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 June 30, 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
July 31, 2008, there were 33,213,323 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 June 30, 2008
      (unaudited) and December 31, 2007Condensed Consolidated Income Statements for the three and
      six-months ended June 30, 2008 and 2007 (unaudited)Condensed Consolidated Statements of Cash Flows for the
      six-months ended June 30, 2008 and 2007 (unaudited)Notes
      to unaudited Condensed Consolidated Financial StatementsITEM 2. Management's Discussion and Analysis of
      Financial Condition and Results of OperationsITEM 3. Quantitative and Qualitative Disclosures
      About Market RiskITEM 4. Controls and ProceduresPART
      II. OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 1A. Risk FactorsITEM 4. Submission of Matters to a Vote of
      Security HoldersITEM 5. Other InformationITEM 6. ExhibitsSIGNATURESEXHIBITS








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
      business strategy, outlook, objectives, plans, intentions and
      goals;


·
            our
      estimates regarding our liquidity, capital expenditures and sources of
      both, and our ability to fund our operations and planned capital
      expenditures for the foreseeable
future;


·
            our
      belief that our growth and success will depend on our ability to continue
      to enhance the quality of our existing services, introduce new services on
      a timely and cost-effective basis, integrate new services with existing
      services, increase penetration with existing customers, recruit, motivate
      and retain qualified personnel and economically train existing sales
      representatives and recruit new sales
  representatives;


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


·
            our
      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;


·
            our
      ability to maintain technological advantages in a variety of functional
      areas, including sales force automation, electronic claims surveillance
      and patient compliance;


·
            the
      actual impact of the adoption of certain accounting
    standards;


·
              changes
      in trends in the pharmaceutical industry 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
CONSOLIDATEDBALANCE SHEETS


(in
thousands, except share and per share amounts)


June
      30,
            
            
            December
      31,2008
      (unaudited)
            
            
            2007ASSETSCurrent
      assets:Cash
      and equivalents
            
            $
            78,924
            
            
            $
            50,973Restricted
      cash and marketable securities
            
            
            20,007
            
            
            
            47,164Accounts
      receivable, net of allowances for doubtful accounts of $3,141 and $3,098
      atJune
      30, 2008 and December 31, 2007, respectively
            
            
            138,280
            
            
            
            162,198Unbilled
      services
            
            
            113,005
            
            
            
            89,384Prepaid
      expenses and other current assets
            
            
            14,514
            
            
            
            19,836Current
      deferred tax assets
            
            
            3,461
            
            
            
            4,279Total
      current assets
            
            
            368,191
            
            
            
            373,834Property
      and equipment, net
            
            
            58,227
            
            
            
            54,740Equity
      investments
            
            
            342
            
            
            
            309Goodwill
            
            
            383,267
            
            
            
            383,714Other
      intangibles, net
            
            
            280,075
            
            
            
            281,122Deposits
      and other assets
            
            
            23,721
            
            
            
            17,137Total
      assets
            
            $
            1,113,823
            
            
            $
            1,110,856LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
            
            $
            13,596
            
            
            $
            17,464Current
      portion of long-term debt
            
            
            3,300
            
            
            
            3,300Accrued
      payroll, accounts payable and accrued expenses
            
            
            103,119
            
            
            
            138,708Current
      income tax liabilities
            
            
            4,664
            
            
            
            6,814Client
      advances and unearned revenue
            
            
            69,540
            
            
            
            76,696Total
      current liabilities
            
            
            194,219
            
            
            
            242,982Capital
      lease obligations, net of current portion
            
            
            22,232
            
            
            
            20,945Long-term
      debt
            
            
            323,400
            
            
            
            325,050Non-current
      income tax liabilities
            
            
            6,280
            
            
            
            7,323Deferred
      tax liabilities
            
            
            17,162
            
            
            
            13,164Other
      non-current liabilities
            
            
            25,875
            
            
            
            23,766Total
      liabilities
            
            
            589,168
            
            
            
            633,230Commitments
      and contingenciesMinority
      interests
            
            
            505
            
            
            
            160Stockholders’
      Equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atJune
      30, 2008 and December 31, 2007, respectively
            
            
            --
            
            
            
            --Common
      stock, $.001 par value, 50,000,000 shares authorized; 33,161,870 and
      32,325,109Shares
      issued and outstanding at June 30, 2008 and December 31, 2007,
      respectively
            
            
            33
            
            
            
            32Additional
      paid-in-capital
            
            
            386,665
            
            
            
            362,116Accumulated
      other comprehensive losses
            
            
            (5,572
            )
            
            
            (6,493
            )Accumulated
      earnings
            
            
            143,024
            
            
            
            121,811Total
      stockholders’ equity
            
            
            524,150
            
            
            
            477,466Total
      liabilities and stockholders’ equity
            
            $
            1,113,823
            
            
            $
            1,110,856


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





INVENTIV
HEALTH, INC.


CONDENSED CONSOLIDATED INCOME STATEMENTS


(in
thousands, except per share amounts)


(unaudited)





For
      the Three-Months Ended
            
            
            For
      the Six-months EndedJune 30,
            
            
            June
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007Net
      revenues
            
            $
            236,003
            
            
            $
            193,455
            
            
            $
            460,581
            
            
            $
            369,846Reimbursed
      out-of-pockets
            
            
            49,039
            
            
            
            38,979
            
            
            
            86,782
            
            
            
            84,544Total
      revenues
            
            
            285,042
            
            
            
            232,434
            
            
            
            547,363
            
            
            
            454,390Operating
      expenses:Cost
      of services
            
            
            144,786
            
            
            
            122,728
            
            
            
            287,575
            
            
            
            239,901Reimbursable
      out-of-pocket expenses
            
            
            52,950
            
            
            
            40,146
            
            
            
            90,434
            
            
            
            85,801Selling,
      general and administrative expenses
            
            
            59,278
            
            
            
            54,445
            
            
            
            121,484
            
            
            
            95,030Total
      operating expenses
            
            
            257,014
            
            
            
            217,319
            
            
            
            499,493
            
            
            
            420,732Operating
      income
            
            
            28,028
            
            
            
            15,115
            
            
            
            47,870
            
            
            
            33,658Interest
      expense
            
            
            (6,309
            )
            
            
            (3,884
            )
            
            
            (12,691
            )
            
            
            (7,446
            )Interest
      income
            
            
            417
            
            
            
            502
            
            
            
            1,247
            
            
            
            1,342Income
      from continuing operations before income tax provision, minority interest
      in income of subsidiary and income (loss) from equity
      investments
            
            
            22,136
            
            
            
            11,733
            
            
            
            36,426
            
            
            
            27,554Income
      tax provision
            
            
            (8,751
            )
            
            
            (4,445
            )
            
            
            (14,393
            )
            
            
            (9,859
            )Income
      from continuing operations before minority interest in income of
      subsidiary and income (loss) from equity investments
            
            
            13,385
            
            
            
            7,288
            
            
            
            22,033
            
            
            
            17,695Minority
      interest in income of subsidiary
            
            
            (316
            )
            
            
            (234
            )
            
            
            (892
            )
            
            
            (489
            )Income
      (loss) from equity investments
            
            
            6
            
            
            
            111
            
            
            
            (35
            )
            
            
            346Income
      from continuing operations
            
            
            13,075
            
            
            
            7,165
            
            
            
            21,106
            
            
            
            17,552Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            94
            
            
            
            92
            
            
            
            107
            
            
            
            175Net
      income from discontinued operations
            
            
            94
            
            
            
            92
            
            
            
            107
            
            
            
            175Net
      income
            
            $
            13,169
            
            
            $
            7,257
            
            
            $
            21,213
            
            
            $
            17,727Earnings
      per share (see Note 7):Continuing
      operations:Basic
            
            $
            0.40
            
            
            $
            0.23
            
            
            $
            0.64
            
            
            $
            0.57Diluted
            
            $
            0.39
            
            
            $
            0.22
            
            
            $
            0.63
            
            
            $
            0.55Discontinued
      operations:Basic
            
            $
            0.00
            
            
            $
            0.00
            
            
            $
            0.01
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            $
            0.01
            
            
            $
            0.01
            
            
            $
            0.01Net
      income:Basic
            
            $
            0.40
            
            
            $
            0.23
            
            
            $
            0.65
            
            
            $
            0.57Diluted
            
            $
            0.39
            
            
            $
            0.23
            
            
            $
            0.64
            
            
            $
            0.56Weighted
      average common shares outstanding:Basic
            
            
            33,066
            
            
            
            31,336
            
            
            
            32,844
            
            
            
            30,874Diluted
            
            
            33,519
            
            
            
            32,026
            
            
            
            33,349
            
            
            
            31,631





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








INVENTIV
HEALTH, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)


For
      the Six-months EndedJune
      30,2008
            
            
            2007Cash
      flows from operating activities:Net
      income
            
            $
            21,213
            
            
            $
            17,727Income
      from discontinued operations
            
            
            (107
            )
            
            
            (175
            )Income
      from continuing operations
            
            
            21,106
            
            
            
            17,552Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
            
            
            9,476
            
            
            
            8,508Amortization
            
            
            7,433
            
            
            
            3,901Loss
      (income) from equity investments
            
            
            35
            
            
            
