UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 Form
10-Q
 
 [X]   Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange
Act of 1934
 
 For the
quarterly period ended March 31, 2008
 
 or
 
 [_]   Transition
Report Pursuant to Section 13 or 15(d) of the Securities
 Exchange
Act of 1934
 
 For the
Transition Period From ___________ to ___________
 
 Commission
file number 0-30318
 
 INVENTIV
HEALTH, INC.
 (Exact
name of registrant as specified in its charter)
 
 Delaware                                             52-2181734
 (State or
other
jurisdiction                             (IRS
Employer
 of
incorporation or
organization)                          Identification
No.)
 
 200
Cottontail Lane
 Vantage
Court North
 Somerset,
New Jersey 08873
 (Address
of principal executive office and zip code)
 
 (800)
416-0555
 (Registrant's
telephone number, including area code)
 
 Indicate
by check mark whether registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X]  No [_]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large accelerated
filer
[X]                                                                           Accelerated
filer [
]                                                      Non-accelerated
filer [_]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes [_] No [X]
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
 
 As of
April 30, 2008, there were 33,043,954 outstanding shares of the registrant's
common stock.
 
 
  
  INVENTIV
HEALTH, INC.
 INDEX
TO QUARTERLY REPORT ON
 FORM
10-Q
 
 PART
      I. FINANCIAL INFORMATIONITEM
      1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2008
      (unaudited)and December 31, 2007Condensed Consolidated Income Statements for the
      three-monthsended March 31, 2008 and 2007 (unaudited)Condensed Consolidated Statements of Cash Flows for the
      three-monthsended March 31, 2008 and 2007 (unaudited)Notes to Unaudited Condensed Consolidated Financial
      StatementsITEM 2. Management's Discussion and Analysis of Financial
      Condition andResults of OperationsITEM 3. Quantitative and Qualitative Disclosures About
      Market RiskITEM 4. Controls and ProceduresPART
      II. OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 1A. Risk FactorsITEM 5. Other InformationITEM 6. ExhibitsSIGNATURES
 
  
  FORWARD-LOOKING
STATEMENTS
 
 This
Quarterly Report on Form 10-Q contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements are only
predictions and provide our current expectations or forecasts of future events
and financial performance and may be identified by the use of forward-looking
terminology, including the terms “believes,” “estimates,” “anticipates,”
“expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their
negative, or other variations or comparable terminology, though the absence of
these words does not necessarily mean that a statement is not
forward-looking.
 
 We intend
that all forward-looking statements be subject to the safe-harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
are subject to many risks and uncertainties that could cause our actual results
to differ materially from any future results expressed or implied by the
forward-looking statements. Forward-looking statements include all matters that
are not historical facts and include, without limitation statements
concerning:
 
 ·
              our
      estimates regarding our liquidity, capital expenditures and sources of
      both, and our ability to fund our operations and planned capital
      expenditures for the foreseeable
future;
 
 ·
              our
      strategy to address the need to offer additional services through
      acquisitions of other companies, including the personnel of such
      companies;
 
 ·
              our
      expectations regarding our pursuit of additional debt or equity sources to
      finance our internal growth initiatives or
  acquisitions;
 
 ·
              our
      belief that our growth and success will depend on our ability to continue
      to enhance the quality of our existing services, introduce new services on
      a timely and cost-effective basis, integrate new services with existing
      services, increase penetration with existing customers, recruit, motivate
      and retain qualified personnel and economically train existing sales
      representatives and recruit new sales
  representatives;
 
 ·           our
belief that there are ample opportunities for cross-selling to our existing
clients;
 
 ·
              our
      anticipation that it will be necessary to continue to select, invest in
      and develop new and enhanced technology and end-user databases on a timely
      basis in the future in order to maintain our
    competitiveness;
 
 ·
              our
      expectations regarding the impact of our acquisitions, joint ventures and
      partnerships
 
 ·           our
expectations regarding the impact of the adoption of certain accounting
standards; and
 
 ·
              our
      expectations regarding the liquidation of the Columbia Strategic Cash
      Portfolio.
 
 These
forward-looking statements reflect our current views about future events and are
subject to risks, uncertainties and assumptions. We wish to caution readers that
certain important factors may have affected and could in the future affect our
actual results and could cause actual results to differ significantly from those
expressed in any forward-looking statement. The most important factors that
could prevent us from achieving our goals, and cause the assumptions underlying
forward-looking statements and the actual results to differ materially from
those expressed in or implied by those forward-looking statements include, but
are not limited to, the following:
 
 ·
              our
      ability to sufficiently increase our revenues and maintain or decrease
      expenses and cash capital expenditures to permit us to fund our
      operations;
 
 ·
              our
      ability to continue to comply with the covenants and terms of our credit
      facility and to access sufficient capital to fund our
      operations;
 
 ·           our
ability to grow our existing client relationships, obtain new clients and
cross-sell our services;
 
 ·
              our
      ability to successfully operate new lines of
  business;
 
 ·
              our
      ability to manage our infrastructure and resources to support our
      growth;
 
 ·
              our
      ability to successfully identify new businesses to acquire, conclude
      acquisition negotiations and integrate the acquired businesses into our
      operations;
 
 ·
              any
      disruptions, impairments, or malfunctions affecting software as well as
      excessive costs or delays that may adversely impact our continued
      investment in and development of
software;
  ·
              the
      potential impact of government regulation on us and on our clients
      base;
 
 ·
              our
      ability to comply with all applicable laws as well as our ability to
      successfully implement from a timing and cost perspective any changes in
      applicable laws;
 
 ·
              our
      ability to recruit, motivate and retain qualified personnel, including
      sales representatives;
 
 ·           the
actual impact of the adoption of certain accounting standards;
 
 ·
              our
      ability to maintain technological advantages in a variety of functional
      areas, including sales force automation, electronic claims surveillance
      and patient compliance;
 
 ·
                changes in trends in the
      healthcare and pharmaceutical industries or in pharmaceutical outsourcing;
      and
 
 ·
                our inability to determine the
      actual time at which the liquidation of the Columbia Strategic Cash
      Portfolio will
 be
completed or the total losses that we will actually realize from that investment
vehicle.
 
 Investors should carefully consider
these risk factors and the matters discussed under Item 1A, Risk Factors, of our
Form 10-K for the year ended December 31, 2007.
 
 Except to the extent required by
applicable laws or rules, we do not undertake to update any forward-looking
statements or to publicly announce revisions to any of the forward-looking
statements, whether as a result of new information, future events or
otherwise.
 
  
  PART
I. FINANCIAL INFORMATION
 ITEM
1.                      Financial
Statements
 INVENTIV
HEALTH, INC.
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in
thousands, except share and per share amounts)
 March
      31,
              
              
              December
      31,2008(unaudited)
              
              
              2007ASSETSCurrent
      assets:Cash
      and equivalents
              
              $
              48,124
              
              
              $
              50,973Restricted
      cash and marketable securities
              
              
              31,368
              
              
              
              47,164Accounts
      receivable, net of allowances for doubtful accounts of $3,226 and $3,098
      atMarch
      31, 2008 and December 31, 2007, respectively
              
              
              132,387
              
              
              
              162,198Unbilled
      services
              
              
              110,935
              
              
              
              89,384Prepaid
      expenses and other current assets
              
              
              13,751
              
              
              
              19,836Current
      deferred tax assets
              
              
              4,120
              
              
              
              4,279Total
      current assets
              
              
              340,685
              
              
              
              373,834Property
      and equipment, net
              
              
              55,328
              
              
              
              54,740Equity
      investments
              
              
              336
              
              
              
              309Goodwill
              
              
              377,296
              
              
              
              383,714Other
      intangibles, net
              
              
              287,100
              
              
              
              281,122Deposits
      and other assets
              
              
              17,708
              
              
              
              17,137Total
      assets
              
              $
              1,078,453
              
              
              $
              1,110,856LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
              
              $
              12,248
              
              
              $
              17,464Current
      portion of long-term debt
              
              
              3,300
              
              
              
              3,300Accrued
      payroll, accounts payable and accrued expenses
              
              
              96,033
              
              
              
              138,708Current
      income tax liabilities
              
              
              1,187
              
              
              
              6,814Client
      advances and unearned revenue
              
              
              66,392
              
              
              
              76,696Total
      current liabilities
              
              
              179,160
              
              
              
              242,982Capital
      lease obligations, net of current portion
              
              
              21,688
              
              
              
              20,945Long-term
      debt
              
              
              324,225
              
              
              
              325,050Non-current
      income tax liabilities
              
              
              6,444
              
              
              
              7,323Deferred
      tax liabilities
              
              
              10,311
              
              
              
              13,164Other
      non-current liabilities
              
              
              39,303
              
              
              
              23,766Total
      liabilities
              
              
              581,131
              
              
              
              633,230Commitments
      and contingenciesMinority
      interests
              
              
              474
              
              
              
              160Stockholders’
      Equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atMarch
      31, 2008 and December 31, 2007, respectively
              
              
              --
              
              
              
              --Common
      stock, $.001 par value, 50,000,000 shares authorized; 32,991,958 and
      32,325,109Shares
      issued and outstanding at March 31, 2008 and December 31, 2007,
      respectively
              
              
              33
              
              
              
              32Additional
      paid-in-capital
              
              
              380,967
              
              
              
              362,116Accumulated
      other comprehensive losses
              
              
              (14,007
              )
              
              
              (6,493
              )Accumulated
      earnings
              
              
              129,855
              
              
              
              121,811Total
      stockholders’ equity
              
              
              496,848
              
              
              
              477,466Total
      liabilities and stockholders’ equity
              
              $
              1,078,453
              
              
              $
              1,110,856
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
  1
  INVENTIV
HEALTH, INC.
 CONDENSED CONSOLIDATED INCOME STATEMENTS
 (in
thousands, except per share amounts)
 (unaudited)
 
 For
      the Three-Months Ended March 31,2008
              
              
              2007Net
      revenues
              
              $
              224,578
              
              
              $
              176,390Reimbursable
      out-of-pockets
              
              
              37,743
              
              
              
              45,565Total
      revenues
              
              
              262,321
              
              
              
              221,955Operating
      expenses:Cost
      of services
              
              
              142,789
              
              
              
              117,172Reimbursed
      out-of-pocket expenses
              
              
              37,484
              
              
              
              45,656Selling,
      general and administrative expenses
              
              
              62,206
              
              
              
              40,586Total
      operating expenses
              
              
              242,479
              
              
              
              203,414Operating
      income
              
              
              19,842
              
              
              
              18,541Interest expense
              
              
              (6,382
              )
              
              
              (3,562
              )Interest income
              
              
              830
              
              
              
              839Income
      from continuing operations before income tax provision, minority interest
      in income of subsidiary and (loss) gain from equity
      investments
              
              
              14,290
              
              
              
              15,818Income tax provision
              
              
              (5,642
              )
              
              
              (5,414
              )Income
      from continuing operations before minority interest in income of
      subsidiary and (loss) gain from equity investments
              
              
              8,648
              
              
              
              10,404Minority interest in income of subsidiary
              
              
              (576
              )
              
              
              (255
              )(Loss) gain from equity investments
              
              
              (40
              )
              
              
              235Income
      from continuing operations
              
              
              8,032
              
              
              
              10,384Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
              
              
              12
              
              
              
              86Income
      from discontinued operations
              
              
              12
              
              
              
              86Net
      income
              
              $
              8,044
              
              
              $
              10,470Earnings
      per share (see Note 7):Continuing
      operations:Basic
              
              $
              0.25
              
              
              $
              0.34Diluted
              
              $
              0.24
              
              
              $
              0.33Discontinued
      operations:Basic
              
              $
              0.00
              
              
              $
              0.00Diluted
              
              $
              0.00
              
              
              $
              0.01Net
      income:Basic
              
              $
              0.25
              
              
              $
              0.34Diluted
              
              $
              0.24
              
              
              $
              0.34Weighted
      average common shares outstanding:Basic
              
              
              32,623
              
              
              
              30,406Diluted
              
              
              33,120
              
              
              
              31,199
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 
  2
  INVENTIV
HEALTH, INC.
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in
thousands)
 (unaudited)
 For
      the Three-Months EndedMarch
      31,2008
              
              
              2007Cash
      flows from operating activities:Net
      income
              
              $
              8,044
              
              
              $
              10,470Income
      from discontinued operations
              
              
              (12
              )
              
              
              (86
              )Income
      from continuing operations
              
              
              8,032
              
              
              
              10,384Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
              
              
              4,953
              
              
              
              3,917Amortization
              
              
              3,657
              
              
              
              1,778Loss
      (income) from equity investments
              
              
              40
              
              
              
              (235
              )Minority
      interest in income of subsidiary
              
              
              576
              
              
              
              255Adjustment
      on derivative financial instrument
              
              
              323
              
              
              
              (290
              )Deferred
      taxes
              
              
              (2,694
              )
              
              
              (530
              )Impairment
      of marketable securities
              
              
              491
              
              
              
              --Stock
      compensation expense
              
              
              2,528
              
              
              
              2,463Tax
      benefit from stock option exercises and vesting of restricted
      shares
              
              
              1,780
              
              
              
              2,967Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
              
              
              29,811
              
              
              
              (2,323
              )Unbilled
      services
              
              
              (21,551
              )
              
              
              1,817Prepaid
      expenses and other current assets
              
              
              6,085
              
              
              
              (6,587
              )Accrued
      payroll, accounts payable and accrued expenses
              
              
              (12,974
              )
              
              
              (4,824
              )Net
      tax liabilities
              
              
              (7,915
              )
              
              
              3,588Client
      advances and unearned revenue
              
              
              (10,304
              )
              
              
              (9,646
              )Excess
      tax benefits from stock based compensation
              
              
              (366
              )
              
              
              (1,948
              )Other
              
              
              7,599
              
              
              
              (7,700
              )Net
      cash provided by (used in) continuing operations
              
              
              10,071
              
              
              
              (6,914
              )Net
      cash (used in) provided by discontinued operations
              
              
              (144
              )
              
              
              86Net
      cash provided by (used in) operating activities
              
              
              9,927
              
              
              
              (6,828
              )Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
              
              
              15,305
              
              
              
              (69
              )Investment
      in cash value of life insurance policies
              
              
              (583
              )
              
              
              (1,654
              )Cash
      paid for acquisitions, net of cash acquired
              
              
              (1,263
              )
              
              
              (25,478
              )Acquisition
      earn-out payments
              
              
              (16,234
              )
              
              
              (20,667
              )Equity
      investments
              
              
              (67
              )
              
              
              22Purchases
      of property and equipment
              
              
              (5,332
              )
              
              
              (2,327
              )Proceeds
      from manufacturers rebates on leased vehicles
              
