures. These
and other changes in regulation could have an impact on the business
opportunities available to us.

Failure to comply with existing regulations could result in a loss of revenue.

Any failure on our part to comply with applicable regulations could result in
the termination of ongoing clinical research or sales and marketing projects or
the disqualification of data for submission to regulatory authorities, either of
which could have a material adverse effect on us. For example, if we were to
fail to verify that informed consent is obtained from patient participants in
connection with a particular clinical trial, the data collected from that trial
could be disqualified, and we could be required to redo the trial under the
terms of our contract at no further cost to our customer, but at substantial
cost to us.

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

The markets for our services are characterized by rapidly changing technology,
evolving industry standards and frequent introduction of new and enhanced
services. To succeed, we must continue to:

         -        enhance our existing services;

         -        introduce new services on a timely and cost-effective basis to
                  meet evolving customer requirements;

         -        integrate new services with existing services;

         -        achieve market acceptance for new services; and

         -        respond to emerging industry standards and other technological
                  changes.


                                       37
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Exchange rate fluctuations may affect our results of operations and financial
condition.

We derive a large portion of our net revenue from international operations. Our
financial statements are denominated in U.S. dollars; thus, factors associated
with international operations, including changes in foreign currency exchange
rates and any trends associated with the transition to the euro, could
significantly affect our results of operations and financial condition. Exchange
rate fluctuations between local currencies and the U.S. dollar create risk in
several ways, including:

         -        Foreign Currency Translation Risk. The revenue and expenses of
                  our foreign operations are generally denominated in local
                  currencies.

         -        Foreign Currency Transaction Risk. Our service contracts may
                  be denominated in a currency other than the currency in which
                  we incur expenses related to such contracts.

We try to limit these risks through exchange rate fluctuation provisions stated
in our service contracts, or we may hedge our transaction risk with foreign
currency exchange contracts or options. Although we may hedge our transaction
risk, there were no open foreign exchange contracts or options relating to
service contracts at June 30, 2002. Despite these efforts, we may still
experience fluctuations in financial results from our operations outside the
United States, and we cannot assure you that we will be able to favorably reduce
our currency transaction risk associated with our service contracts.

We may be adversely affected by customer concentration.

We have one customer that accounted for 11.3% and 11.9% of our net service
revenues for the three and six months ended June 30, 2002, respectively. These
revenues resulted from services provided by the product development, commercial
services and informatics groups. If any large customer decreases or terminates
its relationship with us, our business, results of operations or financial
condition could be materially adversely affected.

If we are unable to submit electronic records to the FDA according to FDA
regulations, our ability to service our customers during the FDA approval
process could be adversely affected.

If we were unable to submit electronic records to the United States Food and
Drug Administration, also referred to as the FDA, according to FDA regulations,
our ability to service our customers during the FDA approval process could be
adversely affected. The FDA published 21 CFR Part 11 "Electronic Records;
Electronic Signatures; Final Rule" ("Part 11") in 1997. Part 11 became effective
in August 1997 and defines the regulatory requirements that must be met for FDA
acceptance of electronic records and/or electronic signatures in place of the
paper equivalents. Part 11 requires that those utilizing such electronic records
and/or signatures employ procedures and controls designed to ensure the
authenticity, integrity and, as appropriate, confidentiality of electronic
records and, in certain circumstances, Part 11 requires those utilizing
electronic records to ensure that a person appending an electronic signature
cannot readily repudiate the signed record. Pharmaceutical and biotechnology
companies are increasing their utilization of electronic records and


                                       38
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

electronic signatures and are requiring their service providers and partners to
do likewise. Many of our customers, or potential customers, are targeting 2003
for full compliance of all their affected systems. Becoming compliant with Part
11 involves considerable complexity and cost. Our ability to provide services to
our customers in full compliance with applicable regulations includes a
requirement that, over time, we become compliant with the requirements of Part
11. If we are unable to achieve this objective, our ability to provide services
to our customers which meet FDA requirements may be adversely affected.

Item 3.  Quantitative and Qualitative Disclosure about Market Risk

The Company did not have any material changes in market risk from December 31,
2001.

PART II. Other Information

Item 1.  Legal Proceedings

On January 26, 2001, a purported class action lawsuit was filed in the State
Court of Richmond County, Georgia, naming Novartis Pharmaceuticals Corp.,
Pharmed Inc., Debra Brown, Bruce I. Diamond and Quintiles Laboratories Limited,
one of our subsidiaries, on behalf of 185 Alzheimer's patients who participated
in drug studies involving an experimental drug manufactured by defendant
Novartis and their surviving spouses. The complaint alleges claims for breach of
fiduciary duty, civil conspiracy, unjust enrichment, misrepresentation, Georgia
RICO violations, infliction of emotional distress, battery, negligence and loss
of consortium as to class member spouses. The complaint seeks unspecified
damages, plus costs and expenses, including attorneys' fees and experts' fees.
We believe the claims to be without merit and intend to defend the suit
vigorously.