            (346
            )Minority
      interest in income of subsidiary
            
            
            892
            
            
            
            489Fair
      market value adjustment on derivative financial instrument
            
            
            660
            
            
            
            (589
            )Deferred
      taxes
            
            
            4,816
            
            
            
            5,851Impairment
      of marketable securities
            
            
            455
            
            
            
            --Stock
      compensation expense
            
            
            5,741
            
            
            
            4,961Tax
      benefit from stock option exercises and vesting of restricted
      shares
            
            
            3,015
            
            
            
            7,892Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
            
            
            23,918
            
            
            
            21,540Unbilled
      services
            
            
            (23,621
            )
            
            
            (14,623
            )Prepaid
      expenses and other current assets
            
            
            5,322
            
            
            
            (6,341
            )Accrued
      payroll, accounts payable and accrued expenses
            
            
            (4,971
            )
            
            
            (1,398
            )Net
      tax liabilities
            
            
            (5,528
            )
            
            
            (5,870
            )Client
      advances and unearned revenue
            
            
            (7,156
            )
            
            
            (9,374
            )Excess
      tax benefits from stock based compensation
            
            
            (669
            )
            
            
            (6,420
            )Other
            
            
            2,481
            
            
            
            (7,705
            )Net
      cash provided by continuing operations
            
            
            43,405
            
            
            
            18,028Net
      cash used in discontinued operations
            
            
            (49
            )
            
            
            (166
            )Net
      cash provided by operating activities
            
            
            43,356
            
            
            
            17,862Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
            
            
            21,605
            
            
            
            (125
            )Investment
      in cash value of life insurance policies
            
            
            (1,681
            )
            
            
            (2,556
            )Cash
      paid for acquisitions, net of cash acquired
            
            
            (3,181
            )
            
            
            (49,524
            )Acquisition
      earn-out payments
            
            
            (16,813
            )
            
            
            (23,055
            )Equity
      investments
            
            
            (68
            )
            
            
            (48
            )Purchases
      of property and equipment
            
            
            (8,973
            )
            
            
            (4,189
            )Proceeds
      from manufacturers rebates on leased vehicles
            
            
            856
            
            
            
            260Net
      cash used in continuing operations
            
            
            (8,255
            )
            
            
            (79,237
            )Net
      cash provided by discontinued operations
            
            
            156
            
            
            
            341Net
      cash used in investing activities
            
            
            (8,099
            )
            
            
            (78,896
            )Cash
      flows from financing activities:Repayments
      on long-term debt
            
            
            (1,650
            )
            
            
            (834
            )Borrowings
      under line of credit
            
            
            --
            
            
            
            20,000Repayments
      on capital lease obligations
            
            
            (6,935
            )
            
            
            (7,456
            )Withholding
      shares for taxes
            
            
            (1,047
            )
            
            
            (661
            )Proceeds
      from exercise of stock options
            
            
            2,130
            
            
            
            5,816Excess
      tax benefits from stock-based compensation
            
            
            669
            
            
            
            6,420Distributions
      to minority interests in affiliated partnership
            
            
            (547
            )
            
            
            (678
            )Net
      cash (used in) provided by continuing operations
            
            
            (7,380
            )
            
            
            22,607Net
      cash (used in) provided by discontinued operations
            
            
            --
            
            
            
            --Net
      cash (used in) provided by financing activities
            
            
            (7,380
            )
            
            
            22,607Effect
      of exchange rate changes
            
            
            74
            
            
            
            60Net
      change in cash and equivalents
            
            
            27,951
            
            
            
            (38,367
            )Cash
      and equivalents, beginning of period
            
            
            50,973
            
            
            
            79,835Cash
      and equivalents, end of period
            
            $
            78,924
            
            
            $
            41,468Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            11,823
            
            
            $
            6,575Cash
      paid for income taxes
            
            $
            12,627
            
            
            $
            11,177Supplemental
      disclosures of non-cash activities:Vehicles
      acquired through capital lease agreements
            
            $
            12,071
            
            
            $
            11,546Stock
      issuance related to acquisitions
            
            $
            17,044
            
            
            $
            34,661





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


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.  The Company’s goal is to assist its 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
accompanying condensed consolidated financial statements.  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;





·
            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 (including its Strategyx business unit acquired in June
      2007) and inVentiv Selling Solutions;
and





·
            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 (acquired in July
  2007).








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.










INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


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 June
30, 2008 and December 31, 2007, the condensed consolidated income statements of
the Company for the three and six months ended June 30, 2008 and 2007 and the
condensed consolidated cash flows for the six-months ended June 30, 2008 and
2007.  Operating results for the three and six months ended June 30,
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 May
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 162 ("SFAS 162"), “The Hierarchy of
Generally Accepted Accounting Principles.” SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP in the United States (the GAAP hierarchy).
This Statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AICPA Codification of Auditing
Standards , AU Section 411, " The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles." The Company does not believe that
SFAS 162 will have a material impact on our Condensed Consolidated
Financial Statements.




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.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


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.





Patient Marketing Group - In
August 2008, the Company completed the acquisition of the net assets of Patient
Marketing Group, Inc. (“PMG”) for approximately $14.5 million in cash, excluding
certain post-closing adjustments and direct acquisition costs yet to be
finalized.  The Company will be obligated to make certain earn-out
payments, which may be material, contingent on PMG’s performance measurements
during 2008 and 2009.  PMG is headquartered in New Jersey and is
a leading provider of patient relationship marketing services.





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.  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.  For the 12-month period ended March 31,
2008, approximately $6.3 million of cash and stock was accrued at June 30, 2008
and paid during the third quarter of 2008.  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.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


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 payments, 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 June
30, 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 June 30, 2008 and December 31, 2007.





The
Company receives cash advances from its clients as funding for specific projects
and engagements. These funds are deposited into segregated bank accounts and
used solely for purposes relating to the designated projects. Although these
funds are not held subject to formal escrow agreements, the Company considers
these funds to be restricted and has classified these balances accordingly. Cash
held in such segregated bank accounts totaled approximately $0.2 million held in
escrow on behalf of clients and was included in restricted cash and marketable
securities at June 30, 2008 and December 31, 2007.




As of
June 30, 2008 and December 31, 2007, the Company had $23.2 million and $45.3
million, respectively, invested in the Columbia Strategic Cash Portfolio
(“CSCP”).  During the second quarter of 2008, based on an update
provided by CSCP, the Company has recorded $5.1 million of the $23.2 million
balance as long-term.  The $5.1 million is classified as deposits and
other assets on the June 30, 2008 Balance Sheet, which is expected to be
distributed after the second quarter of 2009.  As the majority of the
Company’s recorded balances in the CSCP continue to be short-term in nature,
$18.1 million and $45.3 million, respectively,  are classified as
restricted cash and marketable securities on the June 30, 2008 and December 31,
2007 Balance Sheets.  During the first half 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.  Consistent with the Company's
investment policy guidelines, the majority of CSCP investments held by the
Company had AAA/Aaa credit ratings at the time of purchase.




The CSCP
maintained a net asset value of $1 per unit until December 2007, after which the
net asset value per unit fluctuated, 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.










INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


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 periods amounts have not been
restated.  Under this method, the Company is required to record
compensation expense for all awards granted after the date of adoption and for
the unvested portion of previously granted awards that remain outstanding at the
date of adoption.





The
adoption of SFAS 123R resulted in stock-based compensation expense of $3.2
million, of which $0.8 million was recorded in cost of services and $2.4 million
recorded as Selling, General and Administrative expenses (“SG&A”) for the
three months ended June 30, 2008 and $2.5 million, of which $0.7 million was
recorded in cost of services and $1.8 million recorded as SG&A for the three
months ended June 30, 2007. For the six-months ended June 30, 2008, stock-based
compensation expense was $5.7 million, of which $1.3 million was recorded in
cost of services and $4.4 million recorded as SG&A; for the six-months ended
June 30, 2007, stock-based compensation expense was $5.0 million, of which $1.3
million was recorded in cost of services and $3.7 million was recorded as
SG&A.





Stock-based
compensation expense caused income before income tax provision, minority
interest in income of subsidiary and income from equity investments to decrease
by $3.2 million and $2.5 million for the three months ended June 30, 2008 and
2007, respectively, caused net income to decrease by $1.9 million and $1.5
million for the three months ended June 30, 2008 and 2007, respectively, and
caused basic and diluted earnings per share to decrease by $0.06 per share and
$0.05 per share for the three months ended June 30, 2008 and 2007,
respectively.  During the six months ended June 30, 2008 and June 30,
2007 the stock-based compensation expense caused income before income tax
provision, minority interest in income of subsidiary and income from equity
investments to decrease by $5.7 million and $5.0 million, respectively, caused
net income to decrease by $3.4 million and $2.9 million for the six months ended
June 30, 2008 and 2007, respectively, and caused basic and diluted earnings per
share to decrease by $0.10 per share and $0.09 per share for the six months
ended June 30, 2008 and 2007, respectively.