              
              38
              
              
              
              247Net
      cash used in continuing operations
              
              
              (8,136
              )
              
              
              (49,926
              )Net
      cash provided by discontinued operations
              
              
              156
              
              
              
              --Net
      cash used in investing activities
              
              
              (7,980
              )
              
              
              (49,926
              )Cash
      flows from financing activities:Repayments
      on long-term debt
              
              
              (825
              )
              
              
              (417
              )Borrowings
      under line of credit
              
              
              --
              
              
              
              25,000Repayments
      on capital lease obligations
              
              
              (4,414
              )
              
              
              (3,842
              )Withholding
      shares for taxes
              
              
              (1,025
              )
              
              
              (623
              )Proceeds
      from exercise of stock options
              
              
              1,357
              
              
              
              1,629Excess
      tax benefits from stock-based compensation
              
              
              366
              
              
              
              1,948Distributions
      to minority interests in affiliated partnership
              
              
              (262
              )
              
              
              (264
              )Net
      cash (used in) provided by continuing operations
              
              
              (4,803
              )
              
              
              23,431Net
      cash provided by discontinued operations
              
              
              --
              
              
              
              --Net
      cash (used in) provided by financing activities
              
              
              (4,803
              )
              
              
              23,431Effect
      of exchange rate changes
              
              
              7
              
              
              
              (255
              )Net
      change in cash and equivalents
              
              
              (2,849
              )
              
              
              (33,578
              )Cash
      and equivalents, beginning of period
              
              
              50,973
              
              
              
              79,835Cash
      and equivalents, end of period
              
              $
              48,124
              
              
              $
              46,257Supplemental
      disclosures of cash flow information:Cash
      paid for interest
              
              $
              5,980
              
              
              $
              3,164Cash
      paid for income taxes
              
              $
              8,982
              
              
              $
              3,267Supplemental
      disclosures of non-cash activities:Vehicles
      acquired through capital lease agreements
              
              $
              7,405
              
              
              $
              3,066Stock
      issuance related to acquisitions
              
              $
              15,619
              
              
              $
              28,736
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
  3
 INVENTIV
HEALTH, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
 1.          Organization
and Business:
 
 inVentiv
Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
leading provider of value-added services to the pharmaceutical, life sciences
and healthcare industries. The Company supports a broad range of clinical
development, communications and commercialization activities that are critical
to its customers' ability to complete the development of new drug products and
medical devices and successfully commercialize them.  In addition, the
Company provides medical cost containment services to payors in its patient
outcomes business.  Our goal is to assist our customers in meeting
their objectives by providing our services in each of our operational areas on a
flexible and cost-effective basis. We provide services to over 350 client
organizations, including all top 20 global pharmaceutical companies, numerous
emerging and specialty biotechnology companies and third party
administrators.
 
 The
Company’s service offerings reflect the changing needs of its clients as their
products move through the late-stage development and regulatory approval
processes and into product launch and then throughout the product lifecycle. The
Company has established expertise and leadership in providing the services its
clients require at each of these stages of product development and
commercialization and seek to address their outsourced service needs on a
comprehensive basis throughout the product life cycle.  For payors,
the Company provides a variety of services that enhance savings and improve
patient outcomes including opportunities to address billing errors, additional
discounts and treatment protocols for patients.
 
 Business
Segments
 
 Certain
balances in segment reporting have been reclassified to conform to the current
segment reporting structure.  In August 2007, the Company added a
fourth operating segment, inVentiv Patient Outcomes, for financial reporting
purposes.  This new segment more closely links the Company's various
patient-oriented business units.  The Company also realigned some of
its divisions to reflect the new segment reporting, which is reflected in the
Company's condensed consolidated balance sheets as of March 31, 2008 and
December 31, 2007, the condensed consolidated income statements of the Company
for the three months ended March 31, 2008 and 2007 and the condensed
consolidated cash flows for the three months ended March 31, 2008 and
2007.  See Note 20, Segment Information, for
further details.
 
 The
Company currently serves its clients primarily through four business segments,
which correspond to its reporting segments for 2008:
 
 ·
              inVentiv
      Clinical, which provides professional resourcing and services to
      the pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management.   inVentiv
      Clinical consists of the Smith Hanley group of companies (which includes
      Smith Hanley Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”)
      and MedFocus), HHI Clinical & Statistical Research Services (“HHI”),
      and Synergos, LLC (“Synergos”)).
 
 ·
              inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”) (acquired in March
      2007), Chamberlain Communications Group, Inc. (“Chamberlain”) (acquired in
      March 2007), Addison Whitney (acquired in June 2007) and Chandler Chicco
      Agency (“CCA”) (acquired in July
2007).
 
 ·
              inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.  This segment includes inVentiv Strategy
      & Analytics and inVentiv Selling
  Solutions.
 
 ·
              inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease management. This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute (“TTI”) and AWAC LLC
(“AWAC”).
 
 
 The
Company’s services are designed to provide resources and other clinical services
in support of the pharmaceutical clinical development process, and to develop,
execute and monitor strategic and tactical sales and marketing plans and
programs for the promotion of pharmaceutical, biotechnology and other life
sciences products.   In addition, the Company provides a variety
of services that enhance savings and improve patient outcomes for third party
administrators and other payors.
 
 2.           Basis
of Presentation
 
 The
accompanying unaudited condensed consolidated financial statements present the
condensed consolidated balance sheets, condensed consolidated results of
operations and condensed consolidated cash flows of the Company and its
subsidiaries (the "condensed consolidated financial statements"). These
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") and pursuant to the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) related to interim financial
statements. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been
omitted.  The Company believes that the disclosures made herein are
adequate such that the information presented is not misleading. These condensed
consolidated financial statements reflect all adjustments (consisting of only
normal recurring adjustments) that, in the opinion of management, are necessary
to fairly present the Company's condensed consolidated balance sheets as of
March 31, 2008 and December 31, 2007, the condensed consolidated income
statements of the Company for the three-months ended March 31, 2008 and 2007 and
the condensed consolidated cash flows for the three-months ended March 31, 2008
and 2007.  Operating results for the three-months ended March 31, 2008
are not indicative of the results that may be expected for the year ending
December 31, 2008.
 
 These
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2007 as
filed with the Securities and Exchange Commission on February 29,
2008.
 
 The
consolidated financial statements include the accounts of inVentiv Health, Inc.,
its wholly owned subsidiaries and its 60% owned subsidiary, Taylor Search
Partners (“TSP”), which was acquired in conjunction with the acquisition of
inVentiv Communications, Inc.  Our continuing operations consist
primarily of four business segments: inVentiv Clinical, inVentiv Communications,
inVentiv Commercial and inVentiv Patient Outcomes.  All significant
intercompany transactions have been eliminated in consolidation.  In
December 2007, the Company increased its investment interest from 44% to 85% in
Angela Liedler GmbH (“Liedler”), a service provider of communication and
marketing tools for technical, medical and pharmaceutical products, located in
Germany.  The Company accounted for Liedler as an equity investment
until the date of the acquisition of the additional interest, and then
consolidated its results thereafter.
 
 As a
result of the acquisition of inVentiv Communications, Inc., the Company has a
15% ownership interest in Heart Reklambyra AB (“Heart”), an advertising agency
located in Sweden, which is accounted for by using the equity method of
accounting.
 
 
 3.           Recently
Issued Accounting Standards:
 
  In March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161
“Disclosures about Derivative Instruments and Hedging Activities an amendment of
FASB Statement No. 133”, which requires additional disclosures regarding a
company’s derivative instruments and hedging activities by requiring disclosure
of the fair values of derivative instruments and their gains and losses in a
tabular format. It also requires disclosure of derivative features that are
credit risk–related as well as cross-referencing within the notes to the
financial statements to enable financial statement users to locate important
information about derivative instruments, financial performance, and cash flows.
SFAS 161 is effective for fiscal years beginning after November 15, 2008. The
Company is currently evaluating the impact of this standard on our Condensed
Consolidated Financial Statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations” (“SFAS 141(R)”), which addresses the recognition and accounting
for identifiable assets acquired, liabilities assumed, and noncontrolling
interests in business combinations. SFAS 141(R) also establishes expanded
disclosure requirements for business combinations. SFAS 141(R) will become
effective January 1, 2009.  The Company is currently evaluating the
impact of this standard on our Condensed Consolidated Financial Statements;
however, this is mainly dependent on the timing, nature and extent of our
acquisitions consummated after January 1, 2009.
 
 In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS
160”), which addresses the accounting and reporting framework for minority
interests by a parent company.  SFAS 160 also addresses disclosure
requirements to distinguish between interests of the parent and interests of the
noncontrolling owners of a subsidiary. SFAS 160 will become effective January 1,
2009.  The Company is currently evaluating the impact of this standard
on our Condensed Consolidated Financial Statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.SFAS No. 159 provides companies with an option to report
selected financial assets and liabilities at fair value.  This
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. Early adoption is permitted as of the beginning
of a fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.The Company’s adoption of SFAS 159, effective
January 1, 2008, did not have a material effect on our condensed consolidated
balance sheets, results of operations and cash flows as we did not elect this
fair value option.
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  SFAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of SFAS 157 are effective for the fiscal year beginning January
1, 2008; as such, the Company has adopted SFAS 157 as of January 1, 2008, as
required.  In February 2008, the FASB delayed the effective date of
SFAS 157 for certain nonfinancial assets and liabilities until January 1, 2009;
the scope of which applies to all the Company’s nonfinancial assets and
liabilities.  Accordingly, the Company’s adoption of this standard for
2008 is limited to financial assets and liabilities.  The Company
expects to complete its evaluation of the impact SFAS 157 will have on its
nonfinancial assets and liabilities when the FASB completes its evaluation of
implementation issues.
 
 
 4.           Acquisitions:
 
 Acquisitions
are accounted for using purchase accounting, including SFAS No. 141, Business Combinations, (“SFAS
No. 141”) and the financial results of the acquired businesses are included in
the Company’s financial statements from their acquisitions dates.  If
a business is acquired subsequent to a reporting period, but prior to the
issuance of the Company’s financial statements, it is disclosed in the notes to
the consolidated financial statements.  Earn-out payments from
acquisitions are generally accrued at the end of an earn-out period in
conjunction with the preparation of the Company’s quarterly financial statements
when the acquired company’s results are reviewed, as more fully described
below.  The terms of the acquisition agreements generally include
multiple earn-out periods or a multi-year earnout period.  Except for
inVentiv Communications, Inc., pro forma financial information was not required
to be disclosed under the Securities and Exchange Commission’s Regulation S-X
for the following acquisitions because none of the specific thresholds were met
as they were not material to the consolidated operations of the Company at the
time of acquisition.
 
 CCA - In July 2007, the
Company completed the acquisition of CCA, for approximately $69.1 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on CCA’s performance
measurements during 2007 through 2010.  CCA is headquartered in New
York and is one of the largest healthcare-focused public relations firms in the
world.  CCA includes agencies organized and operating in the United
States, the United Kingdom and France.  CCA’s financial results have
been reflected in the inVentiv Communications’ segment since the date of its
acquisition.
 
 AWAC - In
July 2007, the Company completed the acquisition of AWAC for approximately $76.3
million in cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on AWAC’s performance
measurements during 2007 through 2010.  AWAC is based in Georgia and
is a leading provider of proprietary IT-driven cost containment and medical
consulting solutions to third party administrators, ERISA self-funded plans,
fully insured plans, employer groups, managing general underwriters and
insurance carriers.  The AWAC acquisition included the business assets
of AWAC.MD, Inc. as well as Innovative Health Strategies, Inc. and iProcert,
LLC, which were acquired as entities.  Innovative Health Strategies,
Inc. and iProcert, LLC were subsequently dissolved and their business operations
consolidated with the AWAC.MD business operations.  AWAC’s financial
results have been reflected in the inVentiv Patient Outcomes segment since the
date of its acquisition.
 
 Addison Whitney - In June
2007, the Company completed the acquisition of the net assets of Addison
Whitney, Inc. for approximately $18.3 million in cash and stock, including
certain post-closing adjustments and direct acquisition costs which have yet to
be finalized.  The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Addison Whitney’s performance
measurements during 2007 through 2010.  Addison Whitney is based in
North Carolina, and specializes in global branding consultancy that focuses on
creating unique corporate and product brands.  Addison Whitney’s
financial results have been reflected in the inVentiv Communications’ segment
since the date of its acquisition.
 
 Strategyx- In June 2007, the
Company completed the acquisition of Strategyx for approximately $9.9 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on Strategyx’s performance
measurements during 2007 through 2010.  Strategyx is based in
Somerville, New Jersey, and specializes in global strategic
consulting.  Strategyx’s financial results have been reflected in the
inVentiv Commercial segment since the date of its acquisition.
 
 Ignite - In March 2007, the
Company completed the acquisition of the assets of ignite comm.net and Incendia
Health, Inc. (including its Incendia Health Studios brand of services, which is
now operated as a division of Ignite) for approximately $21.2 million in cash
and stock, including certain post-closing adjustments and direct acquisition
costs.  The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Ignite's performance measurements
during 2007 through 2010.  The amount accrued with respect to Ignite
for the 12-month period ended March 31, 2008 was approximately $3.4 million in
cash and stock.  Ignite is based in Irvine, California and specializes
in medical advertising and interactive communications targeting patients and
caregivers.  Ignite’s financial results have been reflected in the
inVentiv Communications segment since the date of its acquisition.
 
 Chamberlain - In March 2007,
the Company completed the acquisition of Chamberlain for approximately $14.7
million in cash and stock, including certain post-closing adjustments and direct
acquisition costs. The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Chamberlain's performance
measurements during 2007 through 2009. Chamberlain is based in New York, and
specializes in public relations in the healthcare industry. Chamberlain’s
financial results have been reflected in the inVentiv Communications segment
since the date of its acquisition.
 
 MedConference - In November
2006, the Company completed the acquisition of the net assets of The Maxwell
Group, Inc. and its MedConference brand of services (“MedConference”) for
approximately $8.1 million in cash and stock, including certain post-closing
adjustments and direct acquisition costs.  MedConference, based in
Norristown, PA, was founded in 1989 and is a leading provider of live and
on-demand virtual event services to the pharmaceutical industry.  The
Company will be obligated to make certain earn-out payments, which may be
material, contingent on MedConference's performance measurements during 2006
through 2008.  The amount accrued at December 31, 2006, and paid in
2007, with respect to MedConference for the 2006 earnout was approximately $1.6
million in cash and stock.  MedConference did not achieve the initial
earnout threshold for 2007 and thus, no amount was accrued.  The
results of MedConference have been reflected in the inVentiv Commercial segment
since the date of its acquisition.
 