On January 22, 2002, Federal Insurance Company and Chubb Custom Insurance
Company filed suit against us and two of our subsidiaries, Quintiles Pacific,
Inc. and Quintiles Laboratories Limited, in the United States District Court for
the Northern District of Georgia. In the suit, Chubb, our primary commercial
general liability carrier, and Federal, our excess liability carrier, seek to
rescind the policies issued to us for coverage years 2000-2001 and 2001-2002
based on an alleged misrepresentation by us on our policy application.
Alternatively, Chubb and Federal seek a declaratory judgment that there is no
coverage under the policies for some or all of the claims asserted against us
and our subsidiaries in the litigation described in the prior paragraph, and, if
one or more of such claims is determined to be covered, Chubb and Federal
request an allocation of the defense costs between the claims they contend are
covered and non-covered claims. We have filed an answer with counterclaims
against Federal and Chubb in response to their complaint. We believe their
allegations are without merit and intend to defend this case vigorously.

We are also a party to certain other pending litigation arising in the normal
course of our business. While the final outcome of such litigation cannot be
predicted with certainty, it is the opinion of management, based on consultation
with legal counsel, that the outcome of these other matters would not materially
affect our consolidated financial position or results of operations.


                                       39
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

Item 2.  Changes in Securities and Use of Proceeds

During the three months ended June 30, 2002, options to purchase 2,000 shares of
our common stock were exercised at an average exercise price of $4.3175 per
share in reliance on Rule 701 under the Securities Act of 1933. We granted such
options prior to becoming subject to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended, pursuant to our Non-qualified
Employee Incentive Stock Option Plan.

Item 3.  Defaults upon Senior Securities - Not applicable

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

         On May 1, 2002, the Company held its Annual Meeting of Shareholders
         during which the shareholders:

         (1)      Elected three nominees to serve as Class II directors with
                  terms continuing until the Annual Meeting of Shareholders in
                  2005. The votes were cast as follows:

<TABLE>
<CAPTION>
                                                                                 Broker
                                           For             Withheld             Non-Vote
                                           ---             --------             --------
<S>                                    <C>                 <C>                  <C>
Vaughn D. Bryson                       104,907,731         2,436,798               --
Pamela J. Kirby, Ph.D.                 104,656,195         2,688,334               --
William L. Roper, M.D., MPH            104,818,011         2,526,518               --
</TABLE>

         (2)      Approved the Company's 2002 Stock Option Plan. The votes were
                  cast as follows:

<TABLE>
<CAPTION>
                                               For             Against             Abstain
                                            ----------        ----------          ---------
<S>                                         <C>               <C>                 <C>
Approval of 2002 Stock Option Plan          54,670,818        50,472,447          2,201,264
</TABLE>

Item 5.  Other Information - Not applicable

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits

                  99.1     Certification Pursuant to 18 U.S.C. Section 1350, As
                           Adopted Pursuant to Section 906 of The Sarbanes-Oxley
                           Act of 2002

                  99.2     Certification Pursuant to 18 U.S.C. Section 1350, As
                           Adopted Pursuant to Section 906 of The Sarbanes-Oxley
                           Act of 2002


                                       40
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

         (b)      During the three months ended June 30, 2002, the Company filed
                  two reports on Form 8-K, one of which was amended by Form
                  8-K/A.

The Company filed a Form 8-K, dated April 17, 2002, including its press release
announcing the Company's earnings information for the period ended March 31,
2002.

The Company filed a Form 8-K, dated May 17, 2002 (as amended by Form 8-K/A on
May 29, 2002) reporting a change in its certifying accountants.

No other reports on Form 8-K were filed or furnished during the three months
ended June 30, 2002.


                                       41
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

                                   SIGNATURES

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

                          Quintiles Transnational Corp.
                     --------------------------------------
                                   Registrant



Date   August 14, 2002              \s\ Dennis B. Gillings
    ---------------------           -------------------------------------------
                                    Dennis B. Gillings, Chairman

Date   August 14, 2002              \s\ Pamela J. Kirby
    ---------------------           -------------------------------------------
                                    Pamela J. Kirby, Chief Executive Officer

Date   August 14, 2002              \s\ James L. Bierman
    ---------------------           -------------------------------------------
                                    James L. Bierman, Chief Financial Officer


                                       42
<PAGE>
                 QUINTILES TRANSNATIONAL CORP. AND SUBSIDIARIES

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit  Description
-------  -----------
<S>      <C>
99.1     Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
         to Section 906 of The Sarbanes-Oxley Act of 2002

99.2     Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
         to Section 906 of The Sarbanes-Oxley Act of 2002
</TABLE>


                                       43