Cash
provided by financing activities increased by $0.7 million and $6.4 million for
the six-months ended June 30, 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
              June
      30,
            Six
      Months Ended
              June
      30,2008
            2007
            2008
            2007Expected
      life of option
            5.5-6
      yrs
            5.5-6
      yrs
            5.5-6
      yrs
            5.5-6
      yrsRisk-free
      interest rate
            3.49%
            --(1)
            3.06%
            4.77%Expected
      volatility
            37%
            40%
            37%
            40%Expected
      dividend yield
            0.00%
            0.00%
            0.00%
            0.00%


(1)In the second quarter of
2007, no options were granted by the Company, hence, the interest rate was not
applicable.








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 six 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 six months ended 2008 and 2007 were 5.46% and
3.34%, respectively.













INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued


Stock Incentive Plan and
Award Activity





The
Company’s 2006 Stock Incentive Plan (“Stock Plan” or “LTIP”) authorizes
incentive stock options, nonqualified stock options, restricted stock awards,
restricted stock units and stock appreciation rights ("SARs”).  Prior
to the adoption of the LTIP, the Company was authorized to grant equity
incentive awards under its 1999 Stock Incentive Plan (together with the LTIP,
the "Equity Incentive Plans"), 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 1.4 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.








The
following table summarizes activity under the Company’s Equity Incentive Plans
for the six months ended June 30, 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
            
            
            261
            
            
            $
            31.37Exercised
            
            
            (151
            )
            
            $
            14.15Forfeited/expired/cancelled
            
            
            (17
            )
            
            $
            26.40Outstanding
      at June 30, 2008
            
            
            1,599
            
            
            $
            21.81
            
            
            
            6.71
            
            
            $
            11,796Vested
      and expected to vest at June 30, 2008
            
            
            1,544
            
            
            $
            21.50
            
            
            
            6.64
            
            
            $
            11,755Options
      exercisable at June 30, 2008
            
            
            850
            
            
            $
            16.41
            
            
            
            5.32
            
            
            $
            9,859




The
weighted-average grant-date fair value of stock options granted during the
three-months ended June 30, 2008 was $11.97 per share.  No stock options
were granted during the three-months ended June 30, 2007.  The
weighted-average grant-date fair value of stock options granted during the
six-months ended June 30, 2008 and 2007 was $12.83 and $16.25 per share,
respectively.   The total intrinsic value of options exercised
during the three-months ended June 30, 2008 and 2007 was $0.8 million and $4.2
million, respectively, and was $2.1 million and $5.8 million during the
six-months ended June 30, 2008 and 2007, respectively.  As of June 30,
2008 and December 31, 2007, there was approximately $6.8 million and $6.6
million, respectively, of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Stock Plan;
that cost is expected to be recognized over a weighted average of 2.5 years and
2.2 years, respectively.




The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled $0.4 million and $4.5 million for the
three months ended June 30, 2008 and 2007, respectively, and totaled $1.0
million and $4.5 million for the six-months ended June 30, 2008 and 2007,
respectively.




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$1.66
            To
            $8.45
            224,449
            $6.86
            3.33
            224,449
            $6.86$9.15
            To
            $15.48
            34,041
            $13.00
            5.89
            27,791
            $12.51$15.96
            To
            $15.96
            262,500
            $15.96
            6.23
            212,500
            $15.96$16.89
            To
            $17.75
            263,053
            $17.39
            4.67
            181,413
            $17.50$18.20
            To
            $26.76
            198,623
            $24.92
            7.31
            88,125
            $24.80$26.77
            To
            $26.77
            180,000
            $26.77
            7.96
            90,000
            $26.77$28.66
            To
            $31.45
            124,882
            $29.73
            9.50
            1,800
            $30.64$32.55
            To
            $32.55
            156,891
            $32.55
            9.55
            --
            $--$35.01
            To
            $35.01
            96,822
            $35.01
            8.56
            24,213
            $35.01$37.21
            To
            $37.21
            57,914
            $37.21
            9.01
            --
            $--1,599,175
            
            
            850,291


A summary
of the status and changes of the Company’s nonvested shares related to
its Equity Incentive Plans as of and during the six months ended June 30,
2008 is presented below:





(in
      thousands, except per share amounts)
            
            Shares
            
            
            Weighted
      Average Grant-Date Fair ValueNonvested
      at January 1, 2008
            
            
            596
            
            
            $
            29.41Granted
            
            
            288
            
            
            $
            31.29Released
            
            
            (177
            )
            
            $
            27.48Forfeited
            
            
            (17
            )
            
            $
            30.17Nonvested
      at June 30, 2008
            
            
            690
            
            
            $
            30.66




As of
June 30, 2008 and December 31, 2007, there was approximately $16.1 million and
$12.4 million, respectively, of total unrecognized compensation cost related to
nonvested share-based compensation arrangements granted under the Stock Plan;
that cost is expected to be recognized over a weighted average of 2.9 and 3.0
years, respectively. The total fair value of shares vested during the three and
six months ended June 30, 2008 was $2.3 million and $5.4 million,
respectively.  During the three and six-months ended June 30, 2007 the
amounts were $1.5 million and $4.1 million, respectively.







INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued




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.





A summary
of the computation of basic and diluted earnings per share from continuing
operations is as follows:








Three-Months
      Ended June 30,
            
            
            Six-months
      Ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007(in
      thousands, except per share data)Basic
      EPS from Continuing Operations ComputationIncome
      from continuing operations
            
            $
            13,075
            
            
            $
            7,165
            
            
            $
            21,106
            
            
            $
            17,552Weighted
      average number of common shares outstanding
            
            
            33,066
            
            
            
            31,336
            
            
            
            32,844
            
            
            
            30,874Basic
      EPS from continuing operations
            
            $
            0.40
            
            
            $
            0.23
            
            
            $
            0.64
            
            
            $
            0.57Diluted
      EPS from Continuing Operations ComputationIncome
      from continuing operations
            
            $
            13,075
            
            
            $
            7,165
            
            
            $
            21,106
            
            
            $
            17,552Weighted
      average number of common shares outstanding
            
            
            33,066
            
            
            
            31,336
            
            
            
            32,844
            
            
            
            30,874Stock
      options (1)
            
            
            311
            
            
            
            523
            
            
            
            322
            
            
            
            583Restricted
      stock awards (2)
            
            
            142
            
            
            
            167
            
            
            
            183
            
            
            
            174Total
      diluted common shares outstanding
            
            
            33,519
            
            
            
            32,026
            
            
            
            33,349
            
            
            
            31,631Diluted
      EPS from continuing operations
            
            $
            0.39
            
            
            $
            0.22
            
            
            $
            0.63
            
            
            $
            0.55





(1)   For
the three-months and six-months ended June 30, 2008, 391,306 and 362,267 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.  Similarly, for the three and six months ended June 30,
2007, 139,229 shares and 130,225 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 and six-months ended June 30, 2008, 20,463 and 807 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.  Similarly, for the three and six months ended June 30,
2007, negligible amount of shares 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 six-months ended June 30, 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
            
            
            June
      30,
              2008inVentiv
      Clinical
            
            $
            56,944
            
            
            $
            --
            
            
            $
            32
            
            
            $
            56,976inVentiv
      Communications
            
            
            190,958
            
            
            
            (6,517
            )
      (2)
            
            
            6,220
            
            
            
            190,661inVentiv
      Commercial
            
            
            45,773
            
            
            
            --
            
            
            
            --
            
            
            
            45,773inVentiv
      Patient Outcomes
            
            
            90,039
            
            
            
            11
            
            
            
            (193
            )
            
            
            89,857Total
            
            $
            383,714
            
            
            $
            (6,506
            )
            
            $
            6,059
            
            
            $
            383,267





(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 when the
      Company finalizes its valuation in this
  investment.





INVENTIV
HEALTH, INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued








Other intangible assets consist of the
following:





June
      30, 2008
            
            
            December
      31, 2007(in
      thousands)
            
            
            
            
            Accumulated
            
            
            
            
            
            
            
            
            AccumulatedGross
            
            
            Amortization
            
            
            Net
            
            
            Gross
            
            
            Amortization
            
            
            NetCustomer
      relationships
            
            $
            110,169
            
            
            $
            (21,415
            )
            
            $
            88,754
            
            
            $
            105,537
            
            
            $
            (15,946
            )
            
            $
            89,591Technology
            
            
            37,940
            
            
            
            (3,105
            )
            
            
            34,835
            
            
            
            37,940
            
            
            
            (1,714
            )
            
            
            36,226Noncompete
      agreement
            
            
            1,506
            
            
            
            (802
            )
            
            
            704
            
            
            
            880
            
            
            
            (617
            )
            
            
            263Tradenames
      subject to amortization
            
            
            2,338
            
            
            
            (516
            )
            
            
            1,822
            
            
            
            1,211
            
            
            
            (277
            )
            
            
            934Other
            
            
            1,235
            
            
            
            (535
            )
            
            
            700
            
            
            
            1,234
            
            
            
            (386
            )
            
            
            848Total
      definite-life intangibles
            
            
            153,188
            
            
            
            (26,373
            )
            
            
            126,815
            
            
            
            146,802
            
            
            
            (18,940
            )
            
            
            127,862Tradenames
      not subject to amortization (1)
            
            
            153,260
            
            
            
            --
            
            
            
            153,260
            
            
            
            153,260
            
            
            
            --
            
            
            
            153,260Total
      other intangibles (2)
            
            $
            306,448
            
            
            $
            (26,373
            )
            
            $
            280,075
            
            
            $
            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
      $6.4 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 $362.7 million of goodwill and the following gross
intangible assets:





Intangible
      asset
            
            Amount
              (in
      thousands)
            Weighted
      average amortization periodTradename
            
            $155,598
            (1)Customer
      relationships
            
            110,169
            10.8
      yearsTechnology
            
            37,940
            14.5
      yearsNoncompete
      agreement
            
            1,506
            4.5
      yearsOther
            
            975
            3.5
      yearsTotal
            
            $306,188
            (2)





(1)
            $2.3
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 5.1
  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 June 30, 2008, is expected to be
$7.3 million for the remainder of 2008, $14.3 million in 2009, $13.9 million in
2010, $13.4 million in 2011, $13.0 million in 2012, $11.6 million in 2013 and
$53.3 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, 2008.