 DialogCoach - In November
2006, the Company completed the acquisition of the net assets of American
Speakers Education Research and Training, L.L.C. and DialogCoach LLC
(collectively, “DialogCoach”) for approximately $5.7 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  DialogCoach, based in Coopersburg, PA, is an education and
training company focused on customized solutions in specialty markets and
building training and educational programs.  The Company will be
obligated to make certain earn-out payments, which may be material, contingent
on DialogCoach's performance measurements during 2006 through
2008.  DialogCoach did not achieve the initial earnout threshold for
2006 and 2007 and thus, no amount was accrued.  The results of
DialogCoach have been reflected in the inVentiv Commercial segment since the
date of its acquisition.
 
 Synergos - In April 2006, the
Company acquired the net assets of Synergos for approximately $6.4 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  Synergos, based in The Woodlands, Texas, is a
focused clinical services provider with expertise in clinical trial management
services, particularly project management and monitoring. The Company was
obligated to make certain earn-out paymentsl, contingent on Synergos’s
performance measurements during 2006 and 2007.  The amount accrued at
December 31, 2006, and paid in 2007, with respect to Synergos for the 2006
earnout, was approximately $0.8 million in cash and stock. The amount accrued at
December 31, 2007 for the 2007 earnout was approximately $0.9 million in cash
and stock, which was paid in May 2008.    The results of
Synergos have been reflected in the inVentiv Clinical segment from the date of
its acquisition.
 
 JSAI - In April 2006, the
Company acquired JSAI for approximately $8.8 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  JSAI is Canada's leading healthcare marketing and
communications agency. The Company will be obligated to make certain earn-out
payments, which may be material, contingent on JSAI’s performance measurements
during the 12-month periods ending March 31, 2007, 2008 and 2009.  The
amount due with respect to JSAI for the 12-month period ended March 31, 2007 was
approximately $2.8 million in cash and stock, which the Company accrued at March
31, 2007, of which the cash portion was paid in 2007 and stock portion was paid
in 2008 once certain contractual restrictions were met.  JSAI did not
achieve the initial earnout threshold for the 12-month period ended March 31,
2008 and thus, no amount was accrued.   The results of JSAI have
been reflected in the inVentiv Communications segment since the date of its
acquisition.
 
 Adheris - In February 2006,
the Company acquired Adheris for approximately $69.9 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  Adheris is a Massachusetts-based industry leader in the area
of patient compliance and persistency programs.  The Company will be
obligated to make certain earn-out payments, which may be material, contingent
on Adheris's performance measurements during 2006 through
2008.  Adheris’s 2006 earnout of approximately $7.7 million in cash
and stock, of which $7.9 million was accrued at December 31, 2006, was paid in
2007.   Adheris’ 2007 earnout of approximately $15.1 million in
cash and stock, of which $15.3 million was accrued at December 31, 2007, was
paid in 2008.  The portions adjusted in the subsequent years mainly
relate to the finalization of the earn-out for the previous years, as allowed
under the contract.  The results of Adheris were reflected in the
inVentiv Communications segment from the date of its acquisition until June 30,
2007.  Adheris was transferred from the inVentiv Communications
segment to the inVentiv Patient Outcomes segment following the acquisition of
AWAC and the concomitant revision of our segment reporting
analysis.
 
 inVentiv Communications, Inc.
- In October 2005, the Company acquired all of the outstanding capital stock of
inVentiv Communications, Inc. (then known as inChord Communications, Inc.) for
approximately $196.8 million of cash and stock, including certain post-closing
adjustments and direct acquisition costs.  To help finance the
transaction, the Company entered into a Credit Agreement, dated October 5, 2005,
which was amended and restated on July 6, 2007, as more fully described in Note
11.  The Company acquired inVentiv Communications, Inc. to vastly
expand its service portfolio in the marketing and communications arena, expand
its market position in the pharmaceutical services market and achieve
cross-selling opportunities by leveraging its existing
businesses.  The Company was obligated to make certain earn-out
payments, contingent on inVentiv Communications, Inc.’s performance measurements
from 2005 through 2007.  inVentiv Communications, Inc.’s 2005 earnout
of approximately $3.8 million in cash and stock, of which $3.6 million was
accrued at December 31, 2005, was paid in 2006.  inVentiv
Communications, Inc.’s 2006 earnout of approximately $24.7 million in cash and
stock, of which $25.0 million was accrued for at December 31, 2006, was paid in
2007.  inVentiv Communications, Inc.’s 2007 earnout was approximately
$21.8 million in cash and stock, which was accrued at December 31, 2007, of
which $17.8 million was paid in 2008 and $4.0 million remains accrued at March
31, 2008.  The portions adjusted in the subsequent years mainly relate
to the finalization of the earn-outs for the previous years, as allowed under
the contract.   The results of inVentiv Communications, Inc. have
been reflected in the inVentiv Communications segment since the date of
acquisition.
 
 5.           Restricted
Cash and Marketable Securities
 
 As part of the acquisition of CCA,
there was approximately $1.7 million of restricted cash, of which $0.3 million
relates to outstanding letters of credit, to support the security deposits
relating to the New York, Washington D.C, California and London offices, which
are now reflected in the inVentiv Communications segment.  The
beneficiaries have not drawn on the $0.3 million letters of
credit.  As this cash has been pledged as collateral, it is restricted
from use for general purposes and has been classified in restricted cash and
marketable securities at March 31, 2008.
 
 The
Company receives cash advances from its clients as funding for specific projects
and engagements. These funds are deposited into segregated bank accounts and
used solely for purposes relating to the designated projects. Although these
funds are not held subject to formal escrow agreements, the Company considers
these funds to be restricted and has classified these balances accordingly. Cash
held in such segregated bank accounts totaled approximately $0.2 million held in
escrow on behalf of clients and was included in restricted cash and marketable
securities at March 31, 2008 and December 31, 2007.
  As of
March 31, 2008 and December 31, 2007, the Company had $29.5 million and $45.3
million, respectively, invested in the Columbia Strategic Cash Portfolio
(“CSCP”), which are classified as restricted cash and marketable securities on
the March 31, 2008 and December 31, 2007 Balance Sheets.  During the
first quarter of 2008 and fourth quarter of 2007, the Company recorded $0.5
million and $0.8 million, respectively, relating to impairments of the Company's
investment in the CSCP, which held certain asset-backed
securities.  The Company’s recorded balance in the CSCP is considered
short-term in nature and is expected to be distributed over the next twelve
months.  Consistent with the Company's investment policy guidelines,
the vast majority of CSCP investments held by the company had AAA/Aaa credit
ratings at the time of purchase. With the liquidity issues experienced in global
credit and capital markets, the CSCP experienced losses, partially due to the
subprime market crisis.
  The CSCP
maintained a net asset value of $1 per unit until December 2007, after which the
net asset value per unit fluctuated, and will continue to fluctuate, based on
changes in market values of the securities held by the portfolio.  The
process of liquidating CSCP’s portfolio was initiated in December 2007 and is
anticipated to continue through 2009.  Future impairment charges may
result depending on market conditions until the fund is fully liquidated. The
$1.3 million cumulative impairment charge to date does not have a material
impact on the company's liquidity or financial flexibility.
  On
February 27, 2008, we entered into an unsecured credit facility (the “Blue Ridge
facility”) with Blue Ridge Investments, L.L.C., an affiliate of Bank of America,
N.A., to allow the Company to separately borrow up to the current balance
remaining in the CSCP.   We have not borrowed any funds under
this credit facility.  The Blue Ridge facility provides for multiple
drawdowns from time to time until maturity, which shall be the earlier of the
day following the redemption of all of our shares of the CSCP and July 1,
2009.  The outstanding balance under the facility may not (subject to
limited exceptions) exceed our account value in the CSCP, and distributions from
the CSCP must be applied to reduce the outstanding principal balance under the
facility.  Amounts borrowed bear interest at the one-month LIBOR rate
plus 0.35% per annum, fluctuating daily.
  
 6.           Employee
Stock Compensation:
  In December 2004, the FASB revised
SFAS No. 123 (“SFAS 123R”), Share-Based Payment, which
establishes accounting for share-based awards exchanged for employee services
and requires companies to expense the estimated fair value of these awards over
the requisite employee service period.  On April 14, 2005, the
SEC adopted a new rule amending the effective dates for SFAS 123R.  In
accordance with the new rule, the Company adopted the accounting provisions of
SFAS 123R as of January 1, 2006.
  On January 1, 2006, the Company adopted SFAS 123R using the modified
prospective application method, as permitted under SFAS 123R, which requires
measurement of compensation cost of all stock-based awards at fair value on the
date of grant and recognition of compensation over the service periods for
awards expected to vest.  Under this method, compensation cost in 2006
includes the portion vesting in the period for (1) all stock-based awards
granted prior to, but not vested as of, January 1, 2006, based on the grant date
fair value estimated in accordance with the original provisions of SFAS No. 123,
Accounting for Stock-Based
Compensation (“SFAS 123”), and (2) all stock-based awards granted
subsequent to January 1, 2006, based on the grant date fair value estimated in
accordance with the provisions of SFAS 123R.  The Company will
recognize the cost of all employee stock awards on a straight-line basis over
their respective vesting periods, net of estimated
forfeitures.  Accordingly, prior period amounts have not been
restated.  Under this method, the Company is required to record
compensation expense for all awards granted after the date of adoption and for
the unvested portion of previously granted awards that remain outstanding at the
date of adoption.
  
 The
adoption of SFAS 123R resulted in stock-based compensation expense of $2.5
million, of which $0.5 million was recorded in cost of services and $2.0 million
recorded as Selling, General and Administrative expenses (“SG&A”) for the
three months ended March 31, 2008 and $2.5 million, of which $0.6 million was
recorded in cost of services and $1.9 million recorded as SG&A for the three
months ended March 31, 2007.
 
 Stock-based
compensation expense caused income before income tax provision, minority
interest in income of subsidiary and income from equity investments to decrease
by $2.5 million for the three months ended March 31, 2008 and 2007, caused
net income to decrease by $1.5 million for the three months ended March 31, 2008
and 2007, and caused basic and diluted earnings per share to decrease by $0.05
per share for the three months ended March 31, 2008 and 2007.
 
 Cash
provided by financing activities increased by $0.4 million and $1.9 million for
the three-months ended March 31, 2008 and 2007, respectively, related to excess
tax benefits from the exercise of stock-based awards.
 
 Assumptions
 
 The fair
value of each option grant is estimated on the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:
 
 Three
      Months Ended
                March
      31,2008
              
              
              2007Expected
      life of option
              
              6yrs
              
              
              5.5-6
      yrsRisk-free
      interest rate
              
              
              2.90
              %
              
              
              4.77
              %Expected
      volatility
              
              
              37
              %
              
              
              40
              %Expected
      dividend yield
              
              
              0.00
              %
              
              
              0.00
              %
 
 
 With the adoption of SFAS 123R in 2006,
the Company has limited its issuance of stock options to senior executives,
while granting restricted shares to employees at various
levels.  During the fourth quarter of 2005, prior to the adoption of
SFAS 123R, management analyzed its expected volatility and expected life of
stock options and concluded that the expected volatility for options granted
during the fourth quarter of 2005 should be 45% and the expected life of the
options granted should range between 5.5 and 6.0 years, depending on the
grantee’s employee status.  The Company analyzed historical trends in
these variables on a quarterly basis; during the three months of 2008 and 2007
the volatility remains at a range of 37-40%.  As of January 1, 2008,
the Company adopted SAB 110 revision to SAB topic 14 for determining the
expected term and the range of the expected term remained unchanged at 5.5 to 6
years as previously reported under SAB 107.  The Company continues to
base the estimate of risk-free rate on the U.S. Treasury yield curve in effect
at the time of grant. The Company has never paid cash dividends, does not
currently intend to pay cash dividends, and has certain restrictions under its
credit facility to pay dividends and thus has assumed a 0% dividend
yield.  These conclusions were based on several factors, including
past company history, current and future trends, comparable benchmarked data and
other key metrics.
 
 As part of the requirements of SFAS
123R, the Company is required to estimate potential forfeitures of stock grants
and adjust compensation cost recorded accordingly.  The forfeiture
rate was estimated based on historical forfeitures.  The estimate of
forfeitures will be adjusted over the requisite service period to the extent
that actual forfeitures differ, or are expected to differ, from such estimates.
Changes in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact the amount of
stock compensation expense to be recognized in future periods.  The
forfeiture rates utilized for the three months ended March 31, 2008 and 2007
were 4.88% and 3.25%, respectively.
 
 
 Stock Incentive Plan and
Award Activity
 
 The
Company’s 2006 Stock Incentive Plan (“Stock Plan”) authorizes incentive stock
options, nonqualified stock options, restricted stock awards, restricted stock
units and stock appreciation rights ("SARs”).  Prior to the adoption
of the LTIP, the Company was authorized to grant equity incentive awards under
its 1999 Stock Incentive Plan (together with the LTIP, the "Equity Incentive
Plans"), which was terminated at the time the LTIP was adopted.  The
aggregate number of unissued shares of the Company’s common stock that may be
issued under the Stock Plan is 1.5 million shares.
 
 The
exercise price of options granted under the Stock Plan may not be less than 100%
of the fair market value per share of the Company’s common stock on the date of
the option grant. The vesting and other provisions of the options are determined
by the Compensation Committee of the Company’s Board of
Directors.
  4
 INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
  
 The
following table summarizes activity under the Company’s equity incentive plans
for the three months ended March 31, 2008 (in thousands, except per share
amounts):
 Shares
              
              
              Weighted
      Average Exercise Price
              
              
              Weighted
      Average Remaining Contractual Term (in years)
              
              
              Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2008
              
              
              1,506
              
              
              $
              19.43Granted
      and assumed
              
              
              193
              
              
              $
              32.35Exercised
              
              
              (98
              )
              
              $
              13.81Forfeited/expired/cancelled
              
              
              (17
              )
              
              $
              26.13Outstanding
      at March 31, 2008
              
              
              1,584
              
              
              $
              21.28
              
              
              
              7.03
              
              
              $
              13,725Vested
      and expected to vest at March 31, 2008
              
              
              1,527
              
              
              $
              20.95
              
              
              
              6.96
              
              
              $
              13,638Options
      exercisable at March 31, 2008
              
              
              825
              
              
              $
              15.71
              
              
              
              5.89
              
              
              $
              10,965
  The
weighted-average grant-date fair value of stock options granted during the
three-months ended March 31, 2008 and  2007 was $13.14 per share and
$16.25 per share, respectively.  The total intrinsic value of options
exercised during the three-months ended March 31, 2008 and 2007 was $1.4 million
and $1.6 million, respectively.  As of March 31, 2008 and December 31,
2007, there was approximately $7.4 million and $6.6 million, respectively, of
total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted; that cost is expected to be recognized over a
weighted average of 2.4 years and 2.2 years, respectively.
   The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled $0.6 million and $2.0 million for the
three months ended March 31, 2008 and 2007, respectively.
   5
 INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
   Options
outstanding and exercisable have exercise price ranges and weighted average
remaining contractual lives of:
  
 Outstanding Options
              
              
              
              
              
              Exercisable OptionsExercise
      Price Range
              
              
              Numbers
      of Options
              
              
              Weighted
      Average Exercise Price
              
              
              Weighted
      Average
                Remaining
      Life
                (years)
              
              
              Number
      of Options
              
              
              Weighted
      Average
                Exercise
      Price$
              1.48
              
              To
              
              $
              8.06
              
              
              
              169,324
              
              
              $
              5.73
              
              
              
              2.81
              
              
              
              169,324
              
              
              $
              5.73$
              8.45
              
              To
              
              $
              15.48
              
              
              
              111,727
              
              
              $
              9.87
              
              
              
              5.84
              
              
              
              103,477
              
              
              $
              9.44$
              15.96
              
              To
              
              $
              15.96
              
              
              
              262,500
              
              
              $
              15.96
              
              
              
              6.48
              
              
              
              212,500
              
              
              $
              15.96$
              16.89
              
              To
              
              $
              17.57
              
              
              
              163,638
              
              
              $
              17.13
              
              
              
              6.57
              
              
              
              81,998
              
              
              $
              17.11$
              17.75
              
              To
              
              $
              23.91
              
              
              
              166,874
              
              
              $
              19.41
              
              
              
              6.63
              
              
              
              102,750
              
              
              $
              18.82$
              25.06
              
              To
              
              $
              26.76
              
              
              
              162,750
              
              
              $
              25.85
              
              
              
              7.43
              
              
              
              83,501
              
              
              $
              25.87$
              26.77
              
              To
              
              $
              26.77
              
              
              
              180,000
              
              
              $
              26.77
              
              
              
              8.21
              
              
              
              45,000
              
              
              $
              26.77$
              30.64
              
              To
              
              $
              32.55
              
              
              
              211,985
              
              
              $
              32.17
              
              
              
              9.64
              
              
              
              1,800
              
              
              $
              30.64$
              35.01
              
              To
              
              $
              35.01
              
              
              
              97,330
              
              
              $
              35.01
              
              
              
              8.77
              
              
              
              24,721
              
              
              $
              35.01$
              37.21
              
              To
              
              $
              37.21
              
              
              
              57,914
              
              
              $
              37.21
              
              
              
              9.25
              
              
              
              --
              
              
              $
              --1,584,042
              
              
              
              
              
              
              
              
              
              
              
              825,071
 A summary
of the status and changes of the Company’s nonvested shares related to its
equity incentive plans as of and during the three months ended March 31, 2008 is
presented below:
 
 (in
      thousands, except per share amounts)
              
              Shares
              
              
              Weighted
      Average Grant-Date Fair ValueNonvested
      at January 1, 2008
              
              
              596
              
              
              $
              29.41Granted
              
              
              260
              
              
              $
              31.55Released
              
              
              (97
              )
              
              $
              29.93Forfeited
              
              
              (10
              )
              
              $
              29.73Nonvested
      at March 31, 2008
              
              
              749
              
              
              $
              30.08
  As of
March 31, 2008 and December 31, 2007, there was approximately $17.5 million and
$12.4 million, respectively, of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Stock Plan;
that cost is expected to be recognized over a weighted average of 3.0 and 2.8
years, respectively. The total fair value of shares vested during the three
months ended March 31, 2008 and 2007 was $3.1 million and $2.6 million,
respectively.
  
 7.           Earnings
Per Share (“EPS”):
 
 Basic
earnings per share excludes dilution for potentially dilutive securities and is
computed by dividing net income or loss attributable to common shareholders by
the weighted average number of common shares outstanding during the
period.  Diluted net income per share reflects the potential dilution that
could occur if securities or other instruments to issue common stock were
exercised or converted into common stock.  Potentially dilutive
securities are excluded from the computation of diluted net income per share
when their inclusion would be antidilutive.
  6
 INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – Continued
  
 A summary
of the computation of basic and diluted earnings per share from continuing
operations is as follows:
 
 Three-Months
      Ended March 31,2008
              2007Basic
      EPS from Continuing Operations ComputationIncome
      from continuing operations
              $8,032
              $10,384Weighted
      average number of common shares outstanding
              32,623
              30,406Basic
      EPS from continuing operations
              $0.25
              $0.34Diluted
      EPS from Continuing Operations ComputationIncome
      from continuing operations
              $8,032
              $10,384Weighted
      average number of common shares outstanding
              32,623
              30,406Stock
      options (1)
              328
              636Restricted
      stock awards (2)
              169
              157Total
      diluted common shares outstanding
              33,120
              31,199Diluted
      EPS from continuing operations
              $0.24
              $0.33
  (1)   For
the three-months ended March 31, 2008 and 2007, 340,728 and 301,120 shares,
respectively, were excluded from the calculation of diluted EPS due to the fact
that the shares are considered anti-dilutive because the number of potential
buyback shares is greater than the number of weighted shares
outstanding.
 
 (2) For
the three-months ended March 31, 2008 and 2007, 27,440 and 413 shares,
respectively, were excluded from the calculation of diluted EPS due to the fact
that the shares are considered anti-dilutive because the number of potential
buyback shares is greater than the number of weighted shares
outstanding.
 
 8.           Significant
Clients:
 
 During
the three-months ended March 31, 2008 and 2007 the Company had no clients that
accounted for more than 10%, individually, of the Company's total revenues
across our inVentiv Clinical, inVentiv Communications, inVentiv Commercial and
inVentiv Patient Outcomes segments.
 
 
 9.           Goodwill and Other Intangible
Assets:
 
 Goodwill
consists of the following:
 
 (in
      thousands)
              
              January
      1,
                2008
              
              
              Acquisitions
              
              
              Contingent(1)
      Consideration
              
              
              March
      31,
                2008inVentiv
      Clinical
              
              $
              56,944
              
              
              $
              --
              
              
              $
              32
              
              
              $
              56,976inVentiv
      Communications
              
              
              190,958
              
              
              
              (9,540
              )
      (2)
              
              
              3,283
              
              
              
              184,701inVentiv
      Commercial
              
              
              45,773
              
              
              
              --
              
              
              
              --
              
              
              
              45,773inVentiv
      Patient Outcomes
              
              
              90,039
              
              
              
              --
              
              
              
              (193
              )
              
              
              89,846Total
              
              $
              383,714
              
              
              $
              (9,540
              )
              
              $
              3,122
              
              
              $
              377,296
 (1)
              The
      contingent consideration represents adjustments relating to the
      finalization of the earnouts for the twelve months ended December 31, 2007
      and March 31, 2008. (see Note 4)
 (2)
              The
      entire amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the Liedler acquisition, which
      was acquired on December 28, 2007.  Under SFAS 141, if a
      business combination is consummated toward the end of an acquiring
      enterprise's fiscal year or the acquired enterprise is very large or
      unusually complex, the acquiring enterprise may not be able to obtain some
      of the data required to complete the allocation of the cost of the
      purchased enterprise for inclusion in its next annual financial
      report.  As discussed in Part 2, Item 8 of our Annual Report on
      Form 10-K, since Liedler was acquired on December 28, 2007, the valuation
      was not completed by the time the 10-K was filed.  The
      allocation period of Liedler will culminate later this year, mainly due to
      finalization of valuation.
 
 Other intangible assets consist of the
following:
 
 March
      31, 2008
              
              
              December
      31, 2007(in
      thousands)
              
              
              
              
              Accumulated
              
              
              
              
              
              
              
              
              AccumulatedGross
              
              
              Amortization
              
              
              Net
              
              
              Gross
              
              
              Amortization
              
              
              NetCustomer
      relationships
              
              $
              108,792
              
              
              $
              (18,646
              )
              
              $
              90,146
              
              
              $
              105,537
              
              
              $
              (15,946
              )
              
              $
              89,591Technology
              
              
              37,940
              
              
              
              (2,409
              )
              
              
              35,531
              
              
              
              37,940
              
              
              
              (1,714
              )
              
              
              36,226Noncompete
      agreement
              
              
              2,132
              
              
              
              (741
              )
              
              
              1,391
              
              
              
              880
              
              
              
              (617
              )
              
              
              263Tradenames
      subject to amortization
              
              
              1,211
              
              
              
              (340
              )
              
              
              871
              
              
              
              1,211
              
              
              
              (277
              )
              
              
              934Other
              
              
              1,229
              
              
              
              (461
              )
              
              
              768
              
              
              
              1,234
              
              
              
              (386
              )
              
              
              848Total
      definite-life intangibles
              
              
              151,304
              
              
              
              (22,597
              )
              
              
              128,707
              
              
              
              146,802
              
              
              
              (18,940
              )
              
              
              127,862Tradenames
      not subject to amortization (1)
              
              
              158,393
              
              
              
              --
              
              
              
              158,393
              
              
              
              153,260
              
              
              
              --
              
              
              
              153,260Total
      other intangibles (2)
              
              $
              309,697
              
              
              $
              (22,597
              )
              
              $
              287,100
              
              
              $
              300,062
              
              
              $
              (18,940
              )
              
              $
              281,122
 
 (1)
              These
      indefinite-life tradenames arose primarily from acquisitions where the
      brand names of the entities acquired are very strong and
      longstanding.  These tradenames are also supported annually in
      the Company’s impairment test for goodwill and tradenames conducted in
      June of every year.
 (2)
              The
      $9.6 million increase in total gross other intangibles arise from the
      assignment of intangibles from the Liedler acquisition as described
      above.
 
 The Company’s acquisitions have
resulted in approximately $356.7 million of goodwill and the following gross
intangible assets:
 
 Intangible
      asset
              
              Amount
                (in
      thousands)
              
              
              Weighted
      average amortization periodTradename
              
              $
              159,604
              
              
              
              (1
              )Customer
      relationships
              
              
              108,792
              
              
              10.8
      yearsTechnology
              
              
              37,940
              
              
              14.5
      yearsNoncompete
      agreement
              
              
              2,132
              
              
              4.6
      yearsOther
              
              
              975
              
              
              3.5
      yearsTotal
              
              $
              309,443
              
              
              
              (2
              )
 
 (1)
              $1.2
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 5.3
  years.
 (2)
              Excludes $0.3 million of a
      definite-life intangible asset that was not
      acquisition-related.
 
 Amortization expense, based on
intangibles subject to amortization held at March 31, 2008, is expected to be
$10.9 million for the remainder of 2008, $14.1 million in 2009, $13.6 million in
2010, $13.2 million in 2011, $12.7 million in 2012, $11.5 million in 2013 and
$52.7 million thereafter.
 
 Goodwill
and other indefinite-life intangibles, such as tradenames, are assessed annually
for potential impairment on June 30, pursuant to the guidelines of SFAS 142,
Goodwill and Other Intangible
Assets.  The Company conducted its assessment and concluded
that the foregoing balances on the Company’s Condensed Consolidated Balance
Sheet were not impaired as of June 30, 2007.  The Company continues to
maintain this position as of March 31, 2008, based on various factors, including
updated forecasts and the current condition of the Company.
 
 
 10.           Fair
Value Measurement
  As
discussed in Note 3, the Company adopted SFAS 157 on January 1, 2008, which
among other things, requires enhanced disclosures about assets and liabilities
measured at fair value. Our adoption of SFAS 157 was limited to financial assets
and liabilities, which primarily relate to our marketable securities, deferred
compensation plan and derivative contracts.
  We
utilize the market approach to measure fair value for our financial assets and
liabilities. The market approach uses prices and other relevant information
generated by market transactions involving identical or comparable assets or
liabilities.
  SFAS 157
includes a fair value hierarchy that is intended to increase consistency and
comparability in fair value measurements and related disclosures. The fair value
hierarchy is based on inputs to valuation techniques that are used to measure
fair value that are either observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset or liability based
on market data obtained from independent sources while unobservable inputs
reflect a reporting entity’s pricing based upon their own market assumptions.
The fair value hierarchy consists of the following three levels:
 Level 1
              
              -
              
              Inputs
      are quoted prices in active markets for identical assets or
      liabilities.Level 2
              
              -
              
              Inputs
      are quoted prices for similar assets or liabilities in an active market,
      quoted prices for identical or similar assets or liabilities in markets
      that are not active, inputs other than quoted prices that are observable
      and market-corroborated inputs which are derived principally from or
      corroborated by observable market data.Level 3
              
              -
              
              Inputs
      are derived from valuation techniques in which one or more significant
      inputs or value drivers are
unobservable.
   The
following table represents the Company’s assets and liabilities measured at fair
value on a recurring basis as of March 31, 2008 and the basis for that
measurement:
  
 (in
      thousands)
              
              Total
      Fair Value Measurement
                March
      31, 2008
              
              
              Quoted
      Prices in Active Markets for Identical Assets
                (Level
      1)
              
              
              Significant
      Other Observable Inputs
                (Level
      2)
              
              
              Significant
      Unobservable Inputs
                (Level
      3)ASSETSMarketable
      Securities
              
              $
              29,471
              
              
              
              --
              
              
              $
              29,471
              
              
              
              --Deferred
      Compensation
                Plan
      Assets
              
              
              6,978
              
              
              
              --
              
              
              
              6,978
              
              
              
              --TOTAL
      ASSETS
              
              $
              36,449
              
              
              
              --
              
              
              $
              36,449
              
              
              
              --LIABILITIESDeferred
      Compensation
                Plan
      Liabilities
              
              $
              7,222
              
              
              
              --
              
              
              $
              7,222
              
              
              
              --Derivative
      Liabilities
              
              
              24,133
              
              
              
              --
              
              
              
              24,133
              
              
              
              --TOTAL
      LIABILITIES
              
              $
              31,355
              
              
              
              --
              
              
              $
              31,355
              
              
              