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 June 30, 2008 and the basis for that
measurement:








(in
      thousands)
            
            Total
      Fair Value Measurement June 30, 2008
            
            
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            
            
            Significant
      Other Observable Inputs
              (Level
      2)
            
            
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            
            $
            23,243
            (1)
            
            
            --
            
            
            $
            23,243
            (1)
            
            
            --Deferred
      Compensation
              Plan
      Assets
            
            
            7,825
            
            
            
            --
            
            
            
            7,825
            
            
            
            --TOTAL
      ASSETS
            
            $
            31,068
            
            
            
            --
            
            
            $
            31,068
            
            
            
            --LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            
            $
            7,857
            
            
            
            --
            
            
            $
            7,857
            
            
            
            --Derivative
      Liabilities
            
            
            10,360
            
            
            
            --
            
            
            
            10,360
            
            
            
            --TOTAL
      LIABILITIES
            
            $
            18,217
            
            
            
            --
            
            
            $
            18,217
            
            
            
            --





(1) – As
described in Note 5, the marketable securities balance of $23.2 million includes
$18.1 million classified as restricted cash and marketable securities and $5.1
million as deposits and other assets, respectively, on the Company’s June 30,
2008 Balance Sheet.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
 
 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 was to be advanced no later than January 6,
2008, which we elected not to 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 delayed draw term loans will mature on the seventh
anniversary of the Credit Agreement, with scheduled quarterly amortization of
0.25% per quarter and the balance becoming due on such seventh anniversary. 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 (including delayed draw 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 June 30, 2008 and December 31, 2007 was 2.78% and 4.70%,
respectively.  As disclosed in Note 13, the Company has two derivative
financial instruments, totaling $327 million, to hedge against the new $330
million term loan facility.




The
Company accounts for amendments to its revolving credit facility under the
provisions of EITF Issue No. 98-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 98-14), and
its term loan under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 96-19). In
amending its revolving credit facility, deferred financing costs are being
amortized over the term of the new arrangement since the borrowing capacity
increased in the new loan, per the guidance in EITF 98-14.  In
connection with an amendment of our existing $164 million term loan, under the
terms of EITF 96-19, bank and any third-party fees were deferred and
amortized over the term of the Credit Agreement since the old and new debt
instruments were not substantially different.  The unamortized portion
of the deferred financing costs were approximately $4.1 million and $4.3 million
and are included in Deposits and Other Assets on the balance sheet as of June
30, 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 $12.9 million (including rebates of $0.9 million) and
$11.6 million (including rebates of $0.3 million) during the six-months ended
June 30, 2008 and 2007, respectively.  The Company also incurred net
disposals of $9.4 million and $3.5 million during the six-months ended June 30,
2008 and 2007, respectively.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
 
 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 variable
rate 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.  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 sensitivity
analysis 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 first half of 2008, the fair market value of
the original derivative asset decreased by $0.4 million from a liability of
approximately $1.0 million to approximately $1.4
million.  Approximately $0.7 million was recorded as interest expense,
attributable to the financing component embedded within the interest rate swap,
while $0.3 million ($0.2 million, net of taxes) was recorded as an increase 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 sensitivity analysis 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 debt agreement.  As a result of the hypothetical
derivative method, there was no ineffectiveness for the period ended June 30,
2008, and as a result, $1.3 million ($0.8 million, net of taxes) was recorded as
a increase to Other Comprehensive Income and an decrease to the swap liability
for the first half of 2008, recorded as Other non-current liabilities in the
Company’s Condensed Consolidated Balance Sheet as of June 30,
2008.  Based on current assumptions regarding the interest rate
environment and other market conditions at June 30, 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
$5.8 million, of which $5.1 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.   With the exception of the claims described below, all
pending matters are of a kind routinely experienced in our business and are
consistent with our historical experience.




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 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 was filed on January 6, 2008.  
Defendants moved on or about February 28, 2008 to strike certain of Plaintiff’s
claims and Plaintiff's class allegations as improper.  These motions
were denied.  In conjunction therewith, Plaintiff’s Motion for
Reconsideration as to her breach of privacy claim was granted.  As a
result, there are four live claims alleged against Adheris: (i) violation of the
CMIA; (ii) breach of fiduciary duty; (iii) unjust enrichment; and (iv) breach of
privacy.





On July 9, 2008, Albertsons filed a
Motion for Summary Judgment on the grounds that all of Plaintiff’s claims were
barred by the applicable statute of limitations.  Adheris intends to
join in these arguments.  This motion currently is set to be heard on
October 3, 2008.





On July
11, 2008, counsel for the parties entered into a 60-day litigation standstill to
pursue settlement through mediation.  The agreement included taking
off calendar all pending motions, discovery and depositions for 60
days.  The parties are in the process of selecting a mediator and
preparing for mediation.





Adheris
intends to continue to defend this action vigorously, and the Company does do
not believe that this action will have a material adverse effect on its
consolidated balance sheets, results of operations or cash flows.  It
is impossible to predict the outcome of litigation with certainty, however, and
there can be no assurance that an adverse result in this proceeding would not
have a potentially material adverse effect on the Company's consolidated balance
sheets, results of operations or cash flows.





The Company's insurer, AIG, is
defending this action under reservation of rights.  The Company is
unable to estimate the loss or range of loss that may result from this
action.




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 PRS
and its appointed counsel would have control over the defense of this
matter.





The Company's insurer, Chubb Group, is
defending this action under reservation of rights.  The Company is
unable to estimate the loss or range of loss, if any,  in excess of
the applicable deductible under the insurance policy that may result from this
matter.





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.  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.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
 
 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 $7.9 million and $6.8 million were included in other non-current
liabilities in the Company’s Condensed Consolidated Balance Sheets as of June
30, 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 June
30, 2008 and December 31, 2007 was approximately $7.0 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 $0.8
million and $1.4 million as of June 30, 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 six-month period ended June 30, 2008 was
40.5%.  The rate included a tax benefit relating to state taxes
settled of approximately $0.3 million and a tax detriment relating to interest
on unrecognized tax benefits of approximately $0.1 million.  The
effective tax rate for the six-month period ended June 30, 2007 was 36.0%. The
rate included a tax benefit relating to state taxes settled of approximately
$0.6 million, $0.1 million of a tax detriment relating to interest on
unrecognized tax benefits and $1.0 million of a tax benefit relating to federal
tax benefits of state tax reserves.  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 $5.8
million as of June 30, 2008.  Included in this balance were positions
totaling $1.0 million at December 31, 2007 and at June 30, 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 was $2.7 million at December 31, 2007 and at June 30,
2008.





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 $1.2 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 six-months ended
June 30, 2008:





(in
      thousands, share amounts)
            
            Common
      Stock
            
            
            Additional
      Paid-In
              Capital
            
            
            Accumulated
      earnings
            
            
            Compre-hensive
              Income
            
            
            Accumulated
      Other Comprehen-sive Losses (1)
            
            
            TotalBalance
      at December 31, 2007
            
            $
            32
            
            
            $
            362,116
            
            
            $
            121,811
            
            
            
            --
            
            
            $
            (6,493
            )
            
            $
            477,466Net
      income
            
            
            
            
            
            
            
            
            
            
            21,213
            
            
            $
            21,213
            
            
            
            
            
            
            
            21,213Net
      change in effective portion of
              derivative,
      net of taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            932
            
            
            
            932
            
            
            
            932Foreign
      currency translation
              Adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11
            )
            
            
            (11
            )
            
            
            (11
            )$
            22,134Restricted
      stock expense
            
            
            
            
            
            
            3,275
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,275Withholding
      shares for taxes
            
            
            
            
            
            
            (1,047
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,047
            )Tax
      benefit from exercise of
              employee
      stock options and vesting
              of
      restricted stock
            
            
            
            
            
            
            683
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            683Proceeds
      from exercise of stock
              Options
            
            
            
            
            
            
            2,130
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,130Stock
      option expense
            
            
            
            
            
            
            2,465
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,465Issuance
      of shares in connection with
              Acquisitions
            
            
            1
            
            
            
            17,043
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            17,044Balance
      at June 30, 2008
            
            $
            33
            
            
            $
            386,665
            
            
            $
            143,024
            
            
            
            
            
            
            $
            (5,572
            )
            
            $
            524,150





(1) As of
June 30, 2008 Accumulated Other Comprehensive Losses consists of a $0.8 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 $6.4 million, net of taxes, that
relates to the effective portion of the Company’s derivative instruments, as
described in Note 13.








INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued
 
 18.           Discontinued
Operations:





For the
six months ended June 30, 2008 and 2007, earnings from discontinued operations,
net of taxes, were approximately $0.1 million and $0.2 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:





Prior to
May 15, 2007, R. Blane Walter, the Company’s Chief Executive Officer (who is
also a member of the Board of Directors) and his brothers held a 46% indirect
interest in the Westerville, Ohio facility leased by inVentiv
Communications.  inVentiv Communications entered into the related
lease prior to the time Mr. Walter became affiliated with the
Company.  The terms of the lease were disclosed to our Board of
Directors in connection with its approval of the acquisition of inVentiv
Communications.





The
Company provided various services to Cardinal Health, Inc. ("Cardinal") during
the first six months of 2008 in the ordinary course of its and Cardinal's
business.  Revenues generated from services provided to Cardinal
during the first six months of 2008 were approximately $0.4
million.  Robert Walter, who was Executive Chairman of Cardinal until
November 2007 and an Executive Director thereafter, is Mr. Walter's
father.  Matthew Walter, who is Mr. Walter’s brother, was a director
of Cardinal until his resignation in January 2008.  Mr. Walter and his
immediate family members collectively own less than 3% of the outstanding common
stock of Cardinal.  Mr. Walter was not involved in any transactions
between the Company and Cardinal and has formally recused himself from such
transactions.





inVentiv's
Promotech business unit purchased warehouse consulting and procurement services
from South Atlantic Systems ("SAS") during 2007. The contractual arrangements
with SAS, which are continuing 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 June 30, 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.





As
mentioned in footnote 4, subsequent to the second quarter of 2008 and prior to
the release of the related condensed consolidated financial statements, the
Company acquired PMG. PMG is expected to be reported in the inVentiv Patient
Outcomes segment.





The
following segment information has been prepared as if our inVentiv Patient
Outcomes segment and the segment realignment described above had been in effect
from January 1, 2007:





Three-months
ended June 30, 2008 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            54,452
            
            
            $
            96,061
            
            
            $
            113,424
            
            
            $
            29,745
            
            
            $
            --
            
            
            $
            293,682Less:
      Intersegment revenues
            
            
            (68
            )
            
            
            (361
            )
            
            
            (8,211
            )
            
            
            --
            
            
            
            --
            
            
            
            (8,640
            )Reported
      Revenues
            
            $
            54,384
            
            
            $
            95,700
            
            
            $
            105,213
            
            
            $
            29,745
            
            
            $
            --
            
            
            $
            285,042Depreciation
      and amortization
            
            
            552
            
            
            
            2,551
            
            
            
            3,889
            
            
            
            1,295
            
            
            
            12
            
            
            
            8,299Interest
      expense
            
            
            --
            
            
            
            33
            
            
            
            296
            
            
            
            1
            
            
            
            5,979
            
            
            
            6,309Interest
      income
            
            
            18
            
            
            
            112
            
            
            
            --
            
            
            
            8
            
            
            
            279
            
            
            
            417Segment
      income (loss) (1)
            
            $
            4,951
            
            
            $
            10,850
            
            
            $
            12,035
            
            
            
            4,953
            
            
            $
            (10,653
            )
            
            $
            22,136




Three-months
ended June 30, 2007 (in thousands):





InVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            46,966
            
            
            $
            66,117
            
            
            $
            100,380
            
            
            $
            21,718
            
            
            $
            --
            
            
            $
            235,181Less:
      Intersegment revenues
            
            
            --
            
            
            
            (195
            )
            
            
            (2,552
            )
            
            
            --
            
            
            
            --
            
            
            
            (2,747
            )Reported
      Revenues
            
            $
            46,966
            
            
            $
            65,922
            
            
            $
            97,828
            
            
            $
            21,718
            
            
            $
            --
            
            
            $
            232,434Depreciation
      and amortization
            
            
            457
            
            
            
            1,477
            
            
            
            4,234
            
            
            
            533
            
            
            
            11
            
            
            
            6,712Interest
      expense
            
            
            --
            
            
            
            --
            
            
            
            554
            
            
            
            1
            
            
            
            3,329
            
            
            
            3,884Interest
      income
            
            
            15
            
            
            
            95
            
            
            
            20
            
            
            
            29
            
            
            
            343
            
            
            
            502Segment
      income (loss) (1)
            
            $
            2,789
            
            
            $
            8,888
            
            
            $
            3,461
            
            
            $
            3,500
            
            
            $
            (6,905
            )
            
            $
            11,733




Six-months
ended June 30, 2008 (in thousands):





InVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            106,638
            
            
            $
            184,555
            
            
            $
            207,148
            
            
            $
            59,643
            
            
            $
            --
            
            
            $
            557,984Less:
      Intersegment revenues
            
            
            (169
            )
            
            
            (581
            )
            
            
            (9,871
            )
            
            
            --
            
            
            
            --
            
            
            
            (10,621
            )Reported
      Revenues
            
            $
            106,469
            
            
            $
            183,974
            
            
            $
            197,277
            
            
            $
            59,643
            
            
            $
            --
            
            
            $
            547,363Depreciation
      and amortization
            
            
            1,099
            
            
            
            5,070
            
            
            
            8,121
            
            
            
            2,596
            
            
            
            23
            
            
            
            16,909Interest
      expense
            
            
            --
            
            
            
            50
            
            
            
            725
            
            
            
            2
            
            
            
            11,914
            
            
            
            12,691Interest
      income
            
            
            68
            
            
            
            346
            
            
            
            --
            
            
            
            25
            
            
            
            808
            
            
            
            1,247Segment
      income (loss) (1)
            
            $
            7,905
            
            
            $
            23,488
            
            
            $
            16,522
            
            
            $
            9,717
            
            
            $
            (21,206
            )
            
            $
            36,426








Six-months
ended June 30, 2007 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            88,410
            
            
            $
            127,709
            
            
            $
            200,296
            
            
            $
            43,104
            
            
            $
            --
            
            
            $
            459,519Less:
      Intersegment revenues
            
            
            (3
            )
            
            
            (420
            )
            
            
            (4,706
            )
            
            
            --
            
            
            
            --
            
            
            
            (5,129
            )Reported
      Revenues
            
            $
            88,407
            
            
            $
            127,289
            
            
            $
            195,590
            
            
            $
            43,104
            
            
            $
            --
            
            
            $
            454,390Depreciation
      and amortization
            
            
            897
            
            
            
            2,557
            
            
            
            7,852
            
            
            
            1,071
            
            
            
            32
            
            
            
            12,409Interest
      expense
            
            
            --
            
            
            
            --
            
            
            
            1,054
            
            
            
            2
            
            
            
            6,390
            
            
            
            7,446Interest
      income
            
            
            36
            
            
            
            305
            
            
            
            33
            
            
            
            48
            
            
            
            920
            
            
            
            1,342Segment
      income (loss) (1)
            
            $
            4,641
            
            
            $
            17,293
            
            
            $
            11,896
            
            
            $
            7,073
            
            
            $
            (13,349
            )
            
            $
            27,554








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


(in
      thousands)
              
              June
      30, 2008
              December
      31, 2007Total
      Assets:inVentiv
      Clinical
              
              $
              135,567
              $
              $127,426inVentiv Communications
              
              
              513,496
              
              513,079inVentiv
      Commercial
              
              
              185,499
              
              183,787inVentiv Patient Outcomes
              
              
              199,935
              
              198,141Other
              
              
              79,326
              
              88,423Total
      assets
              
              $
              1,113,823
              $
              1,110,856


ITEM
2.Management's
Discussionand 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 our
customers' ability to complete the development of new drug products and medical
devices and successfully commercialize them.  In addition, we provide
medical cost containment services to payors in our patient outcomes
business.  Our goal is to assist our customers in meeting their
objectives by providing our services in each of our operational areas on a
flexible and cost-effective basis. We provide services to over 350 client
organizations, including all top 20 global pharmaceutical companies, numerous
emerging and specialty biotechnology companies and third party
administrators.





Our
service offerings reflect the changing needs of our clients as their products
move through the late-stage development and regulatory approval processes and
into product launch and then throughout the product lifecycle. We have
established expertise and leadership in providing the services our clients
require at each of these stages of product development and commercialization and
seek to address their outsourced service needs on a comprehensive basis
throughout the product life cycle. For payors, the Company provides a variety of
services that enhance savings and improve patient outcomes including
opportunities to address billing errors, additional discounts and treatment
protocols for patients.





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;





·
            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 (including its Strategyx business unit acquired in June
      2007) and inVentiv Selling Solutions;and





·
            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 (acquired in July
  2007).





During
the third quarter of 2008, we acquired Patient Marketing Group (“PMG”), a
 New Jersey-based business that is a leading provider of patient
relationship marketing services.  As disclosed in Acquisitions and Divestitures
below, PMG is expected to be reported in the inVentiv Patient Outcomes
segment.





Business
Strategy; Trends and Uncertainties
 
 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 six-month periods ended June 30, 2008 and
2007.
 