              --
 
 11.           Debt:
  On July
6, 2007, the Company entered into an Amended and Restated Credit Agreement (“the
Credit Agreement”) with UBS AG, Stamford Branch and others. The Credit Agreement
provides for a secured term loan of $330 million which was made available to
inVentiv in a single drawing, up to $20 million in additional term loans
(“delayed draw term loans”) that may be advanced no later than January 6, 2008,
which we elected to not draw, a $50 million revolving credit facility, of which
$10 million is available for the issuance of letters of credit, and a swingline
facilty.  The Credit Agreement was used to:
   ·
              amend
      the existing October 2005 credit facility, with a remaining balance of
      $164 million, and
   ·
              enter
      into a new $166 million loan to help fund the acquisitions of Chandler
      Chicco Agency and AWAC, and pay the fees associated with the new credit
      facility, with the balance retained by inVentiv as working
      capital.
   The term
loan will mature on the seventh anniversary of the Credit Agreement, with
scheduled quarterly amortization of 1% per year during years one through six and
94% during year seven.  The revolving loans will mature on the sixth
anniversary of the Credit Agreement. Amounts advanced under the Credit Agreement
must be prepaid with a percentage, determined based on a leverage test set forth
in the Credit Agreement, of Excess Cash Flow (as defined in the Credit
Agreement) and the proceeds of certain non-ordinary course asset sales, certain
issuances of debt obligations and 50% of certain issuances of equity securities
of inVentiv and its subsidiaries, subject to certain exceptions. inVentiv may
elect to prepay the loans, in whole or in part at any time, in certain minimum
principal amounts, without penalty or premium (other than normal LIBOR break
funding costs). Amounts borrowed under the Credit Agreement in respect of term
loans that are repaid or prepaid may not be reborrowed. Amounts borrowed under
the Credit Agreement in respect of revolving loans may be paid or prepaid and
reborrowed.
   Interest
on the loans will accrue, at inVentiv's election, at either (1) the Alternate
Base Rate (which is the greater of UBS's prime rate and federal funds effective
rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest periods
determined at inVentiv's option of 1, 2, 3 or 6 months (or, if the affected
lenders agree, 9 months), in each case plus a spread based equal to 0.75% for
Alternate Base Rate loans and 1.75% for Adjusted LIBOR Rate loans.
   The
Credit Agreement contains, among other things, conditions precedent,
representations and warranties, covenants and events of default customary for
facilities of this type. Such covenants include certain limitations on
indebtedness, liens, sale-leaseback transactions, guarantees, fundamental
changes, dividends and transactions with affiliates. The Credit Agreement also
includes a financial covenant under which inVentiv is required to maintain a
total leverage ratio that does not exceed, as of the last day of any four
consecutive fiscal quarters, 4.0 to 1.0 through December 31, 2009 and 3.5 to 1.0
thereafter.
   Under
certain conditions, the lending commitments under the Credit Agreement may be
terminated by the lenders and amounts outstanding under the Credit Agreement may
be accelerated. Such events of default include failure to pay any principal,
interest or other amounts when due, failure to comply with covenants, breach of
representations or warranties in any material respect, non-payment or
acceleration of other material debt of inVentiv and its subsidiaries,
bankruptcy, insolvency, material judgments rendered against inVentiv or certain
of its subsidiaries or a 40% change of control of inVentiv, subject to various
exceptions and notice, cure and grace periods.
   The
Company has the intent and ability to choose the three-month LIBOR base rate for
the duration of the term of the Credit Agreement.  The three-month
LIBOR base rate as of March 31, 2008 and December 31, 2007 was 2.69% and 4.70%,
respectively.  As disclosed in Note 13, the Company has two derivative
financial instruments, currently totaling $328 million, to hedge against the
current term loan facility.
  The
Company accounts for amendments to its revolving credit facility under the
provisions of EITF Issue No. 98-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 98-14), and
its term loan under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 96-19). In
amending its revolving credit facility, deferred financing costs are being
amortized over the term of the new arrangement since the borrowing capacity
increased in the new loan, per the guidance in EITF 98-14.  In
connection with an amendment of our existing $164 million term loan, under the
terms of EITF 96-19, bank and any third-party fees were deferred and
amortized over the term of the Credit Agreement since the old and new debt
instruments were not substantially different.  The unamortized portion
of the deferred financing costs were approximately $4.2 million and $4.3 million
and are included in Deposits and Other Assets on the Condensed Consolidated
balance sheets as of March 31, 2008 and December 31, 2007,
respectively.
 
 
 12.        Capital
Lease Obligations:
 
 During
2000, the Company entered into a master lease agreement to provide a fleet of
automobiles for sales representatives of its inVentiv Commercial Services
operating segment. Subsequent to 2000, the Company entered into other lease
agreements with multiple vendors. Based on the terms of the agreements,
management concluded that the leases were capital leases based on the criteria
established by SFAS No. 13, Accounting for Leases. The
Company capitalized leased vehicles and recorded the related lease obligations
totaling approximately $7.4 million and $3.3 million (including negligible
rebates and $0.2 million of rebates, respectively) during the three-months ended
March 31, 2008 and 2007, respectively.  The Company also incurred net
disposals of $7.5 million and $2.0 million during the three-months ended March
31, 2008 and 2007, respectively.
 
 13.           Derivative
Financial Instrument:
 
  SFAS
No. 133 “Accounting for Derivative Instruments and Hedging Activities”
(“SFAS 133”), as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires the recording of all
derivatives as either assets or liabilities on the balance sheet measured at
estimated fair value and the recognition of the unrealized gains and losses. We
record the fair market value of our derivatives as other assets and other
liabilities within our consolidated balance sheet. Derivatives that are not part
of hedge relationships are recorded at fair market value on our Consolidated
Balance Sheet with the offsetting adjustment to interest expense on our
Consolidated Income Statement.  For hedge relationships designated as
cash flow hedges under SFAS 133, changes in fair value of the effective portion
of a designated cash flow hedge are recorded to other comprehensive income or
loss; the ineffective portion is recorded to interest expense in our
consolidated income statement.
  We enter into interest rate swaps to manage interest rate risk associated with
debt.
 
 Effective
October 2005, the Company entered into an amortizing three-year interest rate
swap arrangement with a notional amount of $175 million to fix the interest rate
on the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc. The Company entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  At inception, and at least quarterly
thereafter, the Company assesses whether derivatives used to hedge transactions
are highly effective in offsetting changes in the interest cash flows of the
hedged item. To the extent the derivatives instruments are highly effective
hedges, the change in fair value of the effective portion is recorded as a
component of other comprehensive income (loss). To the extent there is any hedge
ineffectiveness, changes in fair value relating to the ineffective portion are
immediately recognized in earnings (interest expense).
 
 From
October 2005 to July 2006, the Company did not designate its original swap
arrangement for hedge accounting and recorded an approximate $2.9 million
reduction to interest expense relating to the mark-to-market adjustment, and a
corresponding derivative asset for approximately $2.9 million, which was
recorded in Deposits and Other Assets on the Condensed Consolidated Balance
Sheet.  The fair value of the swaps represent the estimated amount the
Company would receive or pay to terminate the agreement taking into
consideration the difference between the contract rate of interest and rates
currently quoted for agreements of similar terms and maturities.
 
 On July
17, 2006, the Company formally designated the interest rate swap as a cash flow
hedge pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.  The Company employed the
dollar offset method to assess effectiveness by performing a shock test and
utilized the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement with an inception date of July 17,
2006.  The hypothetical swap had a fair value of zero on the date of
designation and the hedging swap had a fair value of $2.9 million on the date of
designation.  As the swap fair value will decline to zero at maturity,
the $2.9 million of fair value will be recognized in earnings over the remaining
life of the swap as part of the ineffectiveness calculation.  During
the three-months ended March 31, 2008, the fair market value of the original
derivative asset decreased by $1.7 million to a derivative liability of
approximately $2.7 million.  Approximately $0.3 million was recorded
as interest expense, attributable to the financing component embedded within the
interest rate swap, while the remaining $1.4 million ($0.8 million, net of
taxes) was recorded as a decrease to Other Comprehensive Income.
 
 On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount increase to $325 million effective December
31, 2008 to hedge the total outstanding debt notional when the Company’s
original 2005 three-year interest rate swap arrangement described above
expires.  At hedge inception, the Company employed the dollar offset
method by performing a shock test to assess effectiveness and utilized the
hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the original derivative.  As a result of the
hypothetical derivative method, there was no ineffectiveness for the period
ended March 31, 2008, and as a result, $11.2 million ($6.6 million, net of
taxes) was recorded as a decrease to Other Comprehensive Income and an increase
to the swap liability, recorded as Other non-current liabilities in the
Company’s Condensed Consolidated Balance Sheet as of March 31,
2008.  Based on current assumptions regarding the interest rate
environment and other market conditions at March 31, 2008, the estimated amount
of accumulated other comprehensive income that is expected to be reclassified
into interest expense under our hedge relationships within the next 12 months is
$8.3 million, of which $7.2 million will be included as part of our fixed
interest on the loan for 2008.
 
 14.           Commitments
and Contingencies:
 
 The
Company is subject to lawsuits, investigations and claims arising out of the
conduct of its business, including those related to commercial transactions,
contracts, government regulation and employment matters. Certain claims, suits
and complaints have been filed or are pending against the
Company.   Certain such claims that are pending against Adheris
and PRS are described in Part I, Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2007. With the exception of the
claims described therein, all pending matters are of a kind routinely
experienced in our business and are consistent with our historical
experience.  In the opinion of management, taking into account the
advice of legal counsel, no matters outstanding as of March 31, 2008 are likely
to have a material adverse effect on inVentiv.
 
 Pursuant to
the acquisition of inVentiv Communications, Inc., the Company assumed a $7.5
million existing incentive plan liability (out of a potential $15.0 million
liability) on inVentiv Communications, Inc.’s balance sheet relating to certain
performance thresholds of the segment over a three-year period from 2005 through
2007. The first $5.0 million of this obligation was to be paid by or for the
account of the former shareholders of inVentiv Communications, Inc.; this amount
was paid from the former shareholders in March 2008.  The Company has
monitored these performance thresholds on a quarterly basis.  At
December 31, 2006, as a result of new business and the strengthened outlook for
inVentiv Communications, Inc.’s business during 2006, management felt it was
appropriate to record an additional $3.5 million (of which $1.2 million is
recorded in cost of services and $2.3 million is recorded in SG&A) of the
potential $15 million liability since the likelihood of achieving the next
threshold is probable and the amount is estimable, pursuant to SFAS No. 5,
Accounting for Contingencies.  Effective December 31, 2007, the
Company revised certain aspects of the Acquisition-Related Incentive Plan (see
Exhibit 10.20 from Part IV, Item 15 of our December 31, 2007 Annual Report on
Form 10-K).    At December 31, 2007, the Company reversed
approximately $1.5 million of the $11.0 million accrual based on inVentiv
Communications, Inc.’s final results of the three-year performance period from
2005 to 2007.
 
 15.           Deferred
Compensation:
 
 The
Ventiv Health, Inc. Deferred Compensation Plan (the "NQDC Plan") provides
eligible management and other highly compensated employees with the opportunity
to defer, on a pre-tax basis, their salary, bonus, and other specified cash
compensation and to receive the deferred amounts, together with a deemed
investment return (positive or negative), either at a pre-determined time in the
future or upon termination of employment with the Company or an affiliated
employer participating in the NQDC Plan.  The compensation deferrals
were initiated in 2005.  The deferred compensation liability of
approximately $7.2 million and $6.8 million were included in other non-current
liabilities in the Company’s Condensed Consolidated Balance Sheets as of March
31, 2008 and December 31, 2007.  The NQDC Plan does not provide for
the payment of above-market interest to participants.
 
 To assist
in the funding of the NQDC Plan obligation, the Company participates in a
corporate-owned life insurance program in a rabbi trust whereby it purchases
life insurance policies covering the lives of certain employees, with the
Company named as beneficiary.  Rabbi trusts are grantor trusts
generally set up to fund compensation for a select group of management or highly
paid executives.  The cash value of the life insurance policy at March
31, 2008 and December 31, 2007 was approximately $5.9 million and $5.4 million,
respectively, and is currently classified in Deposits and Other Assets on the
Company’s Condensed Consolidated Balance Sheets. In addition, approximately $1.1
million and $1.4 million as of March 31, 2008 and December 31, 2007,
respectively, were invested in mutual funds and classified in Prepaid expenses
and other current assets on our Condensed Consolidated Balance
Sheets.
 
 16.           Income
Taxes
 
 The
effective tax rate for the three-month period ended March 31, 2008 was
41.3%.  The rate included a tax detriment relating to interest on
unrecognized tax benefits of approximately 0.2%.  The effective tax
rate for the three-month period ended March 31, 2007 was 40.7%. The Company’s
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which inVentiv does business and is subject to
taxation.  The Company’s effective tax rate could fluctuate due to
changes in earnings between operating entities and related tax
jurisdictions.
 
 The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48), on January 1, 2007.  The amount
of unrecognized tax benefit was $6.3 million as of December 31, 2007 and $6.0
million as of March 31, 2008.  Included in this balance were positions
totaling $1.0 million as of December 31, 2007 and $1.1 million as of March 31,
2008 that, if recognized, would affect the effective tax rate.
 
 The
Company recognizes potential interest and penalties related to unrecognized tax
benefits in income tax expense.  The total amount of accrued interest
and penalties recorded as of both December 31, 2007 and March 31, 2008 was $2.7
million.
 
 The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal income tax examinations for years
before 2004 and generally, is no longer subject to state and local income tax
examinations by tax authorities for years before 2003.
 
 Management
has concluded that it is reasonably possible that the unrecognized tax benefits
will decrease by approximately $1.4 million within the next 12
months.  The decrease is primarily related to federal and state taxes
that may be settled or have expiring statutes of limitations.
 
 17.           Stockholders’
Equity
 
 The following table describes the 2008
activity in the Company’s Stockholders’ Equity accounts for the three-months
ended March 31, 2008:
 
 (in thousands, except share amounts)
              
              Common
      Stock
              
              
              Additional
      Paid-In
                Capital
              
              
              Accumulated
      earnings
              
              
              Comprehensive
                Income
              
              
              Accumulated
      Other Comprehensive Losses (1)
              
              
              TotalBalance
      at December 31, 2007
              
              
              32
              
              
              $
              362,116
              
              
              $
              121,811
              
              
              
              --
              
              
              
              (6,493
              )
              
              
              477,466Net
      income
              
              
              
              
              
              
              
              
              
              
              8,044
              
              
              $
              8,044
              
              
              
              
              
              
              
              8,044Net
      change in effective portion of
                derivative,
      net of taxes
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (7,418
              )
              
              
              (7,418
              )
              
              
              (7,418
              )Foreign
      currency translation
                Adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (96
              )
              
              
              (96
              )
              
              
              (96
              )$
              530Restricted
      stock expense
              
              
              
              
              
              
              1,381
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,381Withholding
      shares for taxes
              
              
              
              
              
              
              (1,025
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,025
              )Tax
      benefit from exercise of
                employee
      stock options and vesting
                of
      restricted stock
              
              
              
              
              
              
              372
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              372Proceeds
      from exercise of stock
                Options
              
              
              
              
              
              
              1,357
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,357Stock
      option expense
              
              
              
              
              
              
              1,148
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,148Issuance
      of shares in connection with
                Acquisitions
              
              
              1
              
              
              
              15,618
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15,619Balance
      at March 31, 2008
              
              
              33
              
              
              $
              380,967
              
              
              $
              129,855
              
              
              
              
              
              
              $
              (14,007
              )
              
              $
              496,848
 
 (1) As of
March 31, 2008 Accumulated Other Comprehensive Losses consists of a $0.7 million
gain on currency translation fluctuations in our foreign bank accounts remaining
from the divestitures of our European business units, from continuing operations
of our UK, France, German and Canadian subsidiaries, and  equity
investments and minority interests in our foreign business units as well as
other comprehensive losses of approximately $14.7 million, net of taxes, that
relates to the effective portion of the Company’s derivative instruments, as
described in Note 13.
 
 18.           Discontinued
Operations:
 
 For the
three months ended March 31, 2008 and 2007, earnings from discontinued
operations, net of taxes, were negligible and approximately $0.1 million,
respectively.  The gains on disposals of discontinued operations
consisted of contingency payments due from the Company’s previously-divested
Germany-based unit.
 
 
 
 19.           Related
Parties:
 
 inVentiv
Communications’ leases its current headquarters facility in Westerville, Ohio
from Lexington MLP Westerville L.P.  Prior to May 15, 2007, this
facility was partially owned by R. Blane Walter, the Company’s President (who is
also a member of the Board of Directors), his brothers and other current
employees of inVentiv Communications.  The term of the lease is
fifteen years, and expires on March 31, 2015.
 
 Several inVentiv business units provided services to Cardinal Health, Inc.
("Cardinal") during 2007.  Payments from Cardinal totaled
approximately $0.7 million for 2007.  Robert Walter, who is the father
of R. Blane Walter, our President, served as Executive Chairman, and
subsequently as an Executive Director, of Cardinal during 2007.  R.
Blane Walter and his immediate family members (including Robert Walter) and
related trusts own approximately 3% of the outstanding capital stock of
Cardinal.
 
 inVentiv's Promotech business unit purchased warehouse consulting and
procurement services from South Atlantic Systems ("SAS") during 2007. The
contractual arrangements with SAS, which will continue to be performed during
2008, provide for total expected payments of approximately $0.8
million.  Mark Teixeira, who is the brother-in-law of David Bassin,
our Chief Financial Officer, is the General Manager for South Atlantic Systems
and was granted an 11.6% equity interest in SAS as of December 31,
2007.
 
 20.           Segment
Information:
 
 The
Company currently manages four operating segments: inVentiv Clinical, inVentiv
Communications, inVentiv Commercial and inVentiv Patient Outcomes, and its
non-operating reportable segment, “Other”, which is based on the way management
makes operating decisions and assesses performance.  As mentioned in
Note 1, the Company added a fourth segment after the acquisition of AWAC,
realigned certain existing divisions, and has reclassified its segment reporting
to conform to the current segment structure in accordance with SFAS No. 131,
Disclosures about Segments of
an Enterprise and Related Information.  The following
represents the Company’s reportable segments as of March 31, 2008:
 
 ·
              inVentiv
      Clinical, which provides services related to permanent placement,
      clinical staffing, data collection and management and functional service
      provision primarily in support of pharmaceutical clinical
      development.
 
 ·
              inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.
 
 ·
              inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.
 
 ·
              inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease
management.
 
 ·
              Other, which
      encompasses the activities of the corporate management
    group.
 
 The
following segment information has been prepared as if our Patient Outcomes
segment and the segment realignment described above had been in effect from
January 1, 2007:
 
 Three-months
ended March 31, 2008 (in thousands):
 
 inVentiv
                Clinical
              
              
              inVentiv
      Communications
              
              
              inVentiv
      Commercial
              
              
              inVentiv
      Patient Outcomes
              
              
              Other
              
              
              TotalRevenues
              
              $
              52,186
              
              
              $
              88,494
              
              
              $
              93,724
              
              
              $
              29,898
              
              
              $
              --
              
              
              $
              264,302Less:
      Intersegment revenues
              
              
              (101
              )
              
              
              (220
              )
              
              
              (1,660
              )
              
              
              --
              
              
              
              --
              
              
              
              (1,981
              )Reported
      Revenues
              
              $
              52,085
              
              
              $
              88,274
              
              
              $
              92,064
              
              
              $
              29,898
              
              
              $
              --
              
              
              $
              262,321Depreciation
      and amortization
              
              
              547
              
              
              
              2,519
              
              
              
              4,231
              
              
              
              1,301
              
              
              
              12
              
              
              
              8,610Interest
      expense
              
              
              --
              
              
              
              17
              
              
              
              429
              
              
              
              1
              
              
              
              5,935
              
              
              
              6,382Interest
      income
              
              
              49
              
              
              
              235
              
              
              
              --
              
              
              
              17
              
              
              
              529
              
              
              
              830Segment
      income (loss) (1)
              
              $
              2,955
              
              
              $
              12,638
              
              
              $
              4,486
              
              
              
              4,764
              
              
              $
              (10,553
              )
              
              $
              14,290
 
 
 Three-months
ended March 31, 2007 (in thousands):
 
 InVentiv
                Clinical
              
              
              inVentiv
      Communications
              
              
              inVentiv
      Commercial
              
              
              inVentiv
      Patient Outcomes
              
              
              Other
              
              
              TotalRevenues
              
              $
              41,444
              
              
              $
              61,592
              
              
              $
              99,915
              
              
              $
              21,385
              
              
              $
              --
              
              
              $
              224,336Less:
      Intersegment revenues
              
              
              (3
              )
              
              
              (225
              )
              
              
              (2,153
              )
              
              
              --
              
              
              
              --
              
              
              
              (2,381
              )Reported
      Revenues
              
              $
              41,441
              
              
              $
              61,367
              
              
              $
              97,762
              
              
              $
              21,385
              
              
              $
              --
              
              
              $
              221,955Depreciation
      and amortization
              
              
              441
              
              
              
              1,080
              
              
              
              3,615
              
              
              
              537
              
              
              
              22
              
              
              
              5,695Interest
      expense
              
              
              --
              
              
              
              2
              
              
              
              501
              
              
              
              1
              
              
              
              3,058
              
              
              
              3,562Interest
      income
              
              
              21
              
              
              
              208
              
              
              
              14
              
              
              
              19
              
              
              
              577
              
              
              
              839Segment
      income (loss) (1)
              
              $
              1,851
              
              
              $
              8,404
              
              
              $
              8,436
              
              
              $
              3,571
              
              
              $
              (6,444
              )
              
              $
              15,818
 
 (1)
              Income
      from continuing operations before income tax provision, minority interest
      in income of subsidiary and gain (loss) from equity
      investments
 
  (in
      thousands)
              
              March
      31, 2008
              December
      31, 2007Total
      Assets:inVentiv
      Clinical
              
              $
              129,464
              $
              $127,426inVentiv Communications
              
              
              506,876
              
              513,079inVentiv
      Commercial
              
              
              176,064
              
              183,787inVentiv Patient Outcomes
              
              
              199,255
              
              198,141Other
              
              
              66,794
              
              88,423Total
      assets
              
              $
              1,078,453
              $
              $1,110,856
   7
  ITEM
2.                     Management's Discussion and Analysis
of Financial Condition and Results of Operations
 
 This
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements, accompanying notes and other financial information included in the
Annual Report on Form 10-K for the year ended December 31, 2007.
 
 Overview
 
 inVentiv
Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
leading provider of value-added services to the pharmaceutical, life sciences
and healthcare industries. We support a broad range of clinical development,
communications and commercialization activities that are critical to its
customers' ability to complete the development of new drug products and medical
devices and successfully commercialize them.  In addition, we provide
medical cost containment services to payors in our patient outcomes
business.  Our goal is to assist our customers in meeting their
objectives by providing our services in each of our operational areas on a
flexible and cost-effective basis. We provide services to over 350 client
organizations, including all top 20 global pharmaceutical companies, numerous
emerging and specialty biotechnology companies and third party
administrators.
 
 Our
service offerings reflect the changing needs of our clients as their products
move through the late-stage development and regulatory approval processes and
into product launch and then throughout the product lifecycle. We have
established expertise and leadership in providing the services our clients
require at each of these stages of product development and commercialization and
seek to address their outsourced service needs on a comprehensive basis
throughout the product life cycle.  For payors, the Company provides a
variety of services that enhance savings and improve patient outcomes including
opportunities to address billing errors, additional discounts and treatment
protocols for patients.
 
 Business
Segments
 
 We
currently serve our clients primarily through four business segments, which
correspond to our reporting segments for 2008:
 
 ·
              inVentiv
      Clinical, which provides professional resourcing and services to
      the pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management.   inVentiv
      Clinical consists of the Smith Hanley group of companies (which includes
      Smith Hanley Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”)
      and MedFocus), HHI Clinical & Statistical Research Services (“HHI”),
      and Synergos, LLC (“Synergos”)).
 
 ·
              inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”) (acquired in March
      2007), Chamberlain Communications Group, Inc. (“Chamberlain”) (acquired in
      March 2007), Addison Whitney (acquired in June 2007) and Chandler Chicco
      Agency (“CCA”) (acquired in July
2007).
 
 ·
              inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.  This segment includes inVentiv Strategy
      & Analytics and inVentiv Selling
  Solutions.
 
 ·
              inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease management. This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute (“TTI”) and AWAC LLC
(“AWAC”).
 
 The
success of our business as a whole, and of our inVentiv Clinical, inVentiv
Commercial and inVentiv Patient Outcomes segments in particular, is related
significantly to the degree to which pharmaceutical companies outsource services
that have traditionally been performed internally by fully integrated
manufacturers.  We believe that our business has been positively
affected by a trend of large pharmaceutical manufacturers toward utilizing
outsourcing arrangements as a means of controlling variable unit cost and
increasing flexibility.  We also believe that the significant
percentage of New Drug Application (“NDA”) and New Molecular Entity (“NME”)
approvals attributable to small and mid-tier pharmaceutical and biotechnology
companies presents an opportunity for companies providing outsourced services
because these companies often prefer to employ high-quality, third party service
providers (either directly or in co-promotion situations with pharmaceutical
partners) to effect critical late-stage developmental and commercialization
functions.  We therefore target a broad spectrum of companies within
the pharmaceutical industry in seeking to develop business
opportunities.
 
 Our
strategy relies on both internal growth and acquisitions to meet our growth
objectives.  Our businesses have generated strong revenue growth for
the past several years.  Our internal revenue growth reflects our
strong track record in winning new business, which in turn is enhanced by our
pursuit of cross-servicing opportunities within and across our business
segments.  Furthermore, although our revenues are generally received
under contracts with limited terms and that can be terminated at the client’s
option on short notice, we have been successful historically in obtaining
increasing amounts of repeat business from many of our clients and in expanding
the scope of the services we provide to them and thereby sustaining multi-year
relationships with many of our clients.
 
 We seek
out acquisitions in order to fill strategic gaps, selectively strengthen
existing franchises, further strengthen and broaden our clinical,
communications, commercial and/or patient outcomes capabilities, add
complementary client relationships and bring on board additional management
talent.  We believe that our track record to-date in identifying,
negotiating, closing and integrating strategic, accretive acquisitions has been
successful.  Acquisitions contributed significantly to our
quarter-over-quarter growth for the three-month periods ended March 31, 2008 and
2007.
 
 
 Acquisitions
and Divestitures
 
 Strategic
acquisitions are one core element of our business strategy. We believe that our
expertise in identifying potential acquisition targets, assessing their
importance to our operational and growth objectives, diligencing and completing
the acquisition of appropriate businesses and effectively integrating them with
our existing operations is a significant competitive
advantage.   The following is a summary of our acquisitions to
date:
 
 Acquisition
              Type
      of Business
              Segment
      (“inVentiv”)
              Headquarters
      Location
              Month
      AcquiredChandler
      Chicco Agency
              Public
      relations
              Communications
              New
      York
              July
      2007AWAC
              Medical
      cost containment services
              Patient
      Outcomes
              Georgia
              July
      2007Addison
      Whitney
              Global
      branding consultancy
              Communications
              North
      Carolina
              June
      2007Strategyx
              Strategic
      consulting
              Commercial
              New
      Jersey
              June
      2007Ignite
      Health
              Interactive
      communications agency
              Communications
              California
              March
      2007Chamberlain
              Public
      relations
              Communications
              New
      York
              March
      2007MedConference
              Virtual
      event services
              Commercial
              Pennsylvania
              November
      2006DialogCoach
              Education
      and training
              Commercial
              Pennsylvania
              November
      2006JSAI
              Marketing
      and communications agency
              Communications
              Ontario,Canada
              April
      2006Synergos
              Clinical
      trial management services
              Clinical
              Texas
              April
      2006Adheris
              Patient
      pharmaceutical compliance
              Patient
      Outcomes
              Massachusetts
              February
      2006inVentiv
      Communications, Inc.
              Advertising
      and communications services
              Communications
              Ohio
              October
      2005PRS
              Regulatory
      compliance
              Commercial
              Pennsylvania
              August
      2005HHI
              Data
      management and statistical analyses
              Clinical
              Maryland
              November
      2004Smith
      Hanley
              Contract
      staffing and clinical trial support
              Clinical
              Connecticut
              October
      2004Franklin
              Patient
      support programs
              Patient
      Outcomes
              New
      Jersey
              June
      2004
 
 Our
acquisition activity adds complexity to the analysis of period-to-period
financial results and makes direct comparison of those financial results
difficult.  Our acquisitions are accounted for using purchase
accounting and the financial results of the acquired businesses are included in
our consolidated financial statements from their acquisitions
dates.  A prior year period that ended before an acquisition was
completed, however, will not include the corresponding financial results of the
acquired business.
 
 International
Operations
 
 As part
of the acquisition of inVentiv Communications, Inc. in October 2005, we added
that company's United Kingdom-based operations.  As part of the
acquisition of CCA in July 2007, we added CCA’s operations in the United Kingdom
and France.  These units collectively provide advertising, marketing
and public relations services to clients throughout Europe.  In April
2006, we acquired JSAI, a leading healthcare marketing and communications agency
in Canada.
 
 In
December 2007, we increased our investment interest from 44% to 85% in Angela
Liedler GmbH (“Liedler”), a provider of communication and marketing services for
medical and pharmaceutical products, located in Germany.  We accounted
for Liedler as an equity investment until the date of the acquisition of the
additional interest, and then consolidated its results thereafter.  We
also have a 15% ownership interest in Heart Reklambyra AB (“Heart”), an
advertising agency located in Sweden, which we account for by using the equity
method of accounting.  Neither investment is material to the overall
consolidated financial statements.
 