 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 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
  Several
challenges to our business became apparent during the second quarter that we
believe will impact the performance of our businesses during the second half of
2008.
 
 ·
                Impact
      of the FDA approval process on our customer base.  One of our
      large-scope new clients received non-approvals during the second quarter
      on two major drugs, and other clients also faced FDA
      non-approvals.  FDA non-approvals and delays in approval can
      significantly impact revenue, particularly in the inVentiv Communications
      segment, because of the relationship between the approval process and the
      amount and timing of client marketing expenditures to support the affected
      pharmaceutical products.
 ·
                Estimates
      relating to fixed price components of our contract sales
      agreements.  Most of our contract sales agreements in the
      inVentiv Commercial division include fixed price
      components.  When pricing these contracts, we estimate the
      future costs of these fixed price components.  While we are the
      beneficiary of any savings we are able to achieve as compared to this
      estimated pricing, we also bear the risk of loss if costs prove to be
      higher than anticipated and those increased costs cannot be offset by
      savings in other areas.  Increased gas prices are impacting our
      inVentiv Commercial business through the fixed price components of our
      sales force agreements.  Although we are not able to adjust our
      contracts with our clients to absorb the additional costs in the short
      term, we expect over time to adjust our contracts, to minimize the
      exposure and incremental costs.
 ·
                ·Contraction of client
      marketing expenditures.  The tentativeness of clients to make
      marketing spend decisions is affecting the inVentiv Communications
      division.  Clients are reducing marketing expenditures through
      reducing the scopes of agency projects and delaying decisions on new
      marketing
initiatives.


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
      AcquiredPatient
      Marketing Group
            Patient
      relationship marketing
            Patient
      Outcomes
            New
      Jersey
            August
      2008Chandler
      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.

















Three-Months
Ended June 30, 2008 Compared to Three-Months Ended June 30, 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 June 30,2008
            
            
            2007Revenues:
            
            
            
            
            Percentage
      (1)
            
            
            
            
            
            Percentage(1)inVentiv
      Clinical
            
            $
            54,384
            
            
            
            19.1
            %
            
            $
            46,966
            
            
            
            20.2
            %inVentiv
      Communications
            
            
            95,700
            
            
            
            33.6
            %
            
            
            65,922
            
            
            
            28.4
            %inVentiv
      Commercial
            
            
            105,213
            
            
            
            36.9
            %
            
            
            97,828
            
            
            
            42.1
            %inVentiv
      Patient Outcomes
            
            
            29,745
            
            
            
            10.4
            %
            
            
            21,718
            
            
            
            9.3
            %Total
      revenues
            
            
            285,042
            
            
            
            100.0
            %
            
            
            232,434
            
            
            
            100.0
            %Cost
      of services (1)
      (2):inVentiv
      Clinical
            
            
            37,395
            
            
            
            68.8
            %
            
            
            31,545
            
            
            
            67.2
            %inVentiv
      Communications
            
            
            59,766
            
            
            
            62.5
            %
            
            
            41,488
            
            
            
            62.9
            %inVentiv
      Commercial
            
            
            81,937
            
            
            
            77.9
            %
            
            
            76,266
            
            
            
            78.0
            %inVentiv
      Patient Outcomes
            
            
            18,638
            
            
            
            62.7
            %
            
            
            13,575
            
            
            
            62.5
            %Total
      cost of services
            
            
            197,736
            
            
            
            69.4
            %
            
            
            162,874
            
            
            
            70.1
            %Selling,
      general and administrative expenses
            
            
            59,278
            
            
            
            20.8
            %
            
            
            54,445
            
            
            
            23.4
            %Total
      operating income
            
            
            28,028
            
            
            
            9.8
            %
            
            
            15,115
            
            
            
            6.5
            %Interest
      expense
            
            
            (6,309
            )
            
            
            (2.2
            )%
            
            
            (3,884
            )
            
            
            (1.7
            )%Interest
      income
            
            
            417
            
            
            
            0.1
            %
            
            
            502
            
            
            
            0.2
            %Income
      from continuing operations before income tax provision,
              minority
      interest in income of subsidiary and income from equity
              investments
            
            
            22,136
            
            
            
            7.8
            %
            
            
            11,733
            
            
            
            5.0
            %Income
      tax provision
            
            
            (8,751
            )
            
            
            (3.1
            )%
            
            
            (4,445
            )
            
            
            (1.9
            )%Income
      from continuing operations before minority interest in
              income
      of subsidiary and income from equity investments
            
            
            13,385
            
            
            
            4.7
            %
            
            
            7,288
            
            
            
            3.1
            %Minority
      interest in income of subsidiary
            
            
            (316
            )
            
            
            (0.1
            %)
            
            
            (234
            )
            
            
            (0.1
            )%Income
      from equity investments
            
            
            6
            
            
            
            --
            
            
            
            111
            
            
            
            0.1
            %Income
      from continuing operations
            
            
            13,075
            
            
            
            4.6
            %
            
            
            7,165
            
            
            
            3.1
            %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            94
            
            
            
            --
            
            
            
            92
            
            
            
            --Income
      from discontinued operations
            
            
            94
            
            
            
            --
            
            
            
            92
            
            
            
            --Net
      income
            
            $
            13,169
            
            
            
            4.6
            %
            
            $
            7,257
            
            
            
            3.1
            %Earnings
      per share:Continuing
      operations:Basic
            
            $
            0.40
            
            
            
            
            
            
            $
            0.23Diluted
            
            $
            0.39
            
            
            
            
            
            
            $
            0.22Discontinued
      operations:Basic
            
            $
            0.00
            
            
            
            
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            
            
            
            
            $
            0.01Net
      earnings:Basic
            
            $
            0.40
            
            
            
            
            
            
            $
            0.23Diluted
            
            $
            0.39
            
            
            
            
            
            
            $
            0.23


(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.








Revenues:
Revenues increased by approximately $53 million, or 23%, to $285 million during
the second quarter of 2008, from $232 million during the second quarter of 2007.
Net revenues increased by approximately $42 million, or 22%, to $236 million
during the second quarter of 2008, from $194 million in the second quarter of
2007.




inVentiv
Clinical’s revenues were $54 million during the second quarter of 2008, an
increase of $7 million compared to $47 million during  the second
quarter of 2007.  inVentiv Clinical revenues accounted for 19% of
total inVentiv revenues during the second 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 $96 million during the second quarter of 2008, an
increase of $30 million or 45% from the second quarter of
2007.  inVentiv Communications’ revenues accounted for 34% of total
inVentiv revenues during the second 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 in 2007, while the remainder was
from organic growth in the legacy Communications’ advertising
agencies.





inVentiv
Commercial’s revenues were $105 million during the second quarter of 2008, an
increase of 7% from the second quarter of 2007.  inVentiv Commercial
revenues accounted for 37% of total inVentiv revenues for the second quarter of
2008.  The second quarter of 2008 benefited from several new wins,
expansions and incentive fees from certain sales contracts.  We
continue to benefit from the industry trend towards cost efficient solutions,
and are positioned as a market leader in flexible sales force
solutions.





inVentiv
Patient Outcomes’ revenues were $30 million during the second quarter of 2008,
up $8 million from the second 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 $35 million or 21%,
to $198 million during the second quarter of 2008 from $163 million in the
second quarter of 2007.  Cost of services as a percentage of revenues
was 69% and 70% during the second quarter of 2008 and 2007,
respectively.





inVentiv
Clinical’s cost of services increased by approximately 16%, to $37 million
during the second quarter of 2008 from $32 million during the second quarter of
2007.  Cost of services as a percentage of revenues was 69% and 67%
during the second  quarter of 2008 and 2007,
respectively.





inVentiv
Communications’ cost of services increased by 46% to $60 million during the
second quarter of 2008 when compared to the second 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 slightly from 63%
during the second quarter of 2007 to 62% during the second quarter of 2008,
mainly due to the acquisitions of higher gross margin businesses.





Cost of
services at inVentiv Commercial increased by approximately $6 million, or 8%, to
$82 million in the second quarter of 2008, mainly due to the increase in
revenues.  Cost of services was 78% of inVentiv Commercial’s revenues
during both the second quarter of 2008 and 2007.





inVentiv
Patient Outcomes cost of services increased by approximately $5 million, or 36%,
to $19 million in the second quarter of 2008 from $14 million during the second
quarter of 2007, mainly due to the acquisition of AWAC, and increased organic
business at Adheris and Franklin, as mentioned above.





Selling, General
and Administrative Expenses (“SG&A”): SG&A expenses increased by
approximately $5 million, or 9%, to $59 million during the second quarter of
2008 from $54 million during the second quarter of 2007, mainly due to increased
acquisitions in 2007.




SG&A
expenses at inVentiv Clinical decreased by 8% from the second quarter of 2007 to
the second quarter of 2008.




SG&A
expenses at inVentiv Communications increased $9 million to $25 million during
the second quarter of 2008.  New acquisitions constituted most of this
increase.




SG&A
expenses at inVentiv Commercial decreased by approximately $7 million to $11
million during the second quarter of 2008 from $18 million during the second
quarter of 2007.  The majority of this decrease was due to a
receivables reserve recorded during the second quarter of 2007 relating to a
client that declared Chapter 11 bankruptcy.  Prior to the client
bankruptcy in 2007, we have not historically had a collections issue as a result
of client bankruptcy, with virtually all of our clients having excellent payment
histories.




SG&A
expenses at inVentiv Patient Outcomes increased by $1 million to $6 million
during the second quarter of 2008, mainly due to the acquisition of
AWAC.




Other
SG&A was approximately $5 million for the second quarter of 2008, an
increase of approximately $1 million from the second 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 additional corporate personnel transferring from the operating
units.




Interest
Expense:Interest expense increased by approximately $2.4
million, or 62%, from the second quarter of 2007 to the second 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 second quarter of 2008 was
40.1%, versus 38.3% during the second quarter of 2007.  The rate for
the second quarter of 2008 and 2007 included approximately $0.3 million of a tax
benefit ($0.2 million after federal tax effect) and $0.6 million of a tax
benefit ($0.4 million after federal tax effect) relating to state taxes settled,
respectively. 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
differences in tax rates in the related tax jurisdictions.





Net Income and
Earnings Per Share (“EPS”): inVentiv’s net income
increased by approximately $6 million to $13 million during the second quarter
of 2008 when compared to the second quarter of 2007.  Diluted earnings
per share increased to $0.40 per share during the second quarter of 2008 from
$0.23 per share during the second quarter of 2007.  Overall EPS and net
income increased between quarters because of increased business wins, new
acquisitions and the impact of the increase in the uncollectible receivable
reserve, which lowered EPS during the second quarter of 2007.





Six-months
Ended June 30, 2008 Compared to Six-months Ended June 30, 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 Six-months Ended June 30,2008
            
            
            2007Revenues:
            
            
            
            
            Percentage(1)
            
            
            
            
            
            Percentage(1)inVentiv
      Clinical
            
            $
            106,469
            
            
            
            19.5
            %
            
            $
            88,407
            
            
            
            19.5
            %inVentiv
      Communications
            
            
            183,974
            
            
            
            33.6
            %
            
            
            127,289
            
            
            
            28.0
            %inVentiv
      Commercial
            
            
            197,277
            
            
            
            36.0
            %
            
            
            195,590
            
            
            
            43.0
            %inVentiv
      Patient Outcomes
            
            
            59,643
            
            
            
            10.9
            %
            
            
            43,104
            
            
            
            9.5
            %Total
      revenues
            
            
            547,363
            
            
            
            100.0
            %
            
            
            454,390
            
            
            
            100.0
            %Cost
      of services (1)(2):inVentiv
      Clinical
            
            
            73,924
            
            
            
            69.4
            %
            
            
            60,577
            
            
            
            68.5
            %inVentiv
      Communications
            
            
            109,361
            
            
            
            59.4
            %
            
            
            82,495
            
            
            
            64.8
            %inVentiv
      Commercial
            
            
            157,594
            
            
            
            79.9
            %
            
            
            155,986
            
            
            
            79.8
            %inVentiv
      Patient Outcomes
            
            
            37,130
            
            
            
            62.3
            %
            
            
            26,644
            
            
            
            61.8
            %Total
      cost of services
            
            
            378,009
            
            
            
            69.1
            %
            
            
            325,702
            
            
            
            71.7
            %Selling,
      general and administrative expenses
            
            
            121,484
            
            
            
            22.2
            %
            
            
            95,030
            
            
            
            20.9
            %Total
      operating income
            
            
            47,870
            
            
            
            8.7
            %
            
            
            33,658
            
            
            
            7.4
            %Interest
      expense
            
            
            (12,691
            )
            
            
            (2.3
            )%
            
            
            (7,446
            )
            
            
            (1.6
            )%Interest
      income
            
            
            1,247
            
            
            
            0.2
            %
            
            
            1,342
            
            
            
            0.3
            %Income
      from continuing operations before income tax provision,
              minority
      interest in income of subsidiary and (loss) income from equity
      investments
            
            
            36,426
            
            
            
            6.6
            %
            
            
            27,554
            
            
            
            6.1
            %Income
      tax provision
            
            
            (14,393
            )
            
            
            (2.6
            )%
            
            
            (9,859
            )
            
            
            (2.2
            )%Income
      from continuing operations before minority interest in
              income
      of subsidiary and (loss) income from equity investments
            
            
            22,033
            
            
            
            4.0
            %
            
            
            17,695
            
            
            
            3.9
            %Minority
      interest in subsidiary
            
            
            (892
            )
            
            
            (0.1
            )%
            
            
            (489
            )
            
            
            (0.1
            )%(Loss)
      income from equity investments
            
            
            (35
            )
            
            
            --
            
            
            
            346
            
            
            
            0.1
            %Income
      from continuing operations
            
            
            21,106
            
            
            
            3.9
            %
            
            
            17,552
            
            
            
            3.9
            %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            107
            
            
            
            --
            
            
            
            175
            
            
            
            --Income
      from discontinued operations
            
            
            107
            
            
            
            --
            
            
            
            175
            
            
            
            --Net
      income
            
            $
            21,213
            
            
            
            3.9
            %
            
            $
            17,727
            
            
            
            3.9
            %Earnings
      per share:Continuing
      operations:Basic
            
            $
            0.64
            
            
            
            
            
            
            $
            0.57Diluted
            
            $
            0.63
            
            
            
            
            
            
            $
            0.55Discontinued
      operations:Basic
            
            $
            0.01
            
            
            
            
            
            
            $
            0.00Diluted
            
            $
            0.01
            
            
            
            
            
            
            $
            0.01Net
      earnings:Basic
            
            $
            0.65
            
            
            
            
            
            
            $
            0.57Diluted
            
            $
            0.64
            
            
            
            
            
            
            $
            0.56


(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.








Revenues:
Revenues increased by approximately $93 million, or 20%, to $547 million during
the six-months ended June 30, 2008, from $454 million during the six-months
ended June 30, 2007.  Net revenues increased by approximately $91
million, or 25%, to $461 million during the six-months ended June 30, 2008, from
$370 million during the six-months ended June 30, 2007.




inVentiv
Clinical’s revenues were $106 million during the six months ended June 30, 2008,
an increase of $18 million compared to $88 million during  the six
months ended June 30, 2007.  Revenues in inVentiv Clinical were higher
in 2008 predominantly due to increased placement of temporary personnel and new
business wins to provide functional outsourcing services.




inVentiv
Communications’ revenues were $184 million during the six months ended June 30,
2008, an increase of $57 million or 45% from the six months ended June 30,
2007.  inVentiv Communications’ revenues accounted for 34% of total
inVentiv revenues during the six months ended June 30, 2008.  Most of
this increase is due to incremental revenue relating to the timing of 2007
acquisitions of Ignite, Chamberlain, Addison Whitney and CCA.





Revenues
in our inVentiv Commercial segment were $197 million during the six months ended
June 30, 2008, an   increase of approximately 1% from the six
months ended June 30, 2007.  Select client wind-downs in late 2007
were replaced with additional sales force wins with several other clients during
the first half of 2008, building on our strong track record in successfully
redeploying sales teams.





inVentiv
Patient Outcomes’ revenues were $60 million during the six months ended June 30,
2008, up $17 million from the six months ended June 30, 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 $52 million or 16%,
to $378 million for the six months ended June 30, 2008 from $326 million in the
six months ended June 30, 2007. Cost of services as a percentage of revenues
decreased from 72% to 69% between the six months ended June 30, 2007 and 2008,
respectively.





inVentiv
Clinical’s cost of services increased by approximately $13 million, or 21%, to
$74 million during the six months ended June 30, 2008 from $61 million during
the six months ended June 30, 2007.  Cost of services as a percentage
of revenues remained fairly constant at 69% during the six months ended June 30,
2007 and 2008.





inVentiv
Communications’ cost of services increased by approximately $27 million, or 33%,
to $109 million during the six months ended June 30, 2008 from $82 million
during the six months ended June 30, 2007.  Cost of services as a
percentage of revenues decreased from 65% to 59% as a result of acquisitions
with larger gross margins, but higher SG&A.





Cost of
services at inVentiv Commercial increased by approximately 1% from the six
months ended June 30, 2007, in line with the increase in revenues as explained
above.  Cost of services as a percentage of revenues remained fairly
constant at 80% for both periods.





inVentiv
Patient Outcomes’ cost of services increased by approximately $10 million, or
37%, to $37 million during the six months ended June 30, 2008 from $27 million
during the six months ended June 30, 2007, mainly due to the acquisition of AWAC
and increased organic business at Adheris and Franklin, as mentioned
above.





SG&A:
SG&A expenses increased by approximately $26 million, or 27%, to $121
million from $95 million in the six months ended June 30, 2008 and 2007,
respectively, mainly due to increased acquisitions in 2007, offset by a
receivables reserve arising from a client bankruptcy as described
below.




SG&A
expenses at inVentiv Clinical increased by approximately 9% from the six months
ended June 30, 2007 to the six months ended June 30, 2008 due to increased
selling expense and commissions from additional business and additional staffing
requirements.




SG&A
expenses at inVentiv Communications increased $23 million to $51 million during
the six months ended June 30, 2008.  New acquisitions constituted the
majority of this increase.