 In
addition to our fully-owned international operations and our minority ownership
interests, we have within GSW Worldwide and within CCA an established network of
over a dozen international affiliate relationships, which do not involve
any  equity interest in those affiliates, that help support our client
needs in additional international markets.
 
 Critical
Accounting Policies
 
 The Company’s critical accounting
policies are set forth in its Annual Report on Form 10-K for the year ended
December 31, 2007.  There has been no change, update or revision to
the Company’s critical accounting policies subsequent to the filing of the
Company’s Form 10-K for the year ended December 31, 2007.
 
 
 
 
  8
  Three-Months
Ended March 31, 2008 Compared to Three-Months Ended March 31, 2007
 
 Results
of Operations
 
 The
following sets forth, for the periods indicated, certain components of our
operating earnings, including such data stated as percentage of
revenues:
 
 (in
      thousands, except for per share data)
              
              For
      the Three-Months Ended March 31,2008
              
              
              2007Revenues:
              
              
              
              
              Percentage
      (1)
              
              
              
              
              
              Percentage(1)inVentiv
      Clinical
              
              $
              52,085
              
              
              
              19.9
              %
              
              $
              41,441
              
              
              
              18.7
              %inVentiv
      Communications
              
              
              88,274
              
              
              
              33.6
              %
              
              
              61,367
              
              
              
              27.7
              %inVentiv
      Commercial
              
              
              92,064
              
              
              
              35.1
              %
              
              
              97,762
              
              
              
              44.0
              %inVentiv
      Patient Outcomes
              
              
              29,898
              
              
              
              11.4
              %
              
              
              21,385
              
              
              
              9.6
              %Total
      revenues
              
              
              262,321
              
              
              
              100.0
              %
              
              
              221,955
              
              
              
              100.0
              %Cost
      of services (1)
      (2):inVentiv
      Clinical
              
              
              36,529
              
              
              
              70.1
              %
              
              
              29,032
              
              
              
              70.1
              %inVentiv
      Communications
              
              
              49,595
              
              
              
              56.2
              %
              
              
              41,007
              
              
              
              66.8
              %inVentiv
      Commercial
              
              
              75,657
              
              
              
              82.2
              %
              
              
              79,720
              
              
              
              81.5
              %inVentiv
      Patient Outcomes
              
              
              18,492
              
              
              
              61.9
              %
              
              
              13,069
              
              
              
              61.1
              %Total
      cost of services
              
              
              180,273
              
              
              
              68.7
              %
              
              
              162,828
              
              
              
              73.4
              %Selling,
      general and administrative expenses
              
              
              62,206
              
              
              
              23.7
              %
              
              
              40,586
              
              
              
              18.3
              %Total
      operating income
              
              
              19,842
              
              
              
              7.6
              %
              
              
              18,541
              
              
              
              8.3
              %Interest
      expense
              
              
              (6,382
              )
              
              
              (2.4
              )%
              
              
              (3,562
              )
              
              
              (1.6
              )%Interest
      income
              
              
              830
              
              
              
              0.3
              %
              
              
              839
              
              
              
              0.4
              %Income
      from continuing operations before income tax provision,
                minority
      interest in income of subsidiary and (loss) income from
equity
                investments
              
              
              14,290
              
              
              
              5.5
              %
              
              
              15,818
              
              
              
              7.1
              %Income
      tax provision
              
              
              (5,642
              )
              
              
              (2.2
              )%
              
              
              (5,414
              )
              
              
              (2.4
              )%Income
      from continuing operations before minority interest in
                income
      of subsidiary and (loss) income from equity investments
              
              
              8,648
              
              
              
              3.3
              %
              
              
              10,404
              
              
              
              4.7
              %Minority
      interest in income of subsidiary
              
              
              (576
              )
              
              
              (0.2
              %)
              
              
              (255
              )
              
              
              (0.1
              )%(Loss)
      income from equity investments
              
              
              (40
              )
              
              
              --
              
              
              
              235
              
              
              
              0.1
              %Income
      from continuing operations
              
              
              8,032
              
              
              
              3.1
              %
              
              
              10,384
              
              
              
              4.7
              %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
              
              
              12
              
              
              
              --
              
              
              
              86
              
              
              
              0.0
              %Income
      from discontinued operations
              
              
              12
              
              
              
              --
              
              
              
              86
              
              
              
              0.0
              %Net
      income
              
              $
              8,044
              
              
              
              3.1
              %
              
              $
              10,470
              
              
              
              4.7
              %Earnings
      per share:Continuing
      operations:Basic
              
              $
              0.25
              
              
              
              
              
              
              $
              0.34Diluted
              
              $
              0.24
              
              
              
              
              
              
              $
              0.33Discontinued
      operations:Basic
              
              $
              0.00
              
              
              
              
              
              
              $
              0.00Diluted
              
              $
              0.00
              
              
              
              
              
              
              $
              0.01Net
      earnings:Basic
              
              $
              0.25
              
              
              
              
              
              
              $
              0.34Diluted
              
              $
              0.24
              
              
              
              
              
              
              $
              0.34
 (1)
              Cost
      of services is expressed as a percentage of segment
      revenue.  All other line items are displayed as a percentage of
      total revenues.
 (2)
              Cost
      of services includes reimbursed out of pocket
  expenses.
  9
  
 Revenues:
Revenues increased by approximately $40 million, or 18%, to $262 million during
the first quarter of 2008, from $222 million during the first quarter of 2007.
Net revenues increased by approximately $49 million, or 28%, to $225 million
during the first quarter of 2008, from $176 million in the first quarter of
2007.
  inVentiv
Clinical’s revenues were $52 million during the first quarter of 2008, an
increase of $11 million compared to $41 million during  the first
quarter of 2007.  inVentiv Clinical revenues accounted for 20% of
total inVentiv revenues during the first quarter of 2008.  Revenues in
inVentiv Clinical were higher in 2008 predominantly due to increased placement
of temporary personnel and increased traction in functional
outsourcing.
  inVentiv
Communications’ revenues were $88 million during the first quarter of 2008, an
increase of $27 million or 44% from the first quarter of
2007.  inVentiv Communications’ revenues accounted for 34% of total
inVentiv revenues during the first quarter of 2008.  The majority of
this increase is due to the incremental revenue relating to the acquisitions of
Ignite, Chamberlain, Addison Whitney and CCA, supplemented by organic growth
from new wins with both existing and new clients.
 
 inVentiv
Commercial’s revenues were $92 million during the first quarter of 2008, an
decrease of $6 million, or 6% from the first quarter of
2007.  inVentiv Commercial revenues accounted for 35% of total
inVentiv revenues for the first quarter of 2008.  The decrease in
revenues was mainly due to select client wind-downs in 2007; however, we have
secured and are in active discussion on additional sales force opportunities
with several other clients, building on our strong track record in successfully
redeploying sales teams.
 
 inVentiv
Patient Outcomes’ revenues were $30 million during the first quarter of 2008, up
$9 million from the first quarter of 2007.  Growth in the segment was
both organic as well as from the addition of AWAC. The inVentiv Patient Outcomes
segment, which was formed in August 2007, more closely links our various
patient-oriented business units, including Adheris, which was formerly reported
in the Communications’ segment, Franklin’s patient assistance and reimbursement
offerings, which was formerly reported in the Commercial segment, and The
Therapeutics Institute’s clinical education services which was formerly reported
in the Commercial segment, as well as AWAC, which the Company acquired in July
2007.
 
 
 Cost of
Services: Cost of services increased by approximately $17 million or 10%,
to $180 million during the first quarter of 2008 from $163 million in the first
quarter of 2007.  Cost of services as a percentage of revenues was 69%
and 73% during the first quarter of 2008 and 2007, respectively.
 
 inVentiv
Clinical’s cost of services increased by approximately $8 million, or 28%, to
$37 million during the first quarter of 2008 from $29 million during the first
quarter of 2007.  Cost of services as a percentage of revenues was 70%
during the first quarter of 2008 and 2007.
 
 inVentiv
Communications’ cost of services increased by 22% to $50 million during the
first quarter of 2008 when compared to the first quarter of
2007.  Most of this variance is due to new acquisitions as described
above in Revenues.  Cost of
services as a percentage of the segment’s revenues decreased from 67% during the
first quarter of 2007 to 56% during the first quarter of 2008, mainly due to the
acquisition of higher gross margin businesses in 2007.
 
 Cost of
services at inVentiv Commercial decreased by approximately $4 million, or 5%, to
$76 million in the first quarter of 2008, mainly due to the decrease in
revenues.  Cost of services was 82% of inVentiv Commercial’s revenues
during the first quarter of 2008 and 2007.
 
 inVentiv
Patient Outcomes cost of services increased by approximately $5 million, or 38%,
to $18 million in the first quarter of 2008 from $13 million during the first
quarter of 2007, mainly due to the acquisition of AWAC, and increased organic
business, as mentioned above.
 
 Selling, General
and Administrative Expenses (“SG&A”): SG&A expenses increased by
approximately $21 million, or 51%, to $62 million during the first quarter of
2008 from $41 million during the first quarter of 2007, mainly due to increased
acquisitions in 2007.
  SG&A
expenses at inVentiv Clinical were approximately $13 million during the first
quarter of 2008, compared to $11 million during the first quarter of 2007 due to
increased selling expense and commissions from additional business and
additional staffing requirements.
   SG&A
expenses at inVentiv Communications increased $14 million to $26 million during
the first quarter of 2008.  New acquisitions contributed to most of
this increase.
   SG&A
expenses at inVentiv Commercial increased by approximately $2 million to $11
million during the first quarter of 2008 from $9 million during the first
quarter of 2007.  SG&A increased due to annual increases in equity
and non-equity compensation, and SG&A from the new inVentiv Commercial
divisions acquired during the second quarter of 2007.
   SG&A
expenses at inVentiv Patient Outcomes increased by $2 million to $7 million
during the first quarter of 2008, mainly due to the acquisition of
AWAC.
   Other
SG&A was approximately $5 million for the first quarter of 2008, an increase
of approximately $1 million from the first quarter of 2007.  The
increase was mainly related to annual increases in equity and non-equity
compensation expense from the previous year, inclusive of changes resulting from
the overall restructuring of our business and segment structure in August
2007.
   Interest
Expense:Interest expense increased by approximately $3
million, or 75%, from the first quarter of 2007 to the first quarter of 2008,
mainly due to higher interest on the additional $166 million borrowed in the new
Credit Agreement entered into in July 2007, as more fully explained in Liquidity and Capital
Resources.
  Provision for
Income Taxes: The effective tax rate for the quarter ended March 31, 2008
was 41.3%.   In March 2007, the Company recorded a tax benefit of
approximately $1.0 million related to federal tax benefits of state tax
reserves. Excluding this one-time tax benefit, inVentiv recorded a provision for
income taxes on continuing operations using an estimated effective tax rate of
40.7% for the quarter ended March 31, 2007.  The Company’s current
effective tax rate is based on current projections for earnings in the tax
jurisdictions in which inVentiv does business and is subject to taxation. The
Company’s effective tax rate could fluctuate due to changes in earnings between
operating entities and related tax jurisdictions.
 
 
 Net Income and
Earnings Per Share (“EPS”): inVentiv’s net income
decreased by approximately $2 million to $8 million during the first quarter of
2008 when compared to the first quarter of 2007.  Diluted earnings per
share decreased to $0.24 per share during the first quarter of 2008 from $0.34
per share during the first quarter of 2007.  EPS and net income decreased
between quarters mainly because of $3 million of additional interest expense
relating to the increased borrowings for the acquisitions in 2007; $1 million of
tax benefit recorded during the first quarter of 2007, but not 2008; and
increased shares outstanding between the first quarter of 2007 and the first
quarter of 2008 resulting from new acquisitions and equity earnout
payments.
  10
  Liquidity
and Capital Resources
 
 At March
31, 2008, inVentiv had $48 million of unrestricted cash and equivalents, a
decrease of $3 million from December 31, 2007.  For the three-months
ended March 31, 2007 compared to March 31, 2008, cash provided by operations
increased by $17 million from a use of $7 million to a source of $10
million.  Cash used in investing activities decreased from $50 million
to $8 million for the three-months ended March 31, 2007 and 2008,
respectively.  Cash provided by financing activities decreased from a
source of $23 million to a use of $5 million over the same comparative
periods.
 
 Cash
provided by operations was $10 million during the three-months ended March 31,
2008, while cash used in operations was $7 million in the three-months ended
March 31, 2007.  This increase was, in large part, due to the timing
of receivables and unbilled services across our segments.  In addition, $5
million of a former shareholder receivable was satisfied pursuant to the
inVentiv Communications Inc. acquisition related incentive plan.
 
 Cash used
in investing activities was $8 million for the three-months ended March 31, 2008
compared to $50 million used during the same period in 2007.  During
the three months ended March 31, 2007, the Company paid approximately $25
million of cash, net of cash acquired, for the acquisitions of Ignite and
Chamberlain and approximately $21 million of cash relating to earnout
contingency payments from previous acquisitions.  During the three
months ended March 31, 2008, approximately $16 million of cash related to
earnout contingency payments from previous acquisitions.  During the
three months ended March 31, 2008, the Company also received proceeds of $15
million from our investment in the Columbia Strategic Cash Portfolio (“CSCP”),
with a balance remaining of $29 million at March 31, 2008.
 
 Cash used
in financing activities was $5 million for the three-months ended March 31,
2008, compared to $23 million provided by financing activities for the
three-months ended March 31, 2007.  During the three months ended
March 31, 2007, $25 million was borrowed from the existing October 2005 credit
facility, which was subsequently refinanced in July 2007 as described below, to
help finance the Ignite and Chamberlain acquisitions and 2006 earnout payments
from past acquisitions.  The Company had sufficient cash to pay the
2007 earnouts without additional financing, and thus, was the main factor in the
decrease in cash provided by financing activities between the respective
periods.
 
 Our
principal external source of liquidity is our syndicated, secured credit
agreement, which we entered into with UBS AG, Stamford Branch, and others in
connection with the inVentiv Communications, Inc. acquisition.  On
July 6, 2007, we amended this credit facility and in connection therewith
entered into an Amended and Restated Credit Agreement with UBS AG, Stamford
Branch and the other lenders party to the credit facility.  The key
features of the Amended and Restated Credit Agreement are as
follows:
  ·
              A
      $330 million term loan facility was made available to inVentiv in a single
      drawing, which was used to
   ·
              refinance
      the existing October 2005 credit facility, which had a remaining balance
      of  $164 million, and
   ·
              fund
      the acquisitions of CCA and AWAC and pay the fees associated with the new
      credit facility, with the balance retained by inVentiv as working
      capital.
  The
credit agreement also included up to $20 million in additional term loans
(“delayed draw term loans”) that was to be advanced no later than January 6,
2008.  The Company elected not to draw additional amounts under the
agreement.  The agreement also contains a $50 million revolving credit
facility, of which $10 million is available for the issuance of letters of
credit, and a swingline facility.  The term loan will mature on the
seventh anniversary of the Amended and Restated Credit Agreement, with scheduled
amortization of 1% per year during years one through six and 94% during year
seven.  The revolving loans will mature on the sixth anniversary of
the Amended and Restated Credit Agreement.
 ·
              Amounts
      advanced under the credit agreement must be prepaid with a percentage,
      determined based on a leverage test set forth in the credit agreement, of
      Excess Cash Flow (as defined in the credit agreement) and the proceeds of
      certain non-ordinary course asset sales and certain issuances of debt
      obligations and 50% of certain issuances of equity securities of inVentiv
      and its subsidiaries, subject to certain exceptions. We may elect to
      prepay the loans, in whole or in part at any time, in certain minimum
      principal amounts, without penalty or premium (other than normal LIBOR
      break funding costs). Amounts borrowed under the Amended and Restated
      Credit Agreement in respect of term loans (including delayed draw term
      loans) that are repaid or prepaid may not be
      reborrowed.  Amounts borrowed under the Amended and Restated
      Credit Agreement in respect of revolving loans may be paid or prepaid and
      reborrowed.
  ·
              Interest
      on the loans accrue, at our election, at either (1) the Alternate Base
      Rate (which is the greater of UBS’s prime rate and federal funds effective
      rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest periods
      determined at our option of 1, 2, 3 or 6 months (or, if the affected
      lenders agree, 9 months), in each case plus a spread based on the type of
      loan and method of interest rate determination
  elected.
   ·
              The
      Amended and Restated Credit Agreement contains, among other things,
      conditions precedent, representations and warranties, covenants and events
      of default customary for facilities of this type. Such covenants include
      certain limitations on indebtedness, liens, sale-leaseback transactions,
      guarantees, fundamental changes, dividends and transactions with
      affiliates. The Amended and Restated Credit Agreement also includes a
      financial covenant under which inVentiv is required to maintain a total
      leverage ratio that does not exceed, as of the last day of any four
      consecutive fiscal quarters, 4.0 to 1.0 through December 31, 2009 and 3.5
      to 1.0 thereafter.
  Effective October 2005, we entered into
a three- year swap arrangement for $175 million to hedge against the original
$175 million loan arrangement entered into to facilitate the acquisition of
inVentiv Communications, Inc. As more fully described in Part I, Item 3 below,
effective September 6, 2007, we entered into a five-year swap arrangement for
$165 million to hedge against the additional credit exposure under the Amended
and Restated Credit Agreement.
 
 We
believe that our cash and equivalents, cash to be provided by operations and
available credit under our credit facility will be sufficient to fund our
current operating requirements over the next 12 months.  However, we
cannot assure you that these sources of liquidity will be sufficient to fund all
internal growth initiatives, investments and acquisition activities that we may
wish to pursue. If we pursue significant internal growth initiatives or if we
wish to acquire additional businesses in transactions that include cash payments
as part of the purchase price, we may pursue additional debt or equity sources
to finance such transactions and activities, depending on market
conditions.  The acquisition agreements entered into in connection
with our 2006 and 2007 acquisitions include earn-out provisions pursuant to
which the sellers will become entitled to additional consideration, which may be
material, if the acquired businesses achieve specified performance
measurements.  See Note 4 to our condensed consolidated financial
statements included in Part I, Item 1 of this Form 10-Q.
 
 
  11
  
 ITEM 3. Quantitative and Qualitative
Disclosures About Market Risk
 
 Long-Term
Debt Exposure
 
 At March
31, 2008, the Company had $327.5 million debt outstanding under its secured term
loan as described under “Liquidity and Capital Resources” in Item 2
above.  The Company will incur variable interest expense with respect
to our outstanding loan.  This interest rate risk may be partially
offset by our derivative financial instrument, as described
below.  Based on our debt obligation outstanding at March 31, 2008, a
hypothetical increase or decrease of 10% in the variable interest rate would
have an immaterial effect on interest expense due to the fixed rate associated
with our derivative financial instruments.
 
 Derivative
Financial Instrument
 
  SFAS
No. 133 “Accounting for Derivative Instruments and Hedging Activities”
(“SFAS 133”), as amended, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires the recording of all
derivatives as either assets or liabilities on the balance sheet measured at
estimated fair value and the recognition of the unrealized gains and losses. We
record the fair market value of our derivatives as other assets and other
liabilities within our consolidated balance sheet. Derivatives that are not part
of hedge relationships are recorded at fair market value on our Consolidated
Balance Sheet with the offsetting adjustment to interest expense on our
Consolidated Income Statement.  For hedge relationships designated as
cash flow hedges under SFAS 133, changes in fair value of the effective portion
of a designated cash flow hedge are recorded to other comprehensive income or
loss; the ineffective portion is recorded to interest expense in our
consolidated income statement.
  We enter into interest rate swaps to manage interest rate risk associated with
debt.
 
 Effective
October 2005, the Company entered into an amortizing three-year interest rate
swap arrangement with a notional amount of $175 million to fix the interest rate
on the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc. The Company entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  At inception, and at least quarterly
thereafter, the Company assesses whether derivatives used to hedge transactions
are highly effective in offsetting changes in the interest cash flows of the
hedged item. To the extent the derivatives instruments are highly effective
hedges, the change in fair value of the effective portion is recorded as a
component of other comprehensive income (loss). To the extent there is any hedge
ineffectiveness, changes in fair value relating to the ineffective portion are
immediately recognized in earnings (interest expense).
 
 From
October 2005 to July 2006, the Company did not designate its original swap
arrangement for hedge accounting and recorded an approximate $2.9 million
reduction to interest expense relating to the mark-to-market adjustment, and a
corresponding derivative asset for approximately $2.9 million, which was
recorded in Deposits and Other Assets on the Condensed Consolidated Balance
Sheet.  The fair value of the swaps represent the estimated amount the
Company would receive or pay to terminate the agreement taking into
consideration the difference between the contract rate of interest and rates
currently quoted for agreements of similar terms and maturities.
 
 On July
17, 2006, the Company formally designated the interest rate swap as a cash flow
hedge pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.  The Company employed the
dollar offset method to assess effectiveness by performing a shock test and
utilized the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement with an inception date of July 17,
2006.  The hypothetical swap had a fair value of zero on the date of
designation and the hedging swap had a fair value of $2.9 million on the date of
designation.  As the swap fair value will decline to zero at maturity,
the $2.9 million of fair value will be recognized in earnings over the remaining
life of the swap as part of the ineffectiveness calculation.  During
the three-months ended March 31, 2008, the fair market value of the original
derivative asset decreased by $1.7 million to a derivative liability of
approximately $2.7 million.  Approximately $0.3 million was recorded
as interest expense, attributable to the financing component embedded within the
interest rate swap, while the remaining $1.4 million ($0.8 million, net of
taxes) was recorded as a decrease to Other Comprehensive Income.
 
 On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount increase to $325 million effective December
31, 2008 to hedge the total outstanding debt notional when the Company’s
original 2005 three-year interest rate swap arrangement described above
expires.  At hedge inception, the Company employed the dollar offset
method by performing a shock test to assess effectiveness and utilized the
hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the original derivative.  As a result of the
hypothetical derivative method, there was no ineffectiveness for the period
ended March 31, 2008, and as a result, $11.2 million ($6.6 million, net of
taxes) was recorded as a decrease to Other Comprehensive Income and an increase
to the swap liability, recorded as Other non-current liabilities in the
Company’s Condensed Consolidated Balance Sheet as of March 31,
2008.
 
 
 Foreign
Currency Exchange Rate Exposure
 
 The
Company is not currently affected by foreign currency exchange rate exposure,
except for any fluctuations in the foreign bank accounts remaining from the
divestitures of our European business units,from continuing operations of
our UK, France and Canadian subsidiaries and equity investments and minority
interests in our foreign business units, which are not material to its
consolidated financial statements.  Our treatment of foreign
subsidiaries is consistent with the guidelines set forth in SFAS 52, Foreign Currency
Translations.   The financial statements of our
subsidiaries expressed in foreign currencies are translated from the respective
functional currencies to U.S. Dollars, with results of operations and cash flows
translated at average exchange rates during the period, and assets and
liabilities translated at end of the period exchange rates.  At March
31, 2008, the accumulated other comprehensive earnings related to foreign
currency translations was approximately $0.7 million.  Foreign
currency transaction gains and (losses) are included in the results of
operations and are not material.
 
  ITEM 4.  Controls and
Procedures
  Based on
their evaluation as of March 31, 2008, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"))) were effective as of March 31, 2008
to provide reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified by the SEC, and that material information relating to the
Company and its consolidated subsidiaries is made known to management, including
the Chief Executive Officer and Chief Financial Officer, particularly during the
period when our periodic reports are being prepared.  There were no
changes in our internal controls over financial reporting during the quarter
ended March 31, 2008 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.
   Our
management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that our Disclosure Controls or our internal control over
financial reporting will prevent or detect all error and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system’s objectives will be met. The
design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to
error or fraud will not occur or that all control issues and instances of fraud,
if any, have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions or deterioration
in the degree of compliance with policies or procedures.
      PART
II.                      OTHER
INFORMATION
 
 ITEM
1.   Legal
Proceedings
 
 Weisz v.
Albertsons, Inc.(San Diego Superior Court
Case No. GIC 830069):  This action was filed on May 17, 2004 in
San Diego Superior Court, California by Utility Consumer Action Network against
Albertsons, Inc. and its affiliated drug store chains and seventeen
pharmaceutical companies.  This complaint alleged, among other claims,
violation of the California Unfair Competition Law and the California
Confidentiality of Medical Information Act (“CMIA”) arising from the operation
of manufacturer-sponsored, pharmacy-based compliance programs similar to
Adheris’ refill reminder programs.  An amended complaint was filed on
November 4, 2004 adding Adheris as a defendant to the lawsuit.  A
subsequent amendment to the complaint substituted Plaintiff Kimberly Weisz
(“Plaintiff”) as the class representative to this purported class
action.
 
 After several rounds of pleading
challenges to Plaintiff’s various renditions of the complaint, all but one
pharmaceutical manufacturing company, AstraZeneca, LP, were dismissed from the
case, leaving only Albertsons, Inc., Adheris, and AstraZeneca as the remaining
defendants (“Defendants”) in this action.  In the latest pleading
challenge to Plaintiff’s Fifth Amended Complaint, the remaining defendants were
successful in eliminating a number of claims, including fraud-based and breach
of privacy claims.  Plaintiff’s class allegations were stricken as
improper with leave to amend.  The operative Sixth Amended Complaint,
which was filed on January 6, 2008, alleges five causes of action against
Defendants.  Three of these claims – violation of the CMIA, breach of
fiduciary duty, and unjust enrichment – are alleged against
Adheris.  Defendants intend to pursue another round of pleading
challenges to strike Plaintiff's claims, including another attempt to strike
Plaintiff's class allegations as improper.  These motions are
scheduled to be heard on May 16, 2008.
 
 Adheris
intends to continue to defend this action vigorously, and we do not believe that
this action will have a material adverse effect on our consolidated balance
sheets, results of operations or cash flows.  It is impossible to
predict the outcome of litigation with certainty, however, and there can be no
assurance that an adverse result in this proceeding would not have a potentially
material adverse effect on our consolidated balance sheets, results of
operations or cash flows.
 
 Our insurer, AIG, is defending this
action under reservation of rights.
  
 Indemnification
Claim.  In January 2008, PRS received a demand for
indemnification from one of its customers relating to a lawsuit filed against
the customer.   The lawsuit seeks class action certification and
brings claims against the customer pursuant to the Telephone Consumer Protection
Act of 1991, as amended by the Junk Fax Prevention Act of 2005, 47 U.S.C. § 227,
a state consumer fraud statute and common law conversion; and seeks statutory
and actual damages allegedly caused by the sending of unsolicited fax
advertisements related to the customer’s product.  PRS assisted the
customer in sending the faxes in question, although the actual faxing was done
by an unaffiliated entity.  The customer based its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS agreed to indemnify the customer on the condition that we
and our appointed counsel would have control over the defense of this
matter.
 
 Our insurer, Chubb Group, is defending
this action under reservation of rights.
 
 With the
exception of the claims described therein, all pending matters are of a kind
routinely experienced in our business and are consistent with our historical
experience.
 
  I TEM
1A.  Risk
Factors
 
 There have been no material changes in
the risk factors discussed in Item 1A of our Form 10-K for the year ended
December 31, 2007.
 
  ITEM 5. Other
Information
 
 Blue Ridge Credit Facility
 
 On February 27, 2008, we entered into
an unsecured credit facility (the "Blue Ridge facility") with Blue Ridge
Investments, L.L.C., an affiliate of Bank of America, N.A.  We entered
into an amendment to the Blue Ridge Facility as of May 7, 2008 that extended the
maturity date of the Blue Ridge Facility from December 1, 2008 to July 1, 2009
(or the day following the redemption of all of our shares of the CSCP, if
earlier).  We have not borrowed any funds under this credit
facility.
 
 Certain Equity Issuances
 
 As of March 27, 2008, in
connection with the payment of the earnout obligation for 2007 under the
purchase agreement relating to our acquisition of Synergos, we issued for the
account of the seller a total of 12,568 unregistered shares of common
stock.
 
 As of April 20, 2008, in connection
with the payment of the earnout obligation for the period ended March 31, 2007
under the purchase agreement relating to our acquisition of Jeffrey Simbrow
Associates ULC, we issued for the account of the sellers a total of 37,135
unregistered shares of common stock.
  The common stock issuances described
above were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.  In each case, there was no
general solicitation or advertising and the number of recipients of such
unregistered shares was limited and/or sophisticated.
 
 
  12
  
 ITEM
6.                   Exhibits
 
 10.26
              
              Letter
      Agreement dated February 27, 2008 between Blue Ridge Investments, L.L.C.
      and inVentiv Health, Inc., as amended by letter amendment dated May 7,
      200831.1
              
              Certification
      by the Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
              
              Certification
      by the Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
              
              Chief
      Executive Officer’s Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              
              Chief
      Financial Officer’s Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002
  
 
  13
  
 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.
 
 
 INVENTIV
      HEALTH, INC.Date:
      May 12, 2008
                By:
                /s/ David
      S. BassinName:
      David S. BassinTitle:
      Chief Financial Officer