SG&A
expenses at inVentiv Commercial decreased by approximately $5 million to $22
million during the six months ended June 30, 2008 from the six months ended June
30, 2007.  The majority of this decrease was due to a receivables
reserve recorded during the second quarter of 2007 relating to a client that
declared Chapter 11 bankruptcy.  Prior to the client bankruptcy in
2007, we have not historically had a collections issue as a result of client
bankruptcy, with virtually all of our clients having excellent payment
histories.




SG&A
expenses at inVentiv Patient Outcomes increased by $4 million to $13 million
during the six months ended June 30, 2008, mainly due to the acquisition of AWAC
in 2007.




Other
SG&A increased by approximately 25% to $10 million from the six months ended
June 30, 2007 to the same period in 2008 The increase was mainly related to
annual increases in equity and non-equity compensation expense from the previous
year, inclusive of changes resulting from additional corporate personnel
transferring from the operating units.




Interest
Expense:Interest expense increased by approximately $6
million, or 86%, from the six months ended June 30, 2007 to the six months ended
June 30, 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 six-month period ended June
30, 2008 was 40.5%, versus an effective tax rate of 36.0% for the six months
ended June 30, 2007.  For the six months ended June 30, 2008, the rate
for the six months ended 2008 included approximately $0.3 million of a tax
benefit ($0.2 million after federal tax effect). The rate at six months ended
June 30, 2007 included approximately $0.6 million of a tax benefit ($0.4 million
after federal tax effect) relating to state taxes settled, $0.1 million of a tax
detriment relating to interest on unrecognized tax benefits and $1.0 million of
a tax benefit relating to federal tax benefits of state tax reserves. 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 differences in tax rates in
the related tax jurisdictions.





Net Income and
EPS: inVentiv’s
net income increased by approximately $3 million to $21 million during the six
months ended June 30, 2008 when compared to the same period in
2007.  Diluted earnings per share increased to $0.64 per share during
the six months ended June 30, 2008 from $0.56 per share during the six months
ended June 30, 2007.  Overall EPS and net income increased between the
periods because of increased business wins, new acquisitions and the impact of
the increase in the uncollectible receivable reserve during the second quarter
of 2007, which lowered EPS during the period.















































Liquidity
and Capital Resources





At June
30, 2008, inVentiv had $79 million of unrestricted cash and equivalents, an
increase of $28 million from December 31, 2007.  For the six-months
ended June 30, 2008 compared to June 30, 2007, cash provided by operations
increased by $25 million from a source of $18 million to $43
million.  Cash used in investing activities decreased from $79 million
to $8 million for the six-months ended June 30, 2007 and 2008,
respectively.  Cash provided by financing activities decreased from a
source of $23 million to a use of $7 million over the same comparative
periods.





Cash
provided by operations was $43 million during the six-months ended June 30,
2008, while cash provided by operations was $18 million in the six-months ended
June 30, 2007.  This increase was, in large part, due to higher net
income in 2008 as well as reduced excess tax benefits from stock based
compensation.  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 six-months ended June 30, 2008
compared to $79 million used during the same period in 2007.  During
the six months ended June 30, 2007, approximately $50 million of cash related to
the acquisitions of Ignite, Chamberlain, Addison Whitney and Strategyx, while
approximately $23 million of cash related to earnout contingency payments from
previous acquisitions.  During the six months ended June 30, 2008,
only $20 million was paid for acquisitions and earnouts.  During the
six months ended June 30, 2008, the Company also received proceeds of $22
million from our investment in the Columbia Strategic Cash Portfolio (“CSCP”),
with a balance remaining of $23 million at June 30, 2008.  As
described in Note 5 of Part 1, Item 1, the $23 million balance includes $18
million classified as restricted cash and marketable securities and $5 million
as deposits and other assets, respectively, on our June 30, 2008 Balance
Sheet.





Cash used
in financing activities was $7 million for the six-months ended June 30, 2008,
compared to $23 million provided by financing activities for the six-months
ended June 30, 2007.  Approximately $25 million was borrowed from the
revolving credit facility in 2007, of which $20 million was outstanding at June
30, 2007, to help finance the Ignite, Chamberlain, Addison Whitney and Strategyx
acquisitions and 2006 earnout payments from past acquisitions.  Stock
options proceeds were lower in 2008 than 2007 due to the continued trend by the
Company from stock options to restricted stock as well as lower exercises due to
a decrease in stock price.





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 and our acquisition of PMG 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.

















ITEM 3.Quantitative
and Qualitative DisclosuresAbout Market Risk





Long-Term
Debt Exposure





At June
30, 2008, the Company had $327 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 June 30, 2008, a
hypothetical increase or decrease of 10% of our 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 variable
rate 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.  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 sensitivity
analysis 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 first half of 2008, the fair market value of
the original derivative asset decreased by $0.4 million from a liability of
approximately $1.0 million to approximately $1.4
million.  Approximately $0.7 million was recorded as interest expense,
attributable to the financing component embedded within the interest rate swap,
while the remaining $0.3 million ($0.2 million, net of taxes) was recorded as an
increase 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 sensitivity analysis 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 debt agreement.  As a result of the hypothetical
derivative method, there was no ineffectiveness for the period ended June 30,
2008, and as a result, $1.3 million ($0.8 million, net of taxes) was recorded as
a increase to Other Comprehensive Income and an decrease to the swap liability
for the first half of 2008, recorded as Other non-current liabilities in the
Company’s Condensed Consolidated Balance Sheet as of June 30,
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 June
30, 2008, the accumulated other comprehensive earnings related to foreign
currency translations was approximately $0.8 million.  Foreign
currency transaction gains and (losses) are included in the results of
operations and are not material.








ITEM 4.  Controls and
Procedures




Based on
their evaluation as of June 30, 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 June 30, 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 June 30, 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 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 was filed on January 6, 2008.  
Defendants moved on or about February 28, 2008 to strike certain of Plaintiff’s
claims and Plaintiff's class allegations as improper.  These motions
were denied.  In conjunction therewith, Plaintiff’s Motion for
Reconsideration as to her breach of privacy claim was granted.  As a
result, there are four live claims alleged against Adheris: (i) violation of the
CMIA; (ii) breach of fiduciary duty; (iii) unjust enrichment; and (iv) breach of
privacy.





On July 9, 2008, Albertsons filed a
Motion for Summary Judgment on the grounds that all of Plaintiff’s claims were
barred by the applicable statute of limitations.  Adheris intends to
join in these arguments.  This motion currently is set to be heard on
October 3, 2008.





On July
11, 2008, counsel for the parties entered into a 60-day litigation standstill to
pursue settlement through mediation.  The agreement included taking
off calendar all pending motions, discovery and depositions for 60
days.  The parties are in the process of selecting a mediator and
preparing for mediation.





Adheris
intends to continue to defend this action vigorously, and the Company does do
not believe that this action will have a material adverse effect on its
consolidated balance sheets, results of operations or cash flows.  It
is impossible to predict the outcome of litigation with certainty, however, and
there can be no assurance that an adverse result in this proceeding would not
have a potentially material adverse effect on the Company's consolidated balance
sheets, results of operations or cash flows.





The Company's insurer, AIG, is
defending this action under reservation of rights.  The Company is
unable to estimate the loss or range of loss that may result from this
action.




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 PRS
and its appointed counsel would have control over the defense of this
matter.





The Company's 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.







ITEM 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 4.Submission
ofMatters to a Vote of Security Holders





At
an annual meeting of the stockholders of the Company, held on June 11, 2008, the
following matters were submitted to a vote of our stockholders, with the
following votes cast:





(i) 
the election of seven directors to the Board of Directors for a term of one
year, expiring at the 2009 Annual Meeting:





For
            WithheldEran
      Broshy
            27,100,135
            1,677,899A.
      Clayton Perfall
            23,792,572
            4,972,985Per
      G.H. Lofberg
            28,223,513
            542,044Mark
      E. Jennings
            27,785,322
            980,235Craig
      Saxton, M.D.
            24,235,332
            4,530,225Terrell
      G. Herring
            26,504,647
            2,273,387R.
      Blane Walter
            23,996,766
            4,781,268





Pursuant
to Form 8-K filed on May 27, 2008, Mr. John Harris resigned from the Board of
Directors effective May 21, 2008, and accordingly, did not stand for
reelection.





(ii) the
ratification of  the appointment of Deloitte and Touche LLP as the
Company’s independent auditors for 2008:





For
            Withheld
            Abstain
            Broker
      Non-VotesDeloitte
      & Touche LLP ratification
            28,599,523
            128,609
            37,425
            12,478










ITEM 5.  Other
Information





As of July 28, 2008, in connection with
the payment of the earnout obligation for the twelve months ended March 31, 2008
under the purchase agreement relating to our acquisition of Ignite, we issued
for the account of Ignite a total of 48,026 unregistered shares of common
stock.




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
















ITEM
6.                      Exhibits





10.5.2
            
            Employment
      Agreement dated as of June 11, 2008 between the Registrant and Eran
      Broshy.31.1
            
            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


















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.August
      8, 2008
              By:
              /s/ 
      David S. BassinDavid
      S. BassinChief
      Financial Officer and Secretary(Principal
      financial officer and principal accounting officer)